Under Contract But Stretched Myself Too Thin - Sacrifice Escrow on Philly Row and Walk?

[David Ross]

Hey everyone! Long time listener, not much of a forum guy but I thought you might have some good advice.

Back story: Renovated my own house. Grew up in contractor family. Ready to branch out and invest like a saavy investor. I met a partner through BP and we have around $45k to invest collectively. 

Looking to make my move into real estate investing, I jumped at an REO last month in the hot Brewerytown area of Philadelphia. Did lots of research and planning, but I may have bit off more than I can chew. Let me know your thoughts:

3/1 Philly row home. 904sf. ARV $125-135k.
Needs a full renovation $60-70k (using GC). (3-month renovation)
Purchase $30,500
All-In: $100,500.
Net potential profit after closing closing, holding, taxes, etc: $6,500-$26,500

There were a dozen or so cash offers from investors and I edged them out and got the property under contract for $30,500. Two days later I was submitting 10% escrow ($3,050) and started looking at detailed renovation quotes.

Here I am, excited, nervous, and ready to make it happen. My credit union is willing to do a renovation loan for me at $100k (20% down and $80k in draws)

While this planning was going down, partner lines up a much easier property and we get that too under contract:

3/1 Philly row home, 960sf. ARV $115-$120.
Needs LIGHT renovation $20k (using GC). (3-week renovation)
Purchase $60,000
All-in: $80,000
Net potential profit after closing closing, holding, taxes, etc: $13,000-$18,000

So while we were ready to stretch ourselves thin, we are feeling it's our best interest to drop the first property and walk away from $3,050. Yes, $3k, burned to a crisp before I even start my real estate journey.

It's painful, but a more focused effort on the second property and the better risk/reward make this the right decision.

Hey, that's the price of education I guess. It's still cheaper than some guru course!