Section 1: Finding Houses (morning session)
A. Targeting Good Neighborhoods. Lower cost per qualified lead, your money is focused on maximizing high quality leads and minimizing the unwanted one, less time qualifying leads, spend less time filtering and rejecting unwanted leads, find homes quicker, you become an expert in your target neighborhoods enabling quicker assessment of what houses sell for and what they cost to fix, buy more houses, you will have more qualified leads which means more house-buying opportunities, buy the most profitable home, be choosey about what deals to take because you have more leads to choose from.
B. Six Neighborhood Targeting Criteria. Proximity of the neighborhood to your work and home, selling prices of the homes in the neighborhood, sales activity of the homes in the neighborhood, ages of the homes in the neighborhood, appeal and charm of the neighborhood, safety of the neighborhood.
C. Nine Neighborhood Appeal Factors. An established reputation, clean and well-kept yards, a low crime rate, good starter homes (small, relatively affordable), close to schools, close to shopping, close to mass transportation, close to business centers, close to parks and recreation.
D. Generating Leads. Prospecting, advertising, networking, prospecting, four places to prospect, your target neighborhoods, looking for vacant houses, door knocking, beat-up houses, FSBO, driving the neighborhood, vacant houses, seller is motivated, capture addresses, look up property owner and contact info, make contact with owner, the multiple listing service, check frequently and react immediately, look for expired/cancelled listings, days on market, keyword search, fixer, motivated seller, as is, without warranties, needs work, get on realtors’ alert emails, classifieds, MLS, houses for sale, look for clues, vacant, needs work, fixer-upper, as is, must sell, seller describes renovations, foreclosures, default, trustee’s sale, REO, advertising, create your message, buy real estate, any condition, any price, ability to close fast, you will pay them cash at closing, call to action (call you today).
E. Six most popular advertising mediums. direct mail, letters, postcards, or flyers to your target neighborhood. Clear call to action (i.e. call today). Google “residential mailing lists,” less than 1%, business cards, basic contact info, simple message, buy houses, spread the word, signs, cheap and effective, people call right away, four kinds of signs, yard signs, post in your current project, bandit signs, post in high traffic area, billboards, can be pricey, return rate is high, car magnets, printed sign on your car, print advertising, real estate, business, or classified sections of newspapers, Pennysaver, local sales magazines, the internet, online classified ad sites, Craigslist.org, HOA websites or newsletters, radio and television, radio is less expensive than TV, relatively affordable.
F. Other advertising ideas: T-shirts or other apparel, door hangers, exhibiting at local home shows, sponsoring a Little League or other team, flyers in direct mail packets (Valpak or Money Mailer), company newsletters, reach vs. frequency, people are in the target audience of an ad, frequency, how often is an individual in your target audience exposed to your advertisement.
G. Networking. Get in front of professionals who are in direct contact with sellers and/or houses, tell them you are looking for deals, houses to buy, networking is building relationships, the relationship must be “MUTUAL”, they get business from you, they receive a finder’s fee, they get a piece of the action, they get a small gift, they just get a simple “thank you,” the people in your network, other investors (investor clubs), realtors, appraisers, lenders, house inspectors, lawyers, accountants, contractors, courthouse clerks, builders, developers, neighborhood residents, your Networking Script.
H. Qualifying the House. Three Fundamental House-Flipping Criteria, in your Target neighborhood, first question, what is the address, in satisfactory Condition, fire damage, lead paint, water damage, major foundation problems, collapsed roof, asbestos, major termite damage, aluminum wiring, neighborhood misfit, unusual architecture, roof pitch or elevation, lot irregularity, too small, too steep, odd shape, layout, low ceilings, one bathroom, tiny kitchen, no space to add or remodel, house size, much too small or much too large, street busy, parking issues, nearby school or businesses, neighbors, unsightly or oversized houses, commercial buildings, problem neighbor, infrastructure, power lines, retention ponds, railroad tracks, highway noise, scene of a crime.
I. Qualifying the Seller. Factors that make a seller motivated, life events, relocating to another city for a job, physically unable to maintain the property, divorcing and needs to sell, financial hardship, can’t afford the mortgage payments, already moved, dealing with two mortgage payments, can’t afford the maintenance and upkeep, must sell “as is,” can’t afford to fix up the house, must sell “as is,” too busy to fix the house, wants to sell, vacancy, doesn’t want to remotely manage it, unable to rent, qualifying questions for the homeowner, motivated, why are you interested in selling your house? How quickly do you want to sell? Is anyone living in the house? Are the house payments current?
J. Financial Analysis. First determine ARV, after-repaired value defined, pull the comps, use the MLS, ask a Realtor for a CMA, parameters, recently sold, within three months, nearby or same neighborhood, size, plus or minus 500 sq. ft., age, plus or minus 10 years, layout, same beds and baths, drive the comps, eyewitness data, five visual inspection factors, condition, roof, siding, garage door, windows, porch, driveway, walkways, front door, curb appeal, architecture, trees, lawn, landscaping, lot size, grading, view, water, city skyline, mountains, any eyesores, street, cul-de-sac, major street or intersection, pride of ownership evident, Proximity to infrastructure. Commercial buildings, factories, rail road tracks, highways, power lines, parking lots bus stops, read the market, what is the six-month forecast, four economic indicators, mortgage rate trends, up or down markets, higher rates downward pressure on home prices, seasonal buying cycles, Prices increase over the summer and decrease over the winter, time on market, how quickly houses selling in your neighborhood, indication of inventory, developments, major employers, schools, churches, parks, pools, recreational facilities, entertainment centers that could draw new people to the neighborhood, check with experts, get qualified second opinions, real agents in the neighborhood, appraisers, expert in determining value, some will do verbal appraisal for a reduce fee, looking for after-repaired Value, neighborhood residents, talk to the neighbors, sometimes they know less, identify repairs and improvements, what must I do? (repairs), repairs that need to be fixed, what should I do? (renovations), renovations that should be done to be competitive, what could I do? (upgrades), upgrades you could do to increase value.
K. Five Opportunities to Add Value. Amenities, automated sprinkler system, cabinets, extra sinks, garage door openers, internet wired, central alarm system, openings, widening door openings, removing walls, opening up & connecting rooms, conversions, turning a garage, basement, attic, porch, or covered patio into a room, additions, add a bedroom or bathroom, add an outdoor living room, layout changes, major remodeling, changing the entire layout of the house.
L. Account for Costs. Buying costs, when you purchase the house, inspection, appraisal, 1% of the purchase price, holding costs, costs incurred while owning the house, insurance, property taxes, utilities, and maintenance costs, costs of money, interest and points paid, selling costs, realtor commission plus closing costs, title insurance, escrow, set minimum profit, Percentage of ARV you should receive for every flip.
Section 2: Financing Houses (morning session)
M. Arrange Financing. Financing a flip, pay cash in full, all cash, attract financial investors, demonstrate that the risk versus the reward they will receive, risk, accuracy of estimated sales price, accuracy of estimated rehab, volatility of the housing market, experience of the real estate investor (you), create in investment summary, show your plan, and profit they will receive, borrow (institutional vs. private lenders), institutional lenders, banks, mortgage companies that make loans based primarily on the merits of the borrower, interest rate is lower, requirements are stricter and the process is longer, private lenders, individuals or groups that make loans based primarily on the merits of the borrower, interest rate is higher but the process is faster, future value of the house, 75% of the ARV, rehab costs, deferred payments for six months, construction holdbacks, partner to get cash, institutional lenders, private lenders, comparing borrowing vs. partnering.
N. Offers and Counter-Offers. Six components to your offer, purchase price, earnest money deposit, contingencies, subject to inspection approval, subject to financing approval, subject to appraisal at selling price or above, subject to marketable title, closing costs, distressed sellers closing costs, negotiate lower sales price in exchange, closing date, go with 15 or 20 days to help homeowner and/or lender, acceptance date, date your offer expires, traditional 3 days, distressed maybe only 1-2 days, protect yourself with contingencies, financing must be approved, house must pass inspection, property must have clear title, appraisal must be at sales price or higher, your attorney approve the contract, handling counter-offers, owner probably didn’t receive a much better offer, see what the owner really wants, respect deadlines for responding, back-up offers, 50% of all deals fall through, always submit backups, sellers more anxious the second time around, common negotiating pitfalls, over-bidding, don’t present everything in your first offer, excessively under-bidding, careful with low-all offers, bidding against yourself, submitting another offer before the seller responds in writing, making a take-it-or-leave-it offers, don’t make ultimatums, leave communication channels open, talk less and listen more, never talk about certain subjects, responding to unofficial counter-offers. Don’t consider anything verbally, put it in writing.
O. Closing the Deal. Open escrow, get the deposit, draft escrow instructions, issue deed, schedule Inspection, finding inspectors, six qualities you want in an inspector, licensed, American Society of Home Inspectors (“ASHI”), someone who is meticulous, points out every little problem, the longer the list the better, lets you tag along during the inspection, has a working knowledge of renovations, lets you ask him repair questions as he conducts his inspection, writes up his report on the spot, fee is reasonable, four benefits of an Inspection, know your house from top to bottom, have a way out, serious problems, cancelling the deal, refine your budget, refine your budget based upon needs to be done, renegotiate your deal, request the seller repairs the problems, reduce the sales price, credit for repairs, areas of concern, foundation, grading, electrical system, lead-based paint, plumbing and septic, asbestos, furnace and a/c, radon, roof, toxic mold, attic and insulation, lead pipes or lead in water, demand credit back for problems, order Appraisal, review preliminary title report, “chain of title,” liens, unfounded claims/liens, seller remedies the claim, pay it and lower the purchase price, cancel deal, request HUD-1 closing statement, review numbers and confirm they are correct, property insurance, liability (general liability & remodeler’s risk), hazard, prepare for rehab, hire locksmith, turn on utilities, set-up desk, retain pest control company, rent a dumpster, schedule clean-out crew, hire roofer.
Section 3: Fixing Houses (afternoon session)
A. Construction Plan. Five components of a construction plan, scope, what work needs to be done, specs, materials needed, budgets, how much will work cost, sequence, when scheduling the work, trades, who does the work, scope of Work, living room, furnace, air-conditioner, dining room, garage, family room, exterminator, kitchen, plumbing, bedrooms, electrical, bathrooms, driveway, hallways, sidewalks, roof, exterior surfaces.
B. Upgrades & Added Value. Remove walls, identify load-bearing walls, open floor plan, contemporary look, raise the ceiling, add a bedroom, add a bathroom, convert garage, convert porch or attic, extra rooms, add outdoor living room, add patio or deck to backyard.
C. Hire a General Contractor. What good contractors should do, manage the entire rehab project, consult on your scope of work, collaborate with architects and designers, draw up scope of work and material specifications, create a budget and timetable, pull permits and schedule inspections, schedule and make payments for materials, hire, schedule, and make payments to all trades, ensure adherence to budget, schedule, and quality, manage risk and solve problems that arise, sources for finding contractors, real estate investors, construction professionals, real estate-related professionals, friends, neighbors, relatives, & co-workers, hanging out at Home Depot & Lowe’s, visit other construction sites, craigslist.org, seven factors to consider when qualifying a contractor, longevity, how long has the contractor been in business, licensed and registered, appropriate license and registration, real estate investment experience, the contractor worked on real estate investment projects, flips, insurance, the contractor properly insured to protect you, business references, the contractor have good business relationships, customer references, does the contractor have satisfied customers, competitively priced, provide a comprehensive and accurate bids, 15 keys provisions of a contractor’s agreement.
D. Work the Plan. Create a budget, list projects, list the materials, obtain bids and estimates, total the estimates, add 20% for taxes and unexpected expenses, three main project management goals, stay on schedule, changes, timing, decisions made on the fly, goal, “do everything you can as soon as you can,” stay on budget, ensure quality, stay on schedule, sequence, the order in which work gets done, lead time (materials, labor), time it takes to start work, plan everything in advance, labor lead time, material lead time, duration, time it takes to complete the work, stay on budget, effective planning, great execution, process of developing a budget, gather initial data from your walk through, develop a detailed scope of work, detailed material specifications, get more accurate cost assessments, contractor bids and estimates, execute to stay on budget, manage rough work, manage labor, manage scope of work, monitor spending.
E. Tips to Enhance Quality. Link payment to performance, communicate that quality is checked, consider bonus structure, exceptional work over multiple projects, monitor and measure progress often, inspect what you expect, ensure your expectations are being met, address problems immediately, quickly raise red flag if you notice errors, if they cannot be fixed later in the process, cost or time prohibitive, prepare for the work, staying on schedule and on budget, quality outcome, properly prepped, ready for trades to start work, work is clearly defined, job site is clean, prerequisite steps are completed, needed materials are on site, manage the rough spots, intensify your focus on the rough work, work that serves as the foundation for future work, pay for predictability, cheaper isn’t always better, don’t’ hesitate to use turnkey trades, use materials, looking good and being installed easily, manage the managers, delegate duties, have a game plan, switch on utilities, set-up office in garage, order materials, tackle underlying problems first, work from top down, work from inside out, allocate sufficient time for each project, spruce up front of house and yard.
Section 4: Flipping Houses (afternoon session)
A. Use a Realtor. Two ways to sell the house, hiring a real estate agent, sell yourself (“FSBO”), why to hire a realtor, price your house accurately, effective marketing plan, listing in the MLS, advertising to all buyers agents in the area, show to prospective buyers, finding other flipping opportunities, sell in half the time, negotiating a higher price, picking the best offer, the security of agent-accompanied showings, pre-qualified buyers, showings to serious prospects, competitive market analysis, convincing buyers the asking price is right, ensure all necessary paperwork is completed, process flows smoothly, interview realtors, house rehab finished, give tours, interviews, listing appointments overlap, marketing plans in detail, listing agreement, commissions, double-sided transactions, another agent in the same office, term, bonuses, extra payments, marketing plan, internet, realty agency fee.
B. Set Listing Price. Cost to buy, rehab, & hold, understand your current market, drive the comps, research online, and consult other agents.
C. Staging. Five benefits of staging, visual blueprint of life in the home, empty house feel warm and loved, creates proportion in a big room, furniture groupings, tiny room feels larger, customized furnishings, showcases positive features, negative features, open houses, sounds, touch, sights, scents, staging basic houses, custom houses, designer houses.
D. Marketing Plan. Internet, other websites, open Houses, direct mail, post cards, flyers, brochures, print advertising, offer financing, financing flyers, mortgage brokers.
E. Offers and Counter-Offers. Buyers to avoid like the plague, sale-contingent buyers, offer contingent on the sale of their house, buyers without pre-approval letters, the 0-10 percent down payment buyer, pay at least 20-25% down, the bully buyer, listing all the things wrong with your house, concessions, nit-picking disclosures, sight-unseen buyers, considerations of an offer, pre-approval letter, quick inspection period, contingent on sale of another house, short closing period, reasonable down payment, reasonable earnest money deposit, the art of the counter-offer, the Zen of backup offers, insurance policies, accepting backup offers, leverage in negotiating, leveraging multiple offers.
F. Close the Sale. Permits, inspections by city, repair requests, choices if the buyer requests repairs, make the repairs yourself, your contractor make the repairs, scope of work, decline to make the repair, allowing buyer to back out of the deal, title insurance, HUD-1 closing statement, escrow junk fees, keep buyer on schedule, inspections, appraisal, financing, escrow documents, compile buyer’s welcome package, close escrow, cash your check, break open the champagne!!
G. Assembling Your Own “Dream Team.” Title insurance, mortgage broker, realtors, general contractors, CPA, accountant, home inspector, escrow officer, real estate attorney, insurance agent, interior designer, landscaper, gardener, plumber, electrician.
H. 90-Day Action Plan. What to do first, what to do second, how to get started fast, desk, computer, voicemail, internet, fax, emails, websites, foreclosure listing services, newspapers, post cards, business cards, postage, telephoning, submitting offers, meeting with homeowners, inspecting properties, educational seminars, workshops, books, mentoring.