Timely tips and articles for the real estate guru in all of us.

“Green Gold” in your Flip

Thu, 7 Oct 2010 19:47:22 -0400

One of the nice perks of flipping is occasionally finding a treasure inside a ‘mess of a house’.
In a recent short sale we acquired, I found a sidebar hutch that was abandoned and with minimal refinishing effort, made a quick 100 dollars. People have found jewelry...baseball cards...money in pockets of abandoned clothes... but have you ever looked around OUTside for 'green gold' before?

Maybe I have an advantage, in having been raised in the country with a close-to-my-heart Grandparent that was an avid gardener... but with a little study, you can learn what to look for, especially when you have those 'jungle flips' that are loaded with overgrown greenery that needs removed.

This home received a free outdoor Makeover, compliments of a Flip’s excess
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Sometimes, it's not that everything needs removed either! Some of the most satisfying outdoor flip-work I've done is in thinning the overgrown areas and moving those items to other places on a property that were barren, or to other properties I happened to be working on at the same time.

The first thing you can arm yourself with is a simple seed catalog... an easy freebie you can acquire via finding any catalog company in your climate region on the internet. This is something you'll use to refresh your memory (plant picture) and great for identifying the optimal conditions for plants. The best thing you can do however is take a stroll out into the garden center the next time you have to run out for a new blade, pail of paint or bathroom fixture. If you spot something that looks familiar or matches the picture you snapped on your cell phone, make a note of the plant name and later on, instead of doing crosswords in your 'office'... get out your handy dandy seed catalog and get a vision for what you can DO with your lil' green treasure. I know after you've done your homework at the garden center.... you'll realize how the cost of these beauties really add up!

For my example, I happened upon a flip that had many beds around the house and a large variety of plant life. The most interesting find however, was a fully stocked compost pile that had 'black gold' all ready to go, so I proceeded to fill the back of my pick-up truck. Wouldn't you know, the short sale we purchased and moved into has terrible clay soil and badly needs this! Are you doing the math with how many bags of soil and how much $ I just saved? (The City Folk are cheering.)

Lavender, day-lilies, hosta, roses, daisies, sun lovers, shade lovers, varieties of herbs, several varieties of daffodil, many kinds of succulent creepers etc. etc. etc., found their way into the back of my pick-up as well. Plants that needed divided or wouldn't be missed found their new home adding free boo-coo curb appeal to my current residence. What looked like a few hundred dollars of a home and garden spree only cost me and mine a half day of dancing with a shovel. Not only did my personal residence benefit, but our flip got the face-thinning it needed from an ever encroaching jungle.
That, my friends, is a 'two-fer'!

I Hope this has encouraged you to make use of an often overlooked perk, that only requires a lil' extra elbow grease. After all, a little extra work isn't much for a Flipper, else they'd never get themselves into the business!

Ohio native, Jennifer Sowders is an avid flipper that gets all the ‘attention to detail’ and outdoor beautification jobs in her half of flipping winners.

The Flipper's Tool Kit

Thu, 7 Oct 2010 19:42:48 -0400

For those of you that are just jumping into the sea of good deals, we decided to put together a handy lil' checklist of items you're bound to need in your Flipper's Tool Kit. Of course, this is an exhaustive list, but that's because every flip is different. Sometimes it helps to have a list to browse through and say 'yea' or 'nay' to when gathering supplies.

We're also adding a 'comments' section so our more experienced Flipper's can add their 2 cents as well...

Outside:Flip-It Poll 
In conjunction with our article entitled: "The Flipper's Tool Kit",  
Flip-It Magazine wants to know what your "Fav" Flipping tool is. If your #1 Tool de Force isn't listed, be sure and add it with your "why" on our myspace blog comments. 
www.myspace/flipitmagazine 
rake
shovel
leaf/garbage bags
hand pruners
hand saw
gloves
push broom
window-washing supplies:
squeegee w/ foam washer pad 
extension pole 
bucket 
dish soap 
paper towels 
glass cleaner 
power-washer
leaf blower
putty knife/scraper
twine
edger
caulk and/or expanding foam
wheel barrow

Inside:
painting supplies:
razor blade & scraper tool 
masking tape 
floor tarp 
easy pour paint bucket attachment 
brushes 
painting roller w/ extra rollers 
extension pole 
putty knife 
primer 
paint 
window washing supplies*
roll of toilet paper
roll of towel paper
light bulbs
rags
trash bags
caulk
appliance touch up paint
caddy w/ screws, nails, nuts & bolts
wire nuts
drywall putty
sand paper or sanding block
dust mask
rubber gloves
dark brown/lt. brown stain for scratches
green scouring pad
copper scouring pad
toothbrush
scrub brush
buckets
cleaners:
magic eraser 
goo gone 
dish soap 
cleaner w/ disinfectant 
bleach 
comet cleanser 
murphy's oil soap 
mop
tools:
screwdrivers + & - 
adjustable wrenches, incl. ratchet set 
battery powered drill 
pliers 
hammer 
hacksaw 
crowbar 
measuring tape 
level 
square 
portable hand saw 
extension cords
box knife
broom
dustpan w/ hand broom
2 wheel truck
plastic carpet runners
carpet cleaner
sweeper and/or shop vac
metal brush
belt sander
electro-static dusting cloths
plumber's tape and putty
duct tape

Investment Clubs

Thu, 7 Oct 2010 19:41:30 -0400

Investment clubs are a good resource for any level of real estate investor. It’s great for the novice because you can receive so much from so many people. You can ask questions and get answers on deals you’re looking at before you purchase. Most even have a time where other investors share their deals with the club. The moderator of this session should be showing everyone why it’s a good or a bad deal.

It’s also great for the experienced investor. They can make and build relationships with other seasoned investors in their town. They also will have the opportunity to share with the less experienced investors.

But Beware. Just because you meet someone at an investment club doesn’t mean they have your best intentions in mind. Many scam artist flood these meetings hoping to find trustworthy naive investors who they can sell products and properties to.

Finding Buyers for Your Flip

Thu, 7 Oct 2010 19:38:19 -0400

By: Eric Medemar
www.UltimateWholesalingsystem.com
I get emailed virtually every day from people who want to know where to find buyers for their wholesale deals. I see countless posts of people asking where to find buyers. So I put together most of the ideas that I have used or have seen used for finding buyers.
Keep in mind these are ways that I or my clients have actually used, so I know that they work because I have done it.
(1) “We Buy Houses Signs” I call every single one of these signs that I see, I actually keep a note book full of numbers and info that I find out about these companies when I call.
I usually ask them whether they are still buying, what they are looking for, what percentage of FMV they are typically paying, and what areas of town they want to buy in.
While I have them on the phone I also ask them if they wholesale out any of their homes, if they do then I ask them to call me when they have something good. I tell them that if the deal is right I can close in less than 2 weeks with cash.(I can do this because I have other buyers already in place to buy their deals, sometimes these buyers could be other cash buyers for your house buyers).
Here is a sample of a deal that I put together using this.

1.    I called a “We Buy Houses Sign” 
2.    Found out where they were looking. 
3.    Put a home under contract for $52k in that area. 
4.    Called them and let them know. 
5.    I signed a 6 month lease option with them for $64k. 
6.    I closed the home. 
7.    The lease option started. 
8.    He sold the home. 
9.    We close this week, I make about $12,000 (I also made commission when I bought the house, because I'm a realtor). 
10.    He makes around $12k.  

(2) I call realtors and find out if they have any cash buyers for some wholesale deals. It varies on what I offer to pay them but typically I offer 10%-20% of my profit, or a flat 2-3% fee.

If the realtors don’t have cash buyers, I tell them that if they bump into any great deals, they should call me and if the deal is good enough we can buy with cash and close in less than 2 weeks. (Often times you can use other realtors buyers to buy another realtors house and you can make money setting the two up).
An example of one of my clients deals that he ran this way:
1.    I called my client about a great HUD deal. 
2.    He liked the deal and put the home under contract for $115k (I made a $4800 commission on the home when it closed so I was happy). 
3.    We had 60 days to close the HUD home so he started calling realtors. 
4.    He found a realtor with a cash buyer that was willing to pay $122,000. 
5.    We assigned the contract (this is a secret). 
6.    We went to closing and his buyer brought $122,000 cashiers check. 
7.    My buyer left with a check for $7,000 ( he used none of his own money, and I found him the house so he was happy). 
8.    I left with my $4,800.00 commission. 
9.    The realtor who brought the buyer took no commission but got a commitment from his buyer that he would list the home with him when he sold it. 

(3) Newspaper ads. I don’t personally use this one, I have clients who have had great success with it though. They simply place a small classified ad that reads "Looking for buyers to purchase homes at 50-70% of true value".
I have picked up endless buyers with this ad though "Free List of 45 foreclosed/distressed homes" call or visit www.$$$.com. The reason that I have had so much success with this ad is because anyone thinking of buying real estate would much rather get a free list of 45 then have to call each individual ad. You can have a local realtor put together a list of properties for you and email them to you if you can’t find your own. Then take the list that they send you and email it out to people that respond to your ad. Keep in mind you don’t really care about the list that you send, you care about getting the name, phone number, and buying qualifications of responding buyers.
A real life example.

1.    I placed my free list ad. 
2.    I got about 30 responses for the month. 
3.    Found one buyer who has paid me over $75,000 in commissions over the next 3 years on deals I brought him. 
4.    These were realtor commissions, but if you can find a buyer who is taking the kind of action he was you could    seriously line your pockets wholesaling to him. 
  
(4) HUD homes. This is my own technique that I started using to get buyers just for my realtor purposes. Watch for a great deal on a HUD home or any great deal for that matter, then park outside for a few hours and talk to the people going to check out the home. Most of the areas investors will find therir way to the property and you can give them your card and be sure to get their info. Tell them that you run into a lot of deals and ask them if they would like you to give them a call when you run into something decent.

A personal example.
1.    I went to look at a good HUD home that I was going to buy myself. 
2.    The neighbor came over and wanted to see the home while I was there. 
3.    I showed him the home and he ended up buying it from me. 
4.    I ended up making $2500 in commission on it. 

If I were not a realtor, I would have simply talked to him and found out what he was willing to pay, then wrote up a wholesale contract, then put the home under contract with HUD, then played the spread.
This was my most recent deal, but I have picked up endless buyers for other homes while parked outside of HUD homes. I call it hunting for buyers. It’s kind of like deer hunting with a bait pile. The home is the bait pile and the buyers are all coming to eat.
(5) Talk to your current buyers. Buyers typically know other buyers. Ask your buyers if they know of anyone else who is buying (let them know you will only call the referral if they are passing on the property). You also might offer to pay your buyer for a referral fee if one of their people end up buying a house from you. This technique also works great if you have a buyer that only wants to buy in a certain area, then you can call their referral if you have a home outside that area.
Personal example.
1.    One of my buyers had too many homes and could not buy. 
2.    I asked him if he knew anyone else who might be interested. 
3.    He gave me the number to a cousin who was an even bigger investor. 
4.    I ended up selling 3 homes to his cousin this year, and paid him a referral for each one. 

(6) Local REI meetings. If you have a local investor club join it, if you don't then start one. It kind of speaks for itself that this is where many great buyers will be. Just be sure you know a fair bit about what you are doing before talking to very many people about potential deals. The last thing you want to do is burn a lot of bridges by showing your new found buyers a bunch of crap.

(7) Birddogs for buyers. Outside of having bird dogs look for homes for you, you can also have them look for buyers for you. Give them your cards and have them hand them out to people they might meet that are looking to get into real estate investing.

(8) Brochure Boxes. Just like realtors use brochure boxes you can use them to. If you have a property to move leave a brochure box that talks minimally about the property that it is left at, always be sure to leave out pertinent info like price, sq. ft., or bed/baths. If you give all the info away then people will never call you about the property. Focus the brochure mainly on other potential deals in the area or say that you are looking for buyers for properties at 50-70%FMV.

(9) Out of towner and landlords. Many people sell themselves short when they are dialing for dollars. Typically people call or mail out of town owners and other landlords to see if they want to sell. The funny part is if they don’t want to sell then there is a chance that they want to buy, so ask them if they aren’t selling, then would they like to buy some more, or if your mailing them in.

Due Diligence

Thu, 7 Oct 2010 19:37:20 -0400

With the current decline in housing prices and all the shows on flipping, it seems that everyone has an interest in real estate investing. With all that interest, means a need for education and direction.

I read a lot of blogs and articles in an effort to keep up on the current market and to increase my knowledge on the industry. One thing that I continually see are questions about: “What should I look for when looking at a property?”.

The list below is not limited to the only things to keep in consideration when evaluating a property. Different demographics will dictate different things to be aware of.

Foundation
What type of foundation?
Any visible damage?
Any visible mold or water damage?
Any wood destroying pest?

Electrical
Current age?
Is wiring sufficient?
Is electrical panel up to code?

Roof
What type of material?
Current age?
Is sheeting thickness up to code?
Gutters in usable condition?

Furnace/AC unit
Current age?
Is each unit properly sized?
Current condition?

Hot water tank
Current age?
Sufficient size?

Plumbing
Type?
Had the pipes been frozen?
Do I need to order a sewage line inspection?

Flooring
Type?
Able to reclaim?

Siding
Type?
Condition?
Paintable?
Meet’s local codes?

Curb appeal
Tree’s and shrubs overgrown?
Landscaping?
Driveway & sidewalk condition?

Location
Desirable?
If renting is bus stop and shopping nearby?
Stable market?

Exit strategy
Buy and hold
Buy and flip
Wholesale
Lease option
Owner finance
Time line

Funding strategy
Cash
Conventional financing
Hard money
Private money
Partnering

Research
Can the property cash-flow?
What is the average days on market if flipping?
What is the average comp?
Can the house be refinanced?
Can someone else get financing easily?
Vacancy rates in the area?

When evaluating certain aspects of the house it may be best to hire a licensed home inspector. Home inspectors are trained to evaluate the current condition of the home. A home inspection report can be used as a negotiating tool when purchasing a property.

Reserves

After evaluating the property you intend to purchase the next step is to evaluate the necessary reserves needed.
What Does Due Diligence - DD Mean?
1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a sale.
Flipping
When flipping a house it is necessary to take many factors into consideration.

How long will the rehab take? Add on at least 2 weeks to your time line for a typical 4 to 6 week rehab. This will add additional holding cost.
Cost. Make sure you have at least 20% of the cost set aside for overages. To be safe it is best to have 50% set aside.
If you have payments due on the property while you hold it, the rule of thumb is to have 6 months reserve for payments and utilities. In today’s market you may want to consider to have 9 to 12 months in reserves.
Qualifying your potential buyer. It is no longer acceptable for a buyer to come to you with a pre approval letter. You must get a little personal with your buyer so you’re not wrapped up in a contract for months and never ending in a sale. You may want to see a copy of their credit report, bank statements and even talk to their lender. Remember the objective is to sell the property, not sit on it.

Holding
When holding a property there are many additional cost to consider to have set aside in reserves.

Vacancies. The rule of thumb is 25% of the time your property will be vacant. Another rule of thumb is after the tenants move out you’ll need to paint and possibly replace any carpet.
Expenses. The rule of thumb is that 50% of your rental income will go back into the property. You should set an amount equal to that aside so you can meet these future expenses. Remember your actual expenses will be determined by the quality of the rehab to the property and the quality of the tenant occupying the property.
Water. Depending on the municipality in which your property is located, if your tenants ‘up and leave’ or are evicted, it’s highly likely that they will leave a water bill. You as the owner may be responsible for that bill if left unpaid.
Insurance. This is a continual cost. Just because you do not have an occupied property doesn’t mean you should not carry insurance. I’ll share an example why. A few months ago I looked at a mixed use building. It had two retail spots with 2 apartments up top. About two months after that the apartments caught fire from squatters. It did enough damage that a month later the city gave the owner 30 days notice to bulldoze the structure down. If he didn’t the city would do it for $25,000.00. You guessed it, the owner let his insurance lapse since the building had been vacant for over a year.

As you can see there are many expenses and scenario’s to consider before purchasing a property. Each one must be explored for a successful transaction to ensue.

Expensive “Tenants”

Thu, 7 Oct 2010 19:36:18 -0400

When purchasing a foreclosure or probate property, it’s not uncommon for the property to sit for 12, 18 or even 24 months vacant. This gives rodents and critters a great opportunity to seek new housing quarters. Since the property is vacant, it also means that its quiet and dark.

We recently purchased a probate house that had sat vacant for over 18 months. During the whole rehab no one ever noticed any extra tenants. Towards the end of the project I was going over the punch list that our crew was working on when I heard a sound inside the first floor wall. It sounded as if someone was pulling electrical wire from the basement to the second floor.

Confused about what was going on, I asked the crew who was working in the basement. As you could imagine, they gave me a look of concern and told me that there was no one in the house besides me.

Upon pressing my ear up against the wall I heard the one noise that I really did not want to hear, ‘Coons’. I could only assume that there were raccoon pups, also in tow, due to the kind of sound that went with the movement in the walls.

I called a local wildlife removal company and we set traps outside by a big tree that had limbs hanging over the house. Part of the soffit to the dormer needed repair and we assumed that was the location of their entry.

Each of the next two days we caught a coon in the trap. It was finally time to repair the soffit and patch the hole. The only problem was once we inspected the soffit, we found it wasn’t an access point for the coon.

So we still had an entry point somewhere and we still had a coon in the wall because the two we caught were male.

Needing to remove the coons quickly to move in tenants, I finally got online to see if there was any way to get the coons out beside tearing the newly rehabbed home’s wall down.

One suggestion was to remove a wall receptacle and look inside to see if you can see anything. As luck would have it, there was a receptacle in the area in which the coons seemed to have made their ‘home base’.
Sure enough there were remnants of a nest and, to my surprise, a very large pup. I could hear the mom moving franticly up and down the walls. She was moving her pups.

So I called up the wildlife company and they sent their tech out to assess the new findings. I made a decision that we needed to remove the coons at all cost. Since the mom was moving towards the front of the house, I assumed that she was headed for the space above the porch. So we removed a couple of planks to take a look.

Nothing.

We headed up stairs and were looking at how the floor trusses ran in order to figure out where they went. While in a closet we heard the pups. We removed the drywall in the closet.

Nothing.

They were in the floors. So, as any overly anxious investor would do, I grabbed the saw zaw, pulled back the carpet and cut a hole in the floor. The tech stuck his head, yes his head, in the floor with
a flash light. A-ha, coons! Except, they were at the other end of the floor trusses which were right in the middle of the bedroom floor.

Again, I grabbed my saw-zaw, pulled back the carpet and made another hole. The tech reached in and pulled out a pup that is just screeching bloody murder and right behind the pup was MAMA. She came up out of the hole then she headed right back down.

With the sound that the pup was making we had quite a lot of people out on their front porches wondering what all the commotion was.

We had one coon but two were still in the house. The tech put the pup in a little cage and tied the little cage inside a big cage to lure the mom into the cage. The hope was by morning the mom would be caught with the other pup beside the cage.

That next morning I went to check the cage: no mom and no pup. Just the one we caught the day before. I went looking around hitting walls and ceilings trying to listen for any noises. Upon entering the bathroom, which is the location of the dormer, I heard some wrestling in the closet. I decided instead of scaring them away like i did last time, I’ll call the tech and get him over here.

Once the tech arrived we went to the closet to find some coon, and that we did! In the corner of the closet was the other pup. But how did he get there? The top of the closet was the roof and there was the entry, on the other side of where the soffit was torn down.

Behind the wall to the closet was an empty space. So I tore the back of the closet down and we set a trap. By morning when i checked the trap there was mom. We finally had them all. Two males, one female and two pups. Damage done: hole in the ceiling of the porch, two holes in the floor, one hole in the closet wall and one closet wall torn down.

All in all a total cost of removal and repair of $1,000.00

Lesson learned: Anytime you have a possible entry point into the property, coupled with an extended vacancy, it’s best to check to see if you may have visitors before starting the rehab. It’s less costly to replace a section of wall during the rehab process than it is after everything is completed and tenants are waiting.
-staff