Bought my first house to flip in Indianapolis

[Michael Roby]

I have not ever posted on here so I thought I would share my first flipping experience.  It turned out fantastic even though we nevert actually flipped it.  So here is what happened

1) My business partner and I had been talking about flipping a house for a while.  I learned about Bigger Pockets and listened to 181 or so episodes in about 6 weeks.  I was addicted.

2) We decided to make our first procurement a rental for his son while he was going to college (slow Flip is what we called it)  After we found this house we were not going to be able to get it ready in time for school  and that strategy was out the window.

3) Got on bigger pockets market place and found a house in Indianapolis and went to look at it.  We found out that the house was just sold from a neighbor lady.  While we were talking to the neighbor lady we asked her about the house on the other side that was boarded up.  She told me that the owner lived out of town and she has had to call the city to get the grass cut.  Ding! Ding! Ding!  She did not know there name or contact information.

4) I got on the Indianapolis GIS site where you can get the a property report card.  Found the owners name and then used a people search website to get a phone number for the owner.  Called them and asked if they were interested in selling.  Turns out they were and they had a mortgage on the house of about $60K.  So that was the agreed to price.  Got a signed offer and sent the offer to a law office/Title company.  Closed about two weeks later.  I was so nervous.  Did we pay to much?  Did we estimate the rehab costs properly (used Jay Scott guide to estimating rehab costs)  Turns out we did under estimate because we were going to have to put in about $30K more that we originally thought.

5) We had figured the ARV to be about $275 to $300K. We thought we would have to put about $120K for Rehab. We were using second mortgage Line of Credit to pay for all of this. So holding cost would be about $8500 - $10,000.

6) Next step was to write a scope of work.  Which took a lot of hours probably about 40 hours.  Second one will be easier.  First one was tough.  Scheduled appointments with Contractor and sent them the scope of work ahead of time.  One of the things I found about this process is that it is a little bit of a chicken and egg problem.  You have to start with a scope of work and continue to refine it as you talk to contractors.  My scope of work was very detailed about 15 pages.  I had a bid table at the end to get a $ bid for each paragraph or job in the SOW.  I suspect this make your bid a bit higher but I think it will also save arguments at the end of what was included and what was not included.

7) While visiting the house to develop scope of work a young lady walked up and asked us about the house and said she was interested in buying it.  So we showed her the house and told her what we were thinking on price and it was going to be out of her price range.  

8) While meeting with contractors the neighbor lady came out said asked us if we had a business card because people were knocking on her door and asking about the house. So this got us pretty excited. After that we waited for Bids from contractors and wow did they vary. One guy told us we should just bulldoze the house and start over. Some bids were over $200K. The house was built in 1900 and had Knob and tube wiring all plumbing need to be redone, it was pretty much down to the studs rehab. We finally settled on a contractor and were going back and forth on the details. We met him at the house and put a For Sale By Owner Sign in the Yard. We started getting phone calls that very day but they were only from investors wanting to buy it. But we wanted to do the Flip. So were kind of ignoring them but set up some appointments to show the house to a few investors. And got an offer to of $120K which we had discussed would be our minimum price to accept. So we accepted this offer and will be closing this week. So I did not get my first flipping experience but we did get sort of a whole sale experience. Also it turns out that we were probably estimating low on the ARV it was likely going to be worth 325K. All in all my first deal my be the best deal I will ever have.

9) Before we accepted the offer were about to sign a contract with a contractor but had not done so just yet. There were a few details to still work out.  The contractor had spent a bit of time with us.  So we decided to pay him $1000 for the time and effort he had put in.  We thought that was fair.  Besides we will want to potentially use him in the future.