First “Official” Flip Completed

[Ryan Collins]

It’s been a long time coming. I think I joined BiggerPockets back in 2015 and I might’ve found out about the podcast around the same time. Even prior to that I’ve always had an interest in real estate because I’ve always seen it as the best means of financial freedom and getting out of the rat race. Now that I have a family I see it for the even greater tool it will be. There’s nothing like being able to reclaim your time and spend it with those most important to you.

I did my first “unofficial” flip as a live-in (in Cleveland, OH) when I bought it in 2014, and stayed there until 2017 before moving to Houston. Since moving here I’ve picked up a new job, new baby and a new primary residence. So my time has been a little occupied to say the least. Hence the reason for it being almost 4 years before being able to pull the trigger A LOT was happening every one of those years (not to mention getting engaged & married 2015-16). During that time I can’t lie I felt like a failure to my all time goal of RE investing. I had it set in my mind even prior to graduating college at 21 but for one reason or another I was constantly sidetracked. And there I was at a crossroads about to exit my 20’s and in my opinion still hadn’t taken serious action other than buying, renovating and selling my starter home.

FINALLY at the end of 2018 when things started to slow down for me I began to seriously entertain the idea of partnering with my father. We came to terms in May that year and agreed to a 70/30 (me/him) partnership. My father agreed to oversee the contractors and occasionally check in on the property since he still lives there. I handled everything else.

We found our first deal in late August 2019 in the Lee Harvard area of Cleveland. We bought it off of the MLS for $45k. It was a foreclosure that had been recently renovated in 2013/14 with a new roof and mostly required cosmetic updates. We intended for this to be a 30 to 60 day flip but we went with the wrong Contractor. And with the type of financing we used for this deal it was very hard to find another contractor willing to accept the lenders terms. It took about a month to find the replacement contractor, and then another month to get them on board because of the slow rep we were designated. I could complain about the terrible experience with this lender but that would be another book. Through it all we persevered and we have finally got our first flip to the market.

Here are the numbers:

Purchase Price - $45k

Renovation - $17.1k

Holding Costs (To Date) - $3.5k

List Price - $99.9k

15% Down Payment

Closing Costs & Points - $4.5k

At the end of the day this wasn’t the expected home run deal most newbie investors like me seek. We hurt ourselves and at the same time learned lessons you hear about but don’t fully understand until you go through them. I did not want that to happen but from an optimist perspective I’m glad we got burned now so it won’t happen again down the road. And even in the end albeit small money. Money is money and we won’t lose anything. This will be helpful as I attempt to scale my business interests in this market and others.

Biggest Lessons Learned:

1. 1. It’s probably best to keep business and family separate - the initial contractor was distant, distant family
2. 
   2. Make things clear with your contractor and establish ground rules up front
3. 3. The MLS is cool for when you sell. But be extremely conservative when buying from there.
4. 4. Don’t gamble on the neighborhood
5. 
   5. Make sure if you partner with anyone they are knowledgeable about the ins and outs of everything

Exit Strategies:

1. 1. Primarily looking to sell by traditional means right now - my father has decided this game isn’t his primary focus right now and would like to direct his attention to other goals. So this route will make it a little easier to sever ties. He’s still interested in investing with me but primarily only as a lender
2. 2. Owner financing
3. 
   3. Rent & Refi

Thanks for reading! I feel like this is a BIG deal for me to finally be able to post a testimonial lol. God bless & I will try to do my best to answer any questions/follow-up as quickly as possible

P.S. - I typed this in Apple Notepad so if it comes out funky when it posts please excuse the formatting