Flipping America

FAR 023 You need money to do this business. If you don't have your own money, you need either an investor or a lender, but somehow, you have to find the money. The best source of money for an individual deal is a Private Lender. But how do you find private lenders? And how do you get them to commit to funding your deals? Learn how today in my conversation with Jay Conner from Morehead City, NC.  Emails: Elinore from Milwaukee writes, “We have just finished our first project and it’s time to list it. My husband and I are considering whether we should hire a staging company. What are your thoughts on staging?” Randall from Boulder, CO writes, “Properties are so expensive here, the cost of a hard money loan makes it very difficult to find a deal that will work. Any suggestions?”

1. Pay close attention to today’s guest, Jay Conner, talking about Private Money
2. Consider flipping remotely in other areas.
3. Consider a Joint Venture.
   1. Make sure you trust your venture partner(s)
   2. Make sure the paperwork is airtight (Legalshield attorney can help with that at no charge).

William from Long Beach, CA, “Appreciate the show. I picked up a foreclosure that is in pretty good condition. The paint on the walls is in great condition but it’s a light green color. My realtor called it “sea-foam green” and said it’s got to go. I don’t want to spend the $3500 to paint the house. What do you recommend? Interview Guests: Jay Conner, Raising Private Capital

FAR 024 Topics: Re-selling your own home. Ideally, move most of your stuff out. Consider a service like PODS who will bring a storage unit to you, then move it to their secured space until you find your new place. Put EVERYTHING you won't need for a few months in it. Paint neutral colors. Buyers might like your color choices, but they also might not. A "blank canvas" is likely to appeal to more buyers. Hire home inspector, make needed repairs Fix up the lawn. Do everything you can to increase that curb appeal. Consider upgrades to the kitchen and/or master bathroom. Interview agents, hire one that has a complete marketing plan for your home. Even in a hot market, take nothing for granted. Emails: Gershawn from Greenville, SC "I want to bid on a foreclosure being sold at the courthouse steps in June. How should I go about this?"

1. Do your homework. Visit the property. If occupied do a "drive-by" repair assessment.
   1. Premise: The condition of the outside is a reflection of the condition of the inside.
   2. Assume roughly $25/sf plus $5000 for every 10 years of age as a repair "guess-timate"
   3. Research the title. Make sure the foreclosing loan is in first position. Learn whether back taxes are owed.
2. Have several possibilities. If you go with only one in mind your odds are much lower and the temptation to overbid is higher.
3. Take enough certified checks to cover 10% of your max bids. Remember in SC you have I think 20 days to pay off the balances.
4. If you're willing to partner with someone, consider it.
5. If you have time to be an observer for an auction or two, I recommend it.

Patrick from Lancaster PA, "I'm looking at a house that seems like a good deal, but it has fire damage and some water damage from where they put out the fire. It was mostly confined to the kitchen. What are your suggestions?"

• You need a fire restoration specialist. Look for them online. You want someone who is certified by one of the major groups, if possible. You really only want these people for an inspection and a repair recommendation. You're not going to like their quote on the repairs, but get one out of respect for their time.
  • IICRC That's the Institute of Inspection, Cleaning and Restoration Certification. IICRC.org
  • International Restoration Institute, iriedu.com
  • American Council for Accredited Certification Acac.com The Council-certified Fire and Smoke Damage Technician (CFST) and the Council-certified Fire and Smoke Damage Consultant (CFSC) conduct investigations to assess property-related fire and smoke damage.
• Make sure any agreement you sign with them spells out clearly their responsibilities and warranties, if any. You want the option to call them back if it's not done correctly. Run the agreement by your legal department (legalshield) before you sign anything.
• If there is ANY chance that roof framing members or load bearing wall members have been compromised, have the damage inspected by a licensed structural engineer who will sign off on his or her recommendations and keep in mind they will need to re-inspect before you cover up the work with finished walls.
• This is going to cost you some money up front and you should do it during the due diligence period to make sure you are going to remain in budget.
• Keep in mind that the fire and water damage restoration people you are going to find are used to providing repairs for insurance companies to pay. Their estimating software kicks out the highest repairs costs imaginable. You can throw a rock and find a reputable contractor who will do the required work for much less.

FAR 024 Topics: Re-selling your own home. Ideally, move most of your stuff out. Consider a service like PODS who will bring a storage unit to you, then move it to their secured space until you find your new place. Put EVERYTHING you won’t need for a few months in it. Paint neutral colors. Buyers might like your color choices, but they also might not. A “blank canvas” is likely to appeal to more buyers. Hire home inspector, make needed repairs Fix up the lawn. Do everything you can to increase that curb appeal. Consider upgrades to the kitchen and/or master bathroom. Interview agents, hire one that has a complete marketing plan for your home. Even in a hot market, take nothing for granted. Emails: Gershawn from Greenville, SC “I want to bid on a foreclosure being sold at the courthouse steps in June. How should I go about this?”

1. Do your homework. Visit the property. If occupied do a “drive-by” repair assessment.
   1. Premise: The condition of the outside is a reflection of the condition of the inside.
   2. Assume roughly $25/sf plus $5000 for every 10 years of age as a repair “guess-timate”
   3. Research the title. Make sure the foreclosing loan is in first position. Learn whether back taxes are owed.
2. Have several possibilities. If you go with only one in mind your odds are much lower and the temptation to overbid is higher.
3. Take enough certified checks to cover 10% of your max bids. Remember in SC you have I think 20 days to pay off the balances.
4. If you’re willing to partner with someone, consider it.
5. If you have time to be an observer for an auction or two, I recommend it.

  Patrick from Lancaster PA, “I’m looking at a house that seems like a good deal, but it has fire damage and some water damage from where they put out the fire. It was mostly confined to the kitchen. What are your suggestions?”

• You need a fire restoration specialist. Look for them online. You want someone who is certified by one of the major groups, if possible. You really only want these people for an inspection and a repair recommendation. You’re not going to like their quote on the repairs, but get one out of respect for their time.
  • IICRC That’s the Institute of Inspection, Cleaning and Restoration Certification. IICRC.org
  • International Restoration Institute, iriedu.com
  • American Council for Accredited Certification Acac.com The Council-certified Fire and Smoke Damage Technician (CFST) and the Council-certified Fire and Smoke Damage Consultant (CFSC) conduct investigations to assess property-related fire and smoke damage.
• Make sure any agreement you sign with them spells out clearly their responsibilities and warranties, if any. You want the option to call them back if it’s not done correctly. Run the agreement by your legal department (legalshield) before you sign anything.
• If there is ANY chance that roof framing members or load bearing wall members have been compromised, have the damage inspected by a licensed structural engineer who will sign off on his or her recommendations and keep in mind they will need to re-inspect before you cover up the work with finished walls.
• This is going to cost you some money up front and you should do it during the due diligence period to make sure you are going to remain in budget.
• Keep in mind that the fire and water damage restoration people you are going to find  are used to providing repairs for insurance companies to pay. Their estimating software kicks out the highest repairs costs imaginable. You can throw a rock and find a reputable contractor who will do the required work for much less.

Yes the zero-down deals do exist in real estate investing but you will have to pass up 100 good deals to find one. In the meantime, you need operating capital. Our guest today, Bruce Mack, will show you how to have the capital you need to start your business, do your marketing, make your down-payments and interest payments on the houses you buy. All of this takes money and Bruce can put it into your hands. Editor's Note: We are continually developing sources for your deal and business funding. Check the website for updates!

Yes the zero-down deals do exist in real estate investing but you will have to pass up 100 good deals to find one. In the meantime, you need operating capital. Our guest today, Bruce Mack, will show you how to have the capital you need to start your business, do your marketing, make your down-payments and interest payments on the houses you buy. All of this takes money and Bruce can put it into your hands. Editor's Note: We are continually developing sources for your deal and business funding. Check the website for updates!

FAR 026 Topics: Reading from the Book: "The Ten Day Real Estate Investor" Introduction Chapter One Emails: Ron from Austin Texas, "I can't find any deals that fit the formula. I've been looking at properties for about 2 months and I've made 3 offers, but to no avail. Please help." Elsa from Albuquerque NM, "I have the capacity to do one deal at a time. However, I have two great deals in front of me right now - both of them are about the same profit with the same level of difficulty. What should I do?" Amy from Madison WI, "Do you sell many houses over the winter down there in the south? I'm especially curious about the holiday season. I usually just plan on shutting down during the last two months of the year. Peter from Ocala, FL, "I've been hearing about a subject-to purchase. Can you explain what that is? I've also heard it's illegal in Florida."

FAR 026 Topics: Reading from the Book: “The Ten Day Real Estate Investor” Introduction Chapter One Emails: Ron from Austin Texas, “I can’t find any deals that fit the formula. I’ve been looking at properties for about 2 months and I’ve made 3 offers, but to no avail. Please help.” Elsa from Albuquerque NM, “I have the capacity to do one deal at a time. However, I have two great deals in front of me right now - both of them are about the same profit with the same level of difficulty. What should I do?” Amy from Madison WI, “Do you sell many houses over the winter down there in the south? I’m especially curious about the holiday season. I usually just plan on shutting down during the last two months of the year. Peter from Ocala, FL, “I’ve been hearing about a subject-to purchase. Can you explain what that is? I’ve also heard it’s illegal in Florida.”

FAR 027 Announcements: Tuesdays at 2. Free online coaching from the Flipping America guy Contractor Fails Two Renewal Quotes Topics: Is Home Ownership a good investment? The top Ten Real Estate Deals in American History The best time in History to invest in real estate? Jeff Reeves, a columnist for MarketWatch says yes.

1. It's a Healthy Market, not a bubble. Realtor.com has create a "bubble index"
   1. Prevalence of house flipping
   2. Price to income ratios
   3. % of buyers using mortgage financing
2. Foreclosures are at the lowest level since 2000.
3. Innovation is lowering barriers to entry for investors.
   1. Online research
   2. Online funding
   3. Innovations in lending for investors
4. Comparatively, stocks and bonds aren't looking that promising at the moment
5. 10 year treasurys are at 1.6P% annually and investment grade corporates aren't much better.

Emails: Susan and Jonathan write in from Pittsburgh. "We are newly married, both college graduates with decent incomes and a plan for a family. We are considering buying our first home and want to know what you think about it as an investment."

1. Your home is not, and should not be considered an investment. The appreciation in your home will barely cover inflation historically. If you are considering a 30 year mortgage, you have to look at historical trends not what has happened recently.
   1. It doesn't provide income
   2. It doesn't grow in value in a significant way.
   3. Your down-payment applied to an indexed fund is likely to do better over the next 30 years.
   4. You are not going to dispassionately analyze your home like you should with any real investment.
   5. It should be on your balance sheet as a consideration in your net worth, but note that it does not count toward the requirement as an accredited investor. It should be viewed more as a consumption item rather than an investment.
2. But what about paying down the mortgage and building up equity? It is true that for many, homeownership is a means of creating a type of "savings account" and for many, the lack of liquidity is probably a good thing. You won't be selling off a piece of your house so you can buy the hot new consumer electronics next year that you really can't afford. Are you really building equity?
   1. Consider the other costs of home ownership
      1. Maintenance and repairs
      2. Insurance
      3. Taxes (deductible but must be reckoned)
   2. Example: I bought a home in 2002 with $200k in equity the day I bought it. Saw my girls through their high school years, raised my son there. Over the years I have paid the following:
      1. Maintenance and repairs: $46,500
      2. Insurance: $22,500
      3. Taxes: $72,000Total: $141,000
      4. If I were to sell the house today I would net from the sale around that same $200,000 I had the day I bought it.
      5. What I should have done:
         1. Flipped that house for cash after I finished repairs
         2. Calculate the cost of homeownership and over the years invest that $141,000 into other things (along with the original $200k)
         3. I would have well over $1m additional in my nest egg right now.
   3. If you want to pay down a mortgage and build up equity, why not also structure it so you can depreciate the property on your taxes and write off all of the maintenance and repair expenses? Yes I'm talking about owning rental property.
3. But when I'm old and gray I want to have a paid off house so I won't have the burden of the house payment on my retirement income.
4. There are OTHER many good benefits of buying and owning a home:
   1. The forced savings is a reality and for better or worse is the primary savings of most Americans.
   2. You can deduct the interest paid on a mortgage. This is a benefit, but I do not think it rises to the level of a "reason" to buy a home.
   3. Typically you can enjoy more space than you can in a rental. The direct cost per sf is less.
   4. Call me old school, but I think kids need to grow up with a yard to play in. - And parents to make them go outside and play.
5. You can find a home and space in an area where you want to be and rent. When your needs grow, rather than the challenges of selling and buying, just upgrade the rental.
6. Home ownership is undeniably satisfying to the ego and our idea of the American dream, but is not usually the best financial decision. You should never buy as much house as the lender tells you you can afford, and you shouldn't do it without a 20% down-payment and a genuine strategy for savings and investments that will not be affected by your house payment.

FAR 027 Announcements: Tuesdays at 2. Free online coaching from the Flipping America guy Contractor Fails Two Renewal Quotes Topics: Is Home Ownership a good investment? The top Ten Real Estate Deals in American History The best time in History to invest in real estate? Jeff Reeves, a columnist for MarketWatch says yes.

1. It’s a Healthy Market, not a bubble. Realtor.com has create a “bubble index”
   1. Prevalence of house flipping
   2. Price to income ratios
   3. % of buyers using mortgage financing
2. Foreclosures are at the lowest level since 2000.
3. Innovation is lowering barriers to entry for investors.
   1. Online research
   2. Online funding
   3. Innovations in lending for investors
4. Comparatively, stocks and bonds aren’t looking that promising at the moment
5. 10 year treasurys are at 1.6P% annually and investment grade corporates aren’t much better.

Emails: Susan and Jonathan write in from Pittsburgh. “We are newly married, both college graduates with decent incomes and a plan for a family. We are considering buying our first home and want to know what you think about it as an investment.”

1. Your home is not, and should not be considered an investment. The appreciation in your home will barely cover inflation historically. If you are considering a 30 year mortgage, you have to look at historical trends not what has happened recently.
   1. It doesn’t provide income
   2. It doesn’t grow in value in a significant way.
   3. Your down-payment applied to an indexed fund is likely to do better over the next 30 years.
   4. You are not going to dispassionately analyze your home like you should with any real investment.
   5. It should be on your balance sheet as a consideration in your net worth, but note that it does not count toward the requirement as an accredited investor. It should be viewed more as a consumption item rather than an investment.
2. But what about paying down the mortgage and building up equity? It is true that for many, homeownership is a means of creating a type of “savings account” and for many, the lack of liquidity is probably a good thing. You won’t be selling off a piece of your house so you can buy the hot new consumer electronics next year that you really can’t afford. Are you really building equity?
   1. Consider the other costs of home ownership
      1. Maintenance and repairs
      2. Insurance
      3. Taxes (deductible but must be reckoned)
   2. Example: I bought a home in 2002 with $200k in equity the day I bought it. Saw my girls through their high school years, raised my son there. Over the years I have paid the following:
      1. Maintenance and repairs: $46,500
      2. Insurance: $22,500
      3. Taxes: $72,000Total: $141,000
      4. If I were to sell the house today I would net from the sale around that same $200,000 I had the day I bought it.
      5. What I should have done:
         1. Flipped that house for cash after I finished repairs
         2. Calculate the cost of homeownership and over the years invest that $141,000 into other things (along with the original $200k)
         3. I would have well over $1m additional in my nest egg right now.
   3. If you want to pay down a mortgage and build up equity, why not also structure it so you can depreciate the property on your taxes and write off all of the maintenance and repair expenses? Yes I’m talking about owning rental property.
3. But when I’m old and gray I want to have a paid off house so I won’t have the burden of the house payment on my retirement income.
4. There are OTHER many good benefits of buying and owning a home:
   1. The forced savings is a reality and for better or worse is the primary savings of most Americans.
   2. You can deduct the interest paid on a mortgage. This is a benefit, but I do not think it rises to the level of a “reason” to buy a home.
   3. Typically you can enjoy more space than you can in a rental. The direct cost per sf is less.
   4. Call me old school, but I think kids need to grow up with a yard to play in. - And parents to make them go outside and play.
5. You can find a home and space in an area where you want to be and rent. When your needs grow, rather than the challenges of selling and buying, just upgrade the rental.
6. Home ownership is undeniably satisfying to the ego and our idea of the American dream, but is not usually the best financial decision. You should never buy as much house as the lender tells you you can afford, and you shouldn’t do it without a 20% down-payment and a genuine strategy for savings and investments that will not be affected by your house payment.   

One of the biggest challenges facing investors who are either not Realtors or are out of their market area is active valuation. Our guest today, Mark Jackson has developed a solution for this problem. Hear about that and much more coming up.