First Flip: The Education from Hell

[Richardd Barran]

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $105,000
Cash invested: $65,000
Sale price: $245,000

Screw Analysis Paralysis. This was it. I'm taking action!
Narrator's voice "And this is when I realized I screwed up"

We would run into some obstacles that would require additional work that could push the project over budget and cause delays in closing the deal. Luckily, this was a problem I was prepared for. We told our contractor that our budget was 55k, but our real budget is 65k for emergencies and situations like this. We call this our "oh ****" budget. And boy, did it come in handy.

What made you interested in investing in this type of deal?

This is a great way to build capital. Our end game is STR's and this is a great way to afford them!

How did you find this deal and how did you negotiate it?

MLS, escalation clause, inspection contingency.

How did you finance this deal?

Private Money, 70% ARV

How did you add value to the deal?

I took action on the deal we found on MLS, walked it, and put in an offer at a time when people were buying way above the asking price. We created a sense of urgency by adding an escalation clause but within a short time window of response.

What was the outcome?

In the end, we lost about $4500 after paying our lender contractor and realtor, but we gained more knowledge with that flip than I did with $120,000 worth of student loan debt. And honestly. This was the best $4500 I ever spent and would not change it for the world. The wealth of knowledge is immeasurable.

Lessons learned? Challenges?

1. We learned how to create a draw system for contractors to eliminate the possibility of theft, rehab due diligence, and create accountability to make sure our contractors our happy and paid on time.
2. TRUST YOUR GUT. We should have fired our contractor the first time something was 'off".
3. You can find great work through referrals of other RE investors. At this point, I do not hire anyone without vetting them first from personal experience with my peers and networking.