Losing Money On First Flip: Part Two - Lessons Learned
If you haven't read the story on this first flip, you can find all that here:
https://www.biggerpockets.com/blogs/11070/79588-losing-money-on-first-flip-lessons-learned
OK so I admit that I lost money on this flip, but honestly it could have been so much worse. I had no issues with the city on permits (I pulled none) and I was able to finish and sell the house without any legal battles with contractors. And although I came really close, I didn't run out of money at the finish line.
But man, that experience sucked.
Now I look back and there are SO many things would have done different.
1. Don't attempt to do this full time. This is probably not the best use of your time, and you just go broke that much faster.
2. Your Hard Money Lender is on your side - Listen to them.
3. Partner up with experienced flippers -- at least to start. Smaller profits are better than big fat losses, particularly while learning.
4. Get your scope of work right. Have a trustworthy second set of eyes to review, before you commit to a project.
5. Really put in the work in getting your bids.
6. Pay contractors the right away. No prepayments, no daily rates. Reward the right behavior.
7. Don't believe contractors that say they are good at something. When asked, they will always say yes, they can do that. Hire specialists when you can.
8. Plan to run projects in parallel at the job site. While the bathroom contractors are working, what other work can be done by other contractors? Really focus on managing the timelines.
9. Be prepared to have additional exit strategies in place. This might have been a workable rental property, had I been in a position to shift to a BRRRR strategy. It would not quite cash flow but it would have been close. Alternatively, this might have been a winner as an owner finance transaction.
10. People will tell you to take action. Make sure you are taking the right actions. When starting out, don't let your desire to get your first project going deceive you, and cloud your judgement. I clearly talked myself into a bad deal here, and I didn't want to admit it. Even right up until writing this, I just found it so much easier to blame contractors and circumstances, than to blame myself. I wanted to take massive action, and I wanted to prove to others that I was good enough. I paid a big price for this.
Lastly, don't quit. See it through, and take your lumps. It isn't fun to admit to yourself, your spouse and the whole BP community that you really screwed up a project like this. But at least I crossed the finish line, and I am better for it.
Here is a little 'jobsite visit' video that I posted on you-tube. It wont take you through the whole house, but I think you will get a good feel for the project:
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