Overspending on first house fix and flip

[Emily Alexander]

Hello! We bought this house in May 2023 for $300,000 south of Dallas Texas. It’s a 3br, 2 bath and needed to be completely gutted and repaired. Most houses in this neighborhood are selling for $400k or more with basic renovations, and we have put in about $100k in renovations. When we bought it and had an inspector look through, we were originally expecting to pay $55k. But when we started tearing down walls, we noticed the ceiling joists were broken and had to be fixed ($4k), foundation was cracked and uneven ($10k) and the electrical needed to be redone (20k). We also tore down all the drywall because the previous owner smoked in it daily for 30 years and the electrician said it’d be cheaper if we just tore down the drywall, so we had to pay $30k for someone to come through and put new drywall, tape, mud, texture, and paint when the electrician was done. So all in all, we have spent $64k on unplanned costs and spent a total of about $100k on renovations since buying it, And still need to get new cabinets in the kitchen and finish the second bathroom (still down to studs). It is currently our primary residence, we just had a baby so I’m not working at the moment, but our plan is to sell it in 2024/2025. I guess I’m wondering if anyone has overspent on a flip and what you did about it financially? Is there any hope that we might make our money back and be okay? Is there anything we can do to mitigate costs? We’re just really kicking ourselves and upset that we even bought this place. 

[Chris Seveney]

Quote from @Emily Alexander:

Hello! We bought this house in May 2023 for $300,000 south of Dallas Texas. It’s a 3br, 2 bath and needed to be completely gutted and repaired. Most houses in this neighborhood are selling for $400k or more with basic renovations, and we have put in about $100k in renovations. When we bought it and had an inspector look through, we were originally expecting to pay $55k. But when we started tearing down walls, we noticed the ceiling joists were broken and had to be fixed ($4k), foundation was cracked and uneven ($10k) and the electrical needed to be redone (20k). We also tore down all the drywall because the previous owner smoked in it daily for 30 years and the electrician said it’d be cheaper if we just tore down the drywall, so we had to pay $30k for someone to come through and put new drywall, tape, mud, texture, and paint when the electrician was done. So all in all, we have spent $64k on unplanned costs and spent a total of about $100k on renovations since buying it, And still need to get new cabinets in the kitchen and finish the second bathroom (still down to studs). It is currently our primary residence, we just had a baby so I’m not working at the moment, but our plan is to sell it in 2024/2025. I guess I’m wondering if anyone has overspent on a flip and what you did about it financially? Is there any hope that we might make our money back and be okay? Is there anything we can do to mitigate costs? We’re just really kicking ourselves and upset that we even bought this place. 

 If your plan is to sell it in 12-24 months, I would limit the work you to do what needs to be done and what is norm for that price range. For example in the bathroom do what others have done, do not select some expensive wall and floor tile or super expensive fixtures. Also do not go cheap, but do not overspend. 

Things like removing all the drywall, next time speak to others as you can get paints and other items to seal the smoke out that would have cost you 70% less than what you spent. 

Curious, did you get a home inspection on the property, as how did you find out the foundation had issues, and was that not caught during the inspection.

Also I wonder if the damage was required to be repaired or recommended. Big difference as foundations and joists crack but does not mean they lost their structural integrity.