My First Flip, Part One
Hello and welcome. It was my original intention for this blog to move through all aspects of flipping, and that is still my goal. However, as I was considering where to start, it occurred to me that as a prelude, my Minions might find it interesting to hear about my first flip, you know the one mentioned in my last blog, the one I decided to do as sort of a self training effort while working out all my masochistic tendencies…..yeah that one.
Meet 666 (house # changed to protect the innocent) Winganhauppage Rd (yes that’s the correct spelling). Can you say that 10 times fast? It was twisting my tongue just to say it once, let alone trying to get it across to the pizza delivery guy! That should’ve been the first red flag as you can not build a house without pizza. I will just refer to it as ‘WH’ cus there’s no effin way I’m typing that more then once.
Hey, I just figured out how to upload media to WordPress (yea me), so here is WH as I purchased it on that fateful May 2015 day.
So here we go; simply put, if I ever write a book on Real Estate flipping on Long Island (hmmm…..), this project would be the chapter titled ‘WTF were you thinking’. Here’s what I was thinking. Newbies often let their desire and impatience to buy a flip house outweigh their judgement and the facts. I was so very antsy to get my first deal going that I just jumped in head first before seeing if there was any water in the pool (ouch). That is not so uncommon with new investors; so much so, that now as an experienced, successful, and ruggedly handsome investor, I often buy projects from newbies who are in over their heads. Yeah I know that may seem a bit opportunistic, but hey, if the foo shits…..
WH was bought to my attention by an agent I was working with. It was in pre-foreclosure, had been vacant for years, a zombie house and, a previous deal had fallen through (red flag, red flag, red flag) . The bank was going to foreclose in three weeks so the owner needed a white knight (I always wanted to be a Knight) investor to swoop in and buy it. SO I swooped in, and swooped it up. Swoop is such a cool word! Plus the entire deal really played to my ego!
FIRST MISTAKE! No egos allowed. Leave your emotions out of this business. The numbers need to work or you walk away. Remember that.
The problem with thinking with your really, really big head (ego) is that you don’t see the forest through the trees. WH was a small house, with no garage and no basement (red flag, red flag, red flag). No problem, I was going to fix that. I had grand plans to add a full second floor and garage, thereby turning a $130,000 two bedroom / one bath cape (known as a 2/1 in RE lingo) into a 4/2 colonial worth $420,000. What a home run! It’s the bottom of the 9th, Dalis is at bat, his team is down by one. He swings and fouls the ball into his head. When he woke up (from being hit in the head with the foul ball…get it?) He realized all his plans wouldn’t work. Why?
(Back to first person) WH was built in 1952, before property set-backs (distance from roads or property lines) were established. It was the first home put up on that tract of land and was only seven feet from the road. Actually, the road as it is today probably didn’t exist. When the town determined the street set backs would be 25 feet, WH was considered a non-conforming house. Short of WH’s feelings being hurt that it was being called non-conforming (yes WH is sort of a snowflake), it didn’t really matter. It isn’t like the town was going to make the owner hire a bulldozer and push it back 18 feet. Nope, being non-conforming didn’t affect anything at all, unless someone planned to renovate it (that would be me)! See where this is headed? It gets even worse.
SECOND MISTAKE! I didn’t go to the town to get a copy of the Survey, Certificate of Occupancy (CO) and check on the setback. That would have shown me the entire house was legal. Often people put additions on their houses without going through the permit / CO process.
Now what???????
A good writer leaves the reader clamoring for more, especially when danger exists. So I leave you here, hanging off my written cliff. I’ll call this a cliffhanger!
Next blog, I’ll go through how we rectified these issues, plus handled the cost overruns without loosing any money (can you say dumb luck).
How can you lose!