First Deal Gone Wrong

[Jake Lord]

Hello all,

A business partner and I have found ourselves in a pickle with a single-family rehab project that we are looking to flip on the backend. This is a 3 bed 2 bath home that we found on Craigslist and purchased directly from an owner who was originally planning to flip the property himself.

The problem with this one is, the house is in really bad shape and needs much more work than we originally expected. Being first-time investors, we had connected with a contractor to do the work and came to find out on the day we got the contract that he was unlicensed and did not have insurance, etc.

Our inspection contingency period was 10 days with a 3-day contingency following receiving the inspection report. During that time, we continued to try and figure out how to make the deal work and not back out, so we overran the contingency.

Currently, we are in limbo waiting for the title search to come back before we close. However chances are, we will be contractly obligated to move forward with this one, so we need to make it work. It would be great to get everyone's opinion on how they would best go about making the most of this deal.

Here are the numbers for your reference:

- purchase price: $25,500

- estimated repair cost: $40-70K

- taxes: ~$4,250

- expenses: no legal fees (family is lawyer), inspection = $450, title search = $700; cash offer out of pocket, so no interest on a loan

- estimated ARV: ~$100k (conservatively high)

- down payment: $9,000 (yes, you read that right. why did we put $9,000 down? great question, who knows.)

Let me know if you'd like any more information. Thanks!

[Clint Shelley]

If there's no way to cancel the purchase, you could close and do a little cleanup and flip to a first time buyer who can do their own work. Flip to a better equipped rehabber who can buy you out flush. See it all the way through so you can take your exam at the end of the semester and see what you score and how much you learned. Is there extra land that could be sold off as a separate lot? Good luck.

Clint