Flipping Houses: The Most In Demand Home Feature

What will be the most in demand home feature from now through the next three years?

For a variety of reasons, including changing neighborhoods and rising crime rates, there remains a soaring demand for homes that feature increased security measures.

For those flipping houses, measures taken to secure a home may serve as one of the most important aspects in promoting appeal and facilitating the sale of the property. However, the addition of a security home feature may assist those placing their property on the market and real estate agents promoting said property.

It doesn’t matter who you are selling to, or even if you are attempting to lease out rental properties, enhanced security measures can make a big difference in value.

Many real estate investors have shied away from investing in these types of home improvements in the past to keep costs down and profit margins up, but they can no longer be ignored or their importance underestimated.

So whether you are renting out apartments, sprucing up your property for a quick sale, flipping houses full time or even building spec homes; enhancing security features could prove to increase the value of the property in question.

High-end properties may even benefit from the addition of a panic room or disaster shelter.

Of course, lavish home features like these are not always a viable option for the majority of homeowners. However, that doesn’t mean you can’t make an effort to provide an increased sense of security. Any home can benefit from today’s new breed of advanced alarm systems that offer high tech remote monitoring. They are great selling features that can simultaneously boost value and provide its occupants the protection they deserve.

Even on a tighter budget; items like reinforced security doors, basic alarm systems, secure windows and flood lights on the exterior can make a big difference.

The installment of a secure home feature can facilitate the sale of property for real estate investors or even increase the appeal for a homeowners association.  However, security measures are more than just fancy assets. If a tenant or homeowner has been subjected to theft or injury after requesting a specific home feature, and the renter neglected to provide the security measure, they could potentially sue the owner for damages.

Want to go all out? How about developing your own community with security as one of the main selling features?

 

5 Things You Need To Know Before Making An Offer

Most new investors are in a rush to make an offer. They want to accelerate the process and get things started as quickly as possible.  As great as taking action is you also need to know everything about the deal and property you are making an offer on.  A lack of due diligence in just one of a few key areas can completely change the perception of the property.  Prior to looking at any new property you should have a due diligence checklist firmly in place.  This will help streamline the process and allow you to quickly react and avoid a major oversight.  Here are five things you need to know and have in place before making an offer.

  • Financing. The starting point for any purchase is financing. How you plan on financing the property impacts almost everything you do in the transaction. The terms and price on a property you are paying cash for is different than if one you would utilize lender financing. Either option you chose can work but you need to know which way you are going to go prior to making an offer. If you plan on paying cash you need to have your proof of funds letter updated with any amounts adjusted. If you are using lender financing your pre-qualification letter has to have the proposed purchase price in addition to as much specific information as possible. Your financing can, and probably will, change depending on the specific property. However you need to know which way you want to go prior to making an offer. The type of financing you choose will often influence the decision of the seller.
  • Understand Local Market. Getting an alert about a new listing at a reduced price may seem like a steal but it can end up being fool’s gold. If the property is in a declining market getting it for virtually nothing can still end up doing more harm than good. Prior to making any offer you need to know everything about the market the property is located in. It can be argued that the market is more important than the actual property. You need to understand both the micro and macro view of the property. The micro view looks at properties and trends as close to the subject property as possible. The macro view looks at the town as a whole and the big picture view of the area. It is important that you understand as many trends as you can find and have an idea of what influences them. The local market of the property will often directly influence the property value as well as what your future options are. It is not enough to simply acquire the property and figure things out as you go.
  • Know The Property. If you are going to make an offer on a property you had better know everything about it. Almost every seller will go to great lengths to make their property appear as appealing as possible. If the flaws are not obvious it can be difficult finding them. Prior to making any offer you need to go the extra mile to know exactly what you are buying. Track down the listing history and see if there was any work recently completed on the property. Walk the grounds with your contractor or an inspector to give you an additional perspective of the property condition. In your excitement to make an offer it is easy to gloss over some minor items that can actually have a significant impact. By having someone you trust provide an additional perspective on the property you reduce the risk of finding something unexpected after you take ownership. If you aren’t comfortable with your knowledge of the property you should consider passing until you are.
  • Walkaway Price. There is a lot of work that goes into researching a property and making an offer. There are times when you will do hours of due diligence on a property and not be rewarded with a deal. As difficult as this is it is part of the business. What you can’t do is let one deal influence your actions on the next one. It is important that you have a walkaway number in your head prior to making any offer. Without this number it is easy getting caught up in a bidding war and letting your emotions take over. Sometimes some of the best deals you make are the ones you walk away from. Stand firm with your number and know where to draw the line and walk away.
  • Research Exit Strategies. What do you plan on doing with the property if your offer is accepted? Do you have a backup plan or two in mind if things don’t go the way you anticipate? The longer you are in the real estate business the more you will accept that things won’t always go the way you plan. There will be plenty of times when you need to call an audible and change gears on the fly. If you are not ready to adjust you may find yourself in a situation with a property you desperately want to get out of. Prior to making an offer you need to have multiple exit strategies you can employ in a moment’s notice. The more options you have the more valuable the property is. Never put all your eggs in one basket and assume that everything will go the way you anticipate.

You always want to be confident you are making the right offer on the right property for you and your business. If this means taking a little more time on due diligence than that is what you need to do.  Always know and understand these five areas before making an offer.

Sell Your Property For Maximum Return in Calgary

There is a lot that goes into flipping a property. Not only do you have to acquire it at a price that works for you but also, you need to put the right amount of work into it.  There are many investors who are disappointed in their results because they fail to see the end of the process before they start.  Selling your investment is great but the goal is to maximize your return.  This starts from the minute you take ownership of your property.  There are a handful of things you can do from the time of acquisition to the sale that will help in this area.  Here are five tips to help sell your investment property for a maximum return.

  • Think Like A Buyer. One of the biggest adjustments new investors need to make is to change the way they think. You need to be able to put your personal feelings and ideas aside when rehabbing. As much as you may like a certain property characteristic, you are not going to be living in the house. As you sit down and map out what work you are going to do, you need to keep your buyers in mind. This starts with understanding the area and local market. Put some time into researching what kinds of properties have sold in the last few months. Look at the listing sheets to see what features these properties have. It is also a good idea to take a look at homes that have sat on the market for a considerable amount of time as well. After you do your due diligence you should be able to have a good idea which areas you need to improve and which you can scale back. From the minute you start any work you need to think like a prospective buyer would think.
  • Luxury Vs. Affordability. When rehabbing there is a delicate balance between luxury and affordability. All buyers want to live in the nicest house possible. They want granite countertops, updated bathrooms and stainless steel appliances. However, many are not willing to pay a premium for them. Throwing money at a property does not guarantee that you will see a return. Over improving your property for the market may turn out to be a waste of money. With any sale you want to create the highest amount of demand. This often means making the property as affordable as possible. A strong level of affordability brings in the maximum amount of buyers. Not only do you increase the chances of a quick sale but you can also create maximum demand. This demand often ends up in a bidding war which pushes your final price higher. Nice things work only in markets where buyers are willing to pay for them. Never throw money at a property without understanding the potential return.
  • Work With The Right Buyers. Doing the right work does not guarantee maximum return. You need to sell to the right buyer. Regardless if you have one offer or multiple ones you can’t rush to judgement. Accepting an offer that doesn’t close sets you back months. There are times when the highest offer may not be the best one. You need to look at everything involved. The contract, prequalification letter and any financials must be reviewed. It is no secret that the mortgage market is still filled with delays and 11th hour issues. You want to work with a buyer that is as clean as possible and can close without any problems. By accepting a higher offer with a prequalification that looks shaky you can end up wasting 45 days before you find out there is an issue. At this point most of the buyers that were interested most likely moved on to other properties. You will be forced to start the process over again and wait at least another month, possibly longer. Price is always important but working with the right buyer can help you get the best deal.
  • Don’t Wait To Market. There is some debate in investing circles as to when is the best time to market your rehab. While it may make sense to wait until all the work is done to show it to the public you can always market to your network. There is no need to wait to generate interest with local attorneys, mortgage brokers, contractors and anyone else associated with the business. You can take advantage of social media and make posts regarding your property. The sooner you get the word out the more likely you can find a buyer.
  • Price Right. While this is listed last it may be the most important step in selling for a maximum return. Most buyer interest is based on the list price. If you list too high you will lose a large segment of buyers that may have had interest. By listing too low you can end up leaving money on the table. Trying to squeeze 5% more out of the property has a negative impact. A home that sits on the market quickly loses appeal. Real estate agents will direct their buyers to more affordably priced homes in the area. After a few weeks of inactivity you will be forced with a decision to reduce the price. Once this happens buyers look at your property as damaged goods and any offers that come in will be discounted. You are always far better off listing at the right price and hoping to generate demand than trying to get a price that you know isn’t very realistic.

Generating maximum return begins at the start of the process and goes all the way until closing. Just a few percent more on five rehabs a year can equal a large increase in your bottom line.

10 Documents You Need Before Applying For A Home Loan

If you want to ace the home loan process it pays to be prepared.

While some sources report that it has become easier to obtain a mortgage loan, it is still far from as easy as it was 10 years ago. With the current rush to secure loans before interest rates go higher, lenders get backed up quickly. That means processing times can take longer. This is on top of new TRID rules and the coming seasonal rush. In order to speed loan applications through the system and close on time, it’s smart to have your paperwork in order in advance. This is especially true for those purchasing properties who want their pre-approvals to stick.

So what documents will you need?

1. Bank Statements

Virtually all loan types you would apply for today, will require you to provide bank statements. This especially applies to the self-employed and those seeking alternative income documentation loans. Expect to provide at least two – if not three – months of bank statements for ALL accounts. Watch out for large deposits, non-sufficient funds charges, and loan payments, which you didn’t claim on your initial conversation with lenders. Note that any funds you’ll need to close will need to be in your account for at least 60 days (unless they are a gift). Expect additional statements to be required if you roll into a new month.

2. Identification

Your mortgage lender will want, and need, to verify your identity to comply with the law. You won’t be able to close your loan unless you have valid ID. That means a government issued photo ID and perhaps one with at least 6 months left on it. So if yours is coming close to its expiration date, consider renewing immediately.

3. W2s

If you are employed by someone else, expect to provide copies of your last two years’ W2s. If you receive 1099s instead; you’ll need to provide those and your tax returns.

4. Tax Returns

Tax returns can be one of the trickiest documents when it comes to mortgage underwriting. You’ll need at least your last two years’ tax returns. Make sure you have all pages, of all forms submitted, including any amended returns and originals. Transcripts of returns are not sufficient. This gets trickier around tax time. You won’t be expected to file tax returns early. However, if you do file returns during the process, you’ll have to document that you paid any outstanding taxes and where that money came from. Due to staff cut backs at the IRS, some of the copies can take 75 to 120 days or more to retrieve. Make sure you request and receive them well in advance of applying for a loan.

5. Court Documents

If you’ve filed for bankruptcy or have been through a divorce, expect to have to provide all copies of all pages of related documents. This can be a real pain if you’ve shredded them to put that part of your life long behind you. Don’t expect a request by mail to return all of the pages and documents you need. Play it safe and go to the county clerk of courts office where the documents were recorded and get everything before you apply for your loan.

6. LOEs

If you’ve got any credit bruises, gaps in employment, or are receiving any gift funds from family to cover your down payment or closing costs, you’ll be required to submit Letters Of Explanation. If you aren’t sure what to write, ask your loan officer for an example or for exactly what details need to be included.

7. Current Mortgage Statements

If you have mortgage loans on the home you are refinancing or other property, they will be requested to verify the debt, payment status, and loan details. If you are currently renting, then you’ll need to provide your landlord’s contact information and maybe proof of rental payments for the last 24 months. However, this last requirement seems to be fading with some lenders.

8. Purchase Contract

If you are buying a home, you aren’t going to get far without a signed purchase and sales agreement. Make sure to include copies of all pages and addendums.

9. Earnest Money Deposits

Any deposits made must be fully documented. That includes copies of checks, proof they cleared your account, and proof of receipt by the escrow holder.

10. Pay Stubs or P&Ls

Be ready to submit your most recent pay stubs covering the last month. If you are self-employed, you should be prepared to provide a YTD Profit and Loss statement.

Summary

Get these documents together early, save hard copies, copies in the cloud, and copies on backup drives.

Business Development: Why Every Good Investor Needs A Plan

If you are considering getting involved in real estate you need to have a plan. Your plan doesn’t need to be elaborate or even overly formal but you should have some sense of where you want your business to go.  Where most investors get in trouble is thinking they know the business simply by watching a few shows or reading as few books.  As they quickly discover the business has a way of taking them to places they would have never expected.  Without a solid business plan it is easy to bounce around from lead to lead without any real direction.  Prior to looking at your first property or researching your first deal you need to start with a plan.  Here are five aspects of writing a good business plan.

  • Know What You Are Getting Into. You should never start investing without some idea of what you are getting into. Without the aid of experience you should start your plan by doing your homework. Most investors in today’s market are infatuated with rehabs and quick flip deals. While these can certainly make sense in the right market they may not work for you and your goals. You don’t need to be an expert in every aspect of the business but you should have some idea of what you want to do and how you plan on doing it. There is a big difference in what is needed for a rehab as opposed to a buy and hold rental. When you do get involved in your first deal it shouldn’t catch you off guard. You will never know everything prior to getting started but you should always do as much research as needed to make you comfortable.
  • What, Why, When, Where. Your business plan should serve as a roadmap for where you want to go and how you plan on getting there. Start by accessing what kind of investing you want to pursue. Do you want to get in to the world of rehabbing or are you looking for long term rental properties? How you answer will partially determine which markets will be your focus. Some markets work better for rehabs while others make more sense for long term acquisitions. You also need to determine the timeframe for your first purchase. Are you looking to buy tomorrow if something presents itself or do you want to wait a few months? Under each answer you should play out the best and worst case scenarios. Most new investors think everything will fall in line just the way they plan. When they are presented with the slightest issue it throws everything off. The more you consider all of the negatives that can happen the better you are at dealing with them.
  • Time Commitment. One of the great aspects of real estate investing is that you can do it on your own terms. If you want to buy one property a year there is nothing keeping you from doing so. Part of your business plan should be recognizing how much time you can commit to the real estate business. There is a lot that goes into being part of a successful transaction. Even though there are websites and apps that make the process easier there are no shortcuts to success. You need to do your due diligence on every deal if you want to truly know what you are getting into. It is important to ask yourself how much time you have available during the work day to focus on real estate. This can be a challenge if you want to hang onto your full time employment. If finding time during the day is tricky you need to be able to work at nights or on weekends. There are ways to invest even with just a few hours a week but you need to map out exactly how you plan on doing it.
  • Strengths & Weaknesses. What parts of the business do you feel you have a pretty good grasp on right now? While you really never know until you get started often times you know which areas you are comfortable with and those you need to work on. You should play to your strengths and look for ways to compensate for your weaknesses. Whatever field you come from should be your focus. If you come from finance, real estate or the mortgage business you should be able to understand the numbers and jargon on a new deal. If you have a tech background you can use that strength to help generate leads and promote your business. Getting into any new business requires some self-assessment. As you write you plan you should take the time to consider your strengths and weaknesses.
  • Lead Generation. Regardless of your background the strength of your initial lead generation often determines the strength of your business. A major part of your business plan has to be how you plan on getting leads. Fortunately it is easier than ever to promote a business and reach people. The internet, particularly social media, make it easy to reach hundreds of people every day. However reaching people is not enough. You also need to think about how you will generate leads. You don’t need to spend thousands of dollars on lead generation but you should have some strategy in mind. Finding the right strategy will take some trial and error but you need to have a plan prior to getting started.

Your business plan can be as short as a paragraph or as long as you want. Having a plan of attack is the best way to approach a new endeavor.

4 Ways to Reduce Your Power Bill This Season

As the days get shorter and the weather gets steadily colder, homeowners across the country will see their power bills increase dramatically. Heating and lighting your real estate investment through the late fall and winter can cost you thousands if you’re reckless. So don’t be! Here are a few steps you can take to help keep your heating and power bills to a minimum:

  1. Pull the plug. Did you know that even when a device or appliance is turned off it’s still drawing power? Things like televisions, home theater equipment and stereos actually run in “standby” mode when you leave them plugged in, and they can draw as much energy as a 100-watt light bulb. If you remember to switch off your power strips or unplug the individual devices, you can easily save $10 a month on your electric bill.
  2. Put your computer to sleep. Much like car engines, a computer uses more energy during startup and shutdown than it does when it’s left to continuously run in a low-power state. Instead of shutting your computer down, try putting it into hibernation mode instead. You’ll save money on your power bill, and because you won’t have to boot up quite so often, you’ll save time too.
  3. Use small space heaters. Don’t crank up the thermostat every time your real estate investment gets a little chilly. Small, portable space heaters can warm a bedroom in minutes, and when used wisely they can save you hundreds a month on your heating bill. You can pick them up at any department store for less than $20 per unit.
  4. Upgrade your windows. Do you have double-paned argon-filled windows in your home? If you don’t, they’re definitely worth considering. Not only will they save you 9.8 tons of heat annually, they’ll also boost your property value significantly.

The weather might be extreme this season, but that doesn’t mean your power bill has to be. If you take the right steps to insulate your real estate investment and remember to unplug your appliances when they aren’t being used, you can keep your wallet stuffed and your property value high.

8 Steps To Get Your Property Rented

You never know when you may want, or need, to rent a property. There are many investors who got their start in the business by renting out their primary residence after the mortgage collapse.  There is also a large segment of investors who decide to rent after putting their rehab on the market.  A solid rental property can be a great addition to any portfolio.  That being said there is a lot that goes into it.  You can’t simply put a “for rent” sign on the lawn and wait for checks to roll in.  Like anything else in the real estate world there is a certain process that needs to be followed to ensure results.  Here are eight steps you need to take to get your property rented.

  • Research Local Rental Rules And Guidelines. The first step you should take if you are considering renting is to research the local rental rules and guidelines. There are often specific rules based on the town the property is located in. You don’t want to spend time and money in finding a tenant only to discover that your property is not eligible for rental. There are many quirky rental laws out there for student housing, zoning and the maximum number of tenants that may be allowed in the property. Before you get too far in the process you need to know what you can and cannot do.
  • Look At Market Rents. The rental market is very much contingent on local rental prices. The next step is to look at every rental property on the market within a five mile radius of your property. The closer the property is to yours the more reliable of a comparable it is. Look at important items such as size, room count, square footage, parking and other amenities. It is important to fight the urge in placing a higher rental value on your property based on some upgrades you made. Let the numbers guide you as to what kind of rent you can generate.
  • Understanding Expenses. There are a few hidden expenses that can quickly eat away at potential cash flow. All property owners are aware of the monthly principal, interest, tax and insurance payments. However there are many rental property expenses that can take you by surprise. Water bills, lawn maintenance, snow removal and sewer bills are just a few of them. You also need to figure out how you plan on managing the property. A good property manager will make your life easier but they will also take roughly 10% of the monthly rent received. It can be very disheartening finding out that your rental property is breaking even when you thought you were positive $300 a month. Avoid this mistake by understanding all rental property expenses.
  • Get The Word Out. After you run the numbers and make the commitment to rent you need to spread the word. Gone are the days when a classified ad in the newspaper was your best bet. Today there are many more rental listing sites than ever before. Between social media alone you can quickly reach hundreds of people. You can also utilize Craigslist, Trulia, Postlets and any other rental site you can find. Finding a good rental is often a numbers game. The more people that know about your property the better chance you can quickly find a tenant.
  • Schedule Showings. Just because a prospective renter is interested doesn’t mean they are going to take the property. With every showing you need to always showcase the property in the best possible light. Make sure the property is clean, odor free and ready to rent. You may have to show the property half a dozen times before you find a tenant that ready to act. This is all part of the process. Good tenants rarely just fall on your lap.
  • Tenant Screening. One of the most common mistakes that inexperienced landlords make is renting to the first person that shows interest. Your goal isn’t to find a tenant but find the right tenant. You need to spend some time screening each interested tenant. Give them an application, ask for a credit check and follow up with the references listed. Your tenant is going to live in your house for at least nine months. As easy as a good tenant is a bad one is a nightmare to deal with. Take your time and screen every interested applicant.
  • Lease Review. You can probably find a generic lease online in a matter of minutes. This may be easy and inexpensive but will it protect you if an unexpected issue comes up? You are better off spending some money having an attorney draft your lease. Once you are comfortable with your lease you can present it to your tenant. Sit down at the property and review any items of particular importance to you. If you are adamant about pets or smoking rules now is the time to make it clear.
  • Final Walkthrough. After you and your new tenant have signed the lease and collected the security deposit there is just one more step to go. You should meet your tenant at the property on move in day for the walkthrough. You should be ready to hand over the keys and provide specific information about the property. You should also document the condition with pictures or videos. Doing this now will make things easier for you when the lease is over.

Things will rarely go smoothly over the course of the lease. Take things as they come and be ready for anything.  Use these eight steps as a guide the next time you have a property you want to rent.

Getting Started In Commercial Real Estate

There is a normal progression most buy and hold investors take.  After getting started with a single family rental they move up to two, three and four unit properties.  Eventually they become more comfortable with the additional units and look to take on bigger projects.  The next step up from multiple units is commercial, apartment and mixed use properties.  While this may sound intimidating managing the additional units is not that big of an adjustment if you have experience.  With additional units comes additional responsibility but also increased income potential.  Some of the wealthiest people in the county have made their wealth through commercial real estate.  This certainly doesn’t happen overnight but the long term potential is there.  If you are interested in getting started in commercial real estate here are four basic items you need to be aware of.

  • Accept Differences. Taking on additional units is very much like running a busy family. With one child you think things are tough but you have time to figure things out. If you have a second child things get more spread out leaving you on constant patrol. If you are daring enough to have a third or fourth child you know that your time is limited but with experience you have a better sense of how to handle things. The same is the case if you have five or more children. The point is that anything new always seems difficult and daunting but you usually find a way to figure things out. The first step in commercial real estate is accepting that while the process is similar there are many distinct differences. Aside from the obvious difference in units there are many different formulas, calculations, expenses and jargon you need to be aware of. Soaking this all in may seem daunting but it gets easier the more you learn about it.
  • Market. Buying real estate on any level is largely about supply and demand. This is just as important if you are exploring commercial real estate. You need to know that the market can support the property. With a single family property your rental pool is much larger than with a commercial property. You need to entice business owners and tenants who find the market appealing enough to commit to the area for three to five years. This means you need to know everything about the market the property is located in. You should have an idea of any changes in local demographics and what new businesses have come and gone. You should look at local property sales and see if homeowners are buying in your area. Something as seemingly unconnected as the strength of the school system impacts homebuyer demand which can influence business sales. An individual commercial piece of land is only as good as the market it is located in. With any commercial sale market knowledge is critical.
  • Numbers. One of the reasons that investors stay away from commercial real estate is the increase in numbers. Figuring out cash flow on a single family property is fairly straightforward. When extra units get thrown in the mix the numbers are more difficult to calculate. In commercial real estate there are a handful of important formulas you should be aware of. Items like net operating income (NOI), cap rates and cash on cash return will give you a much better sense in the strength of a deal. These terms may sound foreign but in reality they are much more basic then they sound. In addition to formulas there are a greater number of expenses you need to know. The property taxes, insurance, management fee and utilities will all be increased based on the exact number of units. If underestimating one of these has an impact on a single family property it is even more magnified on a commercial piece. The best way to understand the numbers is to reach out to a local commercial real estate agent and ask for a template or a pro forma sheet for you to review.
  • Financing. Loan financing for a commercial property has some similarities to a traditional investment loan but also some stark differences. Unless your credit scores are strong (over 680) you will have a tough time getting the ball rolling. From there you also need significant down payment of anywhere between 25 & 30%. Debt to income ratio is important but the lender will also look at the cash flow of the property. There should be leases in place when you buy or strong cash flow potential. Almost all commercial property loan expenses are double or even triple that of a single family purchase and the process can take anywhere from 45 to 60 days. The number of commercial loan outlets is also reduced. Most local lenders only have a reduced number of commercial loan programs and products which can make approval difficult. There is a big difference in getting approved for a single family investment property and a multi-unit commercial building.

Prior to investing in a commercial property you should have an idea of your goals and how you plan on managing the building. Even the most seasoned investors need management help on a twenty unit apartment building.  There is nothing wrong with getting your commercial start on a five unit mixed use property and building from there.  Like anything else you do in real estate you should take your time and know exactly what you are getting into prior to getting too far.

How To Become A Rehabbing Expert With Little To No Experience in Calgary

Do you want to be a rehabber but don’t know how to operate an electric screwdriver? As crazy as it may sound you don’t need to be a handy person to be a rehabber. Sure, it is a help but far from a prerequisite in getting started. There are many rehabbers all over the country who got their start without knowing the first thing about home improvement. They gained their skills and experience from every project they were on until they knew enough to run a project on their own. Conversely, most handy people think they know the process well enough to dive right into the world of rehab. What they find is that it takes more than the handy person knowledge to be successful. Regardless if you can operate a SAWZALL or don’t know how to swing a hammer the rehab side of the business is open to everyone. Here are four things you need to do to be a successful rehabber without tool belt experience.

  • Know The Process. Instead of being an expert on the technical side of things you should start by knowing the process. You don’t need to know anything about home improvement to master the steps of a rehab. While every rehab has their own unique qualities there are similar several steps with every property. You should have an understanding on the big items to look for that are costly and difficult to deal with. Roofs, issues with the structure, windows and electrical items will have a much bigger impact than simple cosmetics. You don’t need to know how to remedy these problems but you should have an idea of the costs. One way to learn the costs is by simply walking around big box retail stores. This will give you some background on the cost of materials and with a few questions what they may be used for. Cost of labor you will learn the more job sites you are on and the more contractors and project managers you talk to. This knowledge will come in time but knowledge of the process is something you can learn before getting started.
  • Surround Yourself With A Strong Team. If you don’t know what you are doing on a rehab there is a real possibility you can and probably will lose money. Instead of waiting until you master every aspect of the process you can get started by surrounding yourself with a strong team. Start by finding the best contractor you can find. This may not be easy as many contractors only like to work with experienced investors. However, if you reach out to enough you will eventually find one that is a good fit for you and your experience. While you don’t want to blindly give your contractor the keys to a rehab project you should be willing to let them run things the way they see fit. You can certainly get different quotes but let your contractor run the project. In addition to your contractor you should also find a quality project manager, electrician, plumber, drywall expert and painter. Generally speaking, you should try to get at least three quotes on every aspect of the property. This is your rehab but you can make it easy on yourself by having the best possible team around you.
  • Consider A Partner. If the prospect of talking to people in the trades is difficult without knowing the jargon you can consider taking on a business partner. With a business partner you can handle the financial side of the transaction while your partner runs the rehab project. The upside is that you can feel comfortable knowing that your partner will not get run over by a contractor or handy person. The obvious downside is that you will not make as much on every deal as you expect. As you are just getting going this can be a great way to learn the business without the stress of trying to do everything on your own. You can hang around the property in your free time and see how things are done without everyone turning to you with questions or problems. Your partner will be the buffer and deal with any issues that pop up. A partner may limit your upside on every deal but it can be a great way to learn the ropes and break into the business.
  • Defer. In real estate it is always best to know what you don’t know. There are many investors who try to fake like they are an expert only to have it come back to haunt them. There is nothing wrong with saying that you don’t know a particular aspect of the business. With rehabbing if you don’t know what you are doing you will eventually get exposed. You are far better off deferring to the people around you as you develop your education. As we mentioned you should seek out a good team or a business partner until you are comfortable with the process. You will still reap the rewards of the deal, maybe not as much, but in the end it will be worth it for you. There is nothing wrong with deferring to the people around you for your first several rehabs.

Some of the best rehabbers got their start without knowing how to swing a hammer. It may be uncomfortable during your first few deals but eventually you will find your way.

How To Work With Motivated Sellers

With any motivated seller lead the first goal is to get the homeowner to agree to a meeting. The meeting should act as a mini presentation for what you can do and how you plan on doing it without being too over the top.  You never want to hide the fact that you are a real estate investor but there is a certain way of delivering your message.  Every meeting with a motivated seller should be viewed as an opportunity.  They are most likely going to work with someone and that person can be you if you put your best foot forward during your meeting.  Here are five tips to help improve every motivated seller meeting you have.

  • Consider Your Approach.  People like working with people they feel comfortable with. Before diving right into the numbers you should take some time and build a rapport. This starts from the minute you drive up to the property. Wearing a three piece suit may work for some meetings but not for homeowner meetings. You want to respect the process and wear something appropriate but nothing too over the top that creates a negative first impression. As you enter the house you should make small talk and not be afraid to ask about the neighborhood or something timely in pop culture. If you have a good sense of humor you should be willing to make a joke as long as it is in good taste. Usually self-deprecating humor works best. Prior to sitting down you should ask to walk around the property further making the homeowner feel as comfortable as possible with you. By the time you sit down the ice should be broken and there should be little or no uncomfortable feelings.
  • Ask Questions. Most of your heavy lifting is done with the initial conversation. When you get to the property the answers should simply confirm what you already know. As you walk the property you should ask questions to get a better sense of their motivation. Find out or reconfirm why they are selling and what prompted their situation. If they say there was a major life event don’t just glaze over this fact. Shift gears and ask what happened and offer any advice you can lend. You want to get your questions answered but you don’t want to sound like you are reading off a script. If the homeowner feels you are insensitive they will surely go find someone else to work with. You can always switch up the pattern you ask questions to find out the information you need. The template you use for sitting down with motivated sellers is just that-a template. You need to have the ability to change gears on the fly all the while still getting the information you need.
  • Listen To Answers. A common mistake that many investors make is rushing through the process without listening to the answers. In almost every circumstance the homeowner will tell you want they want, when they want it and whether or not they are really interested in selling. If you are too busy thinking about the next question you will miss out on some valuable information. Don’t be afraid to let the homeowner go with their answers. This is usually a very difficult time in their lives and they have probably been holding things in for some time. If they want to talk about the process and what led them to this point you should have a compassionate ear. You should also be ready to answer any questions they have. As unfortunate as it is homeowners need to be on alert for scammers. Don’t take it personally if they ask to verify you and your company.
  • Ask About Goals. It is not uncommon for a motivated seller to have unrealistic expectations for the process. They may have heard a story from a friend or family member about how things went for them and want the same on their transaction. Without knowing exactly what the homeowner wants it can be difficult moving forward. Everything starts with the sales price. If you are far apart on value your first goal is to get the seller to see your number. You can do this by calmly pointing out the flaws of the property without being too critical. You should also use comparable sales and current listings to support your argument. This information should be readily available at your meeting but you should only use if needed. Next you need to get an idea of their timeframe. If the seller doesn’t want to close for six months and you want to close in two you need to figure out how to bridge the gap. It is important that you understand the homeowner’s goals and explain what is realistic and what may be impossible to attain.
  • Lean But Don’t Push. You want to know where you stand immediately following the meeting. Depending on how close you are will determine your next course of action. On one hand you always want to push for an answer but on the other if you push too hard you may discourage the seller. The best way to do this is by asking for answers on a predetermined date but make that date far enough away so they have time to think things over.   Always remember what may be just a deal to you is much more important for the seller.

By definition motivated sellers are ready to take action. Use these tips to help convert more meetings into actual deals.