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My First Memphis Flip

FINALLY, I’m going to tell the story of my first flip. I created this blog a year ago so that I could write down my whole backstory in real estate as well as keep track of my journey going forward. So much has changed! I had no idea when I created this blog that I would have my real estate license right now. My focus was 100% on wholesaling and finding my first fix and flip. Now I’ve got the first one under my belt and just put earnest money down on the second. I’ll keep you updated on that one! But here’s everything you need to know about my first flip.

Finding the flip

During the summer of 2021 my main marketing efforts consisted of my virtual assistant Carl cold calling with CallTools and me following up with SMS messages using Batch. For the record, I no longer do either of those things. But more on that later.

The flip property came from a driving for dollars list. This was a list of a hundred or so addresses my husband and I wrote down while driving around the Colonial Acres neighborhood of Memphis. We basically wrote down addresses of houses that had overgrown yards/bushes, peeling paint, rotten wood, etc. Houses that need repairs or look vacant or distressed in some way.

So Carl had already called the list with no luck. But when I sent out a round of follow up texts to those prospects, I received a response from one of them telling me to call him. I called him up and he told me he had a rental property he wanted to sell because the tenants had moved out. The house was dirty and in disrepair but he didn’t want to try to fix it up himself since he lived out of state.

Colonial Acres Flip
Exterior – BEFORE

Lucky for me he divulged that another investor had offered him $130,000 but he felt that was too low. So I already knew that was the number to beat. We set up a time to meet at the property and met over there with my contractor and another investor I was planning to partner with on the flip. I’ll tell you more about that in the next section on financing the flip.

After inspecting the property with my partner and contractor, I ran my numbers and offered $138,463. The seller accepted and we were in business!

Financing the flip

Partnerships can be really valuable, especially when you’re just starting out. I had $50,000 in private money at my disposal but that wasn’t nearly enough to purchase and rehab the house. Our contractor had quoted us approximately $65,000 for the rehab.

At first my partner and I planned to use a hard money loan to purchase the property and then split the rehab costs between us. At the last minute, however, my partner decided to purchase the property with cash. This saved us thousands in points and interest. Our lender would have charged us 2 points and 8% interest for the loan.

So in the end we purchased the property with cash and then split the rehab costs 50/50. We also split the final profits 50/50 even though my partner contributed more cash overall. This was because I am the one who found and locked up the deal, which is a valuable contribution in and of itself.

Newbie investors can bring value to partnerships by finding the deals, even with few marketing dollars. If you have a vehicle and a smart phone then you can drive for dollars, skip trace the owners, and call them.

The rehab process

You may have heard that contractors have a bad rep. If you find a skilled, honest, and reliable contractor, do your best to hold on to them. A contractor can make or break your deal. Some have been known to run off with deposits, disappear in the middle of a job, etc.

Our contractor was honest and did a great job, but I have to say it took a lot longer than anticipated. He initially quoted us 4-6 weeks for the rehab. I knew that was probably overly optimistic so in my mind I expected it to take 2-3 months. It ended up taking 6 months!

This wasn’t entirely the contractor’s fault. Windows were incredibly difficult to source due to the notorious supply chain issues. We spent a lot of time waiting on those windows. But it just comes with the territory that you need to stay on top of the progress being made. If you don’t insist on your job being a priority, it won’t be. Just make sure your margins allow for the job to take longer than you want it to.

It’s also smart to leave room in your budget for unexpected expenses. The work crew parked on the front yard every day and killed our grass. It cost us a few grand to sod that whole front yard (it was a corner lot, too). We also had to pay for tree work to be done a second time after a big storm knocked some branches loose. In the end our rehab budget ended up around $75,000.

We didn’t have any issues with theft or vandalism but we were exceptionally lucky in that regard. Many of my friends have had their appliances, cabinets, mechanicals, etc. stolen from their flip properties. You need to make sure you have the proper insurance (usually a builder risk policy) and invest in cameras. Not only does my contractor put a cage around the AC unit if necessary, but he has started putting those little Apple tracking tags in the units in case they get stolen.

Flipping Houses In Memphis
Kitchen – BEFORE
My First Memphis Flip
Kitchen – AFTER

The selling process

When our flip was finished we decided to sell it ourselves, without an agent. This was because I felt I was already pretty experienced due to my background as a closing specialist and as a wholesaler. Also, by this point I was pretty far into my real estate licensing course.

I still wanted our listing to appear on the MLS, however, so I paid a flat fee listing service (List With Freedom) to list the property. This cost around $300. Many of my realtor friends thought we made the wrong decision (they weren’t wrong, the flat fee service wasn’t great and I don’t recommend it). I felt confident in my abilities and in my list price of $289,900 though. I had strong comps to support it and the house turned out beautiful. We truly spared no expense. We did some light staging and had professional photos taken for the listing (the photos on this post were taken by me; my contract with the photographer does not allow me to post the listing photos here).

We hosted an open house on the first Sunday after it went on the market and received 2 offers. One was for full-ask with conventional financing. The other was for $315,000 (way above asking price) with VA financing, but it was contingent upon the sale of the buyer’s current home. We needed to sell quickly since the rehab had taken so long, so we accepted the full-ask offer.

Unfortunately that buyer backed out less than 24 hours later! This definitely hurt our momentum and the property took a few more weeks to sell. This caused me some stress. But in the end it sold for $306,000. We were very happy with that!

The profit

Our final profits were around $30,000 apiece, give or take. I also had to pay a couple thousand worth of interest out of my portion to the private lender who loaned me the $50,000. Of course it would’ve been preferable if I could have made the full $60,000, especially since the deal took 6 months from start to finish. However it wouldn’t have even been possible for me to do the deal without a partner, so I’m grateful to have had such a good one.

The takeways

I learned a lot on my first Memphis flip! TLDR, here are my key takeaways from the experience:

  • Partnering with another investor is a great way to do a flip when you don’t have much capital
  • Finding solid private money lenders will save you a lot of money versus using hard money
  • Your contractor can make or break your deal, so choose wisely
  • Expect to go over budget and plan accordingly
  • Expect to go over schedule and plan accordingly
  • Invest in security systems to prevent theft and vandalism

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