Where do I go from here? Here's how I made $85 K....now what?

Rehabbing & House Flipping
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Where do I go from here? Here's how I made $85 K....now what?

Devan Johnson
Fort Collins, CO · Member since 2015 · 24 posts · 15 votes

Hello folks!

I'm new to this forum, and eager to gain more knowledge, as I'm on the cusp of making bigger investments. However, I'm lacking a plan to move forward. 

I want to share my story and get some feedback. I live in Ft. Collins, Colorado currently.

My story: Graduated college, learned multiple trades (tile, stone, trim carpentry), worked as a contractor, remained poor, changed course, college again, and went into Healthcare, built a nest egg. I always wanted to fix up a house and sell. 

Feb 2013: Bought a house in Orlando, Fl (College park) $112K cash. Built 1939 2 bed , 1 bath, 900 sf. Moved there from Colorado, temporarily. The House was pretty beat, termite damage, etc. 

This was a conventional sale, used a realtor to buy, didn't understand foreclosures or short sales or auction process.  And I still don't understand any of that honestly.

I knew the comps, and knew the market was close to its nadir, so I honestly knew it was the right call. Still scary though, I'd never bought a house! It was the classic cheapest house in the most expensive neighborhood. 

This was the kitchen during demo. 

I won't go through the entire process, but my remodel did not add square footage, as I'm not comfortable doing that by myself. 

 I did do a complete kitchen, bath and front porch tearout. Did some plumbing and added a couple circuits, nothing major electrically.  

With a few minor exceptions (landscaping), I did every bit of the work myself. I even had to buy new tools, as my set up was still in Colorado!

This was not really a "flip". I bought the house for my wife to live in as she did clinicals in Florida for 2 years. I knew I would sell it, so I decided to make it my project. 

I Invested about $15 K and about 5 months time into this project. 

We did live through the remodel, which definitely poses a challenge for most people. To make matters even more difficult, I was living in Colorado while my wife lived in the house. I was commuting once a month to Florida from Colorado. Damn, that sucked!

As we got close to selling time, I did my best to research comps. I put together a comprehensive spreadsheet. I wanted to squeeze out as much value from the house as possible. 

Because of this I decided to sell the house without a realtor. Many people told me this was a terrible idea. When I did the numbers, I decided I had to try to sell without a realtor, I felt the entire process was a total racket. But I also knew FSBO without an MLS was a waste of time.

So I simply bought an MLS number for $300 (still a rip off), staged the house, took the pics, marketed and did the showings. Here's how it looked at selling time:

Poured and polished concrete counter tops with recycled glass aggregate from beers I drank! Everyone told me granite was the only way. Whatever (so cliche). Less than 1/4 of the cost, but labor intensive and you'd better know what you're doing.

Obviously, I could go into more detail about the remodel work I did, as this required a lot of forethought as well. But I'm more interested in what people think I should do going forward.

In the end, the house sold for $212K. This was over asking price. I had two offers in 48 hrs. I did the showings myself and was as honest as possible to any potential buyers about the quirks of a house built in 1939. I used the same titling company I had used to purchase the house at closing (saved me $). Inspection went well.

To be sure, nobody knew this house better than me, definitely not a realtor. 

In the end, I profited $85k. I will not be hit with capital gains, as my wife lived in it for 2 years.

Lessons learned:

Timing is everything. The current market is not conducive to profits such as this. (And this is why I don't know how to move forward). 

Make it your Job. I have to devote myself fully to a project or it won't get done. Not just swinging the hammer..this includes marketing and research.

Research comps. Easily done via Redfin or other websites. 

Selling without a realtor is possible and potentially easy. Yes, I sold in a good market, making things much easier. That being said, if you know the process, do your research and be honest and friendly, it's worth a shot in any market. I'm kinda surprised the profession is not yet obsolete.

Questions for the pros out there:  

How do I reinvest? I am now in a new area (Ft. Collins, CO) and the market is obviously super expensive. A conventional purchase is out of the question. I feel the market is now absurdly over speculated. I cannot find any value here!

Foreclosures are rare and confusing. I've been to the county auction, but I do not feel comfortable bidding a house when I can't inspect to know the condition. Additionally, it's all cash! I have a lot , but not close to enough. 

The only way forward as I see it is to find a house before it goes to auction, and this process is again confusing. Any advice?

My goal is to find a rental here (college town, built in supply), but it is very discouraging. I'm more than happy to make this my job again, but in this market, my profit would be zero. 

Ok experts, let me have it. And thanks in advance!

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Erica Osborn
Investor · Tucson, AZ · Member since 2015 · 103 posts · 97 votes
11y

Hey Devan! Great project. I lived in College Park on Harvard Street for many years. That is a great neighborhood and your finished product is beautiful. I like that you didn't change the exterior look of the home too much, like so many do when going into the older areas, keeping its cottagey classic style!!! :)

I would get yourself some education on alternative methods of finding deals, it's fun and from what you mentioned it appears you like rolling your sleeves up, researching, etc. I have recently gotten very into the County auctions and there is a lot of information on the process online, since everything has to be public. If you know your areas very well that you are farming, get signed up with the County and start looking at who's buying, where are they buying, maybe team up with someone with a great deal of expertise in your area and learn how they are snatching up the deals. I am in a smaller market, but there are only about 5 main players (one very dominant) in our County auctions....you'll get to know your competition right away. I joke that I am waiting on him to go on vacation so I can get the deal that he missed :) When you are comfortable with your area as well and get some more deals under your belt, you may be more confident to go after those non-conventional deals.

It can be overwhelming the options of ways you can make these deals happen, choose one at a time and research it until know it front to back, once done, move onto the next. Get comfortable with these ideas and processes, then practice! You obviously have the talent, now go out and learn about some funky ways to make the next deal happen!

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  • Stuart Birdsong
    Investor · Fort Collins, CO · Member since 2015 · 304 posts · 112 votes
    11y
    @Devan Johnson:

    Devan,

    That looks like a great rehab you completed! Well done! I too live in Fort Collins and can attest to the challenging of finding good deals in the current market, although they are out there. You should go take a look at some of the new listings, there is actually a good deal on MLS right now. 185k 3/1 good location. Just a thought. If you're looking for some networking opportunities there is a Local Investor group that gets together, usually every other Tuesday call ICOR. It might be a good place for you to connect with some local investors who might help point you in the rights direction. Please feel free to PM me if you ever want to chat about the local market. Best of Luck to you! Cheers!

    Stuart

    0Reply
  • Devan Johnson
    OP
    Fort Collins, CO · Member since 2015 · 24 posts · 15 votes
    11y

    Stuart, I greatly appreciate you reaching out! Sound like your meet up would be a great resource. Expect me to get in touch.

    I've looked at that property, BTW, 900 sq ft 3/1. Hmm..kinda borderline, but Im sure it will go fast. Crazy market.

    Thanks again.

    0Reply
  • Devan Johnson
    OP
    Fort Collins, CO · Member since 2015 · 24 posts · 15 votes
    11y
    Originally posted by @J Scott:
    Originally posted by @Hugh Ayles:

    @J Scott

    Just curious, why would you advise against someone working on their flip?

    I've written a lot about this, but here's a quick summary...

    Presumably, you're flipping houses in order to make money.  And presumably, more money is better than less money.

    When you do a particular task yourself, the value of that task is essentially the money you're saving by not hiring it out.  So, if you decide to paint a house, the value of you doing that work is whatever it would have cost you to hire out the painting.  Typically, for contracting work, you can hire stuff out for between $10-40/hour.  So, if you're doing the painting yourself to avoid hiring a $15/hour painter, you're essentially earning $15/hour for the time you're doing the painting yourself.

    Did you get into flipping houses to earn $15/hour?  If so, go for it.  But personally, I flip houses so that I can earn at least $300/hour (and hopefully closer to $500/hour).  Unless I'm doing a contracting job that would cost me $300/hour, I'm not accomplishing my goals by doing the rehab myself.

    So, the question is, what flipping jobs earn $300+/hour?  The answer is typically three things:

    1.  Finding deals: If it takes me 40 hours to find a deal that generates $20K in profit, that's $500/hour to find deals.

    2.  Raising money:  If it takes me 40 hours to find the cash to do a deal that earns $20K in profit, that's $500/hour to raise money.

    3.  Business strategy:  If I spent 40 hours working to figure out how to increase my annual income by $20K, that's $500/hour to raise money.

    I can't think of many other tasks that can generate $500/hour, so I tend to focus on those three.

    So, my recommendation would be, instead of spending time rehabbing your houses, spend your time finding more houses, finding more money to buy those houses and think about how to improve your business strategy to generate greater profits on those houses.

    Unless you'd rather just earn $15/hour...

    All excellent points in your situation. However,  I'm trying to put this in context. You are a pro with a well oiled machine of connections, strategy, financing and market experience. I'm trying to keep this geared toward the newbie such as myself. I cannot find a deal after about 6 months of effort and research (from your excellent book, I might add). This is a fact that cannot be overlooked.

     Of course I prefer to earn your rate of $500/ hr. That number represents your experence I outlined above. Starting out, my time is obviously not worth yours, not even close.

    So to sum up, I have no doubt your time is worth that incredible number, but it represents a foundation you have spent years building. I do not have this foundation, so I maintain, my value is in my skills (for now). Perhaps someday my time will command what yours does, for now, I stick with what I know.

    1Reply
  • Devan Johnson
    OP
    Fort Collins, CO · Member since 2015 · 24 posts · 15 votes
    11y

    One more point that I cannot emphasize enough: Quality. I take a lot of pride in what I build and I want that to reflect in my work. That is why I found it so easy to sell my home sans realtor, I actually believed in what I was selling.  

    I am regularly shocked at the poor quality work that goes into flips. When I do the work, I know exactly how it was done and materials used. I know how to properly install a concrete countertop and proper thinset and subtrate for stone as opposed to say ceramic.  Yes, Im pedantic, OCD , whatever. So there's that :)

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    11y
    Originally posted by @Devan Johnson:
    So to sum up, I have no doubt your time is worth that incredible number, but it represents a foundation you have spent years building. I do not have this foundation, so I maintain, my value is in my skills (for now). Perhaps someday my time will command what yours does, for now, I stick with what I know.

    First, don't sell yourself short.  Just reading your posts, it's clear you have all the skills necessary to be successful in this business (foremost, the fact that you're thinking about these things at all -- which most people don't do).

    That said, I 100% agree with you that you can't expect to earn high hourly sums right from the start.  Here's the thing though -- I didn't learn how to generate $500/hour in this business by doing contracting work on my deals.  I learned how to find houses, raise money and build a strong business strategy by practicing finding houses, raising money and thinking about business strategies.

    I promise it won't take you long to get your hourly rate up to a very significant amount IF you spend your time focusing on those areas that generate high hourly rates.

    You said it took you six months to find your first deal -- if you spend all your free time doing contracting work, it will probably take you significantly longer than six months to find your next deal.  But, if you start looking for your next deal right now (while someone else does the contracting work), you'll have your next deal in likely less than six months (because you'll apply what you learned from the first deal).  Then, the next deal will come faster than that.  And the following deal even faster than that.  

    You get good at what you practice on.  If you practice painting houses, you'll get good at painting houses; if you practice finding houses, you'll get good at finding houses.

    Podcast Guest on Show The Truth About Real Estate Investing in 2024 (What Investors NEED to Know)
    2Reply
  • Blake Stevens
    Investor · Fort Collins, CO · Member since 2011 · 38 posts · 14 votes
    11y

    Devan,

    Real Estate is great because it can be scaled to so many different levels.  There are happy rehabbers that take the craftsman route and do the work they enjoy doing on a project, sub out and construction manage the rest and do 2-5 houses a year and make a good living. 

    That sounds more like the route you would want to go or keep your regular job and flip a couple of houses a year on the side.  Or do the nomad model or house hacking method you did on this one, and buy a house, roughly at retail value, add a major renovation and the sell it without taxes after 2 years living in it. 

    I do real estate locally in Fort Collins and I'm not handy and I have a full time job so I focus on the things J Scott lined out plus project management and property management on top of the list of things he focuses on.  I'm open to helping you out and can share courses I have and my knowledge.  But it sounds like you need to do a gut check because your mental game seems off.  Maybe you are just bummed out but when someone on the thread suggests you do something, you reply back with an excuse about why you can't do that.  Don't limit yourself, stop thinking of yourself as just a newbie.  Dive in and learn the skills you don't have, like acquisition and knowing the funding sources and maybe deal analysis and valuation.  You are already better than most real estate investors on construction knowledge but does that translate to your estimating for making offers. 

    There are a ton of cheap local trainings, where real deal people go along with newbies. ICOR, bigger pockets meetup in Louisville area, Mindy Jensen has details on that. NCREIG is a free traning class held weekly be a real deal investor Brian Williams and great buyers agent James Orr. Every wednsday at the board of realtors. info on meetup. Local REIA group ICOR has a library where you can check out for free all kind of Guru real estate courses for the old presenters that came through.

    It's tough to buy in this market but a guy that I know that works a full time demanding job at HP flips 10-20 houses a year and he mainly buys at auction and on the MLS. Mark Ferguson works in our market and doesn't work on houses and does 10-15 a year off the MLS. I work full time and do 4-8 deals a year. The opportunity is everywhere. In downtown Fort Collins if you got licensed you could buy an old house at retail, do the construction yourself and with prices at $250/ft2 you can make a pretty penny on a high end flip. Opportunity is everywhere if you look at the world with opportunity colored glasses. Take action and you'll find success. I doubt you are knocking doors or cold calling, I know I don't. But if I did I'd have a deal in a month or 500 contacts. That would suck but I'd make a minimum of $20k

    2Reply
  • Devan Johnson
    OP
    Fort Collins, CO · Member since 2015 · 24 posts · 15 votes
    11y
    Originally posted by @Blake Stevens:

    Devan,

    Real Estate is great because it can be scaled to so many different levels.  There are happy rehabbers that take the craftsman route and do the work they enjoy doing on a project, sub out and construction manage the rest and do 2-5 houses a year and make a good living. 

    That sounds more like the route you would want to go or keep your regular job and flip a couple of houses a year on the side.  Or do the nomad model or house hacking method you did on this one, and buy a house, roughly at retail value, add a major renovation and the sell it without taxes after 2 years living in it. 

    I do real estate locally in Fort Collins and I'm not handy and I have a full time job so I focus on the things J Scott lined out plus project management and property management on top of the list of things he focuses on.  I'm open to helping you out and can share courses I have and my knowledge.  But it sounds like you need to do a gut check because your mental game seems off.  Maybe you are just bummed out but when someone on the thread suggests you do something, you reply back with an excuse about why you can't do that.  Don't limit yourself, stop thinking of yourself as just a newbie.  Dive in and learn the skills you don't have, like acquisition and knowing the funding sources and maybe deal analysis and valuation.  You are already better than most real estate investors on construction knowledge but does that translate to your estimating for making offers. 

    There are a ton of cheap local trainings, where real deal people go along with newbies. ICOR, bigger pockets meetup in Louisville area, Mindy Jensen has details on that. NCREIG is a free traning class held weekly be a real deal investor Brian Williams and great buyers agent James Orr. Every wednsday at the board of realtors. info on meetup. Local REIA group ICOR has a library where you can check out for free all kind of Guru real estate courses for the old presenters that came through.

    It's tough to buy in this market but a guy that I know that works a full time demanding job at HP flips 10-20 houses a year and he mainly buys at auction and on the MLS. Mark Ferguson works in our market and doesn't work on houses and does 10-15 a year off the MLS. I work full time and do 4-8 deals a year. The opportunity is everywhere. In downtown Fort Collins if you got licensed you could buy an old house at retail, do the construction yourself and with prices at $250/ft2 you can make a pretty penny on a high end flip. Opportunity is everywhere if you look at the world with opportunity colored glasses. Take action and you'll find success. I doubt you are knocking doors or cold calling, I know I don't. But if I did I'd have a deal in a month or 500 contacts. That would suck but I'd make a minimum of $20k

    Blake,

    Thanks for taking the time to look over my post. I definitely you appreciate you offering  local knowledge, I'd be interested on taking you up on it. I've already connected with a couple a folks who have offereed some free advice, I'm motivated to absorb as much as possible.

    As far as your comments regarding my "mental game being off and requiring a gut check and coming up with excuses"...I'm sorry you see it that way. I certainly don't. I came here to gain more knowledge and bounce ideas off seasoned investors such as yourself. I consider my conservative nature and commitment to doing much of my own work as an asset.  I certainly don't feel I'm negative. Cautious? yes. I'm sure there were plenty of first time investors that were told to do a gut check back in 2006. Maybe even their mental game was questioned.

    To be sure, the numbers you mentioned above are motivating, especially in this market. 

    For my part, I'll continue to gather knowlege from as many sources as possible and probably make a calculated investment, mitagating risk as best as I can in this market.

    Again, your input is appreciated, keep it coming.  

    0Reply
  • Kevin Mizuno
    Investor · Honolulu, HI · Member since 2015 · 10 posts · 3 votes
    11y

    @Devan Johnson 

    I have been investing full time for the past 3 years.  I find pretty good rehab deals all the time but I am not proficient at the rehab.  I would love to partner with someone like you.  I'm sure if you look hard enough, you can find someone like me in Colorado, someone who can find the deals but is not good at the rehab.  Another option is to meet wholesalers who are willing to sell you their deals or other investors who can sell you the deals they are passing on.  You may not hit the home run but you should be able to purchase with some equity on the buy.  There are deals in all markets all the time.  The hard part is finding them and that is where the big money is made.  

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  • Devan Johnson
    OP
    Fort Collins, CO · Member since 2015 · 24 posts · 15 votes
    11y

    @Kevin Mizuno

    Agreed,  I think I'm accomplishing the networking angle, (slowly) through this thread. That is definitely motivating. Wholesaling appears to be in short supply in my town, but I hoping some of the people I'm meeting through this forum can shed some light on this. Thanks for the encouragement.

    0Reply
  • Blake Stevens
    Investor · Fort Collins, CO · Member since 2011 · 38 posts · 14 votes
    11y

    @Devan Johnson

    Let me explain more about what I meant about my pointed comment "mental game being off and requiring a gut check and coming up with excuses".  

    It wasn't meant as a dis that you shouldn't do your own work or that you should buy a deal that doesn't pencil and you are being too conservative.  It was a comment that your inner beliefs and assumptions may be holding you back.  I say this based of of these comments you made.  

    General Reply to commentors

    "And in this market, I have to be even more conservative. No need to lament on the lack of deals out there, but more importantly for a newbie such as myself, there's a lack of opportunity. Contatcing any property owner pre MLS (pre forclosure) is not a unique aprroach. The few folks I've contacted have indicated that they have dozens of investors lined up if they wanted to sell."

    and in reply to J Scott

    "I'm trying to put this in context. You are a pro with a well oiled machine of connections, strategy, financing and market experience. I'm trying to keep this geared toward the newbie such as myself. I cannot find a deal after about 6 months of effort and research (from your excellent book, I might add). This is a fact that cannot be overlooked."

    I used to think all the talk about mindset was bull and just some Wu Wu stuff.  Then I see some people that work hard and try and show up to networking meetings year after year and don't get anything accomplished.  Or close friends of mine, who we've done deals together and they've project managed jobs for me but something is holding them back from really succeeding.  After seeing this and trying to help my friend and some of these acquaintances I don't think all the mindset is bull anymore.  That is why I still go network a lot is to hear the people getting stuff done inspire me to do better.  

    The warning sign though I saw in your comments above is that you were speaking reality in to existence.  "the lack of deals out there"  A local realtor James Orr does real good market statistics and fix and flip volume I believe is up this year over last in Northern Colorado.  So somebody is buying and selling houses.  Then "I cannot find a deal after 6 months of effort and research".  This is a fact but you are telling yourself that you can't find a deal.  So what does your sub conscious believe, I don't find deals!

    So while I thought mindset training was useless in the beginning I know believe it is real important.  So I recommend to you, you do some introspection on what artificial limits you are putting on yourself and read or listen to some stuff on that and more importantly network on BP and locally with people doing deals and see that a lot of them, know less about construction than you, are ugly, don't speak well, aren't that smart and you'll say if them, why not me.  

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  • Blake Stevens
    Investor · Fort Collins, CO · Member since 2011 · 38 posts · 14 votes
    11y

    Now to actually answer the question you asked.  

    Where do I go from here? Here's how I made $85 K....now what?

    I would say a quick strengths and weaknesses from what you've shown about yourself on this thread. Strengths - great craftsman and you love doing it, good eye for design, financially conservative can save money and run a project to a budget, FSBO success, possibly willing to do live in flip. Weaknesses - general flipping knowledge, financing, raising money, deal finding, delegation.

    I suggest you work on those 3 items J Scott mentioned so that you can exercise your strengths and execute a project.  Work on Finding Deals, Raising Money and Business Strategy.  You probably have to do the last first.  

    Strategies that might be good for you, Fix and Flip, partner and flip, live in flip, buy a very distressed multi to live in and fix.  Work as a contractor as an apprentice for a successful real estate investor.  I don't know what you want to do or your goals but I'll talk about fix and flip as your choosen strategy.

    Learn fix and flip fundamentals.  Tons of free podcasts, Join ICOR and use the free library to do fix and flip courses, talk to me and borrow mine, buy a course, go through all the BP training and books on flipping.  

    Network locally, check meetup tons of events. Tell people the skills you have and your goals and what pieces of the puzzle you have, you have some capital you have construction, you have FSBO resale or you can always get a good realtor, you don't have a deal or skills to get one and you probably don't have full financing to make a cash offer with no contingencies.

    Get your financing in place, are you going all cash, are you using hard money, are you going to partner with a money partner, are you going to get a fha owner occupant loan?  Learn the options and pick the best one so you can be confident you can close on a deal you find.  

    Figure a way to get a deal.  Learn marketing, you said you talked to people and they had plenty of offers.  Of course they did.  Only 1 out of 25 offers wholesalers make to people who allready self selected and replied to direct mail or internet marketing saying they wanted to sell select a wholesale cash offer.  Did you make 25 offers that fit your conservative nature in the last 6 months of your search.  Probably not.  Get a realtor and work on delegating.  Have them bring you opportunities, you evaluate and offer.  try to find a hungry wholesaler that has a deal but doesn't have construction skills or money.  Find an old vet that is tired of managing bad contractors, split a deal for doing the rehab and learn on the job.  Do any of the things Travis Speer said to do.

    Learn deal analysis and valuation / appraisal get access to the MLS.

    Definetly a lot to get done but if you start taking action I bet you'll have another project to do what it appears you love to do and make a craftsman home with your own hands with your own great design touches.  

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