Archive for the ‘Flipping Houses’ Category

Tips on Hiring a project manager or contractor for your next rehab.

Tuesday, May 24th, 2011

Tips on Hiring a project manager or contractor for your next rehab.




 

We can all buy cheap houses! Can we all rehab them for a profit? People say work smarter not harder so hire it out. For investors they are right to some regard. When it comes to your investment rehab it’s imperative that you choose your construction team wisely. Rehabs are labor intensive and your contractor or project manager is going to want a fee for his time and efforts and it’s up to you “The Investor” to qualify him. Here’s some questions to ask yourself and your potential manager.

 

Here’s a given.

 

“Your manager or contractor should have a fluent background of investment properties and a passion to provide the community with a quality home that increases the end buyers standard of living.”

 

“Your manager or contractor should have a residential builders license in the state you are operating in.”

 

This is very important….. Here’s why. PERMITS… This is your investment so playing by the rules provides smooth sailing. When a contractor or manager needs to pull a permit for a Certificate of Occupancy, roof,  general or structural repairs don’t pay extra to for a permit puller. Out sourcing this task can cost you time and money as well as loss of control of your project. Also, your permit puller would now have the right to lien your property. Here’s a quick example: You hire a licensed contractor to do your full rehab. You need a roof and your opening up a wall that requires an install of a structural header. Your contractor pulls a permit for both items and has guys at his disposal to tear off the roof, re-shingle it, and install the header membrane as needed. He then calls in the inspections. Done! Easy as that with no hidden expenses. Or….You hire an un-licensed contractor or manager and while he’s still trying to decide if a permit should be pulled he’s shopping prices and doing the demo. As this is all happening the city drives by and sees your dumpster and puts a stop work order on the window. Good luck finding your licensed contractor now and happy rehabbing.

 

 

“Your manager or contractor should have a system in place to cost EVERY SINGLE TASK that needs to be done in a home prior to you closing.”

 

This is for your protection. You need this data to justify the expectation of repairs and the features your property will offer in comparison to current ARV. Putting together a detailed list of tasks to be completed is the first step to a successful rehab.

 

“Your manager or contractor should be able to do every task in your project if needed.”

 

Is he or she is You tubing how to install a window? If so, your in for a treat. Picking colors is one thing and operating production crew is another. Having a full understanding of the whole construction process is a must. The manager should have a full scope of work for the subcontractors. Use FULL DETAILS. This will eliminate corners being cut and will provide the best bang for the buck. Subs should show up to work, not price it out. It costs money and time for the sub to drive to your property, price out your project, and make his own scope of work. Bottom line… your going to pay for that. Your manager should need to do minimal shopping for trades and workers. They should personally know how to do every project themselves. This gives them the qualification to oversee and participate in the project. I know we are all experts because we know an expert but your project manager should be your expert. Remember this is your investment.

 

“After completing a few hundred full rehabs here’s a tip for you.”

 

“There is always a corner for a sub or worker to cut that will save him time or money that  may go unseen unless your manager or contractor knows his stuff and is present.”

 

I could tell you at least 10 things that could be quality installed in front of an investor/contractor/manager using corner cutting techniques that wouldn’t be caught by the un-knowledgable. Don’t be a victim.

 

Enjoy “Turning Property to Profits”

 

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The value of a budget before closing

Tuesday, February 22nd, 2011

After all the hard work of finding and negotiating on a property to flip it’s now time to do some work before you close…… Look it’s very exciting to flip homes but do you really invest the right amount of time into your construction process before you close on your deal or do you just go with the flow and hope it’ll work out. The least amount of costly choices made during the rehab process the better. I often see investors making major choices on what to do and not do after closing and during the construction process. It’s funny to to see them close on their property not knowing the exact costs of the remodeling project at hand. This usually turns out to be a nightmare for both the contractor and the investor. Once you close there’s no turning back so I recommend to all investors seasoned or new to take the time to get their costs in place before closing. This will make your investment a smooth process and you won’t have to cut corners that may affect your bottom end sales price. There’s always room to save. But where? It’s pretty easy if you have all the options laid out in front of you before you start writing checks. Here’s a question to ask yourself before moving forward. Do you know enough about residential homes to really see all the deficiencies of a property and can you figure the costs to repair these deficiencies? If so, great. Put your system in place to speed up the process and start capitalizing and having fun in this great market. If not, I suggest building a solid relationship with a rehab consultant that can assist you on the road to rehab success. The worst rehabbing mistake is to have a set construction budget that is made based on what you want to make on the back end of your deal. The basis of a construction budget is to correctly bringing the property to the expectation of the retail market. Investors have failed to sell a home because their construction budget was to low and the rehab didn’t meet the retail standard for the area. Making up your construction budget based on your back end greed or as work is getting done seems silly and may work out for you, but when it doesn’t it’ll hurt real bad. If you can’t afford to do it right. The bottom line is the price paid for the home was probably to much in the first place. So,taking the time to look at the expectation of the retail market your planning on investing in before your purchase will give you an idea of what to do and what not to do. Your goal should be to provide the end buyer with the best possible product on the market priced at or slightly below current market value. This is easy to achieve when you plan your rehab and budget before you close.

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7 quick steps to buying fix and flip real estate

Friday, May 14th, 2010

7 quick steps to buying fix and flip real estate


1. Research the area of the home that you plan to flip. A diamond house in a bad neighborhood is like coal. A high class rental is great for cash flow but not if you want to flip for a profit. You should know your streets in the surrounding area. That’s where your comps are coming from, so don’t grab the cheapest house in a rental market and think you will successfully retail flip it. Look at the school districts, parks, and public amenities. Take the time to look at the bank owned and owner occupied houses that are currently on the market to see what others are asking and what they are offering for the money. Also look at the recent sales and compare to the asking prices and again know what that buyer got for the money. Your goal is to offer the retail buyer the best house in the neighborhood for the best price. Purchase the correct house and create high returns for your private investors and huge profits for you.


2. You need to know your buyers demographics from as many aspects as possible. What are the age groups and income levels in the area. What kind of lifestyles do they live. Knowing what the expectation is before you purchase will give you a good idea if the house you have in mind can meet the highest requirements.


3. Have your contractor by your side to assist you with your rehab budget before your purchase. Your contractor should have strong relationships with every individual who would step foot on your job and should be able to give you accurate price projection from every aspect. You should have a good idea of what materials your going use and what projects your going to and not do. Have a controlled itemized budget before you start any work. Your rehab can make or break the deal.


4. Don’t cut corners on your rehab. If you want to secure your investment capital you have to do the job right. Expect to put materials that are above the standard for the area. Every aspect of your retail flip should be new or refinished. Investors and their contractors tend to leave out the small details to save a buck. Your goal is to flip not hold so pay attention to the minor details. It will pay off.


5. When listing your retail flip hire a broker that works directly in that area so he or she knows that your house is the leader in the community in that price point and will present it that way to the buyers agents. It’s a good idea to hire a broker that understands your position in this deal and the importance of your business. Make sure your broker follows up with buyers agents and produces feedback to you after every showing. Set your expectations high with your listing broker.



6. Have your exit strategy numbers in a spreadsheet so when an offer comes in you’ll know exactly how much you will make based on the offer and all costs to close.


7. After excepting an offer. Take the time to review and research the buyer’s ability to close the deal. Your broker should have this under control but remember your private money is at risk so don’t skip this step. You could lose the deal and waste time.

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5 House Flipping “Don’ts”

Sunday, August 9th, 2009

When it comes to making money in the business of flipping houses and other real estate investments you will find all kinds of do’s and don’ts along the way. The truth of the matter is that these are extremely useful whether this is your first house flip or you have been flipping houses for years. In fact you might just find that you can learn something new on occasion by reading lists such as this even if you’ve been flipping houses for years and have many successful flips under your belt.

1) Don’t forget to check out the neighborhood before you buy.

You will want to make sure that the property you are considering is a good fit for the neighborhood. You should also take the time to make sure that the plan you have in mind for the property will match well with the other neighborhood residents in order to guarantee a quicker sale.

2) Don’t blow your budget without just cause.

Your budget is what you used to determine whether or not the house would be a profitable venture. If you blow your budget and cannot recover the extra money you’ve spent in the selling price on the house you will have seriously cut into your profits if not eliminated them all together. The goal in property flipping is to get in and out quickly and spend as little money as possible in order to make as much money as possible.

3) Don’t forget to set daily goals and hold yourself accountable to those goals.

If you don’t reach your goals for the day it can set the entire project back by as much as a month depending on the goals and what has to be rearranged as a result. Stick to your timeline and your daily schedule in order to avoid potentially costly delays in time and money.

4) Don’t neglect the exterior.

Curb appeal is what brings buyers into the property. If you spend all your money, time, and effort making improvements to the exterior of the home you will have little left to make the outside appealing to potential buyers. A homebuyer is in the market for the entire package. A home that looks run down on the outside leaves the impression of being neglected on the inside and many potential buyers will never walk inside if the outside looks forlorn.

5) Don’t spend money you don’t need to spend.

While it would be great to put in granite countertops and gourmet kitchens into every home it isn’t always practical and this is often money that will not be recovered, particularly in homes that are in marginal neighborhoods. If you want to get the most for your money avoid costly expenses that aren’t exactly necessary for the successful completion of the flip. Resurface bathroom fixtures rather than replacing them if possible and use new cabinet doors or hardware rather than adding new cabinets all together to cut down on expenses. In other words, salvage what you can, fix what needs to be fixed, and add a few cosmetic touches before moving on.


The market for real estate is a very fickle market. Avoid risking too much time and money on a property that isn’t going to recover those added touches and expenses. Instead hold onto those ideas for higher end flips once you have a few successful flips under your belt.

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5 House Flipping “Do’s”

Saturday, August 8th, 2009

While many people have very specific dreams of enjoying the bountiful profits that can be made from flipping houses very few people put too terribly much thought into the process or any formulas that might be pertinent to success when it comes to flipping houses as a real estate investment venture or for the sake of building a nice comfortable lifestyle or retirement. You will hear a lot about the things not to do when it comes to flipping houses but very few people take the time to mention the things you absolutely must do in order to successfully flip a house and thus begin your ride on the road to real estate investment riches.


1) Do put everything to pen and paper and plan it out carefully before you begin.

If you are going to enter into this to make money you need to treat it like a business. This means you need to have a plan of action and make every effort to work towards carrying out that plan.

2) Do establish a budget for the entire project.

You need to have a plan for how much money you are willing to invest in the property itself, how much for renovations, and how much money you need to make in order to be a worthy investment for your time and labor. A house flip is a lot of work in order to pull it off successfully. You want to have a good idea of how much homes in the neighborhood are worth, the value of your property as is and the estimated value of the property once improvements are made. In addition you should also have a pretty firm grasp of the costs involved in making the repairs in order to create a realistic budget for the entire project.

3) Do have an inspection.

This is the single most important detail that can save you a great deal of time, money, and heartache when everything is said and done. Be prepared to walk away if the inspection determines that there is more work needing to be done than simple cosmetic repairs. You want to make changes that people can see because those are generally the changes that drive up the cost of the house. You want to avoid needing to make changes and improvements that aren’t visible but are very necessary. If you need to invest a lot of money and labor into the house you need to seriously consider the realistic profit potential the property offers. If it isn’t significant then you need to walk away before the property becomes a real estate investment money pit.

4) Do know the neighborhood and plan your flip.

Make sure you knwo the neighborhood according to the needs of the area rather than your personal tastes and needs in a home. This is another thing that many first time flippers forget. This is not a personal project it is a business project and you need to treat it as such. Keep costs down and feelings out.

5) Do remember that you are in the market to make money not waste money.

Keep this in mind when it comes to establishing an asking price for the property. You’ve poured blood, sweat, and probably more than a few tears into your flip but you cannot set the value of the property by the effort you’ve placed into it. Have realistic expectations of how much you stand to earn from your efforts and how much you are willing to go down on the price in order to walk away with some profit in your pocket.


You should also take a moment to reflect upon the fact that many first time flippers actually lose money on their first flip. If you turn a profit at all, even a small profit you have learned many valuable lessons that you can carry with you into future flips and make more money. More importantly the lessons you learn from your first flip are lessons that money really cannot buy so it is worth a lower profit or even taking a slight hit if your experience makes you even more money in the future as you continue along your real estate investment path.

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