Diary of a newbie getting started in the Flip game- Fresno, Ca

[Yosef Fares]

I wanted to start this topic just in case there are any other newbies going through the same start as I am. That's just educating yourself for your first flip and trying to figure out how to the finance the first deal without huge cash reserve. Getting started is rather a tough deal. First convincing my wife to buy into the process and start learning along with me was a process in its own. The bigger pockets website has been very valuable to me. I first started and got introduced to the site through the webinar "How to Invest in Real Estate While Working a Full-Time Job." This caught my interest because my wife and I both have full time jobs. In the past we bought and held properties and have two rentals and a primary resident as of now. We wan't to get into flipping houses because of the potential profit you can make. We then want to re-invest and buy & hold a few. My dad is a real estate agent and is successful at it so i have a knowledge source there as well. I also know a few flippers and investors in the area that have helped me along the way. The podcast also has been a great source of knowledge and i listen to them when ever I can. I've learned a lot from the bigger pockets website and from its members. 

Right now I'm trying to figure out how to fund my first project. I've saved up money to put a down payment on another rental but have decided to try and flip with that money. So wanting to know if its even possible I began my research on flipping. I first decided to meet with some lenders. Wells Fargo was our first meeting and we sat down with a nice guy that was very helpful on breaking down how mortgages work on investment properties. Because of my knowledge I acquired through my education phase i was able to talk the same language and ask the right questions in this meeting. We talked about 203k loans, Conventional, and a renovation loan. I was surprised that the bank offered the renovation loan. This loan would finance the purchase of the house and the renovation money needed to put the house back on the market. This is not a 203k loan because FHA requirements are not attached. The way the loan officer explained it, the information was very limited and said that there was a separate department for these type of loans. He said from his understanding you need to have a walk thru with 2-3 contractors done and pick the estimated rehab cost of your choice. Then the loan is done on a 110% of the ARV so the way he explained it is if you buy a house at $80,000 the rehab cost $20,000 you are paying on a the loan at 110% of $100,000 so the loan will be at $110,000 and your down payment is based off of that number. You only need to put 10% down for this kind of loan. The interest would be at 5%. We are setting up a meeting with the loan officer at Wells Fargo who specializes in this particular loan to get more information.

A couple days later we meet with a conventional loan officer for a smaller firm and found out how much they would qualify us for. They can't loan the renovation money but qualified us for a good amount. They told us we had to have a 6 month reserve on our rentals and our new investment property (Wells Fargo said the same thing). But they tried to tell us we had to hold on to the new property for 6 months. This raised a red flag because Wells Fargo did not say that at all. They only said if we sold to an FHA buyer we had to hold on to the property for 90 days if it were a conventional loan buyer we could sell when ever we wanted to. So i explained that to the lady and she stepped out of the office to talk with a supervisor. When she came back in, she told us that we were correct. The lender takes a hit i guess if the loan is sold off before 6 months. Again my education process allowed me to ask the right questions

That same night we attended a Guru seminar for Tarek and Christina on flip or flop. I was disappointed that they were not there but i guess that's the norm for these deals. They tried to sell us on their model and pay for a three day education course. The only thing that real grabbed my interest was the access to the lenders an how that worked. But at the break when you start asking questions about the lending process and how it works they let you know it will all be explained at the three day seminar. That was it for me we left at the intermission I could see how this thing was going to go. From my education process I read other members post on this exact guru deal and new what to expect.

So far this has been my experience in this process of trying to start my first flip. I am currently gathering the knowledge of acquiring private money. I'm Listing to podcast and webinars on that very subject. I'm also going to sit down with a hard money lender to see what that would look like. I will try and post anything new here that i come across. I look forward to comments and advice from you guys. There isn't much i can offer to the site besides my current experience and the process I'm going through.  

[Yosef Fares]

Alright so I put an offer on a great investment opportunity. Could of been a great Flip or a great rental for the BRRR strategy. House was on the market for one day. Went out there with my GC and walked it got a great estimate on the house. When we first got there already other investors were there too. So I knew this was going to be a tough one to get. Found out today someone put an all cash offer in well above asking. This is the most frustrating part of it. I can't compete with these cash buyers with the renovation loan I'm getting. So now I'm thinking of Hard Money or HELOC. I'm also going to talk with a friend of mine that has cash and see if he would like to invest with me. I can find the deals I just can't get them under contract. Anybody have any advice on how to compete with these cash buyers?? I know it's probably I have to get cash of my own.

[Yosef Fares]

Passed my Real Estate test yesterday. Now I'll be able to go into any house when I want and not have to wait for an agent (my dad) to have free time. Plus I'll be able to put in offers and negotiate deals myself. So now it's time to figure out how to get a hard money loan or open up a HELOC

[Yosef Fares]

Ok so I told myself my next post would be to report good news. It's official i have closed on my first property that i will try to flip. I got the property for $87,000 and there is no book or podcast that can prepare for the actual dealing of everything. I know some of you where interested in how i was going to fund my project, well i went with hard money it was the only way for me to competitive with these cash buyers. I recently got my real estate license and was able to do a lot of the dealing on my own. But the way I came across this property was interesting. A local flipper who has done so good he has opened his own real estate company has an agent that is a friend of mine. On a camping trip i told this agent that I don't care about the seller commission or the listing commission i just want the property and the opportunity to flip a property. I told him he could be my agent if he can find me a property (My dad did not like this strategy and let me know about it) The next week he started sending me listings that his boss thought there wasn't enough profit in it for him or couldn't get the asking price down to where he wanted it. So I began to look at these properties all where a little to high priced and to big for my first project but the profit was there. Finally he sent me a listing that his boss had in escrow and backed out of it this property wasn't even listed on the MLS and went pending prior to publication. It was pending for $90,000. The reason I was told the buyer backed out was because of not enough profit. So i went over there with my dad and our contractor. The house was distressed but was in actually pretty good condition. it was a 3/1 SFR in a target neighborhood of mine (Newbies have two target Neighborhoods and know the market there). My contractor said this was the best one he has looked at with me the only issue was it had a swamp cooler and not HVAC. So i told the agent to put an offer in for 87,000 knowing that area comps go for 144-160. I also said it was an all cash offer with a 15 day escrow. I told the agent to make sure the seller knew it was hard cash. The seller came back with a counter of $87,000 but with no loan, inspection, or appraisal contingency's. I being a newbie accepted without talking with my dad who is an experienced REA. I got an earful for that. Newbies don't give up your contingency's if you can. So talking with my friend who does flips all the time was excited for me. He gave me his pest guys phone number and said he's guy is the best. Little did I know the pest inspection should happen before closing. Luckily I figured that out and got an inspection done before closing. I was nervous and slept horrible the night before because he told me he was going under the house to look at the foundation. I knew if there were termites or foundation issues i was in big trouble because i gave up all my contingencies. Now I'm thinking maybe that's why the other guy backed out. Luckily and i mean Luckily everything was fine. The pest guy said there was very little section 1 work needed and that the foundation was a new concrete. He also told me that new piping was laid under the house to the main supply. The only issue he saw is that there was a leak in the bathroom at some point and i may need to address issues in there. All in all the pest guy said it was one of the better proprieties he has seen. Now escrow was a journey all in its own but i learned a lot for my next time around. Construction starts Saturday and I hope it goes smooth. Thanks everyone for your support and help.

[Yosef Fares]

Ok so I know its been a while but I've been extremely busy with my work and starting my Investing portfolio. Im happy to say that My wife and I @Casey Fares Flipped our first home at the end of last year. We had a local investor pass up on a deal and gave it to us off market. We used hard money to do this and paid 11.9% and 2.5 points. I was nervous about using hard money but it was the only way to get in the game for me and at the end of it i was glad i chose to. It was a huge learning experience the whole way through. It is true you can only read and learn so much but the best way to learn is actually do it!! Our first contractor gave us a great deal but didn't do anything for 3 weeks so we let him go and hired a new guy. He did a great job we ended up listing at the high end of the comps and actually set a new comp for the area. here is a link to the listing on 

Zillow  http://www.zillow.com/homedetails/1308-W-Normal-Av...

The house sold in 14 days and a lot of things were learned through the whole process that couldn't be learned through reading and listening to others talk about it. It felt really good to get the first one out of the way. I was very proud of what my wife and I did.

We didn't wait long to jump into the next one this time we bought an REO that had been on the Market for 72 days and this house was the complete opposite of the last one. This house has been teaching us lesson after lesson and thats why my wife an I call it the "Problem Child". First the purchase of the house and just dealing with the bank was a new adventure of its own. The inspection process revealed a $3,000 lien on the property and we had to go through all kinds of stuff to get the bank to take care of it and to get the water turned on to do our inspections. For the electrical we had to call PG&E to come out an unlock the breaker box so we could change a main breaker just to run our inspection on the houses electricity. The quiet cost this time with the hard money loan were higher than last time and i think thats because the loan was for 10,000 more than the last house. But with all the quiet cost of the hard money loan that knocked 7,000 off the top (Including Monthly payments). Our contractor on the last house overcharged us big time on his quote so we had to find a new guy who came recommended by a friend. He did things differently from our last contractor and not as detailed as a job either but at the end of the day he got the work done and the finish product looks nice. We finished and received and offer 6 grand over asking in 5 days. It was an FHA loan and during escrow appraisal killed the deal. I ran comps and had it at 140-145 a sqft and the appraisal came back and gave us 133 a sqft which was based on another local flipper who recently sold in that area and brought the comps way down because his property went for 129 a sqft. So we just as of 3 days ago fell out of escrow we are trying to bring the buyer back as a conventional loan with 5% down. Fingers Crossed we will see. I really just want to get out of this one and on to the next one. We learned a lot from our second home. The goal is to Flip one more this year and buy a one more rental. This will be my last post on this thread because im no longer a newbie I'm what ever a step above that word is. For those reading this that are scared of getting started just do it you will learn a lot and if you scared to lose you will never win!!

here is a link to our second flip that just fell out of escrow

http://www.zillow.com/homedetails/4523-N-Kavanagh-...

[Casey Fares]

Well said hubby! Crossing fingers our "problem child" gets "picked up" and we can move on to the next project. All-in-all, we're learning a ton and enjoying the process.