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: No money is paid out until the property has been physically checked by you or a trusted partner. 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. 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

1701 Sagebrush Flip

A lot of people have probably seen clips of the 8plex I’ve been working on, but let’s go back to the first flip because everyone has to start somewhere. The first property I ever flipped was 1701 Sagebrush Dr. I made a ton of mistakes but learned the skills that helped me to become a better investor. Let’s go over how I found the deal, how I got funding for it, how the repairs process went, and talk about the lessons learned.   How Did I Find The Deal? So, I waited a very long time before doing my first flip. I’d been wanting to do one since late 2018 and didn’t start until late 2020. I got super into the “Bigger Pockets” podcast and bounced around a lot of ideas before deciding that I actually wanted to get into doing flips. Early 2019, I went back to Ft Leonard Wood, MO to finish out my last year in the Army. I partnered with a buddy and we would drive around the area to check out beat up homes and then try to contact owners. We found one that was an absolute tear down and actually got to speak with the owner, but he wanted a ridiculous amount and said he’d patch it up himself. That property is still sitting with a gaping hole in the roof to this day. That was towards the end of my time in Missouri, so we gave up until I got back to Texas where I had better area knowledge. Then, I took the boring route and went through a local wholesaler that I knew from my school and we decided to just pull the trigger because we’d never find the perfect starting deal. I didn’t need the ideal deal; I just needed to do one. That’s where most starting investors get hung up too. They want the perfect deal when they really just need to do anything. Once you get one under your belt, the rest will come a lot more naturally. Don’t just take anything though… I’ll do another deal breakdown about that topic.   How Did I Fund The Deal? This is absolutely not a method that everyone has access to, but my buddy and I started a small company together. The plan was that he’d make the starting money through this company and then I would handle the property side since I had already been a realtor for a few years, even if it was only part time. We purchased it for $95k and estimated about $20k for repairs which turned out to be closer to $26k in the end. We were able to do the first flip with the money from the company as well as our own personal savings. That was a significant reason we even made anything on this deal. If we had to pay for a hard money loan, that would’ve eaten the rest of our profits. One exciting thing I found from this was that many people are willing to lend you money to renovate a property because it’s seen as an excellent or “sexy” investment. People want to be a part of a property flip, even if it’s making them less than the stock market or other assets. Thank you HGTV for making this so mainstream!   How Did The Process Go? OOF! The process was painful for my first time. I have very little technical know-how… yes… HAVE, not had. I have not significantly improved those skills. I learned that I absolutely hate taking down popcorn ceilings, paint sprayers go EVERYWHERE, and contractors are considerably better than me at most things concerning house renovations. I cut a lot of costs by doing things myself, but the reality is that my time could’ve been better spent elsewhere. I consider this project to be a net loss because I sold very few houses during the time I was working on this property. Always keep in mind that your time is money, so spending it to cut costs may end up being even more expensive in the long run. Another issue that I didn’t really think would be a problem is that contractors are incredibly difficult to manage. In general, you tend to have people who have technical skills and people who have management/organizational skills. Very few have both and the ones that do are incredibly expensive, so you’re likely going to be working with someone with poor time management, poor financial management, and/or probably other issues that you’ll be working around too. Admittedly, I’m a bit of a sucker and fall into emotional appeals pretty easily. I’m also overly trusting of people sometimes. So, I got a contractor that was like pulling teeth to work with. He was a nice guy who did fantastic work though and I bought into the “down on my luck” sob stories that he would give me. I paid upfront for a lot of line items and then pretty much had to force him to get to the property to work on it, so our timeline kept getting pushed back at every phase. With a lot of help from my girlfriend, her cousin, and some friends, we got the house finished up and ready for the market. Selling wasn’t so difficult as this was early 2021 when we had finally finished up. I’m very thankful that the market was increasing so rapidly because I initially estimated $130k for a sales price and it closed at $150k with us covering most of the buyer’s closing costs. With that spread and not having to pay myself commission, we were both able to walk away with about $6500 which is pretty much the skin of our teeth by house flip standards, especially when that’s not even really counting holding fees and sweat equity put in over about 4 months.   Lessons Learned While the profits were incredibly low, I gained a wealth of knowledge. It’s cheesy, but it’s true. If I hadn’t jumped in, I likely would’ve waited years to find the perfect deal. This has given me a better perspective to help other investors which has boosted my real estate sales significantly and given me the confidence to work on a few more that have been better on the profit margins. In case you couldn’t tell, I’d say the first thing to take from me as advice on your personal projects is to find a solid contractor and use them rather than trying to do everything yourself. I believe it’s valuable to get your hands dirty at least once to have an idea of how difficult specific projects are, but you’re going to save time and money by hiring someone. It’ll look better too. Be quick to fire if they’re doing a poor job and don’t pay money upfront. Material deposits are fine, but those materials need to be stored securely at the property rather than expecting the contractor will actually use the funds appropriately. Set up a daily time (or weekly, depending on the projects) to go over what has been done and stay on your contractor if they’re not meeting time hacks. Please don’t be a sucker like me and fall for any sad stories as to why they need money upfront that they’ll work off later… it always ends up difficult to get back. People you know have money. There’s hard money companies all over, but you’ll be surprised at how much private money is out there too. Don’t wait until you have the funds because you don’t want to take a risk. Find a property, get it under contract, partner with someone who knows what they’re doing. There’s no reason to go at it alone because there are tons of solid investors all over. Need help? Hit me up and I’ll try to find a contact in your area. If nothing else, I can probably help you find a local investing group. Lastly… just do it. Please make sure you contact someone skilled in your area so you don’t hemorrhage money, but breaking even or a slight loss of funds at the end can still be a win. Just remember that college costs close to $100k, take four years of your time, and has very little in terms of real-world or hands-on experiences. Losing a couple of thousand dollars on a house flip is significantly cheaper, takes less time, and gives you much more experience.  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