Here is brief story about my first flip.
My name is Dakota Coburn and I decided a few years ago that becoming a real estate investor was the right career path. I spent 12 month researching, reading, analyzing, going to seminars and even paying for a mentor, which I do not entirely feel like was a waste but I do not recommend it unless you really know what you are doing. Bigger Pockets as well as a few other sites offer everything needed for new investors that the mentors do, and they are all way over priced and usually a scam.
Anyway on to the deal. Denver Property just outside of Cherry Creek. We bought the property from a wholesaler with an estimated return of $50k profit and an estimated rehab of $105k which quickly turned into closer to $130k. We had a time line of three months to do the rehab and get it back on the market in Sept. So we went with a hard money loan and raised $110k from investors. In this deal I had my brother and two friends all very interested in giving flipping a try.
Side note this was the 10th property I had made in offer on during the course of last spring and I had analyzed another 100. So I felt like we had a good deal when we found this property for $445k, adn we were looking at a minimum ARV of $615k.
The problems started right off the bat when we lost our first lender due to low Appraisal, so we had to rush and find a second and got charged an arm and a leg from this lender, but we felt we had a great deal and moved forward.
Next we ditched our GC week one when is estimate for the work was $30k more then we had budgeted. So we decided we could GC it ourselves.
Asbestos came up on inspection and put us 10 days behind right off the bat for abatement period. Which gave us time to find a new contractor. Our first plumber gave us a low ball quote then robbed us of $3500, and we lost two weeks trying to find a new plumber. Our electrician, did decent work but at a snails pace, and decided through one of our partners he was capable of doing the plumbing, which we found out way down the road that he never pulled permits, wasn't licence and did none of the work to code. So we had an electrician doing his work plus plumbing, dumb, a GC that was really just a carpenter, and a guy doing our new load carrying beam opening up the floor plan, that was nothing more then a great wood worker and never followed the plans from the structural engineer to secure the beam properly.
So we did all the work and spent $150k on rehab about ($20k over budget), and we listed two weeks after our goal date. All in all we felt like things were going really well. Meanwhile I had been living out of state and not watching the progress on a daily basis, come to find out a TON of little details got left unfinished or ignored and all the initial hype of the listing was received with feedback of half *** work. I was confused until I was finally able to take a trip back to CO to walk the property and see light fixtures not cut in right, and trim unfinished, etc. We listed at the high end of the market at $700k and quickly dropped to $685, then $675. We ended up going under contract at $615 to find out that permits on the property were never closed and the laundry list of **** that the inspector wouldn't pass would cost about $20k.
Now we have lost two buyers that pulled out due to the open permits and the inability to close the permits on our end. We are at the point of default with our lender and we are negotiating with them to not go into foreclosure.
And to top it all off one of the silent investors is threatening to sue for his losses.
All the fun of a first time flipper. Any suggestions on how to survive this?
