How did you complete your first rehab flip?

Question

We are going to start doing flips January 2015. We have wholesaled and own two SFR. For those of you that flip when you started out how did you do it? HML? Did you rehab yourself or hire out? Did you find it via your own marketing or a realtor?

Shawn Thom · Answer

My first one was extremely stressful.  If the key is location location location, this one failed.  it was next to a drainage ditch that was next to an apartment complex which was next to a convenience store.  HML added to the stress.  Nothings spells out stress like 14% interest and a bad location.

I'd look around for some better financing than traditional HML loans. I don't know about your location, but here in Dallas, you can find 6.5-8% interest with 1 point at quite a few places.  They are more conservative on what they will lend for, but you don't need some wore out crack house for  your first flip anyway.

I do as little work myself as possible.  I will typically limit my work to final clean up and exterior front landscape.  Everything else is done by some one else.  If you are paying interest, have some one who can spend the proper time to do the work in a timely manner.  i work full time and the last thing I need is to come home and then try to figure out how to put a tile floor in.

Alot of people try to stick to small cheaper house for a first flip.  I am not a fan of small flips.  In our area that mean houses that are $100-125k.  In that price range if you mess up and didn't realize you needed to spend $5k on an AC or a roof, that impacts your profit more.  On a $200k house you have a lot more room to fail and can absorb an AC or roof or plumbing issue easier and not loose money if you buy right.

I get all my houses from wholesalers.

David T. · Answer

I used a friend for funding against my better judgement, now we only use HMLs - it's actually cheaper and a lot less grief. Tried to rehab myself and got ripped off wholesale for time and money (heh), so now only use a GC for this stuff which can be tough to find. Bought it in an auction, but we stay away from realtors for buying properties and prefer to deal directly with the owners.

The key element of flipping is being in control, post to post and don't take chit from anyone. Best of luck with it.

Bryan L. · Answer

Well, it depends on which house you consider to be my first.  I consider it to be the one that I am still living in 12 years later.  We started accidentally.  My wife and I were looking for a house to live in.  We knew nothing about REI and weren't necessarily looking for a deal.  Anyway, we found an REO in the right neighborhood, made an offer, and got it.  It needed a good rehab, but nothing major (carpet, paint, hardwood, appliances, wall-paper removal, etc).  We bought the house with a regular bank loan just like 99% of the population, and we then rehabbed it with our cash savings (didn't even know the term "rehab" at the time).  So, we had equity due to being able to buy it at a bit of a discount and due to doing the rehab (and due to the down-payment that we put on it).  We did most of the work ourselves on this, but did hire a couple of painters to finish up when I needed to go back to work (and we also hired flooring installers).  Next, we went to a different bank and got a HELOC on the equity of this house that we bought to live in.  Next, I used the HELOC to buy and fund the rehab on my first rehab-and-flip (so, maybe one might consider this rehab-and-flip to be my "first").  I hired out most of the work on this one.  Only made about $4000 - $5000 on that first flip, but I was hooked.  I've bought and rehabbed about 30 properties total since then.

Ophelia Nicholson · Answer

First flip was in 2011 and it was a house that was down to the studs- We changed everything on that house except the roof. We did all cash for purchase and rehab and my uncles did the work. Rehab took 6 months. We bought for 62,900 and sold for 191k. We found it on the MLS- it was easier in 2011 to find MLS stuff.

I would say that as bad as hard money is - It's also motivation to hurry the hell up. I think that was one of the reasons we took so long to renovate because there was no one over our shoulders and that made us drag our feet.  There was no need to hurry- So there was a loss of opportunity because when you buy a house in December and sell it in August its not cool.

Now my reno's on the market by week 4- 5 and sold by the time I'm a 120 days-Usually quicker than that. Time is money. Doing the work yourself leads to spending more time in a property. And if you have all your money tied up in one property then you can't do another deal till that one you have sells even if that's 8 or 9 months down the line.

Ryan Dossey · Answer

@Shawn Thom  If i could give you more than one upvote I would. That is excellent advice!

Ryan Dossey · Answer

Great advice @David  T.

How did you complete your first rehab flip?

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