All Forum Posts by: Bill Hinshaw

@Scott W.

I was wondering when someone would call us out on the 2X rehab. Some of this was our fault from lack of experience, some of it was intentional.

We knew the market was appreciating rapidly. We decided to go for full market value. Example, we tore out the existing driveway and carport and moved it to a different location so that we could create a nicer back yard space. We totally overhauled the interior layout to make it more functional, which also meant a complete overhaul on electrical and plumbing. Those things weren't in the original budget. We would have done things differently had the market not appreciated like it did.

Could we have made the same amount with a smaller rehab? Probably so. We wanted the full learning experience and had a good idea that this market would allow us to do that and still be profitable.

Then a part of the miss on the budget is because we just whiffed. Some parts we under budgeted. Some parts we over paid. A big part of our learning was to go thru and note those things, and to put systems in place to make sure we track it more closely on our next house. For example, we had no idea plumbing is as expensive as it is. All plumbers should be millionaires.

I agree we were really lucky with this house. 

@Scott W.

It's been crazy. I never expected to experience anything like that in the Dallas market. We're typically a more stable market with lower highs and higher lows. 

The $76k was total profit, split between my partner and I.

@Steve G.

Good question. We haven't used a penalty clause with our subs. Working with subs is an area I think we will improve on over time. 

We are also utilizing one individual as a contractor with a daily rate. He is working with us pretty much daily at this point. If we can find 3 more similar to him, we may go in more of a "crew" direction as opposed to hiring subs for everything. I know that has implications for workers comp, contractors vs employees, etc and I haven't fully thought through all that.

@Alfredo O.

Congrats on your first property! That is a really great question.

Where to start. Flipping our first house was incredibly exciting and fun at the beginning and the end. In between, it was a battle of the mind with multiple ups and downs. Having a business mindset, expecting problems and being focused on solutions, setting expectations for contractors... all that stuff is not much fun. But that's the kind of stuff that will determine if your business will flip one house or multiple houses. The process really will stretch you and reveal weaknesses in yourself and your partners. There are thousands of little decisions that have to be made quickly, and conflict just naturally arises when taking on something of this scope. How you deal with those things will make or break you.

The biggest thing I could recommend is to define your scope of work as accurately as possible up front. Have an experienced contractor go over each thing to help estimate your budget and timeline. Pay him/her if necessary; it is money well spent. Go over your budget and timeline every couple of weeks with your team. Are you on schedule? On budget? Where did you miss and why? Did you add new things as you went? Can you pull it back in in other areas?

What area is your house in? I used to live in Arlington, just south of I20 and close to 360. I hope you'll update us as your house progresses.

@Steve G. We used our realtor's contract. Why do you ask?

@Steve G. We found both homes through realtors. The first home was not on the MLS yet, and we were able to negotiate a deal with the seller without any competition.

The second home had been on the market for a while. The sellers had just purchased the home a few months earlier with plans for massive renovations, but gave up before they ever got started. They had trouble moving the home when they put it back on the market. I think the quick turnaround scared a lot of people off.

@Steve Osowicz I will try to dig some up and post them here.

@Jon Klaus Hey Jon. We didn't include the Bette Davis part in the MLS description, but we did use it on the brochures and open house. Flip #2 is in Canyon Creek in Richardson. I doubt we'll have near as much possible upside, and the spread is tighter. It is a great opportunity to get a little better with our budgeting.

• Purchase price - $255,000
• Expected rehab - $80,000
• Expected ARV - $425,000
• Actual rehab/carrying costs - $155,000
• Actual sell price - $525,000
• Profit - $76,400
• Time to complete – 7 months to get on market, 9 months to close
• DOM – 27 days

See link to “after” images here: Our First Flip

The House
This was a mid century 3/2 2300 sq ft home on a large ½ acre lot near White Rock Lake in Dallas. It had a garage conversion that was essentially an extra room with a closet but no bath, poorly done with limited functionality. The home was being used as a rental at the time of purchase. As such, it was not maintained that well. It was still a functional home but needed a lot.

It had substantial layout issues. What looked like your typical master bath was right next to the front door and adjacent to the main living area, totally unconnected from any bedroom. Jacuzzi tub, travertine walk in shower, the works. The previous owners had poured a ton of money into this bathroom, but it worked against the sellability of the house because of its location. Also, the carport location took up almost all of the back yard of the property, so the huge ½ acre lot consisted of a large front yard and very little useable space in the back.

One other cool thing… Ron Howard produced his first made for TV movie, Skyward, on location at this house in 1980. Bette Davis was the lead actress.

The Market
White Rock Lake is surrounded by mature neighborhoods that have appreciated with age. It is close to everything Dallas has to offer and is a very desirable area for young professionals and families. The demand for the area combined with the age and condition of the homes creates a wide range of pricing that is perfect for flippers, and there is a lot of competition. There has also been an influx of large corporations into the Dallas area, increasing demand.

We started this house in March 2015 thinking our best ARV would be in the $425k range. In July, a renovated house across the street sold for a sq ft equivalent of $589k in 2 days. We listed ours at $589k in October, reduced it to $559k after 12 days, then accepted an offer at $525k after 27 days on the market. We experienced rapid appreciation followed by a cool off after the summer months ended.

The Rehab

• All new plumbing, including new master bath through slab in garage conversion
• All new electrical
• Most interior walls are new
• New drywall and trim throughout
• New windows
• New roof and gutters
• Repaired foundation and drainage issues
• Removed/replaced bowed stone wall
• Full cosmetic rehab with a higher end finish (real hardwoods, quartz, marble, etc)
• New cedar fence, landscaping and stone borders
• New driveway and demo of existing driveway
• Added exterior door next to new carport location

Strengths/Weaknesses
After 9 months and $155k rehab, we learned some things about ourselves and this business. Starting with our strengths or competitive advantages: Our GC is also a partner in the business. He has been around construction since birth and is fully vested in our success. My wife is a gifted decorator and has her own staging company; she handled our finish and staged the property. Also, we were able to use all cash on this property. That allowed us time to make mistakes without interest accruing.

We have to get better at project management and budgeting. We had zero knowledge of local contractors going in, so we are still learning how to deal with contractors and what pricing we should expect. We’re also in the process of assembling a small crew. I’m not sure exactly how many flips it will take before we feel like we have it down to a science, but I know we will get better pricing , efficiency and results with each one.

Flip #2 is already in progress and should be on the market in March.

Not sure, Keith. That would make it tough, especially if you used hard money. Surely someone with more experience with BRRR can chime in. Either way, your numbers are outstanding and give you some options for exit.

I'm going to post the results of my first flip tonight. It will make you feel better about your 3 month rehab (mine was 7 months). And I spent quite a bit more.

Sure seems like a good opportunity for BRRR. You could potentially pull more cash out than you put in and still cash flow as a rental. Not likely, but it seems like you might be close.

Great job. Pretty amazing what you did for 18k. What could you rent that property for?