I had the genius idea to buy a foreclosed home and do the ‘fix and flip’ for a profit. We closed on the house in May 2011, after all of the usual inspections and a month of paperwork. I thought it would be an in and out thing; instead, it all went wrong. Here’s why.
Additional Problems: We had a very thorough inspection done and thought we knew every issues the house had. When we ripped out the sheet rock, there was mold. Mold is a huge and expensive issue once it’s discovered. I’m not sure what I was obligated to do legally, but morally I felt I had to take care of the issue because I could never have a family move into a dangerous home. When we ripped up the kitchen flooring, we found rot that wasn’t seen underneath the house. This meant redoing the entire kitchen floor, which is also very expensive.
Budget: I very carefully laid out the budget that I had for each part of the house. It had seemed that we would simply have to do basic decorating and now I had to replace a floor and all of the walls. My budget was in tatters. That meant that I had to take money from one rooms redecorating and use it on something else. I knew I was in trouble at this point but didn’t want to give up. I thought with smart shopping, I could still get what I wanted by using cheaper but still ‘nice’ items.
Professionals: Most of the work was going to be done by myself and two friends who had chipped in on the house. With the mold and rot issue, we needed professional help. It turned out that’s very expensive and yet another reason for our budget to be shot.
Advice: We ended up halfway fixing up the flip and took a much lower price than we wanted because it was hardly finished. We simply couldn’t afford the upgrades after paying for the new floor and walls, mold removal, and professional help.
The advice I would give to anyone who is thinking about doing a fix and flip would be to really know what you are getting into. Ask about what you might find behind the sheet rock or under the flooring. An inspection can give you a good idea, but there are always going to be unforeseen issues.
Have a little wiggle room in your budget to work with. An extra $50,000 would have made all of the difference for us. After you make a budget, add at least $25,000 to it. If you don’t have to spend it, that’s great but if you need it, it will be right there.
Also, know your own abilities. Can you handle any kind of house issue without calling in expensive professional help? We through that we could but that all changed in the blink of any eye.
Finally, take the time you think it’s going to take until completion and double it. Often professional help can take months to get to you. We had to wait for a septic to be redone for almost two months. We had just assumed that someone would be able to come out in a week.
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