Our First Flip: Or Flop?

You don't get started in the real estate investment world as an expert.  A well-known book, "The Millionaire Real Estate Investor," said that the path you take when you are new is not the same path you will be taking when you are experienced and successful.  The best thing a beginner can do is get started and learn as much as you can along the way.  No amount of books or seminars will prepare you to be perfect.  You will fail.  But, you will fail your way to success.  

Sheila and I have been experiencing this first hand.  It does not feel good.  The experience is full of worry, fear, doubt, and all sorts of other insecurities.  Through our experience, Sheila and I made a point to accept these failures as learning opportunities that will further our growth.  We have been able to settle our fears by clearing our minds and creating realistic and sometimes unconventional plans.  We then take action with the faith that the rest of the pieces will fall into place when necessary.  

We've been told many times that we are "putting the cart before the horse."  We are, in fact, demanding results and placing necessity on obtaining our desired outcome.  We have failed many times.  But we have never quit on our dream.  We believe that is what ultimately makes a true winner.

We had found a deal on our Elma house.  This inspired further action.  If we were able to find deals then we should have no problem assigning those contracts to an investor for a fee.  After we made the Elma house livable, there was enough time to obtain a list of pre-foreclosure houses and write a few letters.  I wrote out a couple hundred by hand to addresses around Washington State and even spanning out of state.  We averaged one call per 10 letters sent out, but were usually greeted with angry residence who wondered where I obtained their information or thought I was the worst human on Earth.  Through hundreds of leads, I ended up inspecting one home in person.  After presenting a contract, I never heard from the couple again.  Finally, after receiving a death threat from one angry homeowner, I was done.  Wholesaling was not for me!

After completely fixing up the Elma house, we decided to put it up for sale.  We were excited about the profit we would make and the financial stability it would give us.  During the remodel, an old lead we had been chasing appeared again.  It had been over a year since I had spoke with the people about their house, but the lack of communication on their side killed any possibility of a deal.  I would soon find out nothing had changed.  

The house was mostly gutted and lacking water or sewer lines.  The owners had attempted to fix it and had become burned out.  Even though they purchased the house for $25k, they continued to demand a sale price of $45k in a market where ARV was currently $110k.  I had talked and texted the owner on multiple occasions attempting to reduce the price but they would not budge.  I offered to pay their three years of back taxes and reminded them that they would be facing a tax foreclosure in a few months, but that didn't spark enough motivation.  I felt defeated.  I decided to give up yet again.  But, in that moment, I had a thought that I should throw out one last effort to obtain the property.  

I wrote a simple letter with three purchase options.  One was a cash offer of $25k where we would pay closing costs and back taxes.  The second was a $30k owner financing offer where we would pay $5k down and a small monthly payment and the third was a $35k owner financing offer where we would pay no money down and no monthly payment until a balloon payment was due in 2 years.

A few days later I got a call from the wife of the owner I had been talking to.  She said, "I got a letter from you in the mail saying you wanted to buy my house.  I am sick of this place and I want it gone.  If you want to pay $25,000 and closing costs, I am more than happy to sell it to you."

Wow!  Once again, I was just on the brink of failure and out of that came inspiration, an idea, and ultimately success.  

If you would like a copy of the "Letter of Intent to Purchase" I used, you can download it by following this LINK.

In the next blog post, we will share the story of our first (attempted) flip.  If life went perfect, we would have had the ultimate success story.  But as you know, that never happens.  From a sudden decrease in funds from our money partner to going over budget and running out of money, learn how this "flip" turned into a flop and how we recovered to save the project from ultimate failure!

See you there!