Rehab Nightmare | Over Budget | Duplex | EP. 20

Hi, Flippin Danny here, co founders of the Freedom Real Estate Group family of companies.

This is episode 20 Flippy, of our vlog. We're super excited. We're getting up there now. 20. It's big. Our vlog is intended to be a day in the life of the Freedom Real Estate Group family of companies and its team members. So we hope that you're enjoying them. They're meant to be short and sweet. Sometimes we go a little long times means all. But today we're going to be talking about. I can't remember the exact title, you'll see when this gets released, but it's something about the biggest nightmare house or biggest nightmare that you had and how it ended up being a success. I don't know if we got to the success part when we were brainstorming this part. We're just going to talk about the biggest nightmare. And we have two of them.

We didn't find one, we found two.

Yeah.

So. And. And I'll talk about the. The success on one of them.

Okay, great.

And so, so we did have one property that this was a duplex. And this is our biggest nightmare for a rehab. This was a property that we received a. An invoice for the finished bathroom. And I can't remember the dollar amount, but it was thousands for the finished bathroom. And this was when Danny and I decided, hey, let's go look at that property. We walked into the property and opened the door that looked like the door was from 1900. And we opened up the door only to find out that the room that was the bathroom that was finished, that we paid for, didn't have a floor and there was nothing in that room. And so that was immediate panic.

Yes.

And so that was just one of the laundry list of things that we could discuss about this property. But this property, some numbers.

Let me go into one thing real quick. So one of the things and why we're calling this a nightmare is not just because of the story he just said. It's because we had gotten to the stage in our business that we had actually hired a professional project manager. Like, he has been in the business. He's done new construction, he's done it all. Like, this is a guy that we knew, hey, he's gonna, you know, fix all of this stuff and he's gonna be fantabul. And so we trusted him. And so the part of the lesson of this is don't trust everybody and always go out and walk your properties. Because there was a point in time where he said, we Looked at the invoice and we went out there and it's a completely gutted. You know, it's not done, and there's still a hole in the floor. And we're like, okay, what else? That's what you always say as a business owner or investor. Always you go, what else am I missing that I trust it was done and I've paid for and is not done. So it was a bad project manager. That's bottom line of why all of this happened. So as he goes into the numbers, don't think bad contractors. I mean, obviously bad contractors, because they're taking advantage of the fact that they know the project manager isn't even walking all the properties and they are just submitting invoices here, get the roof. Here, finish the bathroom. Here, finish this. And he's not checking. He's just paying out every single week. Because that's one of our things, is that, you know, we attract a lot of contractors because we pay on time every time. And we are trusting that the project manager was following our process of actually walking the property every week to verify that the invoice was actually finished before we paid them. Okay, go ahead. Just had to throw that out.

Touch the source spot. Did it. So this property, this was a. This was a number of years ago that we bought. It is a duplex, and we paid $12,500. That's a great price for a duplex.

Yes.

The after repair value was just shy of $100,000, which it sold for that. And here's where it gets a little painful. When we bought the property until when the rehab was done, it took approximately 26 months for the rehab to be done.

Now, part of that was because it was on the nuisance list. Right.

There's a list of properties here in Montgomery County, Ohio, that if it has a certain amount of violations, and I don't know the number, but if it has a certain amount of violations from the city, they put it on the nuisance list. And what that means is that the city now has to come out to inspect the property prior to your work, and then after your work is completed and sign off on it before you can move forward before doing anything else. And they don't say, they don't inspect the whole house. They come out and inspect the drywall, and then they come out and inspect the plumbing, and then they come out and inspect something else. So it's. It's a very slow process.

So I just wanted to insert that because this is the longest rehab we've Ever done. I don't think there's any other rehab that has even taken over a year.

Where like one, because it was on the nuisance list.

Okay. So any long rehab like that is usually a city thing or something like that, but this one happened to be also bad contractors, bad product manager. It all just piled up into one little nightmare.

And for those of you out there that are already saying, hey, I would avoid properties on the nuisance list. We do.

We do.

Yeah. Now, we found out what that list was. So it took almost 26 months. And the rehab on the property, Remember, the property is worth done. When it's done, it's worth a hundred thousand dollars. The rehab that we had done on the property was just shy of $130,000.

Now, this was a big rehab budget. Anyway, he bought it for 12,500. It needed a lot of work. It was on the nuisance list. We already knew that we were going to pay around 60, I would imagine, at least. Yeah. Yeah. So we just more than doubled it with $130,000. How much did we end up losing on that?

Almost $50,000 out of pocket.

And this is why one of the things, when I get on other podcasts, I say this a lot. And when people call me, they go, danny, this is why I'm a private lender with you. I remember when you were on this podcast, you said you've lost money on houses. Never once has your private lender lost money. They still got paid their principal, they still got paid their interest, everything owed. We're the ones that took, you know, the bath that came out of our wallet, and it's okay. You know, I hate it. I hate losing almost $50,000. That's horrible. Makes me want to cry even right now. But we do volume. So when you do a. When you have a situation like this where it's bad, but you got nine other rehabs that are just fine, then the other rehabs do make up for that huge loss. Obviously, the more experience that we got, the more trusted people that we had on our team. We are a monster machine right now with the most amazing people and the fastest rehabs we've ever done in the history of our company. But there's pain points like this and nightmares like this that. Gosh darn it. Okay, keep going. Sorry.

Well, so that's. That's. That property that was. That was our rehab nightmare. The property's done. It looks gorgeous.

Yeah. I guess the success is we do have a very happy investor. I mean, the house is fantastic. So we lost some money. Our private lender didn't lose any money. Our investor still bought a house for $99,900.

Contractors may not let abandoned.

Yeah, yeah, yeah. A whole lot of people went on that one.

Yeah.

All right. Okay.

So then the other nightmare of a property was a property that we had. I'll use some dates here on this property. We got it under contract in January of 2018. I love this property. The whole neighborhoods, all the same. The same property. Running comps on it was super easy. I knew exactly what it was going to be worth, and I know that this one was a benefit for us. And I was like, yes. We've never done a property in this neighborhood or in this town. So I wanted to do it. Got it under contract. About three weeks after we got it under contract, we found out that the wife was married. Okay, well, do we know where the husband is? Oh, yeah, we do. We sure do. Yep. Yep. Okay. Where's the husband? He's in jail in a different county, about four hours away.

I haven't even heard this whole story. I've only heard the high level.

Keep going. So for the next two months, we tried getting the husband. Husband to sign with a notary, the documents, you know, to, you know, sell the house. He's in jail. He didn't feel like it, so he said no. So the person that we're getting the property for was very aggressive, and he said, divorce him. So the wife said, okay. So then it took the next, let's see, six months for her to get a divorce because he had to sign those papers, too. So anyway, so it took. We didn't close on the property until August. So it took us eight months from when we got it under contract to when we actually closed the property. Now, this property, another little angle on this property. This property was about chest deep in garbage in the entire house. The little half bath next to the kitchen. I love this. This is a true story. That little half bath next to the kitchen had three lawnmowers, two washers, and a dryer in it because that's where you store your lawn.

Yeah. I was about to say that's really a storage.

Yeah, Ye. The. The garage was so full of garbage and tires that halfway through the trash, out of the garage, they found a car. And some of you, if you followed us many years ago, you. You know which property this is. It was a little late 1950s Ford Anglia, like a Mini Cooper. I almost kept it until common sense took over.

And I said, isn't that the Harry Potter car.

It is the Harry Potter car.

That's why I loved it.

And so anyway, so. And then there was a boat in the backyard, which I don't think it could. Yeah, it would sink. But anyway, so we trashed out this property, got it rehabbed, and here's the success part that it took so long for us to get it under contract and then to get all the trash out and then to do the property that by the time the property was done, I ran comps on it and the value of the Property went up $25,000. So it made it even better. So that was. It took forever. And we actually finally sold it in April of 2019. So was that 15 months from when we bought it? We sold it. And so lately we've had properties where we bought it and then it's been rehabbed and sold in three months. And so it's. It's. Our timeline has gotten much shorter now.

Do we hold it that long? It took us nine months to buy it, and it took us. Whatever, however many months.

Well, no, no, we didn't actually buy it until August, so it was.

Oh.

So under contract April.

Yeah, I see, I see.

But from the time I got it under contract to buy it.

Yeah, was.

It was that long. But yeah, from when we bought it, it was August to April, which isn't horrible, but we're doing much better now.

I like this success story way better than the other one.

Yeah, yeah, me too.

O. I was told too.

Yeah. Well, we tried to make it short and sweet. Of course we didn't. But anyway, so this was vlog number 20, so we hope you. You enjoyed it again. Watch the Lookout for our podcast. They're coming out weekly now, so make sure you check out our page to see one of our podcasts. Anything else?

Yes. We always end with invest smart, live happy. Bye.

Bye.