First Flip was a Doozy

[Lee Yoder]

I bought the house that no wise flipper would buy. It was an absolute mess and needed everything. It even had the dreaded leaking basement. I hired contractors for the bigger, skilled jobs, but I put in over 500 hours myself to keep my costs low. My wife and I were very nervous with this being our first real estate venture. It did turn out well in the end and we made more money than we had hoped for and I learned a ton, but it also took way too much of my time.

Purchase price: $80,000.00 Cash invested: $75,000.00 Sale price: $189,900.00

Why this investment? 

With this being our first investment, my wife and I were nervous about losing money, so I bought a house that needed a ton of work thinking that if I did enough of it myself, I would be able to control costs and force a profit. This house was very close to my home so it cut down on time away from my family. It's also located in a great town with very desirable schools, so I knew I would have plenty of buyers.

How did I find the deal?

I bought this home from an online auction site, xome.com. I bid on it several times and I was the high bidder the first round of bidding. I've since learned that you never want to be the high bidder on the first round of bidding because the auction company is bidding against you and will only let you win the first round if you overpay. That may not be true, but I do believe that I overpaid for this property. I was at the point where I really wanted to begin investing so I forced it a bit.

How did I finance?

We opened a HELOC on our home which we bought in 2012, but my guy at the bank either quit or was fired and didn't get the HELOC set up in time so the money wasn't ready when I needed it. So, my wife's parents lent us $60k and we spent $20k from our savings for the purchase. We used the HELOC for the $70k of rehab costs.

What did I add to the deal?

Sweat equity. I put in over 500 hours of work into this flip while working full-time. I would often get up at 4:00am and work for a couple hours before my kids woke up so I wouldn't take away time from my family. I also worked until after midnight several nights. My dad, my father-in-law, my cousin-in-law and my wife helped a lot as well.

What was the outcome?

I learned a ton. That was the most important outcome. Because this house needed everything rehabbed, I learned what it's like to do nearly every part of a rehab. I also learned to manage contractors. We did make about $30k which was more than we had hoped for. But, it came at a price- too much time away from my family and too much added stress for my wife who stays home with our kids full-time.

Any help from other REI professionals?

A local realtor/investor reached out to me before I purchased this flip. He got my info when I entered it on some bank-owned website. I could tell he was genuinely interested in helping me get started. He was also kind enough to encourage me to list this property on my own because he knew I would have no problem selling it. I don't think he made any money on this deal, but he did gain a client for life. His name is Robert (Steve) Riehle.

What now?

I took my profit and my HELOC and bought a duplex at the county auction. I just finished rehabbing it and listed it for sale on 12/14. I'll do another post after I sell it.