First Deal Fell Thru!!

[Khang Pham]

Hi BPers!

I want to express the amount of gratitude I have for the BP community that had showed me so much in the last 4 months. I've learned so much and try to put little by little the things I've learned into actions.

Here are some facts:

Listed: 130k

ARV: 155k

Accepted offer: $125,049 (got this number thanks to Never Split the Difference- Chris Voss, amazing book highly recommend)

Repairs: 20k for rent ready and then later on to find out that it is actually 35k for rent ready and foundation repairs (a whopping -5.5in)

Last week my first deal fell through in Southwest Houston, TX. I found the home on the MLS for 130K after conservatively generating multiple logistics results (thanks to the BP calculator) and made an offer for $125,049 and got accepted. My realtor mentioned that the home had been receiving $90k-$100k offers and it left me wondering why. I got it under contract with a 7 day option period. During my due diligence process I calculated that I was sitting on $116 cash flow after all expenses. I had told myself if the deal will cash flow for $100 or more I would bite. I knew that all I want is to land my first deal regardless of the low monthly cash flow. There was so much to do! Inspections, lending, contractors, insurance, and time! Each day I would drive from work on lunchtime to meet up with contractors to give me estimates on the repairs. Also I wanted to learn what the key things to look for and the ins and outs when buying a home.

I had multiple professional opinions with a wide stretch of estimated repair costs of $20k~$35k. The first contractor (before having an inspection) he advised that the home does not have a foundation issue (when you walk into the house you can feel the slant, the house was -5.5in on the front left) and quoted me $20k. The inspector, 2nd contractor, and 3rd contractor all advised me that the home does have a foundation issue because there were multiple visible branching of cracking through the bricks and sheetrock totaling the repairs value to ~$35k. Ultimately with $35k of repairs I would have been in negative cash flow. This was when I decided to break option period because this was a bad deal. Like you hear it on the BP podcast, “No deal is better than a bad deal”.

I am glad I made my decision with logic and not with my emotions no matter how much I wanted this first deal to work.  In addition, I lost about $500 on inspection and option period, but it was definitely worth it. I got a learning experience from it and who said education was free....Even though this deal fell through I know that this WON’T STOP ME.

I would also like to volunteer my time to help fellow Houston local BPer’s on weekends to; paint your house, paint your cabinets, mow your yard, helping with landscaping, pressure wash your driveway, stage your home, etc…two free helping hands is all yours. All I ask is for you to share about some of your favorite deals and experience over coffee. Please PM me

[Account Closed]

Dealing with Contractors, inspectors (lender/city/county), material-men, is one of the most difficult aspects of this business. Your personality has A LOT to do w/ how you deal w/ those things.

If you tend to believe the best in people, its going to be rough.

If you tend to not believe people, its going to be rough.

The ONLY way to have success with any of those is to have your facts in a row, and to trust people followed by verifying everything you are told; until you know it 100% w/out verification. 

Finding "Facts" in this business is REALLY difficult however. Not many are actual pro's or experts but instead just want whatever comes with the title. i.e. building inspectors make 35-45k a year. But, if they really knew everything about construction they could get a superintendent gig working for a prop manager or construction company making double that, but they would have to ACTUALLY know what they where doing.

The point is this, you can struggle through and make things happen w/out paying for real professionals. I see it done all the time. But you can also budget into your projects to pay people to take away your headaches, and allow you to just verify facts and cut/collect checks.

There is nothing wrong w/ hiring pro's, not everyone can hire 3 dudes off the corner and flip a half a million dollar home. Its not "ability" its personality. 

I get hired by billion dollar REIT's to evaluate their acquisitions (mostly for rehab / repositioning scope/budget) and to do suggestions for long term maintenance issues. They aren't experts on any of that, and getting a bunch of bids would require 100's of hours of work by people who may not ever find the truth. So it has more value to just pay me.

However, I also hire pro's when things are out of my ability. i.e. I hire engineers to review my designs/plans to make sure I am not overloading walls or violating some rule I am unaware of or forgot about. I am a "pro", but that means I know my area and don't try to act like a pro where I am not.