Dumont Flip – 248 Lexington
248 Lexington is a 3 bed/2 bath multi-family home we are converting into a single family home and will be our first flip as real estate investors! We found this property off of Zillow. By chance, when we called the listing agent (who happened to be the seller’s niece), although they were currently under contract with another buyer at the time, because that buyer was using an FHA loan, they were requiring that the seller make all of these repairs before the bank would issue them the loan. Due to the headache of it all, the seller decided to give us a chance and we went to visit the property the day after New Years. At first glance, the property seemed to be in pretty good shape and the rehab would likely be cosmetic in nature in addition to replacing windows and the roof. We made an offer at $250k and had it accepted immediately.
One challenge we are facing with this property so far is the layout of the bedrooms/hallway on the second floor. The space is a bit tight and originally, we were thinking about adding a fourth bedroom which used to be just a big wide open space. However, by adding drywall there, it would essentially close off the space and would leave very little hallway space, which would like pretty awkward. We are now thinking that we just leave the space open and could be functional just as a playroom, reading room or an office. Another space issue we have is how to address an area on the far left side of the hallway which was originally used as storage. We went back and forth about leaving it as storage or just opening up the space to make more room in the hallway but decided to just leave it as storage (which would be the most functional use of the space).
Successes so far
- We were able to obtain lending from a hard money lender right away – used Alpha Funding
- We found a private money lender who agreed to lend us $50,000 at 15% interest – our networking paid off!
- Our estimated rehab costs were pretty spot on – both of the bids that were submitted came in around $40-45k, which was what we originally anticipated when analyzing the deal.
- The initial appraisal came in at $400k – which is what we estimated the ARV to be.
- Sweep found an oil tank but was removed with zero contamination
- Smooth closing
Lessons learned so far
- Always document everything!
- Make sure the statement of work is as detailed as possible (i..e, cost break down of materials versus labor and who is responsible for what…for instance, what types of materials would we as the investors be responsible for picking our and getting delivered versus materials the contractors will be providing)
- Prepare change orders for any adjustments made to the statement of work.
- Request contractor for all receipts/invoices.
- Never pay anything up front in cash – we made the mistake of paying the contractor the first draw in cash without documenting it.
- Create a detailed timeline and request the timeline be confirmed by the contractor. For instance, initially we had no idea when certain items needed to be ordered (i.e., windows, flooring, appliances, etc) in order to keep momentum going.
Rough timeline of rehab process based on conversations with contractor (Jim)
- Obtain necessary permits
- Order dumpster
- Demo process – 2-3 days
- Granite countertop – request contractor to order granite samples and also provide any sample styles you would like to have
- Windows – takes less than 1 week to order and pick up standard windows
- Flooring – this will be close to the last step but important to pick out materials/color and decide whether the home will house engineered hardwood or hardwood; whether you would like to preserve some of the original flooring and just stain and refinish, etc.
Jersey City Flip – 249 Clerk St
Clerk street is the first property we ever made an offer on located in the Bergan Lafayette section of Jersey City. This property is a single family attached row-house. The rehab is a medium rehab, consisting of cosmetic elements as well as new roof and possibly a new water heater and furnace, based on the inspection report.
There are a couple challenges associated with this property. First, the ARV has been difficult to calculate. Because Bergan Lafayette is a section of Jersey City that has been on the upswing only fairly recently, there aren’t any renovated properties on the same street and most renovations that have been done within a mile radius are not exact comps. For instance, some properties are brownstones or detached properties versus attached and also have a different look/feel to them then the subject property.
We have also been dealing with a difficult agent. Tara Duffy is the agent we have been mostly in contact with since the very beginning of our real estate investing journey. In the beginning, she was really helpful and great about giving us access to properties, sending us listings and making offers for us. However, as time went on, she became increasingly difficult about letting us make offers she thought were too low and even seemed to balk at the idea about making offers for us and analyzing deals when we met her for coffee one day. Additionally, our experience with her by going through the Clerk Street deal has been awful. When we asked her to send us comps to support the ARV, she told us we had to dig through our emails and find the ones she already sent us even though we made it clear that the link she initially sent three months ago had since expired. She then went on the complain about how pulling comps took her too much time and she couldn’t stop wasting her time doing these sorts of tasks for us. She also made it difficult for us to access the property when we needed to get in there to show our potential JV partner, Jamal, the property. When we met with her, she just had this sour attitude the entire time. To make matters worse, every time we try to make some sort of requests to the seller or negotiate the deal terms (for instance, when the inspection report came back, we requested credits and the seller rejected them all and threatened to pull out of the deal if we didn’t respond that we would proceed that same day by 2pm). Tara frantically texted us and questioned why we were asking for so many repairs and said that we could lose the deal if we didn’t respond right away that we would move forward. It is just a shame that instead of looking out for our own best interest, she seems to be looking out for her own interest and seems to want to push the deal forward whether we are comfortable with it or not so she could make her commissions.
I also am not too fond of the current contractors we are planning on using for the deal. The statement of work they provided was very general and not specific at all. I sent them back our own break down of the statement of work and asked them to fill in the blanks, which they then responded by saying they would have to get into the property again to do a more thorough analysis. I am also worried that the ARV won’t stick and that the level of repairs will be much greater than anticipated, especially given all of the repairs the inspector told us we would have to make and the current condition of the home.