welcome back to the hybrid real estate

professional podcast today I’m coming at

you with a solo episode to talk about

one of my biggest learning moments for

2024 I am your host Aaron am my wife and

I built a portfolio of eight cash

flowing rental properties across three

states all while working full-time and

bringing three kids into this world this

shows a documentation of that journey

and particularly how my experience can

help you build your own life of

abundance through real estate

investing all all right here we go so I

entered into one new partnership in 2024

for our first outof state flip in

Illinois this was with someone we knew

very well uh for a couple years before

that we had done multiple transactions

together she represented us as an agent

she was our property manager for about a

year and we had sat down and had meals

together we were friendly uh so a lot of

kind of Goodwill coming into this prior

to this particular project she had

started an exited 18 flips successfully

in this market with an average margin of

about 30 to 50K in profit so there

wasn’t that much meat on the bone in

this market to begin with but she had a

proven track record for being able to

have profitable flips now the property

we bought was actually a bit removed

from the main part of town which proved

to be a much bigger challenge than we

anticipated this was a new area for her

the market we’re in straddles the

Illinois and Iowa border and every

single property she had done prior to

this was in Iowa so now that we were on

the Illinois side of the Border uh there

were some new complications and

regulations and a few different things

we had to learn to navigate that proved

to be a little more complex than we

initially thought the area was also a

bit more difficult to comp so it was not

only on the Illinois side of the Border

but it was about 20 30 minutes outside

of town all of our investing experience

for for our personal rentals and all of

her flipping experience was on the Iowa

side of the border and then last kind of

big headwind going into it it was a

heavy rehab so we had about $100,000

budgeted for Rehab which is quite a bit

when you’re talking about $130,000

purchase price so we went under contract

for this property in April of 2024 for

$130,000 we bought this at a very

discounted rate from an estate sale uh

again we had $100,000 set aside for a

rehab budget and our Target sale price

so this is what we when we talked about

and looked at the beginning and decided

to put an offer on this house our Target

sale price was $300,000

we had planned for about a six-month

hold and again it was pretty much a full

gut rehab now a few things happened uh

within that so this is the first time we

ever worked with a Community Bank we

have quite a few assets a good amount of

collateral we look pretty good on a

balance sheet but we had to get to know

and build a relationship with a brand

new bank and the banker that we worked

with actually ended up getting fired

about halfway through this project but

before he did he managed to Fumble our

file around quite a bit so we had an

original Target close date in April but

we didn’t end up closing until towards

the end of May so that delayed closing

for over a month set our timeline back

for when we could start and then

therefore when we could finish as well

so we already had a delay coming right

out of the gate there was a tornado that

came through the property in July you

can’t control things like that but that

was a pretty big surprise thankfully it

only caused a few thousand worth of

damage but it ended up being we had a

$5,000 deductible on our our insurance

policy so it ended up being completely

out of pocket that expense and caused a

couple trees to fall over and it messed

up some of the Landscaping but

thankfully it didn’t destroy the house

but still a big speed bump so the

overall timeline stretched on for about

2 months longer than what we initially

thought and the final sale date for this

property and this flip was in November

the final sale price ended up being

$260,000 which is $40,000 less than what

we had originally anticipated

we had during the time that it was

listed 25 showings and we only got one

single purchase agreement offer we had a

few people that expressed interest but

only one actual written offer and then

the final result just so I don’t bury

the lead is we exited this with $1,000

in profit on a 7-month hold so by

objective measures it was not a failure

we made a profit we made it out

successfully it was a really difficult

year between the the election the high

interest rates and quite a few of the

factors I described however what I

wanted to share in this episode is more

about what I learned from this

experience um so a few kind of key

themes here number one we bet on our

partner track record more than the

actual deal itself so again we had a

great relationship a lot of good willll

leading into this and her track record

was that she had exited 18 flips

successfully and profitably in this area

we bed on that idea more than we did on

the deal itself this was on the Illinois

side of the Border this was 25 minutes

outside of town it was in a completely

different environment than where that

success had originally occurred so while

we trusted our partner and we we believ

that she could pull it off we put a

little more stake in that than we would

like to have in hindsight and that

proved to be a problem based on kind of

the end result we wouldn’t have gotten

into a seven-month hold deal for only

$111,000

in two nope I don’t think anybody would

do that and take on that kind of risk

the second lesson is opportunity costs

is actually a more important variable

than what we had considered so even

though again we exited with a profit the

money that we had to risk and and put

out there was tied up for that entire

seven months and as active as I am out

there networking all the time my wife’s

meeting new investors I’m in different

Mastermind groups I have the opportunity

to invest passively in certain deals and

even partner with different people I had

to to say no to quite a few things

during that seven Monon stretch because

our money was tied up and we didn’t have

anything else to contribute to those

deals at that time without calling out

specifics suffice it to say there were

there were many deals we passed on that

could have had a much better return on

our money than what this flip ended up

having so that’s another consideration

as we think about in the future whether

we would tie up our money in something

like a flip third lesson the risk that

you take on doesn’t actually feel real

until until you’re in the thick of it so

nobody enters a deal assuming things are

going to go wrong we like to think that

we factor in all the risk but in reality

we’re thinking about the reward and

we’re thinking about the return that we

believe we will get we’re not really

thinking truly internally about what

would happen if things go wrong with

three young kids under the age of three

and all the various stress that was

going on in our life let me just tell

you it feels very different being a few

months in and you got things like a

tornado come through coming through and

you see your profit margin start to

erode that’s a whole different game when

you start to actually imagine what it

would be like to lose money so imagine

you tie up your money for seven months

and you end up losing and having to pay

10 15

$20,000 that took us to a pretty dark

spot in our head so understanding and

realizing that risk is a real thing I

think is this is a lesson I will

definitely take away and then last major

lesson here was the relationships with

Partners can be fragile we had a great

relationship heading into this we carved

out what we thought were great Lanes we

felt very good about what we were doing

heading into it but 7 months is a long

time especially when you have a complex

project with a big budget and a lot of

things that can and some that did go

wrong we definitely had some dark

moments and some times where there was

some tension and despite us all getting

along and I’m now we’re on the other

side of this we still have a good

relationship but I do think there are

some scars and also a little bit of

little bit of resentment on both sides

that things didn’t turn out a little bit

better

even though I don’t think it’s any one

individual’s fault so I always try and

Reserve judgment on projects like this

for the very end because if you had

asked me at certain points during the

project it would have been a profanity

laced stress induced response there were

some dark moments that i’ really felt

stressed out coming out on the other

side seeing that we turned a profit at

least we now have a bank of experience

and lessons that we can keep with us for

the rest of our lives and I hope that

anything I shared today could be

valuable to you as you consider whether

it makes sense to take on a riskier

project like a flip versus what we

normally talk about on the show which is

your kind of bread and butter standard

long-term rental single family I’m still

a believer that is the best wealth

building tool that’s accessible to all

and can be taught and and learned

quickly how to go about so hope you

found some value if you did please

remember to leave a five-star rating and

review if you like this style of episode

let me know I’m planning to do more of

these kind of retrospective and

Reflections as uh 2025 goes on