A few days ago, in my blog titled, "You Want to Flip a House? Educate Yourself!", I promised to share some of the headaches I had during my first flip, which I purchased in Cary, North Carolina through a Short Sale .
I acquired the property for $123,000, and it appraised at $147,000 before any work had been started. I eventually sold it for $169,500 to first-time home buyers.
While I did fine with the purchase, it took me a few bumps and bruises to complete the flip. Going through this process has enabled me to help my clients and friends avoid the pitfalls I endured.
Here is what I wish I'd done differently...
- Gotten a Mentor. Whenever one embarks on a new adventure, it is often helpful to have a mentor. I didn't have one! Huge mistake. I had taken classes and read books, so I thought I knew enough to be successful. The truth is, I knew just enough to be dangerous!
A mentor would've been able to keep me out of trouble--and could've helped me save a lot of time, and money, which was my reason for buying the flip in the first place. - Negotiated Better with the Banks. Yes, banks with an "s". There were two mortgages from two separate companies--meaning two different sets of decision makers. I wish I would've spoken with a manager in each bank earlier in the process, rather than the "customer service" people who had no decision-making authority. Because I didn't do that, the purchase process alone took nearly 6 months! My Short Sale was not so short. (Ideally, the best situation would be to purchase a home that has only one mortgage--and thus, only one party to negotiate with during the process.)
The first lien holder bent over backwards to work with me; However, the second lien holder tried to play hard ball. (I'm not sure why, though, because if the property did get through the entire foreclosure process, the second mortgage is extinguished--meaning that they get absolutely nothing!) In the end, I was able to get the second mortgage down from $35,000 to $3,000. So, I guess 6 months was worth the wait! - Repairs: Quite simply, I paid too much. I went into the property with the mindset that I wanted to make it as nice as possible. Don't get me wrong...nice is good! However, I went over the top. Before I started rehab, I should've assembled a strong team of painters, carpenters, a plumber, etc., that would give me a huge discount on the work I needed to have done. I was able to negotiate a discount on some items, but for the most part, I paid retail prices. Not good!
- Learning to do some work myself. If I knew how to change light fixtures and faucets, I could've saved myself quite a bit in labor. Instead, I paid a handyman company nearly $700 for labor.
- I paid too much for items like the stove, new front door, ceiling fans, etc. At the time, I didn't realize that the local Habitat for Humanity of Wake County has a store where they sell discounted household items such as flooring, appliances, windows, plumbing fixtures, and lighting. Also, check out this blog on Habitat by Keller Williams agent Mike Jaquish.
- I didn't have a survey or a home inspection! Today, since I'm a Realtor, I would definitely know to get a home inspection. However, since I found this property without the assistance of a Realtor before I had a real estate license (and was determined to purchase it regardless of what the reports said), I neglected to have inspections. Silly me!!
I had no idea that because I didn't have a survey, there were exclusions in my title insurance policy, including encroachments. Also, because I didn't have a pest inspection completed, I later found out the house had termites. Thank goodness there was no serious damage to the structure! However, this "oversight" cost me $800 I hadn't planned to spend.
Oh, the lessons I learned! Thanks for stopping by today...Email or call me if you have questions about flipping a property in my area.
Darleen McCullen, Realtor, Broker
Keller Williams Realty
Phone: 919.454.8864
Email: darleen@darleenmc.com
Copyright © 2007 - Darleen McCullen
Photo courtesy of Freshome.com
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