Flip going south: Here is my story. I need advice on what to do

[Femi Ibrahim]

I need advice on what to do on my current flip

I bought a single-family house (SFH) in the Dallas Fort Worth (DFW) area from New Western Acquisitions in June of 2019, and my experience has been bad and horrible. I'm still working on the house right now. I seek your advice.

These are the financial details of the house:

Purchase Price: $140,000

ARV: $230,000

Estimated repairs: $40,000 (We’re currently at $53,000, I estimate an extra $7000 to complete the house, making repairs cost totaling $60,000).

Hard money loans: $125,000 for acquisition. I am using my cash for repairs.

Estimated profit after closing cost, sales commissions, hard money interest was supposed to be about $20,000. Right now, I am at a loss.

The house is a 3 bed 1 Bath house, about 1400 sqft. I estimated a repair period of one month before I noticed a lot of issues with the house.

We applied for permit at the city, and we were told that there was no construction permit or plans for the house with the city. In other words, the structure was a cabin by the lake, and additional rooms were added, all without permits.

The building department of the city referred us to the city board to get exception to continue the renovation of the “non-conforming” structure. I have to wait another 2 months to appear before the city to determine if I can go ahead with the structure or not.

I have title insurance and owner’s insurance. I was told by the city that I should seek legal redress as that structure should not have passed a title search.

I don’t know what to do at this moment. Can I seek any legal redress against the seller as the whole structure was not permitted?

I would love your advice at this point.

Thanks

[Lydia R.]

@Femi Ibrahim The first mistake you made was speaking to New Western. This is their business model. Over estimate ARV and under estimate repairs. They prey on new investors who dont know what they are doing. If you are going to be an investor you have to do your own due diligence. Never never just accept the information that is being given to you. If someone starts pressuring you or saying that you need to make a decision right now then walk away. Any good wholesaler will give the buyer time to do their own due diligence. Im sorry to hear this happened to you, but unfortunately this is going to be a hard lesson for you. A lawsuit against New Western will just waste your time and money.