3 Quick Tips of Rehabbing

FUNDING

Ideally, you want to have some capital or credit set aside to flip houses.  However, you can also use other people’s money to flip houses and use only a fraction of your own money.

Getting a hard money loan is easier than getting a loan from a bank. There is less paperwork involved and your credit history is not as big of a factor. Most hard money lenders do not check your credit. This is only a brief overview of how hard money lending works.  Every hard money lender has his or her own terms, conditions, and policies. Each state has its own unique laws, rules, and regulations.

FIND A PROPERTY

New investors often get discouraged due to a lack of inventory in their area.  MLS listings are the easiest way to find properties for sale but do not always offer the best deals. While every market is different, you can almost always find good properties to flip. Here are some places to look for cheap real estate:

Bank Owned/REO Properties – Major U.S. banks are motivated to sell their foreclosed properties. Why are banks so motivated to sell these properties?  Banks have “carrying costs” each month a house is in its inventory.  Carrying costs include property tax, insurance, and maintenance, such as landscaping and/or snowplowing services.  There is also the added risk that squatters will vandalize a property. This causes thousands of dollars in damage that the banks are forced to pay for. All of these factors create an opportunity for you to purchase bank-owned properties at a deep discount.
HUD/VA Properties – HUD and VA Homes are also referred to as government foreclosures.  A HUD property is a house with an FHA-backed mortgage that went into foreclosure. A VA property is a house with a VA-backed mortgage that went into foreclosure. You can often pick up cheap HUD and VA properties.

Off-Market Distressed Properties – These are homeowners who need to sell quickly. If you move quickly, you can get houses for 30% – 50% on the dollar.
WHAT REPAIRS TO DO AND NOT DO

Some people get carried away and do too many renovations. They find themselves trying to sell a property that is over rehabbed for the neighborhood. You don’t want to flip the most expensive house on the block. Do renovations that bring a house up to standards on par with other houses in the neighborhood.

Kitchen and Bathrooms: Kitchens and bathrooms sell houses. Remodel them from top to bottom. If you are not sure what materials to use, look at homes that have sold for top dollar per square foot in your area and copy them.

Flooring: In most flips, use laminate hardwood flooring in the major living areas and carpet in the bedrooms. Laminate hardwood flooring is difficult to tell apart from real hard wood. It is not only much more durable, but also scratch resistant.

Paint: Paint every room in the home. If the walls have a lot of minor flaws in them, use flat paint. Otherwise, use eggshell. And always use earth tones. Anyone can decorate around neutral colors.

Landscaping: Donald Trump himself stated that you get a $10,000 return for every $1,000 you spend on landscaping. It is amazing what rocks, trees, and shrubs can do to increase the perceived value of a property. A good rule of thumb is to budget 1% to 2% of the final expected sale price of your home for landscaping.

Roof: If the home needs a new roof, replace it.

HVAC: Make sure the home has a working heating and cooling system. In some areas, air conditioning is now mandatory.

Garage: Other than paint, do not spend much money here.

Back patio: This is an often overlooked but a very important area. A simple $1,500 deck with two chairs and a small table can make a big difference.

Make sure your general contractor has addressed each of these items in his quote.  If you make these simple improvements, you will be able to sell your property for top dollar and maximize your profits.

How to Hire a Contractor

Home renovations can be time-consuming, expensive and stressful! Finding the right contractor can ensure that your home renovation doesn’t take over your life and your wallet. But how do you know a contractor is the “right” one for you? Learn more about how to find, then hire the right contractor for your home renovation.

Finding Contractors

Ranging from Real Estate Clubs to Lowe’s and Home Depot to Angie’s List of ads in the local paper, there should be plenty of places to find contractors. So, how do you pick the right one for your project? Step one is to ask for personal recommendations. If someone is willing to vouch for their contractor, that is something you should take into account. If you aren’t able to get any personal recommendations, the Internet is your next best bet. Use YELP, Google+ and sites like Angie’s List to read reviews of contractors. While it is also a good idea to look at their websites because they showcase their best work there, you need to know about ALL their past work as well.

Once you’ve gathered a list of contractors, make sure to run a quick search with the Better Business Bureau. Even with personal recommendations, you want to ensure that there are no pending litigations or major complaints filed. Once you find your list of contractors, it’s time to start the hiring process.

Hiring the Right Contractor

Once you have a list of at least three contractors, it’s time to hire the right one! Before you interview each contractor make sure you can clearly communicate your expectations. Questions you should ask each contractor are:

  • What vetting process do you use for your employees or any subcontractors who will work on this project?
  • Will you be handling all the necessary permits?
  • Can you supply a detailed list of services and expected completion dates?
  • What deposit is required and what is the estimated cost?

Once you have these questions answered by all three of your contractors, compare them. It shouldn’t always be about price. If the lowest priced contractor has no vetting process for their employees, you probably won’t be happy with their quality of work. Find a contractor that offers a balance of value and quality. This will help ensure that the work is done to your specifications. Hiring a contractor is the first (and most important) step of any home renovation. A good contractor should be your partner throughout your entire renovation. They should ensure all work is done to code and finishes are in the best quality, all while sticking to your budget. Don’t forget to take into account what contractor you felt most comfortable with. Not only are they going to be in your home every day, you need to be comfortable discussing tense subjects and financial matters with them. A good contractor can make or break a renovation, so take the time to find and hire the right one for your project.

­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­[1] https://www.upwork.com/blog/2017/11/want-job-filled-faster-5-tips-hire-right-talent

[1] http://smallbusiness.chron.com/manage-subcontractor-67687.html

Return on Investment: Finished Basement

Basements are a forgotten source of extra square footage in many homes. A finished basement can provide a little privacy or create space to spread out in an open concept home. When done well, a finished basement can be a great amenity for any family home. Though additional space can improve the day-to-day lives of homeowners, for investors, do they actually add value to a home? Let’s learn more about the return on investment you can expect when adding a finished basement to your property’s floorplan.

Cost vs. Value Report

The 2016 remodeling magazine “Cost vs. Value” reported that the average basement remodel cost approximately $60,000. The expected return on investment was found to be 70.3%, one of the highest ROIs in the survey.

To achieve this impressive ROI, follow these best practices:

#1 Check for signs of moisture or foundation cracks before you invest in finishing your basement. Addressing these issues before you modify the space will ensure best results.

#2 Understand local building codes before you finalize your layout. If you are adding bedrooms, be sure they have the proper egress.

#3 Keep your layout simple. The more walls, the more structure you have to add. Many basements have posts that support the entire structure of the home. Do your best to work around these. Incorporating the existing structure into the design can cut many unnecessary costs.

#4 Calculate your ceiling heights. For the basement to feel like part of the rest of the home, the ceilings will need to be at least 7.5 feet high. The ideal height is 8 feet, and in some new construction areas, basement ceiling heights are closer to 10 feet.

#5 Invest in good lighting, especially if windows are scarce. No one wants to spend time in a dark space, and if you don’t have a daylight basement, there can be a shortage of natural light.

If done properly, a finished basement can add value to any home. Whether you are adding a basement to your home or to an investment property, if you do it right, you can expect that 70% return on investment.

Estimating Remodel/Rehab Costs

In general, when investors are looking at properties to fix and flip, they look at the remodel under three categories: light, medium and heavy.

Here is a general breakdown on the categories with the dollar amounts you can assign to them, keeping in mind that these are not the only way to calculate these rehabs.

  • Light – This involves mostly flooring and paint, with a few light and plumbing fixtures included. This can be in the range of $10-$15 per square foot. The range can vary depending on the extent of the flooring and paint to be done, along with the type of materials you choose. In the case of a fix and flip, you should take into consideration materials that could help you reach a maximum profit when the rehab is done and the property is sold. Suggested Time Line: Considering the formula of 1 day for every $1,000 of estimated repairs, this should take less than 3 weeks.
  • Medium – This includes all that is included in the “light,” along with a kitchen and bath remodel. This can range from $20-$25 per square foot, depending on the amount of remodel that is needed. The property’s use after rehab will help you decide the extent of the actual rehab needed. If damage to the kitchen and bath is so bad that an entire tear out and rebuild must be done, you will probably be looking at the upper-end of the scale ($25 per square foot and maybe up into the $26-$28 range). Suggested Time Line: Again, considering the formula of 1 day for every $1,000 of estimated repairs, this could take up to 5 weeks.
  • Heavy – This is the all-in rehab where you look at everything from the “light” and “medium” levels to throwing in major items, such as foundation repair, roof replacement, replacement of appliances such as AC/Furnace, and door and window replacement. This level of rehab typically involves big-ticket items that require the longest amount of time to finish the remodel. The range for this is around $30-$40 per square foot. Suggested Time Line: With the before mentioned formula of 1 day for every $1,000 of estimated repairs, this should be less than 8 weeks.

Remember that these estimated costs are based on retail purchases of the materials, like what you would buy at Lowes or Home Depot. A licensed contractor is able to acquire their materials at wholesale price, which could bring a rehab 10-15% below estimates that are done using retail pricing.

Understanding Home Inspections

A home inspection is an important aspect to consider when buying a home. This process enables the buyer to identify the overall condition of the targeted property. This operation will save the buyer a lot of money in the long run. The result of any home inspection can greatly influence the final decision of the buyer. As a buyer, you need to be very sure about the subject of your investment in order to avoid future trouble.

A home inspection is usually done by a professional home inspector. The expected output of the inspection must be detailed enough to identify system conditions, deterioration, and other aspects of the home that will help the inspector come up with a good recommendation.

One of the common and important aspects to consider during the inspection is the structural state. This is very vital because nobody wants to have a home with a weak foundation. That is just one common example of things to check during an inspection. There are many other features you need to consider if you want your investment to be worth it. These include landscape condition, potential pests that will surely provide some inconvenience, the state of the septic system, and many other details that can potentially cause stress in the future.

A home inspection would be futile without a good inspector. You need to check if the one you hired is experienced enough to offer you a quality outcome. The inspector must be certified and preferably a member of a professional association. Because you are seeking assurance on the overall condition of the home that will shelter you and your family for a long time, it is essential that you are dealing with the right people.

The report after the home inspection can vary in form. It could be a narrative, a checklist, or any rating system your inspector prefers to give you a clear view of the overall state of the property. During the inspection it is also be helpful if you have certain knowledge about what to ask and what to check. You should not fully depend on the inspector. It would be a big help if the buyer is present during the inspection, giving feedback and asking for advice, because it could help the inspector come up with a comprehensive report for the buyer.

Inexpensive Repairs for Home Sellers

Before selling a home on the traditional real estate market, many real estate agents recommend home sellers complete repairs. “According to the Real Estate Staging Association, homes that have minor repairs completed before going on the market sell 90% faster.”[1]   Home repairs can quickly become expensive home renovations, if you aren’t careful. Inexpensive home repairs will make ready any home for the sale on the traditional real estate market.

Curb Appeal

You only get one chance to make a first impression! There are so many great inexpensive repairs homeowners can complete to increase curb appeal:

  • Trim back bushes and trees
  • Spread fresh mulch in your flowerbeds
  • Repair any loose stones in your walkway

In addition to yard work, some paint can spruce up your entry and even add perceived value. “In a recent survey conducted by the Real Estate Staging Association, 79% of home staging professionals said that a colorful or statement front door can increase the perceived value of the home.”[2]

A Fresh Coat of Paint

A fresh coat of paint is a great inexpensive way to instantly clean up a home. If you’ve ever watched an episode of House Hunters, you know how prospective buyers can fixate on paint colors. New paint is a great way to make a space neutral and ready for any buyer.

Paint can also update your kitchen. Did you know, some kitchen cabinets can be painted? This task is best left to the professionals but is significantly less expensive than a whole new kitchen.

Weekend Walk Through

If you are handy, this repair can be free! Take a weekend to walk through your home with only basic tools. Check for anything from loose door knobs to broken screens to leaky faucets. While these repairs may seem minor, they all add up. Most buyers don’t want to purchase a project, so complete as many tasks as you can!

Listing a home on the traditional real estate market can be a long (and sometimes costly) process. For this reason many home sellers choose to sell directly to a real estate investor. When selling to an investor there are no repairs to complete; they purchase homes in as-is condition.

 

 

[1] http://www.realestatestagingassociation.com/

[2] http://www.realestatestagingassociation.com/

Seven Ways to Get More When Selling

Nobody likes taking a hit when they go to sell something, especially when it is one of the largest investments of their life. Purchasing real estate is a huge investment and selling it can be an even bigger one. In this article, we will go over seven ways to get more for your home. Hopefully some of these tips will help and you will be able to put them to good use.

 

  1. List for less than market value. This will make your home look highly desirable in a tight market and create some urgency with your buyers. Buyers will act faster because they don’t want to lose out on a deal and this should increase your odds of multiple offers.

 

  1. Brighten up the place. Clean out the windows, open the blinds and turn on the lights. Open concept is what many new home owners are currently looking for, and you can help create some of that simply by making the home look more open and spacious with some light.

 

  1. On that same note, clean out the closets. You can make a home look like it has more storage by removing at least 50% of everything in your closets. This will definitely help sell your home.

 

  1. First impressions are key, so paint the front door. While you are painting your front door, go ahead and install a nice, sturdy doorknob and lock. The fresh coat of paint and new lock will help make the place feel newer and less used. Everyone wants to feel safe at home and putting in that new, sturdy lock can help create that sense of security your buyer is looking for.

 

  1. Clean. Clean. Clean! Dust from the ceiling fans all the way to the floorboards. Don’t forget to pull the weeds and grass growing between the cracks in the driveway as well.

 

  1. Make everything neutral. Yes, the pink nursery looks great for you and your home; however, you are trying to sell it. Since it will no longer be your home, you need to help the buyer feel like it could be theirs. What if they only have boys? Pink might distract from all the other amazing features your home has to offer. A fresh coat of paint in a neutral color can help make a huge difference when it comes to the atmosphere the home brings.

 

  1. Put away the photos. Again, little Suzie is adorable; however, you need the buyers to feel at home and not like they are invading someone else’s home.

 

Now get out there and get the SOLD price you are looking for!

What Paint to Paint

You’ve started a project that requires paint, and you now find yourself heading to Home Depot. You think to yourself, “Its just paint. How hard can it be?” Once you arrive, you navigate your way over to the paint department and go to the wall of colors. Now what? I am sure a million and one questions are running through your head and they all start with, what type, color and finish do I need?

 

Well my friend, you are in the right place. In this short but sweet article, you will learn everything you need to know about paint so that you never look like a Moaning Lisa by the wall of colors ever again.

 

First, let’s discuss water vs. oil-based paints. How do you know the difference? You can determine this by taking a wet washcloth and rubbing it against the paint. If the surface transfers to the wet cloth or the surface becomes lighter or softens once rubbed, then it is water-based paint. Water-based paint is a latex paint usually used on walls and ceilings. Water-based paint will stick to oil-based paints but will not stick to high-gloss finishes. On the other hand oil-based paint is great for molding cabinets and furniture. Oil-based paint has a smooth finish and is often used as a protective coat.

 

Now that we have determined if we need water or oil-based paint, we need to determine what color/ colors are needed for our project. Right now monochromatic colors (shades or tints of one color) are really popular. You can get this look by adding a touch of grey into the paint to create a tone. The cooler colors are in right now. What I mean by that is grey and whites. Warmer colors would be your beiges and browns.

 

We are almost ready to get our paint mixed and head out of the store. We have our paint type and color, now all we need to do is determine the finish, which can also be referred to as the gloss or sheen.

 

– Matte/flat: smooth finish, hides surface imperfections, hard to clean, suffers damage easily, and best for low traffic.

-Eggshell: Velvety, easy to clean, still pretty flat look, and better for hardwearing areas.

-Satin: Silky, pearl-like finish, stain resistant, resists moisture and mildew, and best for high-traffic kitchens & bathrooms.

-Semi-Gloss: Sleek, radiant, high resistance to moisture, and best for cabinets, doors or windows.

-High Gloss: Very durable, easy to clean and best for trim and molding.

 

Congratulations you are now able to navigate the paint aisle like a pro. Get out there and start your next project using these tips.

Top 3 HVAC Safety Concerns

The acronym HVAC stands for heating, ventilation and air conditioning, and it’s the broadly used term to describe equipment used to keep homes at a comfortable temperature.  In most residential homes, most HVAC systems are forced-air heating and cooling systems that include heat pumps, air conditioners and furnaces.

Your HVAC system is a major part of your home.  It is a complex system with many parts and can often present safety concerns.  Although safety issues involving your HVAC system aren’t common, it’s important to know about them so you can prevent problems and know what to do if they ever arise.

Indoor Air Quality

When your home is sealed up tight during the summer and winter, your indoor air quality becomes especially important.  Without fresh air circulating throughout, you have to pay attention to the quality of the air coming from your HVAC system.  Have your indoor air quality tested, especially if anyone in your home experiences increased asthma attacks, headaches, allergies, or flu-like symptoms.  These could be signs of poor indoor air quality.  Determine ways to improve the indoor air quality in your home by dusting and sweeping regularly and having your HVAC system serviced and air filters changed regularly. (1)

Electrical Shock

If you’re handy, you may be tempted to fix HVAC issues on your own.  Watching a YouTube video doesn’t qualify you to work on even what may seem to be simple systems.  Unless you truly know what you’re doing, don’t attempt to fix and HVAC issue on your own.  Tinkering could void the warranty, cause even bigger problems, and could put you at rick for dangers like an electrical shock.  Unless you’re trained, leave HVAC fixes to the experts. (1)

Carbon Monoxide Poisoning

Carbon monoxide is an odorless gas that should be a big concern for everyone.  Although carbon monoxide poisoning is rare, it is fatal in some cases.  An aging furnace may leak carbon monoxide without you even realizing it.  Symptoms of carbon monoxide poisoning include headaches, fatigue, nausea, and loss of consciousness.  Make sure your family knows the warning signs and has a carbon monoxide detector to keep them alerted and safe. (1)

If your HVAC system breaks down, it’s not a good idea to attempt to fix it yourself.  If you experience problems with your HVAC or have indoor air quality concerns, contact a qualified HVAC repairman and speak with an experienced professional today.

  1. Custom Air, Inc. – 2016