How I Lost Out on a $300,000 House Flip

31

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!

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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.

The Screwup

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.

Big mistake.

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.

Lesson learned…

The Recovery

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!

Photo: striatic

About Author

Mike LaCava

Michael LaCava is a full time real estate investor, house flipping coach and the President of Hold Em Realty located in Wareham, MA. He runs the website House Flipping School to teach new real estate investors how to flip houses and is the author of "How to Flip a House in 5 Simple Steps".

31 Comments

  1. I bet just about everybody has had one of these lost opportunity lessons.
    I would be comfortably retired today if I had only been a few minutes late for a dinner appointment with my wife.

    I was called out by a young estate attorney, with an emergency. A estate property that was in his care had a second floor heating pipe freeze and burst. A plumber had beaten me to the job site for the repair, but I was asked to follow up to get the boiler running.

    I found a nice house originally owned by a little old lady now deceased, the place was a time capsule from 1960. The rest of the area had long passed this place by, values ranged from $300-$400k. The attorney was responsible for the damage as he had not bothered to pay the gas bill. The plumber offered him $25k for the place, the attorney said that he needed to get $40k for the place because that was close to what the woman still owed on the place.

    I immediately agreed, but the attorney needed me to come to his office at once to sign papers. I put this off till the next day as i did not want to disappoint my wife.

    I called on of my friends a seasoned RE investor, to tell him about the deal. His first question was did you get this signed up? Where I told him the story, his reply was “You never steal anything slowly, call the guy back and get over there and sign that deal up!”

    When I called back the attorney told me the bad news the plumber had raised his offer to $57k which he was pretty sure I would not go for, and the plumber ran to his office and twisted his arm to sign the deal up!

    The really sad part about this was I called the plumper, trying to buy the place from him, but alas he had flipped it to one of his customers for $12k more. .

    Now for the really sad part I was going to keep the place, the end buyer tore the house down and on the over sized 1960’s era lot built two twin homes which he sold for $300k each
    This all happened in 2005.

    The attorney is still one of my customers, he has also become a RE investor, even he realizes he should have bought the house out of the estate for $40k. He told me he had no idea how to value the place, figuring because it was such a mess compared to all the new beautiful places that no one would want it.

    • yes so True Dennis. I have more than one as well. The lesson is to keep improving our systems and life goes on. Hope you are doing lots of deals now! I never stop learning in this business.
      How about you?

  2. Glenn Schworm

    Hey Mike,

    Okay this one struck a chord with me. For what it’s worth you did the right thing spending time with your daughter. Deals will come and go, but time with our children we will NEVER get back and if you’re like me, sometimes we get so caught up in the game that that time can be overlooked. She will not care if you make $6 a year or $60M. BUt she WILL remember the time you spent with her and I think that investment if time yields the greets returns!

    Ok, so now on to the deal. IMHO, here is how it would have went down.

    1- The other buyer having the offer accepted so quickly has some issue. The offer was probable higher than you wanted to pay and/or they had the inside track and you would bot have been accepted anyways.

    2 – It would have turned to a multiple bid situation and the same as #1 applies.

    I have an article coming out tomorrow that talks about my crystal ball being broken. We can’t predict the future, and we can’t miss something we never had.

    I like your plan B for the future, keep spending that quality time with the family, you’ll never get it back and you’ll NEVER regret it!

    I’m off to do the same right now! Have a great rest of the weekend.

    • Melodee Lucido on

      Yes, yes, yes Glenn. My youngest of four is now 17.5 yrs old and barely has an hour for me. She is busy creating her own world. I gave up a lot to raise my kids but it seems no sacrifice.

    • Glenn you are 100% right. In business early on since my first daughter was born and I was married for a few years I made a commitment that no matter how badly I wanted to succeed in business it would never come at the cost of not knowing and enjoying my kids and family. I am a family man first. My plan B does just that like you said and I am sure it will happen again and I will come up with more plan B’s. Thanks for the support and I look forward to you article.
      Have a great Sunday!

  3. John Thedford on

    I have debated and lost out as well! I just finished reading “How To Build Wealth One House At A Time” (excellent book!!!) and one saying in it was “don’t steal in slow motion”. I laughed hard but realized how true this is!

      • John Thedford on

        No flips yet. Buy and hold. As long as I can fund the deals with my cash or OPM I intend to hold. I feel strongly that Uncle Sam will continue to destroy our currrency and inflate RE for some time.

    • LOL Glenn. I am trying to get back to all the responses and other emails on a rehab we just listed yesterday I didn’t notice your spelling errors. : – ) No worries but it is kind of funny.
      3 offer coming in and maybe more. You have to love it when that happens.

  4. Melodee Lucido on

    Michael,
    I like a lot of articles here on BP but this one stole my heart. It made my heart race (cuz I know the scenario way too well) gave me goosebumps and a tear.

    You ABSOLUTELY made the right decision. And see, there is another beautiful benefit from you losing that deal (like Glenn said it could have been a big time waster) you get to share it with everyone here and let others learn to have a plan B as well as a plan A.

    And you get to bring a moment of clarity to everyone who reads this article—hope it’s mannny- to remember to be present to the things in life that really matter. I am definitely “older” now and cherish every—e v e r y—moment I had with my kids. I’d probably be a millionaire+ if I hadn’t chosen to be the one to raise them instead of a day care. I don’t care; they’re stable, strong entrepreneurs and family people : >

    You will be so proud of yourself as you look back on this great vignette in your career and life. Thank you so much for sharing this—-and on a Sunday—a great day to reflect on what we want out of life.

    • Thank you Melodee for those words of inspiration that definitely remind me of what is really important in life. I know this but it is so good to hear it from other’s like yourself. I love the fact that you stayed home with your kids. Early on in my career I decided I would work harder and longer so my wife could stay home with our kids as well until they went to school & she could start back on her career part time. Definitely the best decision we ever could make. Both my kids are great and I couldn’t be more proud. Thanks for sharing and bringing goose bumps to me.
      Have a wonderful Sunday!!!

  5. I own & run a property management business & maintenance business to support the management. We are often dealing with emergencies.

    We have a saying in our household…”work first, play second”
    What it means to my family is if something comes up, we handle it NOW, then go back to family time or simply reschedule family time.

    You simply have to have support vendors & people to accomplish this. I would say the same to hold true on the flipping side. Trust your support & put your systems in place to handle any opportunity that meets certain criteria.

  6. I absolutely think you made the right choice and, as a bonus, because of that choice and what happened, the silver lining was coming up with a fantastic contingency plan for the future! A win-win if you ask me!

      • If a owner occ purchases a home then chooses to sell it I do not think seller has much recourse unless they place a short-term resale deed restriction on the house (usually @ 60 days). I think your real concern revolves around how to make an offer as an owner occ if you want to “flip it”; the answer is move in or something like that (get creative). Also you could partner with a NPO in your area because they get to offer during the first 15 days but they must resale to the low-to-moderate homeowner (this is route I have taken). Good luck

        • I didn’t think of partnering with a non-profit and if they do sell to an affordable buyer then it is worth while and someone gets a great deal that may not be able to buy at regular market prices ? How do you structure it for you make some money on the deal?
          I am looking for ways to try and get more affordable housing in my area so this may be a good way and if I can make some money by doing good at the same time I like that.
          Feel free to inbox me directly if you like Dennis.

  7. My son would have said “you better jump on that before you lose it! Take the 5 minutes to make the offer, I’ll pause the movie”. Deal done. All is well

    • I hear you Jeff. I can’t see I won’t miss out on another deal like this but it won’t be for the same reason. Oh well. It will be interesting to see what this one went for & to see who bought it. Good to follow up sometimes on ones you lost as well.
      Thanks for reading and your comments!

      • Fortunately you’ve made enough good deals that you could afford to miss one! Lol but it still must sting a little. Thanks for sharing the story Michael. It’s a good reminder not to get too complacent in your deal making.

        • True Jeff. I was over it in a day. Always looking forward and learning. Can’t go back and change it so just learn from it. I like to share the good the bad and the ugly. Hey that sounds like a good blog post. Just keepin it real Jeff.
          Thanks again.

  8. Shelby Reed on

    This was great to read Michael. I think all of us, in any type of business have these moments where something slips by that we thought was no big deal… It’s nice to hear others experiences with these moments:). I often get worked up and excited over a deal I find, and often times my husband is trying to bring me back down…this story is a perfect reassurance that maybe it’s okay when I get excited and want to close the deal asap!
    Regardless, I agree with above comments, and any deal we lose while choosing to spend time with our kids and/or family is a good deal lost:).

    • Thanks Shelby,

      Your motivation is in line for this business and that will make the difference for you vs the competition. Balance in my life is very important especially when it comes to spending time with my kids! If it takes more time to hit my financial goals then let it be. However I will never stop to improve my systems to improve my business and learn from my mistakes.

      Thanks for your comments and feedback. Keep them coming

  9. It’s true real estate never sleeps. Sometimes I get frustrated with my realtor for not being at my beck and call but I know she has kids, a marriage, and a home to maintain too. I think it’s important for all of us to unplug and really enjoy our LIFE at times.

    We are always learning. It was great you reviewed and made a game plan for future situations that doesn’t include always prioritizing your business over your family. Similarly, I felt I lost out on a good bargain when my realtor suggested we terminate an agreement so as to not lose earnest money. I really appreciate her looking out for me but in the future we agreed to always counter offer and request an extension. I will not be the one to end the deal since it could very likely work out. Silver lining!

    • Great job Christine coming up with a solution to future negotiations. Sometimes we have to educate our real estate agents about how we operate. Even if they have your back doesn’t mean they may be doing you the best service. I do the same with my attorneys, contractors,wholesalers and anyone else on my team. You are the captain and must control the ship.
      Thanks for your comments and feel free to ask me any questions and share your experiences.

  10. You should have sacrificed that time with your daughter that night to make 60 grand and go on a nice vacation where you could have spent even MORE time together.

  11. Never regret spending time with your kids.

    Maybe you could have done something different (like your new plan) but being able to spend that quality time is one of the reasons you are working so hard to start!

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