How My Flip Went Flop
A decade ago my husband and I purchased our first home together in Austin. It was 1800 mostly well configured square feet with a decadent 3 full baths, 2 of which were en suite. Located in a sought after zip code, we were able to afford it because it’s chopped up living areas, tiny kitchen, and converted garage backed up to a rowdy apartment complex. It needed a lot of work but we were up to the task.
We were practically salivating at the thought of lifting our sledge hammers to those bright orange living room walls and we did just that the very next day after closing. Over the course of a couple of years we worked that property over room by room with our own paint splattered hands.
My husband is a UT Architecture grad with decades of design, construction, and rehab work under his belt. Under his capable direction I added to my remodeling repertoire learning how to lay tile, tape and float drywall, and stain cabinets. These were pre-kid days so we would work well into the night and then go grab a margarita and a taco with sawdust and sweat caked into our clothes. It was hard work. It was messy. It was glorious.
Life brought us away from Austin and eventually we wanted to sell that first love of a home. When we met with our listing agent we were absolutely ecstatic about what he thought we could get for it. Floored. Over the moon. La la for the listing price! We didn’t get full asking, but we made an absolute killing on that house and it made us hungry for more.
The Second Flip
Fast forward a couple moves, a couple more houses, and a couple kids and we were ready for the bigtime. With our boys entering preschool the timing was right for us to dive in and take on a real flip. I planned to manage the day to day and my husband planned to moonlight the design and punch lists. We closed on that first flip on a cold February morning.
The basic idea was to get the remodel done in 90 days and have the house on the market in early June. We had detailed budgets for each room and other than one wall coming down, no major structural changes to handle. We could do this, and do it well, if everything went smoothly.
We hit our first snag right out of the gate when we attempted to pull permits from the city. The carport that had been built more than a decade earlier was never permitted and now that they knew about it, the city was having none of that. More money, more time, and the first of an impressively long list of hiccups.
We progressed through the remodel at a decent pace and I thought the work looked pretty good. My husband? Not so much. Every time he’d come to the house and point out things that needed to be fixed or redone, I took his input as a personal attack instead of what it was: a punch list of items that subcontractors did wrong and had to make right.
Finding skilled workers that can be relied upon is tricky business. Finding skilled workers you can trust completely takes years of trial and error. We were new to this city and did not have the advantage of a deep bench to call upon. We were beginning fresh with new crews we knew very little about. This caused us hugely in timeline, budget, and stress.
1 misstep, 2 misstep….
Several times we had to let people go in the middle of their project because they weren’t cutting the muster. Several times we had to rip out and start again when a sub royally messed up. Several times we were stalled out just trying to find someone to do the work. More money. More time.
On three especially aggravating instances, I arrived on site to find that things were stolen from us. I’m not talking about a hammer here and a tape measure there, either. I walked in the day before the house was going on the market to find an empty hole where the brand new dual fuel high tech range was sitting just the day before. There was no forced entry. It was stolen by someone who had access to the house.
See, I made the massive miscalculation of trusting people I did not know very well. One of them used the code I provided to enter the house and roll out a $3500 appliance. Another time, someone yanked the ice machine out of the wet bar leaving a glaring view of old wallpaper and carpet. Then someone came into the backyard and stole the vacuum right out of the pool. I wasn’t that bent about the Polaris or ice machine but I cried big ugly hyperventilating tears about that range.
Another time saving device I employed in my extremely gullible state of mind was to allow subs to go buy materials and charge them on our account. Sure, I’d see the charges and review them but when a plumber is buying pipe, fittings, strike plates, and a hundred other things that don’t exactly look obvious on a receipt, it would be beyond easy to slip in a few things for himself. I am sure that I overspent grossly because of this and not just with the plumber. In the name of saving time, I lost lots of money.
The final misstep regarding the labor force was that far too often, I agreed to pay a daily rate for general labor. I had a couple guys in particular that did a variety of jobs. They weren’t highly skilled but could do the hundred odds and ends that always needed doing. Instead of spelling out exactly what I needed and agreeing on a price for a particular project, I’d give him a list of several things and he’d show up day in and out, collecting a daily fee each time. I doubt I ever got a solid 8 hours in a day.
Time and again, I was warned that this was ill advised but with a deadline hanging over my head like an anvil, I carried on along this imprudent path. During the last month when a seemingly endless stream of finishing tasks grew day by day, the hole of our already blown budget just kept getting deeper and deeper.
An almost beautiful finish
Summer came along as summer does and we dragged that house over the finish line. Despite all of the setbacks along the way, I must say, it looked good. The listing photos were beautiful, the staging looked great, and we couldn’t wait to get it online and delight in the swarm of showings and offers we just knew we were going to get. Our profit wasn’t going to be as big as we’d projected but we’d still make a sweet chunk of change and be rich with the wealth of knowledge we’d take down the road to the next project.
The listing went live and just as we’d hoped, the showings started lining up like Apple users at an iPhone release. Sure enough, that very first weekend we got a full price offer, which we readily and happily accepted. We were jubilant.
One day shy of the option period expiring, after we’d already sailed through the inspection and negotiation of repairs, the buyers backed out. Their house was on the market and it wasn’t getting much action so they grew leery of carrying two mortgages. By this point I was at my breaking point and this blow knocked me sideways. I was devastated.
Things went radio silent for a long while after that. Every month that rolled by meant more money spent, price reductions, and a bottom line that was quickly approaching absolute zero. We were stressed to the max, at each other’s throats, and utterly baffled at our predicament. We had experience. We had a great house in a great neighborhood. The market was on fire. But our house was cold as ice.
Lesson to be learned
We finally, finally sold it in February, almost exactly one year after we bought the place. It took six months longer than planned and we ended up with a big loss. Our first flip was an absolute flop. As we signed the closing documents we commented that we’d never been so relieved to be losing so much money.
This experience was a huge strain on our finances, our well being, and our relationship, but there was a silver lining. The flop gave us an education on the flip side of the coin. We’d been so fortunate up till then to only have slam dunks. We have now seen the highest of highs and the lowest of lows and understand better than most the risk involved in real estate investment.
Bottom line, we know this: if you put your money on the table, you best be prepared to lose all of it and more because there is no such thing as a sure thing.
Kristen is a Texan living in South Bend, IN with her husband, two boys, and their rescue dog, Townes. Serial relocators and remodelers, they have owned 7 houses in 4 cities in 10 head spinning years. In addition to writing she loves yoga, travel, yard work, and day dates. Follow her on FB and IG or her blog, Long Days, Short Years, Stiff Drinks.