He who hesitates is lost…
The early bird catches the worm…
Don’t step over the dollar to pick up the nickel…
In house flipping, all these sayings are true. And if I had listened to any of them, I’d have a $300,000 house flip in my pocket right now.
Now THAT is the true meaning of having Bigger Pockets!
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
The Ideal House Flip
Before I tell you how I messed it all up, let me first tell you a little bit about it. Suffice to say, the house was perfect for a quick fix and flip.
Here’s the stats:
- Type: Single family Colonial
- Location: Fairhaven, Massachusetts.
- Size: ~1600 square feet
- ARV: $300,000
- 70% Rule: $210,000
- Estimated Repair Cost: $100,000
- MAO: $110,000
- Projected Profit: $60,000
As you can see, the numbers look pretty good. Needless to say, I was excited about it and was ready to pounce.
In Massachusetts, certain types of properties are only offered to owner occupied buyers for the first 15 days they’re on the market. This property just so happened to be one of them.
My real estate broker told me that the house was coming on the market and I needed to wait out the 15 day period. Fair enough, so I waited. I figured I had 15 days to wait, so I didn’t think much of it.
Five days goes by and I’m at home on a Sunday night watching TV with my daughter when my phone rings. It was after 9:00 PM and I was exhausted so I didn’t bother looking at the phone.
At about 10:00 PM, curiosity got the better of me. “Who could possibly be calling me at 9 o’clock on a Sunday night?”, I thought to myself.
Was it one of my contractors with some big issue? Was it a tenant problem at one of my rentals? I actually began to get concerned that I was either missing out on something or something had gone wrong somewhere.
Although I was exhausted and really not in a “business mindset” at the time – I checked my phone.
As it turns out, it was a phone message and a text message from my real estate broker about the property with the 15 day waiting period.
In his breathless voicemail message, he told me that the Fairhaven property was suddenly on the market and open for real estate investors to put in offers.
He told me to call him as soon as possible if I was interested in making an offer. He said he would be up until midnight.
I half debated calling him right then and there…but my daughter and I were having such a nice time relaxing together on the couch -something we rarely do together because I always seem to be working. And I figured I could just call him first thing in the morning and put in my offer.
Or was it? Is spending time with your family more important than making $60,000 on a house flip?
Real Estate Never Sleeps
The next morning, I got up super early and started getting myself prepared to make an offer on the house – fully expecting everything to go smoothly as I would be the first one to place an offer on this Monday morning.
Just then, my real estate broker called – and I grabbed the phone as quickly as possible.
I could tell as soon as I pick up the phone…I had missed out.
Another real estate investor had beaten me to to the punch and put in an offer the previous night. The offer was accepted.
Awesome house flip deal – lost.
The Agony of Defeat…
I was so mad and so disappointed, I just sat at my desk staring into space for the next five minutes…
How could I have been so stupid? It wasn’t like my real estate broker had dropped the ball. In actuality, he did an incredible job informing me as soon as possible that I could put an offer in on the house.
I really wanted to blame somebody else, but I couldn’t. It was totally my fault.
Had I gotten complacent? Was I starting to “lose my edge”?
I was just starting to realize that although my career is extremely important perhaps spending time with family is even more important…but do I have to sacrifice one for the other?
Regardless, I was pretty frustrated. And although I teach other people how to invest in real estate and flip houses, I taught myself an important lesson that night.
I guess it just goes to show you that no matter how much you think you know about real estate investing, you can always get better – no matter how many years you’ve been doing it and no matter how much money you’ve made doing it.
I also realized that the best, juiciest, most lucrative house flip deals are the ones that you have to pounce on it immediately. You can’t hesitate for one second – regardless of how tired or how brain-dead you might feel at the time.
I called my real estate broker back a half hour or so later and told him how proud I was of him. I also told him how I was the one who was responsible for losing it – not him. Like me, he felt horrible about it as well.
We agreed that in the future, we would do things differently. So right there, we put a “contingency plan” in place for situations like this that may crop up in the future.
Did I lose this house flip deal because of my own failure? I sure did.
Will I ever lose a deal like this ever again? Not likely.
The plan for the future was this: for any future 15 day waiting period properties that meet my house flipping criteria, I’ll have proof of funds, a signed offer and any other paperwork ready for him in advance prior to the end of the 15 day period.
That way, if a situation like this ever came up again, we would be prepared to act immediately.
We both felt pretty good about this plan and knew that although we had lost out on this one deal, we wouldn’t ever lose out on another like it ever again.
That way, I wouldn’t have to interrupt my “quality time with the family” – but run my business at the same time – while leaning heavily on my house flipping team.
As crushing as this failure was, I actually felt like there was a silver lining that came out of it. After all, success in real estate investing is just as much about doing more of the things that you do right as it is about fixing and learning from the big mistakes that you do wrong.
What do you think? Did I make the right choice by staying on the couch with my daughter? What are some of your biggest real estate disappointments? Please leave a comment below!