I was so excited, I found my first deal!
I did what every new real estate investor is taught to do first, I contacted a real estate agent and they set me up with a daily MLS email of properties I could buy and flip. I found an awesome 2,400 square foot diamond in the rough just waiting for me to fix up. The agent helped me to get the deal closed and for a great price, or so they said.
Renovating a house would be easy I thought; with all of my previous construction experience, what could go wrong?
I couldn’t wait to demo, make improvements and see my grand vision come to life. We had a budget of $40,000 to make it all happen and it seemed like a million bucks, especially because I was going to save a ton of money and do much of the work myself.
With a few eager helpers (including my wife) the demo was done, onto the fun stuff. We ordered materials, framed the new walls, installed wiring and recessed lighting, plumbed the new fixtures, installed the drywall, and quickly, three months had elapsed. We weren’t even painted yet and were clearly running out of money and we had already run out of time.
The search for an affordable painter was time consuming but successful and the painters showed up every day, but the summer heat and my frugal behavior gave one painter a heat stroke so I was forced to turn on the air conditioning; another monthly hit to the budget!
Once the painting was complete, I put on my tile installer hat and installed the floors and tiling floors is definitely not my favorite activity.
Four months into this project, things became tense between my financial partner and I. We were out of money, time, and patience. I was doing all of the work (he and others helped some weekends), not getting paid a dime for my efforts, and he was not receiving a return on his investment.
The kitchen cabinets were installed for both kitchens (did I mention that this house had an in-law suite in the basement?) and then granite was installed shortly afterwards. The house was really coming together nicely.
Weekends were usually spent mowing the one acre of grass, landscaping, and managing the help inside the house; weekdays were consumed by fixing work from the weekend, and the never-ending list of renovation tasks to be completed, it was exhausting!
Finally, after 6 months of renovations and no income, I was finished with my grand design.
Except, once listed, it sat on the market forever. Our price was way too high and everyone who looked knew it as well.
To stop the interest payment issues, we rented it out for 18 months to cover the interest expenses.
And once the renters vacated, we renovated the house AGAIN and staged it. This time the house sold and the partnership was officially over.
I did not receive one dollar for my effort.
2 renovations, 8 months of my life, and nothing to show for it but experience.
What lessons did I learn from my first real estate fix and flip deal? Well, let’s look at a few of them.
- Buy a house at the right price. No matter how hard you work or how frugal you are, you will never make up for paying too much for a property.
- Time is equal to money, arguably more valuable when it comes to flipping houses. Do not do all of the work yourself. You may do a few things, but all critical items should be done by others, even if you are capable.
- Put it in writing. Do not trust that someone will honor their word and pay you for your effort. When it comes down to it, people would rather have you lose money than themselves.
- Don’t over renovate your property; people want a house that is clean and safe. Up to a certain price point, buyers don’t care if you have installed thousands of dollars in lighting, dimmer switches, expensive tile, and level 2 granite. Keep your renovations simple, clean and safe; your time and financial budget will thank you.
- Big yards are not as appealing as you may think. With today’s fast paced family, yard work is looked at in a negative way, most people don’t want to spend all weekend mowing their grass.
I trust that sharing my experience will benefit you by avoiding these costly mistakes. After this experience, I realized I didn’t know what I didn’t know; so, I began to search for the successful way to be a real estate investor.
I learned how to effectively market and interact directly with the property owner, otherwise known as motivated sellers. Our present company, https://www.forrestbuyshouses.com, provides real solutions to people who have real estate burdens. By solving their issues, we provide winning strategies that bless many people for each successful deal. Sellers, buyers and tenants, contractors, private money lenders, and our employees all benefit from our services.