All Forum Posts by: Todd Jones

Recap - I joined FS in 2023 with intent to flip many and generate more $ to invest with. started in cleveland market with no luck and switched to cincinnati market (where I live).

Bought off market 3/2 cape cod for $102k in cash 10/2023. Seller wouldnt turn on Utilities so couldnt check major items. Rehab estimated at $63K. ARV of $210-$215k. So it appeared to be a solid deal.

Well, there were many costs that just piled up over the rehab timing. like, drain lines that needed clearing, a water leak, having to switch to a 3/1.5 due to the odd layout. replacing AC unit (not factored into above rehab number), replacing Furnace (not factored), replacing roof) not factored, demoing and painting basement (not factored).

Time also played a factor as the contractor was not good. Lucky though for me I am local and could go over and check all items after complete. I had to tell him many times to fix items.

Rehab started OCT but didn't finish until JUNE 8 mo later! GC said 4 months initially.

By June i'm at $183k spent. I used HELOC so interest only payments continue.

Staged and listed and got a Ton of attention. Excitement was high. Accepted offer for asking $210K. Inspection back with whole slew of items. Buyer wanted $15k in items/credits, I denied as there was so much attention I thought for sure I could find a better offer. Back on market and lots of showings but no offers until mid July (cash institutional buyer) Offer of $204K but they wanted $20K in reduction after inspection.

Meanwhile I replaced roof (many buyers kept mentioning it so vs doing credit for same amount I just replaced) so total spend up to $188k with HELOC juice and half year tax payment.

More showings, dropped list price to $204K , no offers until 10/2024, $204K but again wanted many repairs and the aluminum branch wiring was the exit reason due to "insurance".

At this point I am not happy with agent (Do not recommend Howard Hannah) and I ask to release contract as I need to drop price and their commission is keeping me from profit. Well, they said sorry bud you signed a 12MO contract (lesson again learned to not ever signed an agent contract for 12mo) and they wouldnt release me so I just rode it out until contract was over.

I list FSBO in JAN 2025 through Homecoin(great site) $179500 offer came in a few days after list for list. Inspection requests were minimal but they wanted closing costs paid so it went through and sold in FEB.

All in $190K and came home with $165K. So $25K lesson learned. (I did not want to BRRRR or sell turnkey I just wanted out as I was afraid the bad rehab was going to cost me long run)

After all this, If I could have advised my self before getting into flipsystem, I would have said, Do not do this. I would have said, go to your local Real estate chapter and ask the leaders who in the group is the best at what you are trying to do in your area. Connect with that person or persons and offer to pay them to learn it all or try your best to learn from the RE meetings. They might offer up the knowledge for less than you'd think. I do get it thought that the point of FS is to not have to do any of that (education, finding people, finding teams, vetting teams, etc) and just have it done for you asap.

What do I think of Flipsystem? The education and calls were good, the team they told me to "trust" in my market was bad. Maybe it's just me and my experience in Cincinnati though as I cant say anything about the teams in other markets. I do see though, if the teams were better in my market FS would be a good program.

Did I take on too big a project for my first retail flip? I think so, but the FS team led me to believe I could make it happen.

Did I learn valuable lessons, absolutely. Should I have listened to @Jay Hinrichs absolutely LOL.

I have a slew of questions regarding this but in general, where did the "$63k rehab" figure come from? The listing?
Did you perform an inspection or walkthrough with a GC? If so, they didn't notice the roof or basement work?
Were you aware of the pending items that the buyer's inspectors eventually found?
What should have the realtor done better as the home still needed a slew of work as you mentioned.

0 Votes

I've read the OP several times and there are some data points missing which causes many questions. I wish I can speak to them in person.

Who specifically gave the $63K rehab estimate? The GC or the listing? Not running being able to run utilities to verify leaks and non-working items increases risk. They missed knowing a new roof and basement work was required in the original estimate? Did you have the GC go through the home in detail or have an inspector go through it? When did you find out about the aluminum branch wiring? Why is "insurance" in quotes, as in you question this? When you told the GC to "fix items" are you saying they missed some things they agreed upon but didn't get or they pointed out new things to you?

If the buyer's inspection(s) found a slew of items, how was all of this missed? Did you know of these issues but tried to sell anyway? It sounds more like risk mitigation and a thorough review wasn't performed as well as it should. Hence the 8 month vs 4 month rehab.

Also, what did you expect the agent to do? They were trying to sell a rehab home that still needed work. "Their commission is keeping you from profit?" When you calculate their commission and other seller fees, selling at $210k - closing cost - $15k credit was the better option but hindsight.

2 Votes

Quote from @Patrick Drury:

@Jinglei Shen
You'll need a signed mutual release from the seller before the title company will release those funds. In Ohio, EMD will stay with the title company or buyer broker (whichever it's deposited with) for 2 years, then it gets released back to the buyer if the parties can't come to an agreement

Section 4735.24 of the Ohio Revised Code:

(B) A purchase agreement may provide that in the event of a dispute regarding the disbursement of the earnest money, the broker will return the money to the purchaser without notice to the parties unless, within two years from the date the earnest money was deposited in the broker's trust or special account, the broker has received one of the following:

(1) Written instructions signed by both parties specifying how the money is to be disbursed;

(2) Written notice that a court action to resolve the dispute has been filed.

(C)(1) If the parties dispute the disbursement of the earnest money and the purchase agreement contains the provision described in division (B) of this section, not later than the first day of September following the two year anniversary date of the deposit of the earnest money in the broker's account, the broker shall return the earnest money to the purchaser unless the parties provided the broker with written instructions or a notice of a court action as described in division (B) of this section.

2 Votes

Cleveland, Ohio

Quote from @Jonathan Ghione:

@Shandy Victory I am in the same position as you looking to invest in Ohio I am flying out there next month to check out the area. Maybe we can talk network etc.

What city are you visiting? On the "Real Estate Rookie" podcast, a guest host recommended Dayton. I'm familiar with the market in Toledo, Akron/Canton, Kent, Columbus, Warren, Youngstown, and especially Cleveland.

1 Vote

I 100% agree with everyone here. However, do not go sight unseen unless you have the capital for major repairs. Don't just go by the pictures they posted. Use Google street view to get an idea of the neighborhood. It varies greatly street-by-street if you pick a C-class neighborhood.

I have associates that fix up a place beyond the typical look of the neighborhood but they have to buy-hold (which is fine) as selling means loss of investment.

0 Votes

Just curious, why section 8 in Beachwood/Highland Hills? Demand in general for that area should be stupendous.

1 Vote

Cleveland, Ohio

I assume you're going to house hack again as you are doing in Cincinnati. I agree with Wise. Yes, Cleveland has a ton of multi-family homes, the schools are pretty low rated.

The suburbs have less duplexes but the school systems are a bit better. Just post some of the neighborhoods of the homes you find and we can give a yay/nay. Just note that if it is cheap (<$60k), there is a reason.

Both the east and west side are find. Lakewood is great and one of the best but demand is extremely high. It all really depends on your price range.

0 Votes

Cleveland, Ohio

In Cleveland, we get 4 seasons but at weird times due to lake effect snow. It’s not surprising to see a serious snow blast in September / early October. Then it gets warm again.

2 Votes

Quote from @Jay Hinrichs:

Is it just me or did you just coin this term?

1 Vote

Quote from @Nathan Gesner:

Quote from @Claudia Stewart:

I hope you have this agreement in writing. If not, your case may be difficult to prove.

They should take responsibility for the lawn, security, and utility abuse. It makes sense to keep A/C on for showings in the summer heat of Dallas, but they could turn it up to 80 degrees. They definitely should turn the lights off and secure the property.

They aren't professionals. Here's what I would do:

1. Start looking for a new PM immediately. I'll provide some suggestions below.

2. At the same time, contact the current PM - in writing - and remind them of their responsibilities. Let them know you intend to hold them liable for the lawn damage and excess utility use. I would also let them know you are looking for a new PM.

3. If they don't make it right, report them to the Texas Real Estate Commission: https://www.trec.texas.gov/public/how-file-complaint

4. Transfer management to a new PM as soon as one is located.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

This.

Without question, immediate find another PM. Even if they get a tenant in, what service do they provide per the agreement? How many times will they visit, etc?
If a business is willing to state something verbally, they should have no problem putting it in writing with the details e.g., “Sounds great! Where is it at in the agreement?”

Same thing happened to me years ago. Bought a new construction in a very hot area (both temperature and housing market). I told the PM numerous times verbally and in emails “It has a sprinkler system. Please make sure it remains on.” The grass? Thick, green carpet. Strong blades. Looked award winning. A couple months later, I made a surprise visit. The grass? Wasteland. Not one blade. Only occasional weeds the size of people. I asked the PM:

Me: “Why is the grass gone? Why wasn’t the sprinkler system on? Did the tenant turn it off?!”
PM: “Oh, it has a sprinkler system?”
Then a guy sitting down said “Yea you have to water the grass every 6 hours or it will die in 5 days”.

I since sold the home. On Google maps, grass is still gone and I’m not so good shape.

2 Votes

Dallas, Texas

All Forum Posts by: Todd Jones

Todd Jones has started 2 posts and replied 230 times.

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Post: Dead lawn due to lack of watering on vacant property considered PM negligence?