Why You Need a Realtor

If you have been an investor for any length of time and have gone to any real estate seminar you will hear how real estate agents are the scourge of the industry. I have been to dozens of bootcamps and workshops and everyone loves beating on the real estate agent. Like they caused all the problems the investor had on their last deal.

Yes, like in every profession, you have people who are not professionals and do not know what they are doing. Real estate is no different. But I am here to tell you that you need and want a professional Realtor on your power team. A professional is someone who understands how an investor thinks, knows to ask what they are looking for and not afaird to say when they do not kow something. They know their market and can bring deals to the investor. A good realtor will save you money and time.

I can relate a costly mistake we recently made. We were selling a house and it was a good house with a good profit margin on it. But we gave thousands of dollars based on a disclosure. A simple disclosure that we signed and left off limiting laungage about the max amount of the repairs we would agree to pay. A typical thing to do according to a realtor friend of mine. We missed it and we had to do the repairs that we could have split with the buyer. All to save 3% on the deal. By the way, the cost of repairs is more than the 3% we would have paid the realtor.

So have a real estate agent on your power team and tell them up front what are your expectations. If they do not meet those expectations then let them know ad find another one.

Real Estate: 410 Emerson Ave Rehab

Now that we are getting another rehab project going, I should step back-up and give you a little back ground on. I mentioned in my last post that the house is 1050 square feet in size with 3 bedrooms and 1 bath. The house was built in the 1950s. Good, solid house that has seen better days but it is in a neighborhood that has held up well. It is certainly the worst house in a good neighborhood.

We purchased the house from a woman who needed to get out. We will now spend the next five weeks preparing the house to be leased by a future homeowner. The budget is tight on this one, but this economy is getting us some fantastic prices from contractors. I believe we can get the price down to $15,000. That would be great.

You can check out the house at our website JM2 Sells Houses.

See Ya,
Mike

Real Estate: Property Inspection Day (Part 2)

Here are the steps you will use to inspect a property:
Start outside

1. Landscape
2. Foundation
3. Exterior surfaces
4. Check trim at windows & doors
5. Check the eaves
6. Check roof shingles and surface

Move inside

1. Check for cracks in walls
2. Look at ceiling
3. Check plumbing under sink
4. Check plumbing fixtures
5. Check cabinets & countertops in kitchen
6. Check windows
7. Check flooring
8. Check faucets in bathroom & kitchen
9. Check HVAC
10. Look at electrical outlets.

Start outside:

1. Landscape: Note condition of the landscaping; we are looking for curb appeal. Is the automatic sprinkler system working?
2. Foundation: Any cracks larger than ¼” in width and go from top to bottom. If you see this condition, call for further inspection by a structural engineer.
3. Exterior surfaces: Does it need paints (for us that is always yes)? Note repairs that need to be done. Are there holes the siding or stucco? Does the house have gutters? Note these conditions.
4. Check trim at windows & doors: Check the trim for dry rot. Does it need repair or replacement
5. Check the eaves: Condition of eaves – cracks or dry rot. Are there any gutters? Are they any leaks or rust stains on the gutter?
6. Condition of the roof - is moss growing on it? (It certain does around here). If it is asphalt (or composition shingle) look for turned-up corners this is a sign of ware. Try to determine the age of the roof. Asphalt shingles can last 25 to 50 years depending on the type. If it is wood shingle 20 years is about max. Spend some time on the roof because it can be a big expense if you need to replace it.

Inside:

1. Check for cracks in walls: Large, wide cracks can be a sign of settling in the house. Some cracks are to be expected but never wider than a ¼”
2. Look at ceiling: Looking for stains from a roof leak. If you see a large stain then have a roof inspection by a roofing contractor
3. Check plumbing under sink: Check all the sinks to see that the plumbing is OK. Look for stains under the sink for signs of a leak. Rotten wood is a clear give away.
4. Check plumbing fixtures: We replace all fixtures so this is not a big deal. But check for leaks around fixtures
5. Check cabinets & countertops in kitchen: Can the cabinets be used again or paint. If the countertop is tile, it can be painted (by companies that paint tubs) this will save money over retiling.
6. Check windows: Leaks around the windows. Do they operate
7. Check flooring: We always replace the flooring. Check for stain marks on floor – if necessary lift the flooring
8. Check faucets in bathroom & kitchen: We will replace these items
9. Check HVAC unit: Locate the unit. If it is old – have it inspected to see if you need to replace.
10. Look at electrical outlets: We replace all the outlets and switches with new when we paint the walls. It gives it that fresh look.

This is the preliminary inspection we do before we buy a property. After we have made an offer and before we close we will have a property inspection done by a 3rd party to confirm our initial inspection. Anything that we missed or that will impact the purchase price and our profit we will renegotiate with the seller. Don't force the numbers to get a deal. A deadly and common aliment with investors who really want to get a deal. Whether if its your first or 50th it is always lurking. Follow the numbers and they will never lead you astray.

See Ya,
Mike

Real Estate: Property Inspection Day

Making progress everyday in your business requires certain activities that you need to do. Establishing a routine helps to keep you moving forward. Saturdays are a good day to do property inspection. We frequently go look at property on Saturday because the pace is slower. The calls are less on this day and we can concentrate on the job at hand.

When you go out bring a clip board to make notes or a worksheet that is marked up as we go through properties (email me and I will send you our worksheet). You will need this worksheet or notes because after a day of looking at property, even if you look at three house, they all start to swirl around in your head. Inspecting a property will take time at first because you may be new to the process and want to be very thorough. But after a few times you will notice that a lot of the same improvements are needed on houses. You will always want to paint the interior and exterior of the hosue. Replacing the flooring is a must. All the items that make a house sparkle must be replaced or repairs to like new condition. Here is the list you will always want to repair or replace:

1. Paint inside & out
2. Flooring
3. Electrical outlets
4. Light switches
5. Light fixtures
6. Toilet
7. Tub/shower (repaint at least)
8. Paint kitchen cabinets
9. Paint or replace countertop
10. Landscaping (Front new sod and scrubs & sod in back)
11. Door hardware (if it does not match)

There are other items we will consider replacing:

1. Windows
2. Interior doors
3. Garage door
4. AC Condenser

Tomorrow we will review the steps when inspecting a property and what to look for.

See Ya,
Mike

Follow-up, follow-up, follow-up!!!

Follow-up is the word when it comes to selling properties. In fact follow-up is the word in buying properties also. You must not rest on your leads. Even if you get tons and tons of leads (I actually don't know how many tons and tons of leads are but it sounds like a lot) you can not wait for them to call back. As my mother says "He who hesitates is lost" and that can not be more true. The buyer or renter has too many options for you to sit back and wait.

Do not count the property sold or rented until you have cash and a contract in hand. Otherwise the property is still available. Let me tell you a tough example on that note. Our first property we purchased, and I will admit we purchased it wrong. We paid too much and were optimistic about selling it quickly. We poured all kinds of money in the home. We took it from a REO nightmare to a beautiful home. We had our open house and we got a few people through it. We were priced to high for the market. We continued to market the property to avail. Then a woman came by and said the house was perfect for a program she was putting together. In fact she wanted buy it with owner financing and pay it off in 7 years. That worked out to $3300 per month. Well we got the agreement drawn up and she sign with a earnest money deposit. We found out later that the check she gave for the earnest money bounced. We asked her and she said that an investor pulled his money early but she would have the money in there soon. Meanwhile she paraded interior designers, furniture reps, etc through the house to begin to get the house ready. Well many months passed and no closing. Finally we told her to put up or shut up. We canceled the escrow and realized that we lost 3 months of marketing for the house. We lost all the momentum. We never recovered. We gave the house back to our private lender and learned a very expensive lesson.

The deal is not closed until we have the money and the contract in hand. Otherwise the property is always available.

Real Estate Course: Day Twelve of 30 Day Action Plan

Day 12

1. Talk to one person every day about your private money program
2. Lunch with an expert (Realtor/title officer/mortgage broker)
3. Visit properties from calls
4. Looking for equity

Day Twelve: Private money! Review your warm list and how they responded to your offer. Compile a list of people who said no because you will go back to these people. We want to give them five opportunities to say no.

Lunch with an expert! Make sure you rotate your list of experts so you grow your list of real estate experts and contacts. Remember you can also talk to them about your private money program. That will help with the action item above.

Go look at properties that sellers called on yesterday. You are reviewing them for repairs required and assess how a buyer would feel about the property. Does it need a lot of repairs? What is the cost of the repairs? Does it have curb appeal? Do we want to spend the money for curb appeal? Is there equity?

You continue your property research to see if they have equity. Check comps with a realtor or on-line to verify property information and asking price. If the sellers’ asking price is more than the area comps then continue looking. If it is close, I will go look at the area and make an offer based on what the property can afford. I do not really care what the seller wants. It all comes down to what the property can afford and that is based on rental rates, repair costs, transaction fees and our profit in the deal.

Its the Little Things When Selling Real Estate

Hi Everyone,
I know I have a post today for Day 9 of the 30 Day Action Plan but I wanted to relay just some of the things that go on around here.  We laugh about it after but it does create stress in your day.  Lessons learned: Use an established, licensed contractor and get a property inspection.

Our program that is the most successful is buying properties (Foreclosure or distressed sellers), rehabbing the property and reselling them to buyers with owner financing.  We did that for a property that we recently sold.  It was a Bank Owed home that needed a lot of work.  So much work that we gutted the interior of the house.  We figured that since we were replacing everything that we would not need a property inspection because everything is all new.  Well that was wrong.  We sold the property and everything was great, for the first month and when it was sunny.  The troubled started in December and that is when things turned sour, the roof leaked!!  This was a brand new roof it should not leak.  The first call was before Christmas, not the best time to get someone out to look at the problem.  I would love to go back to the contractor and tell him to fix it but he closed up his business and is gone.  So we have to bear this cost for our buyer's sake.  Well when the sun came out a few days later we found the problem; the roof was a tar and gravel roof and someone put a boot print on the roof when it was hot and left a bare spot on the roof that water just loved.  If only I could use CSI to identify the person who did it like they do on TV.  A property inspection would have noted that in the report prior to the sale and most importantly while the contractor was still in business and desperately seeking more work from us.

Also we had the house rewired - I should say that someone convinced us to rewire the house.  That someone being the thieves that came in during the remodel and removed all the copper wiring, how nice of them.  We had the contractor rewire the house, and as the contractor told us when he presented his price, to bring it up to current code.  He failed to tell us that the wiring would overload the rating on the main service panel.  A normal house that is 1200 square feet will have a 100 amp main electrical panel and it will work fine.  Our house had a 60 amp panel.  So the additional outlets that are required by electrical code overloaded it.  Now of course this did not show up until the Christmas time when the homeowner had all the lights on at night and a small electric heater in one of the rooms.  All that load made the lights flicker.  So another late night call this time after Christmas.  Again a property inspection would have noted the 60 amp service and made a recommendation to upgrade to current standards. 

I am very fortunate to have a very dedicated staff led by my General Manager.  She works with all our buyers and sellers and makes the process very easy.  So when you buy that first property that you are going to resell do not skimp on the cost of a good property inspector.  They will be worth their weight in gold or cold hard cash as we learned.  They can establish a scope of work for your contractor for things that are not readily apparent, good luck.

See Ya,
Mike

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