Any Unsuccessful Flips?

Question

Hello everyone. My Name is Sam and I am new to the forum. I am taking steps to rehab and purchase rental properties. I live in the LA, CA area. I have been reading for the last few weeks and have found some great info so thank all of you.

With all the success stories that I hear almost every day on flips I would like to see if there are some unsuccessful flip stories. What lessons where learned and how you overcame them.

Thanks for all the great info and I look forward to contributing in the future.

Sam G.

Bryan Casteel · Answer

Saga,

For sure the hardest deal is the first one.  A very comforting thought is that a good deal comes along all of the time.  There is always a day when a good deal comes into the market.  The trick is to be active in the market so that you can spot the deal and take action.  The more experienced people with bigger pockets will grab some from you, but just hang in there and I promise you will get one and it will feel good.

N/A N/A · Answer

I have a bad tenant story for you, as I still am getting going on the flipping side of this business. We rented to a guy, who claimed that  he was a research assistant at a local hospital, and his girl. They were just moving because supposedly they had a fire at their last place that was started by their landlord. (I knew of the guy and could believe it). They move in and a few months later, the upstairs apartment gets burglarized by the door that leads from  THEIR  apartment downstairs, the cops find him coming home with a screwdriver in his pocket after he takes off when we got there. He gave permission to search his pad, but forgot to remove everything when he left, so we found a necklace. We evicted them, and when we went in to clean all of their stuff out, we found out that as a hobby she was a drug mule, and he stole luggage from the airport. 16  LARGE pieces of luggage all thorugh the house. We screen much better now. Don't call their last landlord, call the one before that. Oh, and he wasn't a research assistant, he was a research  TEST subject. *a guinea pig* Things have gone much better since then.

N/A N/A · Answer

ProHabber your site is excellent and I have spent a few hours on it since your  post. Jared thank you, I feel the same way you described. I want to jump in as well but know I must have the patience to be ready for the right deal. Takleberry, an excellent point.

Thanks for the insight; my biggest concern is that in my area (Los Angeles) there are so many motivated flippers that a newcomer like myself feels intimidated. I think, how can I get into something before someone with a better eye and bigger pocketbook gets to it?

Jeff Takle · Answer

Jared,

This is a great thread--I'm hoping to hear more stories from others. It's very refreshing to hear the details, even the specific details, of how deals went wrong.  That's very helpful in clearly understanding the risks involved in the business, something most people avoid talking about...when they are selling you their latest "system"...

I haven't (yet) had any unsuccessful flips, but I definitely have had tenant problems. Guy called with sob story about why rent would be late and I said that I appreciated his being upfront and trying to solve the situation so I would work with him. Worked fine for month #1 but he never got back to paying on time and EVERY subsequent payment was late. Abou $3,700 in rents and damages later, I've been chasing him around Maryland for the money.  Bad call.  As much as I hate to do it personnaly, taking an all business hard line as a landlord seems to be the clearly correct path.

N/A N/A · Answer

I have a couple of good ones for you.  First off, I live in the midwest, so some of these numbers may make a few of you laugh.  I bought a 1700 sq ft 4 br 2 bath for 24K.  Put about 14K into it, so all in at 38.  Put it on the market in November for 69,900.  Well, it is now March (5 months later) and I just lowered the price to 54,900 with no bites yet.  The big mistake was I have a formula for buying, and I altered it just to make a deal.  I am guessing the home will sell in the low 50's and I will make a small profit, but for how long this has sat and tied up 38k, it was definitely a mistake.

Next mistake.  I bought another house for 37,500.  I bought it from a sweet little old lady that was behind on her taxes.  My plan was to put about 13 in it, so all in around 50K, and then sell it for 80-85K.  Sounds great except this lady was a pack rat and in the agreement at closing, she was to be out two weeks after that date.  Realistically this was just not possible and I chose to ignore that fact because I had a deal.  Three months later after I had her evicted and took her to court for back rent plus charging her for cleaning out all her crap I almost have it ready for sale.

The moral of these stories??  Patience.  I read these forums and success stories and I was FIRED UP!!!  I just wanted to be like one of these big shots here and roll in the money.  Patience.  That's all.

Jared :mrgreen:

Bryan Casteel · Answer

Great question Sam.  This is one of the more shocking realizations that I found when getting into the rehab business.  When you hear other people talk about how to do it, you only hear about the best stories of the best deals.  Many people leave out the dirty little details.

Last year I gave a presentation to the local REIA called the "Gator Presentation".  I called it that because I wanted to point out some ways that investors can avoid "alligators" that bite you in the deal.  I got a lot of feedback from people saying that they were glad to hear about all of my mistakes and troubles because all they ever hear about are successes.  I pointed out that all of the deals that I talked about ended up being successes but not as big of a success as I had planned because of the troubles that I ran into.

I summed up some of my learnings with the following rules to investing:
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