Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
Over the last several months I've spent a significant amount of time reading books, BP forums and almost anything I could get my hands on, to prep myself for my Real Estate journey.
I've finally lined up a hard money lender that is willing to work with me on doing a flip in the north Chicago suburbs. They are requesting that we do the deal and split all profit 60/40. They get the 40. They are willing to lend me up to $80K with cost of rehab included.
I have a great real estate agent lined up and have several options for RE attorneys.
Does anyone have any recommendations or insight on doing a deal like this?
Real Estate Investor · Los Angeles, CA · Member since 2011 · 31 posts · 13 votes
12y
Sounds like that might have been a good thing though. You certainly seemed to be concerned that you were overpaying, might not make much money, and have a bathroom count that may be difficult to sell. I know you get anxious to do your first deal you want to jump at something and get going, but don't talk yourself into deals that don't seem like wins. You'll regret it.
1. You made your offer without getting contractor bids; Did you get bids during a due diligence [inspection] period once your offer was accepted? Or did you wait until after closing? Just curious how your lender/partner didn't require plans upfront...
2. Was it necessary to revisit your original terms with your partner/lender once you increased the purchase price and reno budget? I'm assuming you borrowed more than the $80k budget you initially requested.
Real Estate Broker · North Aurora, IL · Member since 2014 · 130 posts · 82 votes
11y
Great Job!!! Wait until you close and get that check!!! What a fantastic feeling!! I read your entire thread and was able to relate to a lot of your emotions, ups and downs, throughout the process.... The key for me is perseverance and the ability to see the bigger picture. Those two traits will help set you up for success as you continue down your road!
What a great job - your rehab turned out very nice which is why it sold so quickly. You'll see that the process gets easier and easier, especially after you get the first one or two under your belt. Thanks for sharing with everyone. Your flip reminds me (almost exactly in some ways) of my first flip - only you did a much nicer job and made more money! lol
Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
11y
Unfortunately, I just found out that the contract has been cancelled due to a family emergency on the part of the buyers. They said they could not discuss it and their agent offered for us to check her MLS records to prove that they didn't find another house or anything... so back to trying to sell this place. Amazing how fast you go from done deal to nothing.
To answer your question @Brandon Eleazer my partner did need a complete breakdown of the costs and estimates. I've gotten fairly good at estimating costs and had an idea of what this would cost. I did have my contractor and my inspector visit the property with me within the first 5 days after I got it under contract. The contractor was able to give me a verbal estimate, which is what I used to true-up the numbers for my partner.
The original agreement with my partner was for up to $100K. I ended up borrowing $98K for this project. All other overages were covered by me. I'm not sure what you mean about increased my purchase price and reno budget?
Real Estate Agent · Philadelphia, PA · Member since 2010 · 166 posts · 23 votes
11y
That really stinks, sorry to hear things fell thru with your buyer @Roman Pak
Did you collect a deposit from them?
My 2nd question came from reading your early posts, which said your partner was "willing to lend me up to $80k with cost of rehab included". You initially made an offer of $153k needing an estimated $23k renovations...I'm just wondering how you addressed the switch to an offer of $219k with $58k renovations. Sorry I missed that your partner agreed to lend up to $100k, I thought it was $80k. Thanks!
Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
11y
@Brandon Eleazer Sorry for the confusion, that was a different house, we got that under contract and cancelled it after the inspection revealed an additional $35k in rehab work.
For this house which we got under contract the following week, My partner lent me 98k. 48k for down payment and closing, and 50k for rehab. The overage of 8k in rehab came out of my pocket.
Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
11y
UPDATE:
The house is still listed for sale. I've had to decrease the price to 359,000 in an attempt to drum up some more showings. After my last post, we received a number of offers, 4 to be exact, none of which stuck. They were either rejected by me or were recalled by the buyers. Now I'm just as surprised as my agent, but it seems that no one is buying anything in this area. Despite several open houses and even door to door pamphlet handouts in the neighborhood, we've had very few showings and the mls shows virtually no recent sales in the neighborhood. I have a couple of months worth of payments saved up still, but I'm feeling pretty nervous.
Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
11y
@Scot Howat at the end of June we dropped the price again to 349,000 for about three weeks. We had barely any showings. Took the property off the market. My wife and I moved in.
Long Island, NY · Member since 2015 · 138 posts · 20 votes
10y
@Roman PakThe house turned out to be beautiful! You did a great job. I am sorry to hear that you were not able to sale but it is great that you and your wife were able to move in. Hopefully your property will appreciate and if you desire some time down the road, you can sell and it will be a success. I hope that you continue to stay on the investing journey. Have you had any success with it since your last posting regarding this experience?
Also question, the hard money lender you found, was it someone you personally knew or a company? I am curious to know; that was definitely a nice deal that you stepped into. All the best to you.
Investor · Arlington Heights, IL · Member since 2014 · 135 posts · 34 votes
10y
@Tyisha G. Thank you I appreciate the kind words. I remain hopeful that the house will appreciate. Living in the house I have seen several brand new homes being constructed around us that are being listed in the $600K + range. I've put REI on hold for now, and am working on a startup that I founded.
To answer your question, the investor I found was indeed a family friend. I doubt that I would have gotten the deal I did with a lending company.
Long Island, NY · Member since 2015 · 138 posts · 20 votes
10y
@Roman Pak You are so welcome. Perhaps now the new constructions around you just show that you were only ahead of your time. Keep sitting on it and when you're ready- wa la! Congratulations on founding a startup! That is great. Feel free to keep in touch if you want to share details and I can support. Best to you and your family.
Specialist · Cleveland, OH · Member since 2011 · 1k+ posts · 852 votes
9y
Roman,
Awesome!!! There is not a better teacher in the world than experience. I would look at some off market stuff too. Not saying your agent is not great, but my first deal sucked and it was because my agent was more interested in commission than a long term relationship. LOL
Actually it was because I had no idea what I was doing and neither did he! :-)
I would bring any deal you get back here to show the numbers and let the experience of BP help with the offer.