First Deal Completed - Lessons Learned

[Mike Flint]

Hello All,

I’ve been very quiet here on BP as I didn’t feel it appropriate to post much since I was only starting out. Now that I’ve fully completed my first flip, I wanted to share the details in the hopes I can get additional insight from you experts and pass on what I’ve learned to those starting out.

I'm investing out of state: where I'm from, but do not currently live. I have family in the area to be my eyes and ears on the ground. My preferred niche is BRRR, but am also open to flips, which is what I ended up doing on this property since the numbers didn't work to make it a rental. Below is an overview of the deal.

Purchase price: $72k

Repair cost: $15.9k

Purchase, holding & sale cost: $17.4k

**This is everything: loan service, utilities, insurance, maintenance, closing costs, etc.

Sale price: $125k

Profit: $13.5k

Holding time: 14 Feb – 20 Aug (188 days)

ROI: 13.7%

Annualized ROI: 26.6%

Lessons learned:

I should have discussed closing details with my realtor prior to buying. In this market, it is standard that the seller pays the buyer’s closing costs. I did not expect nor account for this and only learned of it when I got my first offer and spoke with my realtor about it. Obviously, this had a non-trivial impact to my profit.

I had no idea finding a contractor to conduct repairs could be such a challenge. I have money and they want to practice their trade to get it, right? Turns out it’s not that easy. Just like you’re trying to find a good contractor, they’re trying to find good customers…and maybe they have all they either want or can handle at the moment.

I need to write down every detail I want addressed by the repair contractor. Ensuring the details you care about in the repair get done are more difficult than I expected. I did not communicate enough about the small things because I was too worried about the contractor thinking I was a pain, but in the end, resulted in me having to ask them to go back to the property to address them in three waves.

I shouldn’t let the small things worry me so much. The little things seemed to take most of my energy/time/worry. Getting the property on a regular lawn maintenance was a bigger challenge than I expected.

I need to always ensure I have room in the deal for unforeseeable/unpredictable circumstances. I, along with most everyone else I would imagine, did not account for the additional holding time I encountered due to COVID.

Remember than in addition to a real estate investor, when I buy into a deal, I’m also the home owner. That means that new repairs may be needed, such as an HVAC failure two days before closing that I encountered with this property.

I must work as hard as I can to become a cash buyer. I learned that lenders can flat out just leave you whenever they want, even if you're already under contract. I'm using HML and my experience with the company had been great, until I was 1 week out from closing on another property (while working the subject property), when they stopped all lending and left me without options except to let the property go. I lost some money, though fortunately, not a lot. I understood the rising lending risk due to COVID and understood not initiating any new loans…but take exception to being left out to dry so close to closing after the loan was already approved and ready to go.