I became a licensed realtor during my first flip in Newark NJ

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I became a licensed realtor during my first flip in Newark NJ

Alan Nellis
Real Estate Agent · New Brunswick, NJ · Member since 2018 · 6 posts · 2 votes

Investment Info:

Small multi-family (2-4 units) fix & flip investment in Newark.

Purchase price: $73,000
Cash invested: $150,000
Sale price: $290,000

Large two family residence. Full gut job, oil tank removal, and finished basement. Complete renovation electrical, plumbing and sheet roc. Two kitchens, three bathrooms.

What made you interested in investing in this type of deal?

I hoped I could break into the business with a start company that would help transform a community.

How did you find this deal and how did you negotiate it?

I found this deal thru a partner of mine via the mls. We offered the full asking price and the deal was accepted.

How did you finance this deal?

We used our own money to start the company and hard money to finance our first deal.

How did you add value to the deal?

I am the CEO of my organization and during this project I acquired my real estate salespersons license.

What was the outcome?

We successfully completed the flip and sold the house for the highest price at the time. However we did not make a profit on this project.

Lessons learned? Challenges?

I began the long process of learning this business from the ground up. I also learned what the term "skin in the game" really means!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

We had a real estate agent working with us but I felt I could do a better job. Since I had so much skin in the game I believed know one could give my project the attention to detail that I could.

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  • Bryan Scott
    Investor · Castle Rock, CO · Member since 2011 · 107 posts · 65 votes
    6y

    Thanks for sharing your project.  Just curious, in terms of the comment, "However we did not make a profit on this project," what would you do differently to change the outcome?  Did some aspects, or phases cost more than budgeted?  What surprises did you uncover during the rehab, which were not planned for in your budget?  A breakdown of your actual costs would be useful in analyzing and recommending changes for the next project.

    Based on the amount of cash invested, at $150,000, this should have covered the purchase price and most of the rehab costs.  If yes, hard money expenses were expensive, but minimal, right?

    Anyhow, based on some quick calculations and assuming your hard money expenses were minimal, you should have broken even, or close to it, right?

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  • Alan Nellis
    OP
    Real Estate Agent · New Brunswick, NJ · Member since 2018 · 6 posts · 2 votes
    6y

    Hey Brian,

    Wow!  We should have done better but we didn't establish a work force/crew successfully from the beginning.  The original crew we were going to work with didn't pan out for the duration of the project.  Not to mention they were charging us to much money for inferior work.  So that is the first lesson I have learned.  You must establish a relationship with certified working contractors that you can count on to do the work according to your standards and your timeline.

    As far as the hard money lender (Lima One Capital) is concerned I believe that the biggest issue was related to time.  We didn't anticipate spending as much time on the project as we did.  So each month we were paying the hard money rates we were losing money from our bottom line.  So having a reliable crew or two would have insured finishing the project in a shorter period of time.  Which ultimately would translate to a bigger profit.

    We encountered a break in at the property during the late stages of the project.  Thieves broke in and cut out the copper pipes causing a flood in the basement.  SMH!  Another issue that arose was when we listed the house.  We couldn't find comps to support or asking price and cover the over budget.  We received full asking price at our first open house.  We actually had a bidding war that pushed the price up to $355k.  Our appraisal came in at $278k.  This opened up a can of worms that we just couldn't do anything about.  Both of those deals feel thru and we waited another couple of months to get a deal done.

    All in all the education was priceless.  Our in experience cast us a considerable amount of time, money and heartache.  I would say that getting to know qualified professionals first would give any investor a much better chance at being successful.  Now I focus on being a real estate agent focused on helping aspiring investors and providing them with the support and knowledge that I gained over the last four years. 

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  • Marc Weisi
    Rental Property Investor · Jersey City, NJ · Member since 2017 · 104 posts · 53 votes
    6y

    Hi @Alan Nellis , I appreciate you sharing your story. In my opinion, it's easy to get lost in all of the rosy stories of investors getting started and encountering no obstacles in becoming experienced investors. I too have encountered many surprises (despite talking to much more experienced investors and A LOT of self-education) but have viewed these as the "cost of tuition" for my education in RE investing. I know that this experience will benefit your clients and I hope that you won't let these misfortunes keep you away from doing more deals yourself. I know that the going is tough, but I've committed to take similar mistakes and profit from them in the future. Best of luck!

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