All Forum Posts by: Boone Tyson

@Camden Kelly Great BRRRR dude! I love that you used a HELOC as well. I think thats the best way to go without a doubt! Any more deals in the pipeline?

@Nate Volker You can probably google an assignment contract for your state. I can send you a blank of we have used before if thats helpful. They are pretty straightforward and simple

@John Whittle yes sir. I'd say definitely something that could've been avoided

@Melanie Stephens

My name is Boone Tyson. I'm an agent/flipper/rental owner in McAllen, Texas. I just posted this in the deal diary and thought it was a cool story to share.

In February, we bought a fixer upper from a wholesaler at about 80K. Assumed ARV would be about 140K and knew it was a good deal, but when the market heated up, it got even better.

Our county went into a lockdown and mandatory shelter in place for everyone not deemed "essential personnel" because of Covid. We lost about 30 days of rehab time because our subs weren't "essential." We finally finished after about 3.5 months and had it set to close on June 25. It was under contract at 165K to a cash buyer who was buying it for their family member. Inspection came back with minor issues that we took care of. We were looking at about 30-35K in net proceeds.

On June 23, we went to the property and the city had posted a notice that our certificate of occupancy had been revoked because there had been an enclosed garage in 1997 that wasn't permitted. In McAllen, you can only get a roll-off dumpster by ordering it through the city, so when they came to pick it up, thats when they flagged the house. With the certificate of occupancy taken away, it couldn't be sold. It took us about 2.5 weeks to get the permit done without losing the square footage which was a major education in and of itself.

We go to closing day which was July 17th. The buyer signed first and wired money to title. I cam in at 2 PM, signed, and went to the city to pick up the occupancy certificate to drop off with the buyers agent. We had been given permission by the buyer to spend an extra day touching up after closing. One touch up item was replacing a leaky spigot on the front porch. When our handyman tried to replace it, the old copper broke, so he had to solder on a new valve.

At 3:30 PM on closing day, after all parties had signed and the money was en route to our account, our handyman called me and told me the house was on fire. I dropped a few swear words, told my brother/business partner, and we jumped in the truck and sped over.

On the way over, we thought to call the attorney that closed with to see if the money had cleared in the account yet. Because the wire went out late in the afternoon and hadn't posted, we were able to have him cancel it before hitting our account and not record the deed. If we hadn't done that, we would've just burned someone else's house down.

The fire was mostly contained to the attic with damage to the roof, decking, AC, electrical, water lines, rafters, and some walls in about 35% of the house with smoke and water damage in many other areas. We were probably looking at minimum 50-60K in damages.

After it was all said and done, the insurance denied the claim and we discovered that we had been sold a rental policy on a flip house and therefore the vacancy was grounds for denial. We are in the process of litigation right now with our insurance company to try and collect as much as possible for damages.

The experience honestly took the wind out of our sails for a month or so. We didn't know what to do. After multiple discussions, I was driving down the road, thinking about this deal, and a question came to my mind:

“Can I flip 2 in the time it will take to finish this one?”

The answer was an absolute yes. So that’s when we elected to sell because we knew it would be a long project to break even at best and our crews would be tied up rather than somewhere making us money.

We have picked up 1 great deal since then and have our guys working on a 2nd that is looking like our best flip yet. And we have a 3rd under contract that should close in a week or so. The profit from those, if things go even halfway correct, will be 2x the loss and way more hopefully.

Lessons Learned:

1. Sometimes its better to take a loss in the short-term to move closer to your long-term goal.

2. Get the right insurance and ask more questions.

3. Permitting garage enclosures in fairly simple and we now have an awesome way to add square footage to smaller houses.

Hope this is something you think might be a good story to share

@John Whittle No insurance. He was just a handyman of ours.

@Nick Barlow These are all performing pretty well. It would be difficult to redeploy the capital right now into something better unless it was a different asset class I would say. I love the rentals we have right now. They are low maintenance for the most part and the tenants are easy as well. 

Outside of an impending market shift, I wouldn't sell. That being said, it probably makes sense to hold because I'm trying to time the market by selling, which historically fails for the average joe. I'm humble enough to admit that I'm probably about average haha!

@Jake F. Thanks for the mention.

@Randy G. I'm a licensed agent and I flip houses. Full disclosure, I didn't read all the replies you received so far so some of this may be repeat, but I imagine I may take a different approach than some people have mentioned.

I would recommend you try to list it yourself and give it no more than 2 weeks. If it doesn't sell, get a listing agent. I say 2 weeks because the market will always tell you if you are getting the right exposure and if you are priced right or not. A well priced flip getting good exposure will almost always go into a multiple offers situation in less than 1 week. Zillow is notorious for bad information so be prepared to contact customer service after you list to correct any issues that pop up. Spend the money on professional photography and watch a couple youtube videos on staging. Making those photos POP will mean the difference between upwards of 10K-20K.

That being said, one thing to keep in mind is that you can safely assume you will be paying out a 2.5%-3% commission to a buyer's agent anyway so if you can negotiate with a listing agent to do a 4%-5% total if you send them all your flips, you spend an extra 1%-2% to buy back all the time you would've spent otherwise. I don't know what your time is worth, but I imagine if you flip a number of houses, your time is worth more than 1%+.

it also largely depends on how many transactions you have conducted and how savvy you are with the buying/selling process when you don't have representation.

A business partner of mine from another city always does the flat fee option to get it on the MLS and then handles everything on his own, but he has done about 20, so he is pretty familiar with the process.

DM me if you want any more advice. Hope this helps.

@Dillon Dale Thanks man! That’s where we were leaning as well! I appreciate your input. Do you own rentals?

@Anna Laud No problem! Happy to help!

@Anna Laud step 1 would be finding an investment savvy insurance agent. We talk a lot about investment savvy realtors but it takes a full team including insurance, bankers/lenders, etc...

Step 2 would’ve been a better meeting than just a brief phone call where the scope of work and plans for the property were laid out clearly. This would’ve allowed the best policy and riders to be selected.

Step 3 could’ve been presenting some hypothetical scenarios to see if coverage extended to those. This was such a freak occurrence that it wouldn’t cross our kids most of the time, but that’s what insurance should be for - those freak occurrences.

Step 4 should’ve been better ongoing communication with my insurance agent to stay educated and also stay top of mind. There’s no telling what might’ve been different if I would’ve known what questions to ask and also if I had been a favorite client for my agent