One of My Most Frustrating House Flips is Finally Finished!

I complete a lot of house flips, and occasionally, I run into a project that drives me crazy. We just finished one of those projects, and Nikki (my project manager) and I are so glad it is done, at least almost done. We still have to sell the house. I bought this property almost 15 months ago, and we just finished the remodel. The house needed a lot of work, but I have completed much more extensive rehabs. The problem with this flip was we had to add land to the lot in order to put in a septic system and get a water tap. I knew some of this when I bought the house, and Nikki told me not to buy it, but I did not listen to her. We will still make money on this one, but I am not sure it was worth it!

Why was the property so unique on this fix and flip?

frustrating house flipThe house that we bought was located in the country but only had a half acre of land. The previous owners had used more land than that because they had a lease with the neighbors for another half acre for 100 years. The lease was great except it was never notarized or recorded with the county. Technically the lease was not valid and we could not enforce it. What we could do is buy the land that was leased from the neighbor and add it to the lot of our property. This would take an amended recorded exemption and subdivision exemption from the county. We talked to the county, and they said it was doable, so I went ahead with the deal.

The house was decent but needed some work. You can see the video below:

How much did I pay for this house flip and what is the ARV?

I bought this house from a wholesaler and thought it was a good enough deal to make up for the pain I knew I would go through. The house was purchased for $173,000 on March 15th of 2017 (ugh).  I figured we would spend a lot of money on the house, but I underestimated it with everything we had to go through. I was hoping to sell the house for $260,000 to $320,000 after we were done with everything. The huge value range was based on getting the extra lot or not. I figured the rehab on the house and garages would cost around $50,000.

There were a ton of extra costs that went into this deal that we were not expecting but also helped to increase the value of the house.

How to get a great deal from a wholesaler.

How did this flip turn into a nightmare?

We started working on the house and realized there were many things we had to do that we were not planning to do. I buy my houses without inspections, which gets me a lot of deals. Buying with no inspections can also hurt me when we find major repairs that were not viewable. This is why I suggest new house flippers do not buy houses the way I do!

One of the biggest problems we ran into was the septic system was completely trashed. It was super old and basically caving in on itself. We could not save the system and had to install a new tank. When you install a new septic system, you have to get permits from the county. We wanted to install the new septic system, but because the lot was so small, there was nowhere to put it without being too close to the house or the well. We had to get the neighbors’ lot added to our lot to install a new septic system.

Something else we ran into was a half-acre lot is non-conforming. It is way too small for this area in the country. This house used a well for all of its water. In order to use a well, we have to have at least 2.5 acres. This lot had been grandfathered in and could legally use the well, but if we added to the lot, we would lose that grandfathering status. We could not add 2.5 acres, but we could get up to one acre of land. The county would allow a water tap if we got up to one acre. Not only did we have to install a brand new septic system, but we also had to buy and install a water tap.

How much does it cost to fix up and repair a house?

What was the process like adding land to this flip?

I had already talked to the neighbor about buying part of his lot. He was fine with selling the portion of the lot that had been rented because he never used it. We agreed to a price ($10,000) and started the process of transferring the land. We ran into more problems with the county when we did this:

  • The actual lot size was just under one acre when we had a survey completed. We had to buy more land from the neighbor, which cost us $5,000 more.
  • The lot was still non-conforming with only one acre. We had to get special approval from the county to do all of this work. They said it should be approved since we were getting close to a conforming lot and making the property much better.
  • The department that allowed permits for the septic system did not want to allow us to install it until the lot addition was completed.
  • The department that allowed the lot addition did not want to approve that until the septic system was installed.
  • The county took their sweet time approving anything and asked us to redo the survey three times after taking 6 weeks to look at it each time.

We had to get another survey and buy more land, and we still had to argue with the county to let us complete the septic before the lot addition was approved. We finally were able to convince them to make the final septic permit contingent on the lot addition being completed. This entire process took almost a year!

How big of a project should new house flippers take on?

How much more money did we spend on this flip than we planned on?

The hoops we had to jump through and time we had to hold this property added a lot of costs to this project. We spent close to $100,000 on everything after spending $12,000 on the septic system, $30,000 on the water tap, and $15,000 on the extra land. We also had more carrying costs because I was paying interest on a hard-money loan this entire time. My total costs on this project will be over $300,000! Luckily, the market has done well in our area since I bought the house, and the improvements we added like the water tap add value. We just listed the house for $379,900. You can see the after video below:

Conclusion

This house has turned into a bit of a nightmare. I also had to fire my contractor, who was working on the interior remodel, and hire someone new. He fell apart this year while working on my new office. We had more delays in getting everything done since we held off on a lot of the interior work while we figured out the lot situation. We should make money on the deal still, but I don’t know if the project was worth it. If I was just starting out flipping houses, the delays and costs could have sunk me. Luckily, I have the resources to get through something like this. You can see my other 20 flips we have going here: Fix and Flip Scoreboard.

 

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2 Comments

  1. SK from Canada August 17, 2018
    • Mark Ferguson August 17, 2018

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