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How My First Flip Disaster Transformed My Career

by Brandon · 19 comments

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I want to tell you the story of one of my first “flips.”

The house was called The Eklund house.

It was located in a family neighborhood of good homes that were generally priced $120,000 – $150,000. I was able to buy “The Eklund House” for just $50,000 and spent the next nine months remodeling the home into a beautiful condition (See the quick promo video I made – four years ago- below.)

I purchased the home using a “hard money lender” who also financed the repairs. After spending nearly $45,000 on repairs the home was ready for resale. I put the home on the market for $150,000.00 and began to plan my new car and dream vacation.

However, what I didn’t plan for was the market.

It began to fall.

Over the year’s time that the home sat on the market I watched average property prices drop from $150,000 to $130,000 then $110,000.00 and even lower. Each month was a reminder that I was making even less in the end.

Don’t Worry – It Got Worse.

The loan I had taken on the property was good for only two years – and two years was quickly approaching. I began to worry about what to do and spent many sleepless nights deciding what to do.

Being that I did not have a job (and the mortgage world was collapsing) there were no banks who would give me a long-term loan to pay off the hard money lender. I put a renter in the home who paid $950 per month to help with the monthly expenses, but the bleeding continued.

This is when I finally had an idea:

What if I were to add a partner to the deal and refinance the home?

(Refinance: Get a new loan to pay off the first)

You see –

  • The money was already invested.
  • The repairs were already done.
  • The renter was already in.

Finding a partner was not too difficult with most of the risk out of the way. I didn’t need to use someone’s money – I needed to use someone’s income and credit. My strategy changed immediately and I began to look at the home through the long term lens rather than the short term.

I liked what I saw.

In exchange for the partner adding their name to the property and getting a refinance in their name (but keeping both of us on the deed to the property) I was able to convert the property into a monthly mortgage payment (including taxes and insurance) of under $600 per month and pay back the hard money lender in full and on time. The property now produces over $300 per month in income for our partnership and we are not dependent on external factors. The market could improve, we could sell, and we could make money. Or we can collect cashflow each month, pay the fixed-rate loan down a little more each month, and make money.

Do You See the Fundamental Change?

The partnership allowed the center of control to shift.

The property became my first long term rental – but more importantly it opened up the world of partnerships to me and revealed an important truth:

I cannot control the market.

The market moves up, the market moves down. However, by locking in a fixed-rate mortgage I was able to ensure that I had the control -not the market.

Sure, I lost 50% of my profits. However, given the alternative (sell and make $0) it was well worth it.

I’m not saying you should always use partnerships (though, I am a fan.) I’m simply encouraging you to think in terms of security rather than profit, sustainability instead of greed.

Thoughts? Comment below!

About Brandon

has written 199 Awesome posts in this blog.

Brandon Turner (G+) is the Senior Editor and Community Director and owner of He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

P.S. looking for hard money loans in California? Be sure to check out my friends over at They have very competitive rates, can fund within a week and specialize in fix and flip loans and other hard money loans.

P.S. Looking for more real estate investing knowledge? If you are interested in a top-notch course to help you understand the nuts and bolts of creative real estate investing, I would like to recommend Ben Leybovich's Cash Flow Freedom University. Ben is a close friend and has been my trusted adviser for years. He's a smart guy and CFFU is pretty awesome. The course is waitlisted, but while you wait for an opening Ben will send you tons of FREE content. Seriously. Click here to check it out.

(yes, that's an affiliate link!)

{ 19 comments… read them below or add one }

Remi October 17, 2012 at 6:18 pm

How were you able to get a hard money lender without a job?


Brandon October 17, 2012 at 9:17 pm

Hard money is more concerned with the deal than with your job. Times have changed, and hard money lenders have been tightening up their standards. However, it’s still possible. I still do it often. The trick with hard money lenders is making them feel (and actually be) secure.


remi October 17, 2012 at 11:43 pm

Would it work for Multi Units if I were to buy and hold and rent?


Elizabeth October 18, 2012 at 2:00 am

So Brandon, when you say “in a family neighborhood of good homes that were generally priced $120,000 – $150,000” do you mean that this was the tax assessed value of the homes in the neighborhood, or the actual, current sales values of homes in the area when you purchased? And were homes in the area selling well, or sitting for sale for months, or a year or more when you bought?

Finding a partner with deeper pockets in the 11th hour is probably not the best real estate strategy for most of us… the importance of knowing your market and having realistic comps (same area, same condition, same bedrooms/bathrooms, features, etc) on which to base your calculations is essential before doing something as risky as borrowing 100k from a hard money lender with no job and no back up plan.

You sure are brave 🙂


Brandon October 18, 2012 at 5:05 am

Agreed 100% Elizabeth! The last minute partner is never a good strategy, but this was 2007 as the market began to tank. The story isn’t meant (at all) to show a good way of investing. If anything, it is a good example of how I almost lost big because I was stupid but was able to turn it around by being creative. This situation taught me a lot about how to change house flipping from a gamble to an investment (and having better thought-out exit strategies)

At the time, houses were selling from 120-150k and even higher. That’s what it was like when I bought it. However, it took nine months to complete this project cause I did almost all the work myself (terrible… i know… I was young and stupid!) and by the time it was ready to go the market had begun to tumble. I just followed the market down with price reductions. Ugh.

Thanks Elizabeth for the comment! I always appreciate your insight!


Elizabeth October 18, 2012 at 9:43 pm

Glad it worked out in the end!
So did you live in the property while working on it?
Lovely “staging” in your video, by the way. Like watching HGTV 😉


Keith October 18, 2012 at 2:10 am

Cool video, love the song… and thank goodness you put the labels on there, because I did not realize that was the fireplace or Kitchen! LOL!


Brandon October 18, 2012 at 5:08 am

Hahaha yeah, I was just a kid when I made that… 😉 (23 or 24 I think?)

Youngin’s and their labels!


Danny Johnson October 19, 2012 at 3:01 am

Great story. Mainly because you didn’t just say ‘Woah is me!’ and give up. It’s refreshing to see people work hard on fixing the problem they are having instead of just blaming it on the market and allowing it to go to the lender.

That was an interesting time when the market was changing. A lot of people I respected in the house flipping business around here were telling me how it was not a bad idea to try to get a JOB again and sit it out. I couldn’t believe it. After already working the business for a while there was no way I was going back to a JOB. I’m glad I didn’t because it became much easier to buy the houses as a lot of the competition was disappearing.

The competition is back, but that just mean we have to continually be on our toes and think of new ways to beat them. Keeps it interesting.

Thanks for the great read.


Brandon October 19, 2012 at 3:40 pm

Thanks Danny. Yeah, a lot of people I know just gave up and were foreclosed on. I take a lot of pride in not having to do that. As the old cliche says, “Where there’s a will, there’s a way.”

And yeah, it seems the competition is back. Hopefully that will be good for prices on the ones I have to sell!


Joe October 21, 2012 at 12:23 am

Absolutely loved the video, and a great lesson for us all.


Brandon October 22, 2012 at 3:49 pm

Thank you Joe! I appreciate it!


Dennis October 21, 2012 at 11:02 pm

Your story is familiar to many in RE investing. I had almost the same experience, except I already owned the property free and clear only paying $20k for it in 2002.

In my instance the house was rented for $500 a month, it was a total dump, but the tenant loved it the same as it contained 4 bedrooms and a nice private yard.

Around 2006 I decided it would be a great idea to remove the tenant and do a total rehab and flip. I secured a buyer to pay $140k (he had a pre approval) when the place was done, we figured about 4 months and $50k.
During the rehab we discovered a few issues that set the project back 2 months. Later the builder’s wife had twins, this stopped construction for near a month. Then the project started rolling again and just when it seemed like it was going to end in 2 weeks the builder found out his wife was pregnant again with twins. Having another set this close basically caused him to loose whatever mind he had left.
One day I came to the site to find all of his tools gone as well as all of the materials gone as well.

After finally securing another builder to finish the job the credit market started to dry up, the buyers approval was moved down to $120k and then at settlement the lender would not wire the money.

In the end the property was appraised at $120k but there were no buyers approved. So this once again became a rental for $925 a month, now it contains a tenant paying $800, but who is planning on buying it so he takes excellent care of the place.

My financing is a bit different, the underlying financing was a $95k non recourse line of credit, with a 5 year term at $200 a month interest only payment. That is what a high credit score and some assets will get you. The lender went belly up, not surprised giving loans on junk buildings. I could have just written a $95k check and let the lender take the $20k property back, as it is in a trust, and I am the trustee.

The new note holder pushed down the line of credit to what was borrowed $70k.
The five year term was approaching I was also losing sleep concerning the loan.
My wife however said the note holder would be insane to ask for their money I was paying 4% interest only, and have a 830 credit score. She was right as always I received a letter from the note servicer saying the note holder was going to extend the loan till 2014.


Brandon October 22, 2012 at 3:50 pm

Yeah, it’s definitely not an uncommon situation. Sounds like you got through it as I did. Creativity is everything in these situations! Thanks Dennis for the comment!


Bret October 22, 2012 at 1:23 pm

I noticed on one of your comments you said “I did almost all the work myself (terrible… i know… I was young and stupid!). ” Is it just the time invested compared to the money saved that makes it stupid to do your own work? I am looking for my first property and putting plans together. What are the real pros and cons to doing work as the owner?


Brandon October 22, 2012 at 3:48 pm

Hey Bret, thanks for the comment. It’s not always stupid to do one’s own work – but definitely dumb to do ALL of it. It took soooo long, and because of that I missed the prime time to sell, the market dropped, and I never really made anything yet (except the cashflow). In reality – I love doing construction work and don’t think it should be “below” any investor -especially new ones. If I didn’t know how to replace a hot water heater, I would have a hard time knowing how much someone should charge me to do it for me. So doing the work does give you experience for later.

If you can – I recommend budgeting in the cost of a contractor doing ALL the work. Use that number in your calculations. Then, if you choose to do some (or all) the work yourself – you just make more money. This way also – if you run into trouble, you have a backup plan (well, I guess I’ll just install that floor myself…).

I’ll write a post on this soon Bret! It’s an excellent question. Thanks!


Aaron October 31, 2012 at 7:59 pm

Thanks for sharing. I can relate. I think we all have similar stories that get us going.

Thank you,


Brandon November 1, 2012 at 4:54 am

Yeah, I think most investors have been through the school of hard knocks more than once! Thanks for the comment!


Affordable residential properties Gurgaon November 19, 2012 at 7:49 am

Very nicely written post.


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