This is part two!
I did this blog differently than my previous deals, I always like to make these posts about my deals so people can see the details of the transaction but this project had two additional components that I felt were important.
First, if I just went over the deal itself wouldn’t include a lot of the early strategy that went into building this project and I wanted to include that. Since this technically my first flip I thought it warranted a more thorough reflection.
Second, I wanted to record the whole flip on YouTube and that changed my strategy of how to deliver this content. I didn’t want to duplicate efforts so my goal is to create the technical explanation through text on my website, and create theater and storytelling through the YouTube content. Not sure if it’ll work like I want yet, but I tried it and I’m delivering a product that I hope you enjoy.
Let me tell you about YouTube
Part of my overall 2020 goals was to work more on videography. I talked about this in part one, and I talked about this in my 2020 goals post.
I love real estate, but I want to find a way to blend my other hobbies with it, owning rentals and trying to do YouTube around them is difficult, but flips are exciting and visually appealing. For this reason, some portion of the motivation to move to flips was that it would lend itself to videography as a value add.
So I recorded this whole flip and it came out DECENT. I really have no idea what I’m doing here but I knew I wouldn’t get better unless I did the whole project from start to finish and just put it out there. Then the next one I can improve.
So here it is, I’m only sort of proud of it, but I’m glad I have it so I can track the progress of my flip business and the progress of my video capability.
The one with the pink door
Yes I painted the front door of this house pink and yes I did it on purpose.
On it’s own it’s not that big of a deal. It’s just one house and if the response to it was negative I would have painted it black immediately. The stir it made in my social media was significant though and the more people
but if you want to hear a deep and complex story about the backstory about this I will tell you the details:
First, I use a lot of pink branding, especially lately. It’s not something I’m particularly set on it’s just that I used it to be loud and it seemed to polarize people. The more it created a stir the more I leaned on it. So when this flip house came up I thought I could paint the door pink and see if I could use the branding for social media.
I started asking around to people to see what they thought, and the feedback was resoundingly negative. Now I knew it wouldn’t be a very popular idea but the list of people who told me it was a terrible idea was long.
The people in my life who told me not to do this was nearly everyone, all who were close to me, and this makes for a very important point about life:
It’s very difficult to do something in the face of advice from your entire social circle.
Now this could be anything from career, your spiritual belief or political system, your partner, or what color your paint for your front door. Going along with the group is not just easier, it’s far easier, and pushing against the pressure is far more difficult.
In some ways I’m lucky to have the confidence in myself to do things in the face of my peer’s advice but in many ways it’s a personal disappointment that I can’t sell my ideas better to even my closest friends. It’s a long and tedious road in life to fight against the grain at every step, but that’s what’s required of us to create our own path. This is hardly the only thing I’m a contrarian on in life, it’s just another in a long list.
The more people pushed back on the pink door, the more I knew I had to do it. So I’m curious to my readers, who do you think was right?
What went wrong?
Not much fortunately, I was very lucky.
We were closing right in the middle of Covid-19 and it did delay us about ~45 days but that’s about it.
The rehab went in a very reasonable amount of time ~6 weeks but honestly it could have been at least one week faster but I was the one who was slowing things down mostly due to my indecision. If I could sum up my biggest errors into one word it would be: scheduling.
I wasn’t sure what to do with some of the finishes and the delays started adding up. I also was very slow in coordinating some of the vendors like tile and granite. These vendors have long lead times (~2 weeks) so any hesitation to schedule them means that those lead times start to effect all the vendors who need to come after them.
Next time I’ll be sure to line up vendors with a long scheduling period much closer rather than later.
Another thing I want to mention was the way I set up the deal cost me a LOT of money. I offered my money partner 30% of the deal in exchange for easy access to capital. This means I had no interest payments, no inspections, no draws, no hurdles at all. This is highly valuable to me because I wanted less pressure to perform and in case things went south this spread the risk around a lot. Hard money would have actually been a much smaller payout at the end but it would have been more difficult to deal with. This is also in hindsight after things have gone well, if things had gone bad I would have been VERY happy that I had no payments or interest burden. This is a very important thing to note, analyze deals going forward the best you can, never backwards with the results in mind.
All that said, 30% was too much I think. I do prefer to continue to use a private money partner but I think him and I will be renegotiating for more favorable terms on my end.
What went right?
The rehab went fast, ~6 weeks
It came in at budget
We sold it for more than I expected.
How could it possibly go better?
Everyone got paid! Above I mentioned that I paid too much for my cost of capital, but the truth is my money partner did very well and that makes me happy.
This is likely a fluke deal that I’ll never be able to replicate but I’m happy to enjoy it while I can!
Purchase Price $20,762
Budget $20,500 This is the only money I used in the deal, out of my HELOC
Rehab Costs $54,785
Holding Costs $1,633
Selling Costs $9,241
Sold price of the house $145,000
Projected - $130,000
Total Expenses $86,421
This includes cost to sell
Net Operating Income $58,579
Projected - $45,000
Private Lender $17,573
Projected 30% - $13,500 Total final ROI for them - 35% Annualized ROI - 85%
Deal ROI 67%
This includes the selling costs.
My ROI 197%
Calculated my net income after lender payout
Simple, I’m going to find another house to flip and I’m going do the same thing I did here. I’m also going to create a YouTube video for story and build a blog like this for the details.
On social media I made such a big deal about this flip even though it’s just one project and there are a sea of bigger investors who have done better and bigger than me. but it was fun to practice creating a buzz, the pink door was a hit, and maybe this info can help someone else succeed.
I know this deal isn’t what’s important but I’m practicing now so I can be prepared for when I get much bigger! I like that I’m telling the story from the start, maybe that will have value later?
Overall, this was a fantastic experience and if you read the whole thing THANK YOU!