My husband and I bought our first property to fix and flip about 10 years ago. With some hard work and effort we were able to clean up this house, make the necessary repairs and sell it for a small profit. Since this little venture worked out so well and was a success, we decided to seek out another property to flip. It turned out that one was available just across the street from our own home.
Our neighbors were on the verge of declaring bankruptcy and needed to sell their home very fast. They knew that we bought one previously and hence they let us know about their situation. As we looked into the possibility of acquiring their home, we thought of the convenience as it was close by and that it would be easier to work on, before reselling. It was a 4 bedroom, 2 baths home, similar to the one we were living in and hopefully would not require too much work to make it marketable.
The problem, however, was that we did not look close enough. There were some issues which we had not checked on when we decided to buy the house.
We were told of one price for the house which was the outstanding balance to be paid on the loan, but as we got closer to closing on it, we found out that the owner had taken out another mortgage which bumped the final cost up a further $24,000. At this point we probably should have not gone through with the purchase, because it was additional funds which we did not anticipate on spending. We bought the home anyway.
Another problem we ran into was the cost of the remodel. It was quite expensive. There was damage we had not anticipated. The entire kitchen needed to be gutted and redone with new cabinets, counter tops and appliances. We needed to replace all of the carpeting and the front door. There was a partially built deck which we had to finish, as there was no railing in order to bring it up to code. The interior of the house needed to be painted and there were miscellaneous plumbing repairs as a result of leaks inside, and on the roof. Shingles had to be replaced too.
In addition, we were also faced with the market crashing and home values going down. This meant we were beginning to lose money on our investment. Our options were to either sell the house fast before we lost any more money, or keep it for a while until the market changed in our favor. We decided on the latter.
Although this fix and flip was a failure, it turned out to be a blessing in disguise. We have since turned it into a rental property and the income has helped us out when we needed it most after my husband lost his job and decided to go back to school. We still own this home.
What we did learn from this experience, however, is that we needed to be more cautious about any investments we make and to properly research any home we are interested in to ensure that there are no surprises, second mortgages or costly repairs. If we kept a closer watch on the market too, we would have seen the downward trend in home prices and job market and perhaps would have not made the purchase at that time. We were very lucky as everything worked out in the end.