Flipping Homes - My Exciting Journey (Post 1 of ?)

[David Friedman]

Hello BP!

I've been meaning for quite some time to post some of my completed and ongoing real estate deals. Hopefully by doing this, others can learn from my mistakes, cash investors will come flocking to me, or it will motivate someone to start their own investment journey.

Background: One of my mentors suggested that I start investing by flipping single family homes. Thinking that this was a great idea, I began setting up a plan. Investing became an actual possibility by saving money from my real estate commissions and borrowing $100,000 from my grandfather. Before my grandfather would loan money to me, he required that I show him a sound analysis of the deal and a formal business plan. My father has been my business partner since we started our brokerage/investment firm in 2011. If you'd like more information about my company or me, I'd be happy to answer questions below or my profile has plenty of information.

First Property: Sheridan, San Bernardino (The Test Subject)

My very first investment property was purchased as a short sale. Many of us can attest to the fact that short sales usually have many competitors and dealing with the bank is no cake walk. Here are the details:

Purchase Price: $210,000

Received Commission: $6,300

Estimated Rehab: $15,000

Estimated Time Frame: 3 months

Sold Price: $275,000

Actual Costs: Approximately $22,000 with escrow fees, agent fees, carrying costs and rehab

Net Profit: $49,300

Before Pictures:

What I Learned:

- Don't go over budget unless you truly feel the improvement can bring more value

- Hire professionals (I tried to do a lot of work myself) I probably saved a meager amount and could have saved more time by hiring someone who knows what they are doing.

- I needed to practice taking pictures or hire a professional. As a Realtor, pictures sell properties.

- It is important that you build a great construction team. Communication of your vision is important. Not everyone can picture in their mind a house from start to finish. It does take some skill/experience.

- Save money where you can. That doesn't mean you should cut corners though. For example, the badly damaged kitchen cabinets you see in the before pictures are the same cabinets in the after pictures. My father taught me an interesting method to refinish cabinets. If you paint the cabinets red and then apply a stain over the paint, the result will be something close to  cherry wood. It worked in this situation, but on higher end flips I don't see this method working.

After Pictures:

Summary:

This flip turned out great. I could not have asked for a better first time home to flip. The location was also superb. We had an offer in about 15 days, which at first scared me. I was extremely impatient, but everything turned out well. There were a total of 3 partners on this flip. My father, a family friend and myself. My father is an accountant so we did not have too hard of a time keeping track of each partner's contributions, but we are continuously working to improve this system. Everything involving money is done on some sort of paper document so that we have a record of every transaction. All in all, this was an extremely fun and insightful experience for my first flip. 

I will try to post one previous flip every couple of days and answer questions in-between. If you think I can improve on the formatting of the post or if you think I am leaving out crucial information, please let me know. I will try to answer every question.