Our First Fix and Flip
The Property
A 1,500 square foot SFR nestled away on the East Side of Indianapolis in a neighborhood called Irvington. This property is blocks away from The Historic District which boasts lots of cool attractions, restaurants and parks. Fun fact, Butler University once called the town of Irvington home.
How We Found It
In March 2020, we connected with an experienced investor in the Indianapolis market. He was one of the first investors we ever spoke with and after months of communication, we randomly asked if he was selling a property.
How We Funded The Deal
Similar to Broad Ripple, we went the hard money route. This time around, we were very lucky enough to put very little vinto the deal, which in the end, really helped us on our ROI.
What we did wrong
With a quick closing and being near Labor Day weekend, it was difficult to find any availability for an inspection, especially from the inspector that we normally use. Since the house was vacant for over a year, an electrician needed to inspect and tag the meter. This caused a delay in getting the inspection done and wasn’t completed literally less than 24 hours of closing. My General Contractor (GC) already created the Scope of Work (SOW) so there weren't any changes that I could negotiate if the inspection report came back awful.
The rehab finished a week before Thanksgiving (this seems so long ago), and we set the rent too high (we pushed it a bit). After sitting on the market for a few weeks and being impatient, we dropped the rental price and with a lack of qualified tenants, we decided to test the market and list it for sale. The issue here is that the property was rehabbed as a rental, not as a fix and flip.
All inspection reports said to consult with a structural engineer, which we did not. When the buyers requested a structural engineer to view the property, we had a HUGE bill. Luckily, our network helped us with this and found someone to fix the structure for a quarter of the price we were quoted from the engineer.
What we did right
Improved System. We played the middleman between our HML and the Project Manager on our first project. On this property, we eliminated ourselves and had our Project Manager work with our HML on releasing draws. We still received weekly updates from our Project Manager and we authorized any changes but our Project Manager reached out to our HML when they needed funds.
With pivoting to flipping this property, we had enough cushion to make a small profit. Remember the money is made when you buy the property!
Conclusion
From the acquisition to the rehab, everything went smooth. Then, shit hit the fan. Our indecisiveness from renting to flipping cost us as we all know time is money. This property sat on the market as a rental during the holidays before we switched to listing it on the market. We took a risk knowing that we did not hire a structural engineer as recommended from the inspections. After 2 weeks on the market and an offer at our listing price, the buyers inspection also suggested an engineer analyze the structure. Well, this is where our profits got eaten alive. To keep things simple, the foundation needed A LOT of work and delayed our closing by months. We are glad we are walking away with a small profit and I would not change this experience for anything. This property tested our patience, it challenged our mindset, but to finally push this to the finish line has given us a greater amount of confidence that we are built for this and will do anything it takes to reach our goal of time freedom.
