Need Advice on My Flip Please!

Bird Dogs, Wholesaling
1

Hi, everyone,

I posted this on a different forum, but I thought I would try my luck here since I am also dealing with a flip.

I began working on my first flip last month, and it has been a total disaster, or at least I think. It is on a REO duplex that we bought wicked cheap.

Purchase price, including fees: $5000
2 unit, 3 bd, 1 bath each side
COMPS: $45-65K

Mistakes I know that made:

Allowing my husband to hire his “friends” so we could get good work done at a fair rate.

Not being tough enough: I let too many cooks in my kitchen, and I took too much advice from people who don’t know sh*t, b/c I am -WAS - too soft… .

I went through THREE drywallers, none of whom finished the job. HELLO! How many weeks does it take to freaking drywall 1000 sqft??? I am so frustrated and bummed.

Otherwise, I thought I did everything pretty textbook, if you can use that term in the RE business. I did my research, I shopped around… It still doesn’t seem like I am going to make a profit here. I’m afraid that I will have to claim it as an entire loss or even worse, with my luck, have any profit get eaten up by taxes and fees.

I really want this to be my thing, but I feel like such a failure. How can I save money on this deal without hurting my family financially. I have already sunk about $25,000 into it, and it looks as though I will have to put in about another $25-30 to get it all right, to clean up mistakes. Finished, turn-key, on the market.

What can I do? Please help!

2

My 2 cents: Don’t put any more money into it. Try to sell to an investor, you should have done that first and not go through all the BS you’re getting. Buy, fix, and sell is alright but not with the people you have doing the work. Herbster
PS learn how to drywall, its easy just dirty.

3

As herbster said,try to move it to an investor.Take it as a lesson,don’t give up.Just research construction costs next time.It’s pretty easy to get professionals to do stuff at a fair price right now cause of the new construction slowdown.Sorry to hear of your bad deal,this is why I keep friends/family and business all far away from each other.3wks on drywall,should’ve been 3days.

4

Every deal you’ll learn a lesson. And you have to look at it like it cost you 25k to go through this school. Its a learning experience.

If I were you I would lease option or sell it with owner financing to a retail home owner.

5

I sure would like to know what 25-30K to get it all right consists of. Houses I buy for 5K are done with another 20-25K put into it. Remember, you can drop the flip idea and fix it up for rental which will cost you significantly less.

Keywords for rental are “safe” and “clean” but not “perfect”.

6

Hello again, everyone,

Thank you so very much for responding.

Herbster - I have actually done my share of the drywall finishing, believe it or not. I textured some walls, taped, sanded… I enjoyed it, but I am not that great at it. It is certainly a fine art. My husband and I did a lot of the demo, I painted, came up with the design scheme… I certainlu learned a great deal about home repair.

Hooch - the money we spent thus far has been on reconstructing the innards of the duplex - we ripped everything down to the studs pretty much and started fresh. New wiring, all new windows (27 of them), new doors, new everything… Demo took us a lot longer than we expected, and then there’s that da*n drywall issue. No kidding - 4 drywallers!!! The first two were dopers… The third turned out to be a racist wack-job who threw the “n” word around like it was just ok - fired him quickly. (He actually scared me). The fourth was ok, but he blew off the job site a few days when he promised to be there. Time is money. If this were a single family home, I would be more or less done for this price, but I have two units to do. I guess I didn’t really do enough homework.

Thanks again for all of your advice. I will certainly take it under advisement.

On a lighter note, I called some more agents today, and I got some much better numbers in terms of selling it completely rehabbed. (Mid 80’s). Thoughts?

Muchas gracias - thank you everyone!!! :biggrin

7

Hooch - the money we spent thus far has been on reconstructing the innards of the duplex - we ripped everything down to the studs pretty much and started fresh.

Ok here is your first mistake. Please learn from this and never gut a house again. I also buy 5K houses and it is MUCH less expensive ripping out a ceiling or two only where needed. Or cutting out the bad area and replacing it with sheetrock. ONLY the bad area. Spending a little time blending it in. Scraping off the peeling paint and texture the walls which will hide it. ETC.

New wiring, all new windows (27 of them), new doors, new everything…

Don’t do this on your next one. I often have a seller come to me after gutting a house and ask me to buy it. I feel like ringing their neck because now that they have done that I can offer them significantly less. You are thinking Flip like you see the idiots do on TV. You need to think of flips as repairing what is needed instead of building a new house.

I guess I didn’t really do enough homework.

Wrong, that is not the issue. The issue is that you watch too many flip shows and think the way these fools do it is the way the pros do it. A good flipper will become the master of disguise. Will have experiance on ways of making rough walls look good, etc. I’m not saying to hide a serious problem. I am simply saying to learn how landlords do things and step it up a notch since it is a flip.

On a lighter note, I called some more agents today, and I got some much better numbers in terms of selling it completely rehabbed. (Mid 80’s). Thoughts?

Think of things based on a worse case scenario. If things turn out better than that’s great.

Now that you are moving to fix the outside, prior to getting crazy with the thing, I suggest you post what you are going to do before doing so. Take your 25-30K estimate and cut it in half by doing things in a more cost effective manor. You already spent too much on the inside so it is now time to recoup some of the losses on the outside. Don’t screw your family financially. It’s now time for you to make sure that you know what you are doing prior to doing it.

Ask the experienced investors here so you can get ideas before making your moves. That way you will walk out of this and be prepared for the next.

I am assuming that you are selling this to a landlord. Go here to determine the value of that house to an experienced investor. Look at either the Hooch method or the 2% rule depending on it’s location.

http://www.reiclub.com/forums/index.php/topic,43281.0.html