All Forum Posts by: Donald S.

 Hmmm...Budget process...sure. I got estimates from 5 or 6 GC's that ranged anywhere from 120k to 220k to do the whole job. Had them break down by line item of my (very rough) scope of work. From there I wanted to know where the differences where. I got bids from a few different subs, researched material and finishes cost, and chose the contractor I thought gave me the best price/finish/quality work while staying low enough to give me a profit. 

I figured I could do the tile work and paint work myself, as those tend to be very expensive trades, had him rework his bid, and subbed a few of the items to subs of my own that could do better than the GC could. i.e. I have a window guy who's great and got it all @$305/window, my concrete guy (while slow) was good quality and fairly priced and gave me a discount since I gave him the demo and fence work as well. All told we figured the rehab would cost us about $140k all in. With that in mind my lender was willing to give me $150k with the extra 10k meant to cover the interest cost of the loan. On top of that he only charged interest on money I had drawn, and we did 3 draws, 35%, 35%, 30%. 

As for your 2nd part. I'm VERY comfortable with numbers, they're easy to work and massage. But to ensure I wasn't valuing the property more than it was I ran my own (amateur) comps as a non-realtor, and had my realtor runs comps as well, and we were fairly close without collaborating, so I was pretty sure of the ARV. I also figured, given the ARV and repair, any overage I could safely cover by eating into my profit, which I ended up doing.

As a fun side, this was my first real flip that I ran comps on, and my initial ARV was $207k. After finishing the work my realtor reran and thought we could do 230k so we listed at 230k. After 10 days we dropped to 223k. Lo and behold we got under contract at 213k with 5.5k concessions meaning....my 207k amateur estimate was pretty much dead on.

Now how did I feel comfortable moving forward lol. I am SUPREMELY confident in my own abilities to get **** done. Some would say overly confident, like I feel I can "will" something to happen if I want it bad enough. And by God that's what happened. It helps when you are used to jumping in feet first. I'm the kind of guy that once I make a decision I go with it, 2nd guessing just ain't my style (at least not until I can't go back anymore lol). 

Hope that helps

Cheers!

 I tried for the 1st month we owned it while I was also talking with GC's and subs. Couldn't find a buyer who wanted it, so decided do to it myself. 

 Thanks!

My business partner and I actually bought 2 more flips already, closed on those purchases about 1 and 3 weeks after this one closed. Currently going through some permitting pains, but should be cleared up this week and then hope to have them ready before August is over. Both are only ~65k in repairs so significantly less work. I'll definitely be making more posts in the future once those finish up. 

 If you're near Rooster on Grand then you're in a high end and appreciating part of town. You can probably risk going higher end and still come out ahead, although without seeing the property myself I can't tell you what to do. 

As for my GC, the one I used on this I wouldn't recommend because his crew is too small to take on all the jobs he wants to take on. I have another GC I've since started working with and am happy with his performance in most things. I use a separate landscaper, window installer, and flooring guy because this new GC isn't competitive on those trades, but other than that I am using him on another flip now that is just getting under way. Feel free to PM me if you want to discuss further. 

Wow, thanks for the feedback everyone. Let me see if I can answer some of the questions..

@Lilian Ruwende our loan on this was from a private lender who gave us a 9 month 150k loan at 10.1875% interest. We (I should have mentioned @naveen C. Reddy and I were partners on this deal) bought the house with cash and a month later decided to flip it ourselves after we couldn’t wholesale it, so the 9 month loan worked out perfectly. We were actually scheduled for the loan to be due May 17th and closed the sale May 7th. (whew!)

@Jesse Bender it turned out our rehab cost/sf was ~$69.88

@Ty Davis “Honest people” lol. Some of my contractors were honest…but I may not have been the GC on this, but I surely had to keep a thumb on everything going on, God only knows how long it would’ve taken to do the job had I not. My concrete guy for example instead of pouring the new parking pad and sidewalk in November in relatively good weather, waited until January and then we got lucky with a “warm” 40 degree string of dry days he could pour.

@Glenna Wood wood lol yeah, most of my real estate friends thought I was nuts. I only started investing in Feb 2018 (research began Nov 2017), so didn’t have much experience at all, but figured I’d make it work.

@Oliver Perry I listed my main takeaways in the last part of the post. Aside from that, keeping a close eye on what your contractors are doing is key. And everything takes longer than expected.

@Brian Barnhart I’m a staff accountant, not a CPA. I work for a medium size retail goods wholesaler. Feel free to PM me if you want to talk more. 

@Carlos Varum Jr thank you for the detailed devil’s advocate. Around the 25 DOM mark we started looking at holding it as a rental as it looked like we weren’t going to get the 230k asking price, but after figuring out rents vs costs we were looking at best a breakeven. Rents in the area for a 3/2 (even rehabbed) top out at 1400/mo and that’s optimistic, more like 1300/mo to be conservative. But yes we definitely looked at renting it as an option and we calculated a roughly breakeven after reserves. That said, if our contract had fallen through and the buyers backed out, we were ready to do a refi since our loan went from 10.1875% to 15% if we needed an extension. Then we’d probably would have looked for a rent to own situation.
 

Wow, wasn't expecting such a reaction, thanks again everyone and wish you all luck in your endeavors also. 

Cheers!

 Hi David,

Yes this is the one you're thinking of. The one across the street that the owner wanted 25k for got it sold at 25k to a wholesaler who managed to sell it for 39k. It's under rehab now by someone else.

Personally I don't know how the builder will turn a profit on that. 

double post

Apparently I posted this discussion twice. Can a moderator delete this one in favor of my other one at

https://www.biggerpockets.com/forums/223/topics/716541-a-successful-barely-first-flip?page=1#p4225537

Gonna try and post some pics. Cant get this to post straight...

Above: the kitchen in the upstairs unit, the whole place looked pretty much the same.

Below: Building after all cleaned out except the studs.

Above: Framing started.

Below: Finished finally

Above: Great room

Below: Master bedroom

Above: Master bath

Below: Floorplan

So I just finished doing all the calculations for this flip. Man it was a beast. Almost 10 months from close to close and a huge project for a first time flipper.

So here's what I got:

I had a call from a direct mail campaign and the seller offered me his duplex in an up and coming neighborhood of St. Louis known as Benton Park West. He was only asking $9,000 so I thought there's no way I can't make this work.

I went and looked at the place, it had been vacant for nearly 25 years and was in rough shape to say the least. But the foundation was solid, brick work was in good shape, and the floors and floor joists (that I could see in the basement), looked to be in good/salvageable shape.

My business partner decided it was worth it and we bought the place for $9852.00 including closing costs. About a month later after talking with about 6 general contractors, numerous subs, 4 architects, and a host of potential wholesale buyers I lined up contractors and decided to hire a GC to do/oversee most of the work and I would project manage/manage the GC. We put a budget of $132,000 for the contractors to do their part, and I would contribute another $8,000 worth of work mostly in tile and painting.

With that in hand I found a private money lender through a friend of mine, and showed him the comps my Realtor (I wasn't licensed at the time), had pulled and he was already funding a similar project 4 blocks over from mine. He agreed and gave us a loan of $150,000, Interest only, Rate was ~10.5% 3 month variable.

My GC thought he could start August 20th and finish by December 1st, so in our contract I gave him until January 1st to finish before penalties would kick in. Work started with demolition on August 20th as predicted and within 2 weeks the place was a shell. Literally everything except the studs were gone (and those would be gone soon also). Unfortunately work did not progress as fast as my contractor had hoped and it would be February 20th before he managed to finish enough for us to put the place on the Market. Fortunately my GC and I had a good relationship and he kept his word, paid the penalty (200/week), and through in a 1 year warranty transferrable to the new owner as of the close of a sale.

After getting staging set and pictures taken, landscaping completed, we listed the property around March 5th, right at the beginning of the spring selling season. We had 2 really positive open houses on back to back Sunday’s and a good amount of showings throughout the weeks. After the 1st open house we put out advertising saying something to the effect of “If something isn’t quite right, let us know, we’ll do what it takes to make it right for you!” This was a good and bad thing it turned out, but mostly good.

After almost exactly 30 days on market and a price drop we got an offer at $200k and a request we provide $5k in closing cost and a $550 home warranty, we had listed it at $230k-223k. We countered back with $213,000 and kept the other concessions. Closing was set May 7th. We had a deal!

After some trials with the occupancy inspector and home inspector on some relatively minor things, we finally made it to close. I cannot express how nerve racking the waiting period between listing a house and getting an offer is, this was the first house I had sold, and then the escrow period was almost worse. The buyer’s didn’t know, but had they cancelled the contract, we were probably screwed as our loan was due on May 17th.

So how were the final numbers? (all rounded)

Purchase: $9800

Renovation: $162,000 ($22,000 over budget)

Total Interest Paid: $8700

Closing Cost: $18,400 (including commissions and concessions)

Holding Cost (other than Interest): 1100

Sale Price: $213,000

Gross Profit: 13000

Takeaways:

I learned a ton on this rehab.

1) Don’t try to do work yourself, have a pro do it.

2) make sure you keep a good lock on what’s going on and when with your contractors, one of our costs overruns was time.

3) On a gut, just because you think you can salvage something (like the floor), put a contingency budget in for it.

4) My 10% contingency was not enough.

Photos to follow: