1105 Brock Flip

1105 Brock Dr was the second renovation I ever started. I utilized some of what I learned from the last flip and learned a whole lot more. A lot of the things I mentioned about the last flip were really learned during this transaction, so let’s dig into it!

How Did I Find The Deal? 

So, a difficult thing about being a REALTOR® and an investor is that I have a hard time finding off-market deals at the prices I need to flip them because I can typically get someone more on the market. This rang very true during the COVID market craze where a house could be actively on fire and still get over market value. Due to my internal struggle, I found it more beneficial to work with a wholesaler to find properties.

For this one, I was working with a newer wholesaler who I had originally met because he was looking for investment properties in the area. He would find a deal and ask me what I would pay for the property and then would try to work something out with the seller that fit what I needed to make a profit. If that number didn’t work out, he’d check with other investors. This was a great relationship because I got first stab and I’d help him with any comps or general market knowledge. After turning down a few, 1105 Brock Dr fit our criteria and we went with it.

How Did I Fund The Deal? 

Similar to the last deal, I used funds from the previous company for the purchase. We basically got all the money out from the last property and then put some into this one because it was a lot cheaper. We purchased 1105 Brock Dr for just $65k, but estimated closer to $40k for repairs because it basically needed to be gutted and we also wanted to change the half bath into a full so it could be a 3/2.

How Did The Process Go? 

So… this one could’ve gone a lot better. I had a talk with the contractor from the last flip about actually being at the job and he told me that if he could do the whole property himself instead of being pulled for random things here and there, he could stop taking any other jobs in the meantime. We agreed to do that and discussed a weekly salary for the job rather than a total cost. If he actually worked, there was a good chance I’d save a lot of money with that payment plan, so I took it… that was a huge mistake.

At that time, the sales market was insane as this was early 2021, so I didn’t take a lot of time to check in on the property. The contractor would text me a list of a few things he’d done for the week, send me a few pictures, and take payment. Every so often, they’d need a small advance, but they’d trade that for some “extra” work or something so they could go out that weekend. We had a deadline because I’d promised this property to some friends, but then the contractor started having family issues. He’d tell me that he couldn’t make it to the job site because of something happening at home or a medical emergency. There were all kinds of stories. Instead of being skeptical, I was sympathetic and helped him out. Eventually, he started ghosting me for days or weeks at a time. I tried getting him to get out there because I’d paid in advance on quite a few things. Finally, he told me that he wouldn’t be coming to the job site anymore. I was furious and told him to refund me the money, but he told me that he didn’t have it anymore, but they were in the process of selling some stuff and would pay me out of that… I never saw a dime.

I had to get other contractors in and that’s where the fun started. Many of the pictures I was sent as proof of work were just a small piece of the work that had been completed with other things left undone. Insulation in the attic was never done, counters never got installed, and the worst was that they didn’t even do the plumbing under the house. They installed everything so that it was just pointing into the dirt pretty much (this was a pier & beam home).

All in all, I paid that contractor about $30k of the $40k I expected for the property and then had to pay these other contractors an additional $30k to finish the job, leaving me $20k over budget with all of the repairs being covered out of my own personal expenses. I ended up keeping that property as a rental and I actually have one of the contractors who helped me finish the job living in there now.

Lessons Learned 

It’s like they say: “fool me once, shame on you. Fool me twice, shame on me.” I should’ve learned my lesson from the lack of communication the first time I used this contractor, but I’ve always been overly trusting and sometimes downright gullible, so he took advantage. Thankfully, the real estate market was going super well, so I still had equity in the property and I had funds to cover the overage without putting myself in a terrible position, but that definitely made me tighten my budget on other things considerably.

Here’s my top 3 takeaways from this investment:

1. No money is paid out until the property has been physically checked by you or a trusted partner.
2. If there’s things like plumbing or electrical, run the plumbing and electric. Check under the house and around the property as this is running to verify no leaks or that there’s even plumbing at all.
3. This is a job. Don’t be sympathetic to family struggles. As much as you want to be a good person, the relationship is usually not as buddies, but as you being the one with the money and them being the one that wants it. If you build up a trusting relationship with a contractor, you can adjust as necessary. A rule of thumb should be: if you wouldn’t invite them to your birthday, you shouldn’t be fronting them money without some sort of promissory note attached to that loan.

Learn from my mistakes, so a 3 month cash cow of a flip doesn’t turn into a 6 month nightmare! I was lucky that I didn’t have a hard money loan or this could’ve been SIGNIFICANTLY worse!

Get in Contact 

I’m always happy to talk if you’re interested in learning more about investing in real estate or if you want to buy/sell a property. Feel free to reach out!

If there’s a topic you’re particularly interested in, get in touch with me: 512-803-7226 orJankovichRealEstate@gmail.com