April 6, 2017
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Hi! Today, I have Seth Tucker who is a farmer and gardener at Tucks Fresh Food. The enticement for a fix & flip investment is high because it seems so easy and a great way to make money. I am thankful for Seth sharing his personal story about a failed fix & flip investment. Enjoy this guest post!
For years I have always wanted to flip houses. There is just something special about breathing life into something and having it become more valuable. I had imagined finding a home well below market value, being able to quickly go in and make the property beautiful and sell it for a large profit. That’s the vision we are sold on, right? According to all of my experience watching HGTV house flipping shows, it shouldn’t be that hard to do. Very quickly houses can become much more complicated than predicted.
The era the house was built in impacts the kinds of materials you might run into, which can radically complicate the renovation process.
This probably seems strange or you may even think I’m referring to old copper piping instead of today’s modern pex plumbing that is essentially a hardened plastic. But, it is incredibly critical when you are walking through an investment property to assess the work needed to renovate and resell accurately, and this means a thorough understand of what you are looking at. The property I initially purchased didn’t have any major cosmetic blemishes, and didn’t have any load bearing walls on the interior. The floor plan was horrid because the building was originally meant to be the office/shed for a commercial green house operation on the property. This meant I could move forward with my plan to move the walls and turn this 1 bedroom 690 sq. ft. home into a 1,200 sq. ft. 2 bedroom home with a better floor plan.
The house being built in the early 1950s meant that there was a very good chance the walls were originally painted with lead paint. No problem, that’s easy enough to plan ahead for. What I had not planned ahead for was the vermiculite insulation. When I ran into these grey fluffy pellets in the walls and ceiling I was shocked. My contractor was immediately alarmed—he knew something that I had forgotten to check during my purchase. I’m naturally more of a gardener than a builder, and vermiculite is used in gardening for aeration and water retention. But, before the 1980s, it was estimated that over 70% of the nations vermiculite came from Libby Montana through a brand name called Zonolite.
As it turns out, Libby Montana was shut down and condemned.
Due to the fact that the vermiculite they were mining had a large vein of asbestos running through it. The vast majority of the Zonolite sold had toxic levels of the most deadly asbestos that causes Mesothelioma. Over 60% of the town’s residents were diagnosed with a form of cancer caused from asbestos exposure. Yikes!
Just moving the vermiculite insulation was enough to cause the dangerous fibers to become airborne and contaminate the entire building. Thankfully, there is a great Zonolite Trust that’s been established to help pay for 50% of the remediation costs. In addition, they’ll even work directly with your asbestos abatement contractor. Expect even the smallest of cleanups to run your renovation costs up $2,000 or more. Learn more about the trust here.
Be safe, and get all vermiculite tested.
Remember flooring tiles, and siding were also made from asbestos, along with pipe insulation in homes built before the 1980s. It looks a lot like fiberglass insulation we find today, but don’t jump to conclusions that it’s safe! Get it tested at a local environmental agency. It’s cheaper and faster than you think, usually under $100 with a 1 day turn around for the test.
My Failed Fix & Flip Result?
I walked away in the end. The house had a green house that was just STUNNINGLY beautiful, but turned out all of the glass was glazed in using asbestos. Plus the foundation was build using an asbestos based siding. All in all, remediating that would have run my renovation costs up $20K above what I had originally projected.
The lucky part is, I had negotiated seller financing, so I was able to walk away without a note due or a foreclosure by coming to a settlement.
Overall, this failed fix & flip lessons cost just over $50,000.
Related Post: How To Save Money
Seth Tucker is a farmer and gardener at Tucks Fresh Food.
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