The Flips That Didn’t Happen
There are many posts all over social media, websites and even podcasts saying how real estate investing is all unicorns and rainbows. I always knew ‘failures’ would occur and I’m a firm believer of failing fast and failing often. Although these setbacks have occurred, we are grateful it did and will learn from each mistake.
We inquired about a SFR in an up and coming area, on the red line (bus) and right across a huge park where multiple events are held. Once our realtor reached out to the seller, we discovered that the vacant lot adjacent to the SFR and a duplex that sat next door were all available. Since there were multiple properties involved, we partnered--with the intention of only wanting the SFR since there were only photos of the SFR available. Surprisingly, the seller accepted and we were under contract with a 10 day closing period. Our GC was able to get in the SFR to provide a rehab quote but we discovered a squatter was residing in the duplex. With such a short timeframe, our GC was able to get in there later than we had hoped and of course, it was in worse condition than we had expected. The rehab costs came out higher, our HML wasn’t willing to loan what we needed to make our initial out-of-pocket work. We decided to walk away from this deal, but it was a great learning experience. Below are some of the lessons we learned.
Communicate with your partner. Initially we only wanted the SFR to flip and didn’t feel too comfortable going under contract for a property that had no photos. If we would have just said we were only interested in the SFR, we would have given our partner a clear understanding of where we stood and he could have found another partner to take this deal on with him.
Don’t go under contract (or offer) until you have seen photos of the property and/or have your boots on the ground team walk the property.
Attention to details on underwriting. Always figured this was a strength of mine as I always analyze best and worst case scenarios. I could have been more conservative when running my numbers and anticipate the HML coming in lower than expected. With that being said, I could have dropped out of the deal sooner rather than 2 days before closing.
Again, we all make mistakes and it’s on us to be discouraged or to just push forward. I have set my eyes towards our goals, getting 1% each better and taking extreme ownership of every aspect of my life.