All Forum Posts by: Doug W.

Congrats on jumping into the REI pool.

At a sales price of $110,000 you would be paying the buyer's and your (seller) agents $6,600 ($3,300 each). You then have your closing costs which can vary widely. Don't forget to figure these into your numbers.

I might be late to the picnic but I do like trying secret sauce. Unless it's from McDonald's.... I avoid those types of secret sauces. Please send it my way @Jay H. if you find my profile worthy. I'm in the market for my second fix and flip and I keep eyeing the auction sites.

Thanks!

Thanks, again, everyone. Here are some more replies/comments based on new posts since I was last here:

@Account Closed - it is in Fairfax County, VA. Yes, I'd love to do another in the same neighborhood. You're local so I don't need to tell you how expensive real estate is in this metro area.

Wow! I'm very pleasantly overwhelmed by your responses and votes for my original post! I was hesitant to actually publish the post but I really wanted to offer what moral support I could to other flippers because I know that during my very long 9 months I could have often used extra support from those who have experience. And it's also extra motivation on this Friday morning to find my next house! 

Thanks to all of you that have offered words of encouragement and support! I'm going to try to respond to some specific questions and comments here. Please don't take offense if I missed yours! :)

 @Ken T. - I loved the breaking even on college education comment! That is the truth!! 

I thought I would share my story with the hope that it inspires someone to start the home flipping adventure and/or saves someone from making some of the (costly) mistakes that I made. Note that I'm purposely not including $$ figures for privacy reasons. 

Background: After years about talking about doing a flip I finally jumped into the pool. The adventure started when I left my office job in April 2014. In June 2014 I bought my first property with cash (let's say that it was from an angel investor). 

The house: Built in 1952 and owned by the seller's family since 1954. The house had been vacant for over a year at this point and the seller, who was a relative of the deceased owner, lived in another state. 

Purchase: The property hit the MLS on a Wednesday, I got inside it on Thursday, and made an offer (all cash, no inspection contingencies) on Friday. The planned open house for Sunday was cancelled due to the seller receiving multiple offers. Negotiations took place on Monday. I had to increase my offer. My second offer was accepted on Tuesday. We closed 6 days later (the title company said it was the fastest closing they had ever done).

The plan: The house hadn't been updated in any significant way in decades. The wallpaper in the living room had turned yellow. The bathroom and kitchen were last touched in the 1980's (that was my guess). I knew that some of the mechanicals would need to be updated. The plumbing drains, from what I could see, looked to be updated (PVC). The landscaping had been neglected for years so it needed major pruning. The plan seemed simple: clean it up, paint, refinish hardwoods, new kitchen + new bath. I thought that I could do most of the work myself. My projected timeline was 3-4 months.

The outcome: I sold (closed on) the house in February 2015 (9 months and 9 days after my purchase) and broke even on paper. If you consider 9+ months of lost income then you could consider it a major financial loss. I don't because I look at it as a heck of an education that I couldn't of gotten from books or videos or online forums. 

What I learned:

1) I wanted to do most of the work myself. What I saved in checks written to contractors I lost (and then some) in the time it took me to complete everything; including holding costs. The takeaway: I love working with my hands and "fixing" things. The next time I decide to fix and flip I am going to pick one or two passion projects and make them my own (landscaping, tiling, etc.) The rest I will outsource. 

2) You don't know what you have until you open the walls. I found major plumbing issues and major electrical issues that were not apparent on the surface. These were definitely jobs for the pros. The takeaway: plan for the worst and hope for the best. This is where a lot of my money went and I hadn't budgeted for the worst.

3) I paid way too much for the house. I cannot overemphasize this enough. By my 20-20 hindsight calculations it was about $12-65k more than I should have paid depending on how you prefer to calculate your potential profit vs ARV. The takeaway: I got out by the skin of my teeth. The reality is also that another investor would have paid more than I would have I wouldn't have gotten the house. 

4) Don't put a house on the market less than 3 weeks before Christmas. The takeaway: just don't -- it's not a good time to be trying to sell a house.  

5) Finding good pros is key. My electrician (whom I had used in the past) introduced me to an HVAC guy and a builder and both paid off in dividends. Also, when you use a "big" company you will also be paying for their overhead (marketing, human resources, rent, etc). That showed in their pricing. The opposite end of the spectrum is that sometimes I had to wait until the "small" guys had time to do the work. It's a double edged sword. The takeaway: when you find someone you like, and trust, ask them who else they know. It also felt good helping out other entrepreneurs who are making a living doing what they love. I've since become friends with some of the guys.

6) Don't give up. There were times during the long process when I didn't see a way out. Had I given up I would have financially sunk my family. The takeaway: it's not always going to be easy. Be ready to have to dig in and push forward. 

Conclusion:

I am really, really glad that I did it. I am very proud of the final product. I spent years pretending that I was making an effort at becoming a REI when, in reality, I was spending my time doing busy work in order to convince myself that I was making strides towards my goal. I needed to get one under my belt. And now that I have I feel like I can do another -- only hopefully with a much more profitable outcome.

I'm happy to answer any questions but please keep in mind that I won't answer questions related to $$ amounts.

Before and After

I had the roof on a fix and flip professionally cleaned via a low pressure solution. I'm sure that the solution was as is described in a lot of the posts of this thread. Basically they sprayed it on (really soaked it) and then within about 7-10 days, including a couple of good rain storms, the difference was really noticeable. The shingles looks great.

I would also warn you, as I noticed others have done above, that the chemicals can potentially hurt plants. This includes when it blows in the wind. I'd also be careful when it comes to the cleaning solution getting onto cars, garbage cans, etc. The stuff could end up bleaching your clothes later if you rub against the car or garbage can. I speak this from experience. 

Thanks for sharing the details of your experience @Raji Kaur . You have inspired me to go back to the site and see if there is something I want in my area. I started this morning actively looking for another fix and flip so the timing here is perfect. 

Despite @Aaron McGinnis sarcasm being unproductive to the conversation I am going to dignify the post with a sarcastic response of my own: 

[sarcasm] In my case I suppose that the 5 master electricians who have worked on my rehab, the who knows how many staff from the regional power company who agreed to upgrade the service from 60 to 200 amps (including a new line from the pole, new point of connection, new drop and new box), the county permitting office who approved the electrical permit, and the county inspector who approved all of the work during his concealment inspection must be in cahoots with each other. I might even suspect that the insurance company, local fire department, and my Realtor are also in on the plan. I guess that only leaves me as not part of the gang. [/sarcasm]

To bring this back to a productive response; here is more to chew on: 

Is the situation ideal? It depends on how you define it. Is the rehab a complete gut or a cosmetic update? Could all new wiring be run through crawl spaces, attics, and walls without significant labor and damage? What does the budget and ARV dictate? There are probably a dozen questions like this that each investor needs to ask himself before deciding on whether the cost (investment) is worth it. A buyer needs to ask himself the same questions before buying. Similar to something I wrote earlier: If you're buying a 1950's home and expect everything in it to be like a brand new 2014 home you had better either reset your expectations or be willing to pay for the updates.

Let's not act like it either has to be either completely left as-is or completely brought up to 2014 new construction standards. There are plenty of alternatives in the middle that are safe enough if the work is done correctly. That's what the inspectors should be checking for when they are on the job. If the outcome resides in the middle somewhere could I still get an electric shock from an appliance or light fixture that doesn't have a ground? Yup. And that's a risk I take, amongst many others, of buying a home in 2014 that built in the 1950's. 

[sarcasm] In our next series we will be discussing galvanized drain pipes. Has our fast food culture put too much of a strain on old plumbing systems? [/sarcasm] 

It can be very costly to upgrade all of the wiring. You also need to figure in the costs to repair drywall, etc. from that work.

As far as reselling.... the house was built in the 1950's. Copper wiring with no ground is what was used back then. So it's not like the electric is unusual for the time period. And a buyer should expect that.

Here is what I just did in a 1952 home: 

1) Upgraded the panel and grounded it because the house was not grounded prior to this update.

2) Upgraded the service and box from 60 to 200 amp

3) Switched out all of the existing 2-wire ungrounded receptacles with 3-prong receptacles that are GFCI protected at the breaker or receptacle. We also added AFCI protection at the breaker for the bedrooms, per current code requirements. 

4) All of the new receptacles that are on the existing ungrounded 2-wire copper circuits have been labeled with "GFCI Protected" and "No Equipment Ground". 

5) New circuits have new wiring. 

In the county I work in the permits are public record and searchable online. These online records go back to 1989. Anything before that would require a trip to the county permitting office. 

I've used the records to search my property and those of my neighbors (to get ideas for contractors to hire).