Rehabbers: What was your first rehab deal?

Question

I'd love to hear stories from the rehabbers out there . . .

Do you remember your first rehab deal?  Was it a winner or loser?

Please share some details and what you learned from the experience.

Marc Freislinger · Answer

Is a project still a loser if you learn something?

Of course.

But I made every mistake in the book. Underestimated time, budget, and holding costs. I over priced it when I listed because I got greedy. I did all the work myself.

I knew I would underestimate the budget, and gave myself quite a large buffer, so I didn't actually run out of money. I did however use up every bit of the contingency budget I set up for myself, so I highly encourage any new rehabbers to have extra set aside. Holding costs ended up being really high because we were doing drywall during the middle of an Indiana winter. I had to run the heat non-stop in order for the mud to dry, and since I was doing all the work myself, it took quite a while to tape and mud every wall and ceiling. I was pretty good at it by the end though.

Throughout the time I was doing the rehab, I kept thinking that every extra thing I did should add to my list price. You know what I mean, the nice tile counters instead of laminate, or the brushed nickel fixtures instead of chrome. Turns out, you can't get more than your market will bear. I sold (after multiple price reductions) within $5,000 of what I had originally planned to sell for.

Doing the work myself, I envisioned learning a lot about construction, and saving myself a ton of money. The first part came true. I can do damn near anything to a house. The second though, was not nearly as true. In the extra holding time, I spent most of what I had saved on utilities and taxes.

I ended up breaking even, so with the experience that I gained I feel it was worth the effort. (I tell myself this, but I never actually had the guts to run a final tally.) I do wish that I had found this website before I started this project though, I could have saved myself a lot of headaches.

Account Closed · Answer

my first rehab took all summer while i was in college...actually into fall semester, i still was washing dishes out of my bahttub bc i didn't have a countertop in the kitchen....i paid too much for the house, overdid some of the rehab, used the wrong contractors (read cheap, but not professional)..i still have it as a rental, but man did i learn a lot over there!  i'll have to dig up some pics..i also learned that i don't enjoy living in a construction zone  :)

J Scott · Answer

We just sold our first flip property last week!  :D

We made a lot of mistakes, and had to hold it for 2.5 years before we could get rid of it.  We did two full rehabs (2 years apart), lease-purchased it for 2 years, and ultimately -- after all rents, option fees and sales revenue -- made about $3000 on the deal.

I was absolutely THRILLED with that $3K.  Not only could I still say I haven't (yet) lost money on a flip, but what I learned on that first one was well worth 2.5 years of hassles and headaches.

Tara G. · Answer

It was 2004 winter and we bought a REO property with a steeeeeep driveway that had been languishing. Borrowed from relatives, put in 8k of our own money for 112K buying price. We put in new carpets and learned never to try and lay carpets ourselves. No garage on the house so we were going to lower the driveway and add a few steps to the front door. The backhoe hit the water line from the meter to the house and we had red mud wash all over the cul-de-sac, which promptly froze. Thank god for understanding neighbors!

We have watched several potential buyers drive onto the driveway- which was much less steep now, but still sloped up- and promptly back out and drive away. They did not even bother to go into the house. I would get a sinking feeling watching this.. Anyway, it sold in March 2005 for 132K, 8K net to us. Our realtor made more money on the buying and selling than we did, which prompted me to get my own license. That is the one good thing that our first deal resulted in.

Toni D. · Answer

Our first deal was in Bakersfield in a very nice area behind their Jr. College.  It took us nearly 8 months to finally win this bid.  We thought it'd be easy since we run our own RE business, but it wasnt.  The competition was & still is fierce & again finding a great RE Agent out there was not easy either!
Bought 3/2 bath, built 1954 with large front lawn & decent back yard size.  Paid cash $63K.  We took our Agent's suggestion & used his friend who said he had managed a crew for KB homes, which sounded very impressive, but we ended up driving up(Ventura County) more times than we wanted to & had to ask contractor to do this & that. The rehab cost -$18K. New sod front & back! New Kitchen floor & appliance, Paint inside & outside, New floor tiles-entrance & bathroom. New bathroom tiled with new water fixtures in kitchen & bath. New lighting in kitchen & entry way. Funny thing, we wanted to participate with the rehab & decided to work on the yard, so we planted seeds & grass barely grew, so we decided to hire landscaper to do the grass! We decided to stick with what we know best, RE! 
The property sold for under $100K, net profit $15K. Our first rehab was not a big winner in the sense of money, but overall we purchased, rehabbed & sold property within 90 days!
We learned that we needed to find a contractor who we can trust & have done rehabs for years.  Finally we did find an incredible contractor who does not need supervision.  Presently he has completed 2 more rehabs for us & again the timeline has been 90 days for 2nd & 3rd rehab.
We also learned to leave all the construction to the contractor & our job is to find more properties. 
From our experience, buying low & selling low has been helping move our properties quickly.
We use the same realtor who found the property sell the property for us. We truly become RE Investors, except we do our own due diligence & comps.  Our entire team is a win win situation!

Aaron Mazzrillo · Answer

August 16, 2006 I bought a 2 bed 1 bath house off a wholesaler in a not so good area of San Bernardino, CA for $200K and I thought it was a good deal. Can you believe that??!!!

I hired a guy to do the work and spent about $5K fixing up very minor things. I don't recall painting or replacing the carpeting at all, but I did put a few new windows in the garage, hauled off a lot of trash, an old RV and a junk car. I also made a very poor attempt at doing some front yard landscaping.

I sold the house in 6 weeks for $272K and made a little over $26K. Wow, the market has changed!

I just checked title and the person I sold it to is losing it to foreclosure. It is scheduled to go to auction soon.

Herm M. · Answer

http://www.biggerpockets.com/forums/67/topics/63439-pictures-of-my-first-rehab-

Will Barnard · Answer

My first rehab was on a personal residence back in 2003, so it does not really count. My first real rehab to then re-sell was in 2007 (before that, I was buy and hold only) and it was a disaster.

The property was in TX (I live in CA) and it started out as a rental. We could never get good tenants in there and decided to exit via rehab. It was mid July in TX heat and I flew out there to do much of the work myself (big mistake). First off, I did not have any of my own tools there which made the work difficult and everything I did have was borrowed, rented, or purchased there.

The home was disgusting, I would not subject my worst enemies to live in such a place. Being a ball player, I am known around town to be the fastest runner around (or at least I was in my younger years), but had anyone been there, they would have seen lightning speed as I had to scramble to run out of the house after stepping into the laundry room from the kitchen to avoid yacking. Once outside, it was all I could do to not toss my cookies in the yard. Any future entrance to the home required a mask.

Long story short, contractors and subs (carpet installers, painters, etc.) were impossible to mnage from afar once I got back home and did not do the jobs in the timeframes or qualities I would have demanded had it been a local deal. The end result was a loser, but this was a purchase to hold and not originally intended as a flip so I discard it from my rehab flip totals.

All in all, what I learned is that doing rehabs from afar is something i will never do again, I will never make the mistake of buying a rental in the wrong area again, and I will never do the types of labor I subjected myself to on that project just to save a few bucks, especially know as my time is much more valuable now than it was then.

For all of my rehabs I have done locally, I have only lossed money once. It was a home next to my personal residence i puchased REO. Even though I lossed around $1000 (very small loss amount here in CA), it was somewhat of a gain/benefit because I was able to fix up the nieghbors house the way I like it to look and I got to choose my neighbor. It was a toss up to buy it or not to buy it and I had several reservations in my mind. A great learning expereince for me came from this purchase as well and it is this: If I ever do not have a complete warm and fuzzy about a rehab opp., I WILL PASS on it.
Intuition and gut feelings may be something to discard fro some, for me, I find them valuable and ignore them at your own risk!

Luis A. · Answer

Will never forget it because it completely changed me.  :cool:

Before my first flip I always thought I would have to depend on a job for income for the rest of my life. After I pulled it off my entire mindset of what I could accomplish and what is possible through real estate completely changed. I wrote a detailed account of my first flip  (if youre interested) but basically after a year spent in education and then another 6 months looking for this house I mustered the courage to pull the trigger and buy this house. At the time I was looking for a rental but when I ran the numbers on this house they all kept pointing towards a flip rather than a rental.

I had recently met J Scott through a group of investors and saw what he was doing ( he was relatively getting started). Seeing what he was doing gave me the confidence to give it a try.

To date that first flip is still one of my highest ROI of any of my flips.  :D

Funny how life works, a couple of months after I sold that flip I found myself layed off from where I worked. Thanks to what I had learned from this experience and the confidence I developed I was able to continue flipping houses but this time in order to put food on the table.

I really don't want to imagine what would have happened if I had lost my job but had never learned how to flip houses. :cry:

Of course I ran into problems on that flip including an unexpected mold and basement leak problems. But since I had been very conservative with my margins and budget projections we still had money to fix those problems and still come out with a good profit.

J Scott · Answer

My wife and I were just talking a couple days ago about the fact that -- now that we've been in this business about 3 years -- we're going to start seeing houses we've sold coming back due to foreclosure.  It will no doubt be sad (we've liked most of our buyers), but also a great opportunity...

Rehabbers: What was your first rehab deal?

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