Painful First Flip Turned Flop. Any Advice??

Painful First Flip Turned Flop. Any Advice??

Rental Property Investor · Allentown, PA · Member since 2014 · 67 posts · 38 votes
Dear BP Community, It all looked so good on paper, and then when the project started things did not go according to plan... I'm dealing with a painful first flip that I still haven't sold yet but purchased in October. Pick an aspect of the flip and it went wrong: over schedule, over budget, manpower issues with contractors jumping off the job, design flaws, payment terms, forgot to fill the oil tank over the winter and ruined the radiators and downstairs flooring... The list goes on and on. Although it's a painful experience, there was a lot to be learned here. My rental portfolio is doing well, and my job will help me slowly recover. I'm wondering if there are any other first time flippers in the Lehigh Valley, Allentown, Bethlehem, or Easton who may have experienced something similar, a "battle scar" to share. What have you learned through your failure? Did you try to flip again? What was the most important lesson you learned from your first flip? How did you pull through the challenge and continue investing in RE? Thanks!
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Real Estate Broker · Allentown, PA · Member since 2013 · 28 posts · 5 votes
10y

Matt, 

Thanks for sharing your post - I'm sure it took a lot to write down and admit failure. 

I have two similar situations on flips. My first two lost money both times and once it was really big (25%). I was inexperienced, listened to the wrong people for advice, and was too excited without enough due diligence because it also "looked so good on paper". On top of that, the one house was on the market for 3 weeks and was broken in to and they stole all of the appliances, FURNACE, toilets, AC unit, and other random things. I learned that vacant property insurance does not cover theft of materials inside the home. That alone cost 12k. It was awful, but I made it through the experience and learned a TON.

Now, I am thankful for the experience because of how much I learned and how strong I now am because of the loss. It happened for me to get better and become the investor I am today.

Stay focused. 

Nick

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  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    10y

    @Mathew Pezon . To be honest, I stayed away from real estate for a little while after that fiasco. First, I needed time to rebuild my balance sheet. I was also working on other facets of life - finishing a doctorate degree, for example. 

    Aside from that, I let it go. Part of it is probably just my nature, but I'm not someone who dwells on negativity for too long. I'm not religious, but that "serenity" prayer is probably worth considering: give me strength to change the things that I can, courage to face which I cannot, and wisdom to know the difference. In my case, there was no point in feeling depressed about the money I had lost or the poor way the project had progressed. There was nothing that was going to bring back that money, or change some of the poor decisions, so to dwell on those things would only be counterproductive. I've always thought you create your own attitude, and you create your own emotions. I attach little importance to emotion, because those can change at the drop of a hat, and I choose to have a good attitude. In my case, yes I lost a lot of money, but I live in a society where I have been able to meet so many of my needs that I can go out on a limb and try things like that and not be ruined for life. That's pretty fortunate. How many people throughout the world could absorb a 5-6 figure loss and continue on virtually unscathed in life? Not many. I'm lucky to live in a stable society, with a smorgasbord of opportunity, and have been equipped with tools to be able to be successful. Yes, I've worked my *** off, but I'm the recipient of so much good fortune that I find it impossible to wallow in self-pity. 

    Skyline Properties
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  • Rental Property Investor · Allentown, PA · Member since 2014 · 67 posts · 38 votes
    10y
    Jd Martin excellent thoughts. Thank you for sharing. Your point about not dwelling on the loss and focusing on what is in our control to change is solid. Great advice. Your perspective about the society in which we live and the opportunity to rebound despite an early failure is also great. It's easy to get focused on the details of the defeat and miss the big picture - that there's more opportunity out there in the marketplace and we can choose to go after it again (after recovering from our loss/shoring up our balance sheets). Appreciate the support during the challenging time.
  • Rental Property Investor · Allentown, PA · Member since 2014 · 67 posts · 38 votes
    10y
    Mark Brogan Nick S. Jd Martin Manolo D. Jeff Amore Kurt Gardner Thanks for the help and guidance. I'm happy to report that the flip is now under contract, hopefully the project can be put behind me and the healing process can begin. That being said, "knock on wood" there's not a bump in the closing process. all in all it was a good experience. Didn't even know what I didn't know. Humbling and educational. Got some solid construction experience and project management skills. Thanks to all for the advice!
  • Westminster, CO · Member since 2015 · 37 posts · 13 votes
    10y
    Just saw this and there have been a lot of good responses. A few ideas from another GC: Get everything in writing. Make a schedule and make sure the milestones are being met. Establish a pay schedule up front based on progress. Get everything in writing. Communicate often and visit the project to verify work complete. Ask for copies of GC license and insurance. Never pay an entire contract up front. Get everything in writing. Good luck!
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