2 Worst Deals:
1. Bought a house at the coast, numbers worked all day on comps, but ended up dragging out and selling eventually for a $100,000 loss. That one hurt.
2. Basic flip on a pretty rough house in Seattle area, the city caught wind and everything went to hell. Everything bad that could happen happened. I even paid a down payment to an electrician of $4k and he literally had a heart attack and died 3 days later. That one ended up losing $65,000.
I've flipped about 200-250 houses at this point. I've maybe lost money (the above 2 examples being very extreme) on 10 of them. My advice to you or anyone whos had a bad deal would be the following:
1- Doing 1-3 flips a year and losing money on one is a lot worse than doing 30+ a year and losing money on 1 of them, so go big if you can
2- Don't do any deals that aren't pretty for sure unless you have a contingency plan. If you've got a 'maybe' deal and you're guaranteeing all your personal assets with some blood money lender thats not a good idea. Find lending partners that will split profits with you on riskier deals. On the large 100k loss one, I did a 50/50 split with the investor. Because if something goes wrong, like it did in this case, I didn't go out of business, but if it goes right, they get more than their typical interest. Obviously, these types of deals go right more than wrong otherwise you lose the investor.
3- Don't do any deals you can't pay for the worst case scenario. If you've got 5k in the bank and worst case scenario you can lose 50k, dont do that deal.
4- Always do your own evaluation on rehab and resale numbers. It blows my mind how many people listen to agents on what a flip will sell for when its done. Most agents don't really know anything. They use average price per foot, and CMA's. These, in my opinion, mean absolutely zero. Learn to run comps for yourself and always verifiy resale. The other people giving you their opinion aren't on the hook when things go wrong, so don't put too much weight on what they say.
5- ALWAYS ALWAYS ALWAYS ***LEARN**** something from each bad deal. On both of the deals above, I learned some valuable lessons and it changed my business for the best. This business certainly isn't a guaranteed series of consecutive wins. You're going to get your teeth kicked in once in a while, so use that to better yourself and your business and be an exercise in improving your grit and move FORWARD.
Just remember, most of the battle is outworking and outlasting your competition. Never quit.
Hope this helps. Happy investing!
-CW
