First Flip Experience

[Shawn Jetton]

I figured I would share my story and thoughts on my first flip. I purchased a 2 bed, 1 bath single family cape cod for $28,600.00 cash (no loans). To date I have invested about $25,000.00 (again cash) into the house. The house is now a 3 bed, 2 bath and my realtor is thinking we should list the house for $134,900.00 which should net me a nice chunk. So far it sounds like a dream flip.

While it sounds great and in reality it is, it didn't go nearly as planned. My plan was to renovate the house by myself and only hire contractors for jobs I had no past experience with. Since I was 16 I have done construction on some form (roofer, electrical, siding, windows etc). I went through several houses, place bids on 2 but was out bid on those. This house I had walked with my realtor who also flips houses. The house seemed right, it was a bank foreclosure listed for $33,500.00. I low balled them at $20,000.00 and they informed me that had already turned down 25k offers. I went back to my spread sheet and came up with the final offer of $28,600.00 which they took. I estimated I would spend about $20,000.00 into it and the plan was to list it around $100,000.00 with 6 months flip time (I work full time and planned to work on it nights and weekends but since it was all cash I wasn’t worried about the timeline).

Closing day comes and I jumped right into demo. The plan was to new floors, lights, countertops, appliances, redo bath plus add one, paint, remove a chimney that came through the middle of the house as well as some other cosmetic things. Well it didn’t take long to see that the plan needed to change. On day one I noticed the landing for the stairs didn’t have enough headroom clearance for code. Not sure how I missed that in the walk through but I quickly came up with a plan to turn the stairs leading up to the landing and push them back which solved this problem. To make a long story a little shorter I ended up moving walls, building walls, replacing every light, switch, outlet, new doors(inside and out), new cabinets, every piece of trim is new, built closets, rewired most of the house. You name it and it was done to this house. Turns out the guy who owned the house was a meth head who was cooking meth in the garage and kitchen. I had to cops at the house twice to collect drugs I find hidden in walls and rafters and disposed of a ton of needles. The project has reached over a year to finish.

In the end I ended up doing a lot more upgrades than I expected. After finding out about the meth cooking the kitchen was gutted and everything thrown out. There isn’t a single thing in the house besides the heater that hasn’t been changed out. 95% of the stuff I put into the house came from auctions which is how I kept the costs down (was getting pallets of lights and ceiling fans for $175.00, bath tubs for $1.00 yes one dollar and hardwood flooring for $0.50 linear foot) as well as doing 90% of the work myself. About the only things I paid retail for was the granite countertops, carpet, paint and a misc stuff. I will say that working with auction stuff you need to be flexible. But if you are smart about it and you can work around not knowing what size tub is going in the bathroom till you buy it, it can be a huge savings.

Over all I’m happy with the flip. It turned out 10X nicer than I had planned. But I guess that happens when you start tearing into something and it unravels. I had planned on reusing the kitchen cabinets but after finding out about the meth there was no way I would feel comfortable reusing them. On the up side the extra time it took me to finish the house the market in that area has shot up HUGE. Houses that were selling for 70k and on the market for months are now going for 90k and selling days. There isn’t a huge inventory in that area either. For me it worked out pretty well but I can see this going from a potential $81,300.00 profit to a barely break even if things didn’t work out the way they did.

I know a lot of people say your first flip your profit is in experience and that’s 100% sure for me. If I had to do it all over again I would have gone with a house that cost a little more but needed less work. I would have also subbed out a lot more of the work. While my profits would be less I would have more flips under my belt. My house should be on the market within the next week or two. I have a guy in there now finishing up the small things (paint touch up, outlet covers, chalking). I meet with the stagers next week.

My plan is to keep flipping. I’ve already started looking into new flips. I still plan to be an all cash flipper if I can. I don’t mind the money being tied up as long as the profit is worth it. Hopefully my next flip works out as planned better. While I wouldn’t say this one spiraled out of control it did have scope creep at a much larger amount than I would have liked.

Well there you have it. That’s my first flip. Wish me luck on the sale.