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(EXECUTION): How [NOT] to flip a house

JDE

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Hey everyone, so I’m most of the way through my first house / mobile home flip and thought I’d share a bit of my experience and make a few posts about the progress I’ve made so far, and I’ll keep posting until the property is sold with details about how it went down.

First disclosure is that if you want an expert’s opinion on the area of flipping real estate you should check out @JScott 's material. But, if you’re interested in learning how not to do your first rehab, then keep reading.

Second disclosure is that the way I went about this flip probably wouldn’t qualify as fastlane. It violates many of the CENTS commandments, especially scale, because I decided to do the entire rehab myself, with no contractors, and no construction experience. The most handyman thing I had done up to the point when I purchased the following home was paint my parents fence one summer. I was also good at putting together ikea furniture.

Very quick background on why I decided to do something like this. I recently finished my master’s degree (in something entirely unrelated) and had a few months off before I could get licensed and start working at that job. I wanted to do something Fastlane related, but was so burnt out from seven years of book work and continuous lofty abstract thinking that I decided I wanted to work on something concrete and tangible, where I could get my hands dirty and hit things with a hammer.

So, when I read @Major 's post on this forum HOT TOPIC - Where are all the Mobile Home Park Investors? about flipping mobile homes in short periods of time, I figured I might as well give it a go. In the past I have suffered from pretty bad analysis paralysis (see my first thread REAL ESTATE - Critique my residential real estate checklist), so I figured now was the time to go in blind and wing it.

So, I found one of the cheapest and most run down mobile homes in my city and bought it. If you did a search for every property for sale in the city (of over 1 million people) and ranked them from lowest to highest price, it was number three on the list. There were only two properties in the entire city that were cheaper when I purchased it.

Here it was when I first saw the listing:
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It has come a long ways since I saw this picture, and at this stage I am mostly working on the finishing touches, and will soon get it up and listed for sale. Anyways over the next couple weeks I’ll post up some more pictures, progress notes, and INSIDERS secrets like how to use an angle grinder to grind your way out of a broken down bathroom you’ve locked yourself into for two hours.

Also shoot me any questions and I will provide my unlicensed, unprofessional advice :peace:
 
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Ocean Man

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how to use an angle grinder to grind your way out of a broken down bathroom you’ve locked yourself into for two hours.
I can’t wait to hear this story, haha.

Looking forward to the progress and really want to see photos of the before and after! Thanks for this.
 

JDE

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I can’t wait to hear this story, haha.

Looking forward to the progress and really want to see photos of the before and after! Thanks for this.

Haha thanks man I appreciate it!

Step 1 be in a rush
Step 2 turn ancient bathroom door handle aggressively
Step 3 feel the internal mechanism of the handle crunch and pop as it breaks beneath your hand, locking itself in the closed position
Step 4 profanity
Step 5 attempt to remove pins from door hinges, discover they are too bent and rusty
Step 6 profanity
Step 7 check for phone. No phone. Check window size. Too small to climb out of.
Step 8 profanity
Step 9 Check for available tools. 1 x angle grinder.
Step 10 use angle grinder to melt away the hinge metal for the most miserable hours of your life, hotboxing the room with the smell of burning metal
Step 11 Convince yourself it was a character building experience
 

JDE

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For this project I had three areas where I planned to add value.

1. Finding a Good Deal - the easiest $10,000 I ever made was last year, when I purchased a foreclosure property for approximately $10,000 lower than it's market value, due to very poor appearance, despite good condition (REAL ESTATE - Just purchased my first Canadian investment property *tips, pics, and ama*). Additionally, because the mobile home market in the area is relatively niche and ignored by most of the property rehabers in the area, combined with the fact that there is very little general consensus on how to even value mobile homes in the first place, meant that there were great deals out there.

2. Flipping the property as efficiently as possible - I planned to do what is called a cosmetic rehab or paint/carpet deal, where you find a property that is in good condition, but looks bad due to dated flooring, paint, fixtures etc. This is the step that I screwed up the most - because I did not do enough due diligence I purchased a property that required a great deal more than simple cosmetic fixes.

3. Excellent marketing - the mobile homes being sold in my area, with the exception of a few of the more expensive ones, are marketed very poorly. There are typically very few pictures available, minimal bland descriptions of the property, and the pictures that are available are dim, grainy, and unprofessional. This was an easy and inexpensive area to set my property apart from the competition. As an example, I have attached some listing pictures of my particular property to show how it was marketed prior to purchase:
Screen Shot 2019-12-01 at 12.33.19 PM.pngScreen Shot 2019-12-01 at 12.32.18 PM.pngScreen Shot 2019-12-01 at 12.31.55 PM.pngScreen Shot 2019-12-01 at 12.31.41 PM.pngScreen Shot 2019-12-01 at 12.30.52 PM.pngScreen Shot 2019-12-01 at 12.30.21 PM.png
 
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Strategery

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because I did not do enough due diligence I purchased a property that required a great deal more than simple cosmetic fixes.
Did you hire a home inspector? I would think they would have caught the bigger problems for you.

The carpeted, murder/sex-stained bathtub is a lovely touch.
 

Pink Sheep

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For your next flip, slapping on a fresh 3mm plaster + new floorings and interior improves value immensly :)
But its definetly an art!

Feel free to shoot me a message if you are going to flip another one, i'm in construction as an electrician, so i have a good idea whats economical and not.
 
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D

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Wow, those before pics really remind me of my house when we first got it! We were deceived during the viewings and should've cancelled the offer as soon things started taking 10x longer than normal when it came to them providing documentation, having surveys, etc.

We quickly realised they had removed supporting beams, every single wall was off, and they'd even boarded out a utility room! We probably overpaid by at least £10k. We've spent more than that getting to the house to the point where we have a house with working utilities, that is stable and doesn't stink of animals. We learnt from the neighbours they had ponies, cats, dogs, chickens, and lots of em!

With Brexit, if I don't make the money to finish the place and sell up soon, I stand to lose £40k all-in-all, ouch. Best of luck to you, hope you do much better!
 

JDE

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Did you hire a home inspector? I would think they would have caught the bigger problems for you.

The carpeted, murder/sex-stained bathtub is a lovely touch.

I was hesitant about the place until I saw the bathtub, was fully sold after seeing/smelling it. Work of art.

Good question – I did hire a home inspector, however there were many things that were not picked up with the inspection. For example, while the inspector confirmed all the electrical outlets worked properly. What he did not pick up on was that there wasn’t a single electric box in the whole house – it was built with a strange box/outlet combo system so we had to add and wire over 40 electrical boxes behind pre-existing walls, then add the new outlets and plates. Goodbye elbows.

For a second example we noticed that most of the house was covered in laminate, but the laminate seemed to feel squishy when you walked on it, as though it was placed on top of a bouncy castle. Typically if you have subfloor water damage it will be concentrated to certain areas like around windows, not evenly distributed through the entire flooring. At the time I just thought it must be some unusual subflooring material with extra spring or something, and figured worst comes to worst it would just hurt less if anyone tripped and fell on it.

So second day of the rehab I pull up some of the laminate, and there’s carpet underneath. Then I pull up the carpet and there’s carpet pad underneath this. Not that big of a deal I thought, it’s pretty easy to remove carpet padding. However it turns out the reason the previous owner laid laminate flooring over carpet was because the staples that were used to hold the carpet down were designed by satan himself. They were extremely deep, but fragile at the top. Too thick to cut with a scraper, too fragile to pull with a pulling device, too deeply embedded to be removed with pliers. And there were literally thousands of them. The only option I had was to grind/melt them away, one at a time, on my hands and knees. This did not take a lot of money, however because you need both hands on the grinder and the staples are obviously on the floor, I could only do this for around 2-3 hours at a time because it absolutely decimated my lower back.

This is why I had an angle grinder in my favourite bathroom from the above story.

Also here’s a few non-professional pictures of the (almost) completed exterior from a couple months ago.
Picture1.pngPicture2.png
 
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JDE

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Who says you can't let out your inner Tony Montana while living in a mobile home?

Wish I hadn't removed the tub now so I could be doing this every day to cap off a hard days work.

For your next flip, slapping on a fresh 3mm plaster + new floorings and interior improves value immensly :)
But its definetly an art!

Feel free to shoot me a message if you are going to flip another one, i'm in construction as an electrician, so i have a good idea whats economical and not.

I appreciate the advice @Creep I'll keep this in mind for the next one!

Wow, those before pics really remind me of my house when we first got it! We were deceived during the viewings and should've cancelled the offer as soon things started taking 10x longer than normal when it came to them providing documentation, having surveys, etc.

We quickly realised they had removed supporting beams, every single wall was off, and they'd even boarded out a utility room! We probably overpaid by at least £10k. We've spent more than that getting to the house to the point where we have a house with working utilities, that is stable and doesn't stink of animals. We learnt from the neighbours they had ponies, cats, dogs, chickens, and lots of em!

With Brexit, if I don't make the money to finish the place and sell up soon, I stand to lose £40k all-in-all, ouch. Best of luck to you, hope you do much better!

Jeeze thanks for the story, I can tell you all about mouse droppings from this one but no chickens to contend with... yet

Nice journey. Mobile homes are a wild and untamed animal. I want to learn from your success.

Appreciate it @Lucky Lu!
 

JDE

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So it’s been awhile since my last post, I have a new lesson. It’s called how to split your trailer in half using your electrical panel.

Around a month ago on a very cold Canadian day I needed to replace a few outlets. The electrical system is confusing so I cut the electrical breaker to the whole house for a couple hours to be safe. Here’s what happened.

Cutting the main breaker also cut the power to the heat tape that wraps around the main water line in the crawl space under the trailer.

At -40 Celsius outside it only took around two hours for the water in the pipe, no longer warmed by the heat tape, to freeze, and expand.

The main water line, made of copper, also expanded, but could not accommodate the newly forming ice within it, and exploded.

The 1” line, now fully ruptured, began spilling about 9 gallons per minute of water into the ground under the trailer. It took me around six hours to realize what was happening before I shut off the main water line. That’s 3240 gallons of water pooled under the trailer.

The temperature the next day increased, before rapidly dropping again, allowing most of the water to sink into the soil, before refreezing.

The saturated soil, now full of expanding ice, shifted. This is called frost heave.

This shifting began moving the concrete foundations that the mobile sits upon. Because the amount of water deposited around each foundation pile was different, they all shifted different amounts.

The subfloor of the mobile, accustomed to being on perfectly level foundation legs, began getting compressed in some sections, and pulled apart in others.

In most sections of the trailer this caused the vinyl plank flooring to lift up or pull apart, however at about the middle point of the trailer the wooden composite subfloor itself could not accommodate the stretching forces placed upon it, and split cleanly in half, from one side of the trailer to the other.

So that’s how you split your mobile home in half with your electrical panel.
 

JDE

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In other news, the trailer is complete and will be listed later this month. I've attached a few before/after pictures, and will put a few of the listing photos up next week.Screen Shot 202f0-02-12 at 5.18.00 PM.pngScreen Shot 2020-02-12 at 5.16.10 PM.pngScreen Shot 2020-02-12 at 5.16.21 PM.pngScreen Shot 2020-02-12 at 5.18.44 PM.png
 
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EVMaso

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JDE

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Alright so all the work has been done for awhile now and hoping to have it sold once the whole apocalypse situation blows over. I've attached a few of the final listing photo's, I chose not to stage it as the property is at such a low price point and there wasn't room in the budget. In other news I used the last month off work to get my realtors licence and my next flip will be a stick built house, and I will be contracting out a significantly larger component of the renovations.
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Lucky Lu

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Alright so all the work has been done for awhile now and hoping to have it sold once the whole apocalypse situation blows over. I've attached a few of the final listing photo's, I chose not to stage it as the property is at such a low price point and there wasn't room in the budget. In other news I used the last month off work to get my realtors licence and my next flip will be a stick built house, and I will be contracting out a significantly larger component of the renovations.
View attachment 32196
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Congratulations!!! Looks amazing brother
 
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JDE

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I forgot to mention this in my last post but wanted to put it out there in case anyone else is in startup mode in their business and getting knocked around.

I picked up this place for $20,900, holding costs $12,745, purchase/sales costs $6,150, renovation costs $18,750, and sold for $57,900.

That's a net loss of $645, and I put about 886 hours into it, so for every hour I worked, I lost around a dollar.

There's a lot of ways you can look at this, but for me that's a way cheaper education than going to real estate seminars and not even close to what university cost me in time and money. Also, someone got a nice place out of the deal so it's all good by me.
 

MJ DeMarco

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I forgot to mention this in my last post but wanted to put it out there in case anyone else is in startup mode in their business and getting knocked around.

I picked up this place for $20,900, holding costs $12,745, purchase/sales costs $6,150, renovation costs $18,750, and sold for $57,900.

That's a net loss of $645, and I put about 886 hours into it, so for every hour I worked, I lost around a dollar.

There's a lot of ways you can look at this, but for me that's a way cheaper education than going to real estate seminars and not even close to what university cost me in time and money. Also, someone got a nice place out of the deal so it's all good by me.

Thanks for the transparency. The place looks fantastic, just wish you made profit on it.

Next time will be better, and yes, tuition was $645! Not bad!

In doing a post-deal autopsy, where do you think things went sideways? The remodel looks very quality, perhaps too much $$ on the finishes? Seems glamorous for a trailer.
 

JDE

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Cheers man I really appreciate it!

Thanks for the transparency. The place looks fantastic, just wish you made profit on it.

Next time will be better, and yes, tuition was $645! Not bad!

In doing a post-deal autopsy, where do you think things went sideways? The remodel looks very quality, perhaps too much $$ on the finishes? Seems glamorous for a trailer.

I really appreciate the kind words, it was a lot of fun.

There’s two major areas that caused me issues –

First I did not do enough analysis of the neighborhood beforehand. I got my renovation costs accurate, but I didn’t have a good enough idea about what it would sell for. Most of the comparable properties were listed for around $100,000, but it turns out they were only selling for around 60. Because I didn’t have a realtor at that time for access to the MLS I wasn’t looking at sold prices which was a huge mistake. I didn’t read a single book about flipping prior either, it was trial by fire. I had experience with rental / buy and hold real estate but turns out it’s not quite the same haha.

Second I did the entire project myself except for the furnace replacement. On the one hand this kept costs low so I didn’t go into a massive deficit, and it was a great learning experience. But learning numerous trades simultaneously took a huge amount of time and my holding costs went through the roof and opportunity costs went down the drain. For my next project I will be contracting out almost every job and the plan is to make it a 1-2 month project, and a more extensive renovation than this one.

I know a lot of people who pay a LOT more money to get much less of an education. This is awesome...

I made a ridiculous number of mistakes on House #1, and it took me more than 2 years to ultimately get it sold. But, here I am 400+ houses later, and I still learned more on that first house than any other 10 put together...

Congrats on getting the first one done, and I promise, the next one will be a whole lot easier...

I really appreciate the comment, after this project I did what I should have done long ago and read through your flipping and rehab costs books a few times. It made me feel better reading your story as well as the stories of a few other entrepreneurs who had a rough go the first time round!
 

JDE

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What's up everyone it's been a while since I've posted an update here but I've had my head down in reno-land for the last three months.

We accepted an offer yesterday on flip #2 and couldn't be more pumped about how things went down, I've included a comparison below of flip #1 (ie desert of desertion) vs flip #2 (ie I now make more than minimum wage)

Flip 1 -
Hours spent on project: 886
Time between purchase and accepted offer: 12 Months
Days on Market Before Offer Accepted: 91 Days
Number of People (contractors, brokers, etc involved): 5
Cost of Renovations: $18,750
Sold for: $2,000 below list price
Net Loss: -$645

Flip 2 -
Hours spent on project: 250
Time between purchase and accepted offer: 2.75 Months
Days on Market Before Offer Accepted: 1 day
Number of People (contractors, brokers, etc involved): 46
Cost of Renovations: $66,077
Sold for: List Price
Net Profit: $12,893

Things I did differently for this property vs flip #1
1. Flip #2 was not a mobile home (regular homes have much larger spreads between crappy (ie $290,000) vs fixed up (ie $395,000) prices so there is much more room for spending on renovations)
2. Used sold comparables rather than active comparables in the analysis (properties are often listed for much higher than they sell for)
3. Spreadsheet for renovation costs was massively more accurate (thanks to the many mistakes made and lessons learned on flip #1)
4. Role Change (during this project I became much more of a project manager than a contractor - this is how the project went almost over 4x faster (even though this one was a much larger renovation) and looked way better (because it was actual professionals doing the work))
5. Planning (I spent 3 months creating systems for finding, appraising, and managing flips and renovations prior to purchasing this property vs 2 weeks for my first flip)

Things I will do differently for flip #3
1. Realtors Licence (if I had my licence for this flip I would have made an additional $15,847 profit through the purchase and sale for a relatively small amount of extra work)
2. Improve Team (in my opinion flipping is like the ultimate small business because you have people that "work for you" but don't depend on you. Therefore if they do bad work you don't have to go through a nasty firing process, you can just choose not to work with them on the next project. It also means you have no responsibility for them once the job is done so you can take a week, a month, or a year off between projects with no harm done. So for the next project I will continue working with my rockstar contractors, and change out the ones who did poor work)
3. Continue improving renovation costs spreadsheet (way more data now)
4. Reduce my contracting responsibilities (I still did a decent amount of carpentry, demolition, painting, and handyman tasks on the most recent flip. In the future I would like to outsource most of this (except carpentry because I love it) so I am almost entirely a project manager)
5. Continue to improve systems (I'll spend a few weeks after this project is wrapped to adjust all my spreadsheets, systems, etc to make things easier to use and more efficient. Whenever something happens that sucks or causes big problems I write it down and then make a point of addressing it later and seeing how I can adjust the systems so it won't happen again)

Anyways I'm sure I missed a bunch of stuff but these were a few of the big things that came to mind, hit me up if you've got any questions! I've attached a few pics as well below
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JDE

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I'm now about a week into our third flip. It's been an interesting one so far - the previous owners had removed almost all of the load bearing walls in the house so the ceiling had sunk onto the non load-bearing ones. None of this had shown up on the inspection prior to purchase so we've gone from thinking there would be one beam required, to installing 6 beams, 9 posts, and replacing over 80% of the major structural elements of the house haha.

With each successive flip I've tried to phase myself out of the smaller picture stuff and work on the higher level things like marketing, managing etc - I've included our first before video below (it's weird because it looks good but has terrible bones - usually it's the opposite). From the first mobile home flip where I did 95% of the contracting work myself, on this one I'm probably closer to 5% contracting and 95% project management and big picture and it's made a world of difference. Once you have good people it's a huge game changer, and hopefully I'll be able to continue scaling and moving things along more and more efficeintly.

I'll try and keep updating as it moves along, we're hoping to have this one done within the next 6 weeks!

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sparechange

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20 grand in Edmonton? Dam that's cheap...
 

sparechange

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I don't know anything about real estate, but wouldn't a good idea be to just rent it out long term?

I'd guess you could rent the home for 1-2k and within a couple years be in profit no?
 
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JDE

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I don't know anything about real estate, but wouldn't a good idea be to just rent it out long term?

I'd guess you could rent the home for 1-2k and within a couple years be in profit no?
Great call - holding costs are a lot better when there's no financing.

Three main challenges people run into when renting mobiles though -

First is that in a lot of cases mobile homes aren't built very well, so the capital expenditures / repair costs can be high when constantly fixing them up. They don't always draw the best tenant profiles as well due to the price point.

Also even though there are no financing fees when it's that cheap, there are still rental fees for renting the mobile home park pad - in this park it was ~$700 / month which isn't that far off what a mortgage payment would be for an entry level home, except you aren't paying off any principal in this case.

Lastly in RE you typically want the land which is more likely to increase in value, rather than the building on the land which will gradually decrease in value. In this case just like when you own a condo, you own the depreciating building but not the appreciating land. That's why there's been a big movement of investors trying to buy up mobile home parks lately.
 

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