FLIPPING HOUSES
Knowledge FoundationBooks: “Flip: How to Find, Fix and Sell Houses for Profit” by RickVillani “Find It, Fix It, Flip It!...
Agenda1. Part 1: How to Find the Right House2. Part 2: How to Fix the Property3. Part 3: How to Flip the Property for Prof...
Part 1: How to Find It
Where to Look: Neighborhoods “Buy the worst house on the best block” Target neighborhoods and become experts in them Sh...
Types of Houses“CosmeticFixer”“Teardown”“DownrightUglyHouse”Source: “Find It, Fix It, Flip It!”• Structural problems that ...
Doing the SearchMLS (Realtor Access Only): Identify average price per sq. foot andthe range of prices for different house...
How to Choose the Right House Calculate your Profit Up Front:Estimated Final Flipped Price: _________- Purchase Price of ...
Final Flipped Price In order to figure out the final selling price follow four steps:1. Pull the comps Find similar hous...
Other Variables Purchase Closing Costs: Title insurance, inspection, survey, appraisal and documentation Usually ~1.5% ...
Tax & Legal Costs Work with an Accountant: Pocket up to $500,000 in profit tax free if married couple holdyour property ...
Your Dream Team Key professionals needed: Real estate agent Lawyer AccountantFix ItFind ItFlip ItNew Fund
Part 2: How to Fix It
What to Fix? Divide improvements into Must, Should and Could: Must: Absolutely required to sell Should: Usually floorin...
Cost Approximations ($/sf)Basic Standard DesignerMake-Hab $3 $5 $7Rehab $12 $15 $18Remodel $20 $25 $30Restructure $35 $40 ...
Basic Areas of ImprovementOutside: Curb appeal Landscaping Flowers Front Door Exterior painting Pathways and drivewa...
Potential Lifestyle Upgrades Bad flow Underdeveloped living space Worst view Very little natural light An unwelcome e...
Your Dream Team General Contractor (licensed, insured and bonded) Subcontractors (Electrical, landscape, plumber, roofer...
Estimates & ContractsTips on estimates: Difficult initially, then gets easier Pay contractor based an hourly feefor walk...
Budgeting & SchedulingBudgeting Tips: Create more refined budgets as yougo. Initial at Big – 10% actual / 90%guess, Off...
Design Tips: Key Principles Keep it simple (traditional styles to not alienate anyone) Stay consistent (same styles all ...
Design Tips: Lighting Lots of natural light Avoid window treatments (cost, less light) Use dimmers (not just on/off) U...
Design Tips: Painting Type: Flat: Walls, Celing, Stucco, Cement Semi Gloss: Kitchen Walls, Bath Walls, Woodwork, Cabine...
Design Tips: Floor Plans Open floor plans Adjust non-load bearing walls Increase kitchen size if required Bigger maste...
Part 3: How to Flip It
Staging Adding furnishings to make visitors associate with home: Gives buyers a visual blueprint of what life will be li...
Part 4: New Local Flipping Fund
Niyat1. Help OC Mumineen start new businesses2. Allow Mumineen with money in banks to earna return on the money while taki...
Management TeamManagement Team: Mulla S. Takhtawala: Engineering background Experience managing $5M+ Masjid constructio...
TimelineStart OfferAccepted/EscrowStartedEscrowClosedHousefor SaleOfferAccepted/EscrowStartedEscrowClosed1-2 Months 1 Mont...
Starting Housing Search Leverage realtors in Jamaat to help with housingsearch: A. Hussain S. & R. Khambaty A. Sabir ...
Target Neighborhood Corona, Ontario, Chino,PomonaTargetAreaFix ItFind ItFlip ItNewFund
Sample #1: 1103 Francis ST #G Condominium located in Ontario, CA (1,051 sf, 2 bed &2 bath, built in 1980) – Listed at $11...
Sample #2: 734 Saint Paul St. Single family residence located in Pomona, CA (1,289 sf, 3 bed & 1bath, built in 1949) – Li...
Terms & Conditions Use existing LLC 50/50 Profit split between investors & management team Referred to as norm in refer...
Discussion Topics Using realtors (terms & conditions) Investment amounts Investor say-soFix ItFind ItFlip ItNewFund
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OCJamaat-Flipping Houses

  1. 1. FLIPPING HOUSES
  2. 2. Knowledge FoundationBooks: “Flip: How to Find, Fix and Sell Houses for Profit” by RickVillani “Find It, Fix It, Flip It!: Make Millions in Real Estate-OneHouse at a Time” by Michael CorbettTV Shows: Flipping Boston Property Brothers Flip or Flop
  3. 3. Agenda1. Part 1: How to Find the Right House2. Part 2: How to Fix the Property3. Part 3: How to Flip the Property for Profit4. Part 4: New Local Flipping Fund
  4. 4. Part 1: How to Find It
  5. 5. Where to Look: Neighborhoods “Buy the worst house on the best block” Target neighborhoods and become experts in them Should be close to you for travel purposes Definition of good neighborhood: Good schools, well-maintained front lawns,garbage under control, low crime rate, 15-20% of homes recently fixed up, R-1Zoning (single family, no apartment buildings), lots or real estate activity, more than75% of sales to owner occupants, accessibility to stores and services, stronghomeowners association Also try: Fringe neighborhoods to good neighborhoods Neighborhoods in Transition (New stores, renovation projects, etc.) Older neighborhoods Be wary of houses in newly developed cookie cutter communities (hard to make yourflip stand out and not enough to need big improvements)Fix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  6. 6. Types of Houses“CosmeticFixer”“Teardown”“DownrightUglyHouse”Source: “Find It, Fix It, Flip It!”• Structural problems that are beyondrepair economically (Foundations not onslab or concrete, Major shifting, bad floorplan requiring room addition, trussdamage to the roof, major fire damage,illegal room additions)• Geological Problems that you can’tovercome (severe earthquake damage,unstable hillside near house, slipping orshifting due to soil erosion)• Environmental problems to run from(asbestos ducting, mold, faulty septicsystem or long sewer line to street, highlevels of radon)• No curb appeal, but lots of potential• Great bones• Little or no landscape• Maybe a few structural problems (i.e.sagging foundation)• Dark interiors with drapes/blinds• Upgrades needed in house systems• Dated kitchens/bathrooms• Rotting subfloors• Leaks in roof• Lots of small rooms•Just needs a bit of cleanup, paint,landscape, redo the floors, scourthe kitchens/bath with newappliancesFix ItFind ItFlip ItNew FundFlipper’sTarget
  7. 7. Doing the SearchMLS (Realtor Access Only): Identify average price per sq. foot andthe range of prices for different houses Check expired/canceled listing report Days on market report – target housesthat have been on market for a while Do a keyword search on relevantkeywords: “handyman special’, “needswork/updating/TLC”, “Repairallowance”, “Assumable”,“Undervalue”, “Deal”, “As is”,“Motivated Seller”, “VLB (Vacant onlock box)”, “Estate sale” Set up daily alerts (need to get beforeothers)Other: Searching in classifieds (such ascraigslist.org): Look for keywords like:“Handyman special”, “Vacant”, “Motivatedseller”, “Must sell”, “As is”, “Needs work”,“Fixer upper”, “Estate sale”, “Needsupdating”, “Great neighborhood”,“Charming” Search the Internet for “For Sale ByOwner” and then your city to see otherlisting sites Hit the streets and note down any vacantor run down properties and look up theproperty owner and contact information inTax Rolls/property tax records andcontact directly with letter or phone callFix ItFind ItFlip ItNew FundSource: “Flip: How to Find, Fix and Sell Houses for Profit”
  8. 8. How to Choose the Right House Calculate your Profit Up Front:Estimated Final Flipped Price: _________- Purchase Price of Home: _________- Purchase Closing Costs: _________- Estimated Fixit Costs: _________- Carrying Costs: _________- 10% Buffer: _________- Sale Closing Costs: _________- Capital Gains Tax: _________End Profit: _________Fix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  9. 9. Final Flipped Price In order to figure out the final selling price follow four steps:1. Pull the comps Find similar houses in MLS that were: 1) sold recently (last 3-6 months),2) same neighborhood, 3) same size (+- 500sf), 4) same age (+- 10years), 5) same bed/bath (+- 1 bed/bath)2. Drive the comps Based on visual factors rate each comparable with +1 (better than ours),-1 (worse than ours) or 0 (same).3. Read the market Future changes in housing prices4. Check with experts Average your comps to get an approximate $ per s.f. andaverage selling priceFix ItFind ItFlip ItNew FundSource: “Flip: How to Find, Fix and Sell Houses for Profit”
  10. 10. Other Variables Purchase Closing Costs: Title insurance, inspection, survey, appraisal and documentation Usually ~1.5% of purchase price Carrying Costs: Property taxes, insurance, utilities and maintenance costs Usually ~1.5% of purchase price Sale Closing Costs: Real estate agent commissions, closing title, survey, appraisal, etc. Usually ~7% of selling price Profit: Should be 10 to 20 percent of final selling price Plus risk associated with rehab complexity (generally base 10% profit plus 1% foreach $5/s.f in improvement costs)Fix ItFind ItFlip ItNew FundSource: “Flip: How to Find, Fix and Sell Houses for Profit”
  11. 11. Tax & Legal Costs Work with an Accountant: Pocket up to $500,000 in profit tax free if married couple holdyour property for two years or more and it has been your primaryresidence Keep up to $250,000 tax free if you are single Less or even no capital gains on $250-$500K if you move fromyour primary residence before 2 years due to specialcircumstances Own home for a year and a day, capital gains rate goes down Using Federal 1033 tax-deferred exchange program, sell aproperty and roll your profit into the next one not matter howshort a time you’ve stayed there, and pay no tax on it One business setup (i.e. LLC) for all your flips or new businessFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  12. 12. Your Dream Team Key professionals needed: Real estate agent Lawyer AccountantFix ItFind ItFlip ItNew Fund
  13. 13. Part 2: How to Fix It
  14. 14. What to Fix? Divide improvements into Must, Should and Could: Must: Absolutely required to sell Should: Usually flooring, countertops, trim, tile, lighting and paint Could: Amenities, openings, room conversions, additions, layout changes When choosing what improvements to make need to identify whatimprovements are available in market and pricing constraints. Each improvement can be done at different design levels: Basic, Standard,Designer or Custom finish level (www.flipthebook.com)Source: “Flip: How to Find, Fix and Sell Houses for Profit”Fix ItFind ItFlip ItNew Fund
  15. 15. Cost Approximations ($/sf)Basic Standard DesignerMake-Hab $3 $5 $7Rehab $12 $15 $18Remodel $20 $25 $30Restructure $35 $40 $45Fix ItFind ItFlip ItNew FundSource: “Flip: How to Find, Fix and Sell Houses for Profit”
  16. 16. Basic Areas of ImprovementOutside: Curb appeal Landscaping Flowers Front Door Exterior painting Pathways and driveways Garage door Outdoor lighting Backyard & GroundsOther Internal: Kitchen Master Bath andBathrooms Floors Walls & Ceilings PaintingInternal Systems: Electrical Plumbing Heating andAir Roof WindowsFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  17. 17. Potential Lifestyle Upgrades Bad flow Underdeveloped living space Worst view Very little natural light An unwelcome entrance Undefined property lines No security system No backyard boundaries Noise Undeveloped structures Hidden square feet Bad kitchen layout No outdoor living area Cement yard No income potential Borderline neighborhood Tiny master closets No home office Underutilized storage spaces No privacy Wasted yard spaceFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  18. 18. Your Dream Team General Contractor (licensed, insured and bonded) Subcontractors (Electrical, landscape, plumber, roofer,painter etc.) Handyman (can work under GC license, otherwise you willneed to file with city for home owners permit yourself and getwork signed off) Design (sometimes get free help from home improvementstores) Yourself (limit to demolition, cleanup, landscaping, spotpainting, wallpaper removal, change out switch faceplates,replace door hardware; let other professionals do the rest)Fix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  19. 19. Estimates & ContractsTips on estimates: Difficult initially, then gets easier Pay contractor based an hourly feefor walk through if required Call subcontractors Interview three, pick one If they don’t show up to interview ornot responsive, find someone else Refer to Marshall & Swift guide(www.marshallswift.com - $11 usedon Amazon)Make sure contractor bidsinclude:1. Line item bid of costs2. Material and laborbreakdown3. Materials detail4. Any exclusions5. Statement of insuranceand bonding6. Debris removal7. Completion time frame8. Contractor payment termsFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  20. 20. Budgeting & SchedulingBudgeting Tips: Create more refined budgets as yougo. Initial at Big – 10% actual / 90%guess, Offer accepted - More refined, getcontractor/subcontractor input duringescrow close Final – Take your offer acceptedbudget and add an “Actual” columnto track variances andoverages/underages. Update budget at least twice aweekScheduling Tips: Plan ahead Order materials ahead Confirm your deliverydates Keep contractors insequence (useHomeFixers 50 steps torehabbing a house:www.flipthebook.com) Only use in-stock materialsFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  21. 21. Design Tips: Key Principles Keep it simple (traditional styles to not alienate anyone) Stay consistent (same styles all rooms andindoor/outdoor): Cabinetry: same style and color throughout the house Countertops: same styles in kitchen and bath Carpet Window treatments: same style in all bedrooms Hardware: Door knobs and door hinges Lighting Keep it neutralFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  22. 22. Design Tips: Lighting Lots of natural light Avoid window treatments (cost, less light) Use dimmers (not just on/off) Use halogen bulbs Replace all switch plates, light switches andelectrical outletsFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  23. 23. Design Tips: Painting Type: Flat: Walls, Celing, Stucco, Cement Semi Gloss: Kitchen Walls, Bath Walls, Woodwork, Cabinets, Wood siding,wood trim Gloss: Doors Ceilings: Always a shade of white, makes room look bigger Interiors: Choose one base color of neutral tone, then choose oneshade darker and one shade lighter than base color. Most walls will bepainted lightest shade. Accent walls and adjoining rooms with one ofthe two darker shades (for example kitchen in medium shade and livingroom in darker shade). Exteriors: Neutral earth tone base color for large surfaces such aswalls, contrasting but complementary color for trim and accent moldings.Rich, strong third color for very select accent items such as front doorFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  24. 24. Design Tips: Floor Plans Open floor plans Adjust non-load bearing walls Increase kitchen size if required Bigger master bath if possible Walk-in closets in master bedroomFix ItFind ItFlip ItNew FundSource: “Find It, Fix It, Flip It!”
  25. 25. Part 3: How to Flip It
  26. 26. Staging Adding furnishings to make visitors associate with home: Gives buyers a visual blueprint of what life will be like Makes empty space feel warm and inviting Creates proportion in a big room through groupings Makes a tiny room feel larger through right furniture Showcases positive features and downplays negatives Tips: Keep classic and simple Make more expensive then everyday home furniture Bring your won, borrow from friends, second hand stores or hire aprofessional stagerFix ItFind ItFlip ItNew Fund
  27. 27. Part 4: New Local Flipping Fund
  28. 28. Niyat1. Help OC Mumineen start new businesses2. Allow Mumineen with money in banks to earna return on the money while taking risk andhelping other Mumineen start businessesFix ItFind ItFlip ItNewFund
  29. 29. Management TeamManagement Team: Mulla S. Takhtawala: Engineering background Experience managing $5M+ Masjid construction project Mulla H. Kothari: Business background Real estate license/experienceAdministrator: M. Khambaty: Business/financial analysis background Landscape architecture construction experienceConstruction Advisor: Mulla T. Campwala: Licensed general contractor Multiple construction project experienceFix ItFind ItFlip ItNewFund
  30. 30. TimelineStart OfferAccepted/EscrowStartedEscrowClosedHousefor SaleOfferAccepted/EscrowStartedEscrowClosed1-2 Months 1 Month 2-3 Months 1-2 Months 1 Month6-9 MonthsFIX ITFIND IT FLIP ITFix ItFind ItFlip ItNewFund
  31. 31. Starting Housing Search Leverage realtors in Jamaat to help with housingsearch: A. Hussain S. & R. Khambaty A. Sabir S. & S. Sikora Possibly set 2 week proposal period then evaluatealternatives Focus on off MLS listings (“Worst house on bestblock”) Target Neighborhood: Corona, Ontario, Chino,Fix ItFind ItFlip ItNewFund
  32. 32. Target Neighborhood Corona, Ontario, Chino,PomonaTargetAreaFix ItFind ItFlip ItNewFund
  33. 33. Sample #1: 1103 Francis ST #G Condominium located in Ontario, CA (1,051 sf, 2 bed &2 bath, built in 1980) – Listed at $111,000 Eventual Selling Price: $125 per s.f ($131,000) Other Costs:Purchase & Sale Closing Costs: $11,000Carrying Costs: $1,500Fixit Costs (need to confirm): $10,000 Potential Profit @ $10K: Max Offer of $98,000Fix ItFind ItFlip ItNewFundAddress Square Feet Selling Price $/sf2321 Magnolia AV #14D2125 MagnoliaAv2078 Mountain` Av2220 Smoke Tree Ln2033 Magnolia Av2321 Magnolia Av #10d2052 MountainAv1602 Mountain Av #F1604 Mountain Av #9C104610601200134610601146120010641064$95,000$102,000$120,000$150,000$158,000$160,000$160,000$163,000$163,000$91$96$100$111$149$140$133$153$153Average 1132 $141,222 $125
  34. 34. Sample #2: 734 Saint Paul St. Single family residence located in Pomona, CA (1,289 sf, 3 bed & 1bath, built in 1949) – Listed at $161,200 Eventual Selling Price: $175 per s.f ($226,000) Other Costs:Purchase & Sale Closing Costs: $13,700Carrying Costs: $2,400Fixit Costs (need to confirm): $20,000 Potential Profit @ $20K: Max Offer of $170,000 if @$160,000 offer, potential profit = $30,000= 15% return in 6-9 months (30% annualized)Fix ItFind ItFlip ItNewFundAddress Square Feet Selling Price $/sf1429 Farrell AV1321 AlvaradoST1002 Colmar ST980 Colmar ST779 Saint Paul ST954 Karesh AV1002 Colmar ST1356 Brewster DR1076 Karesh AV153312231223122510841254122313661254$246,000$197,000$202,000$205,000$216,000$218,000$275,000$230,000$239,000$160$161$165$167$199$174$225$168$191Average 1297 $227,300 $175
  35. 35. Terms & Conditions Use existing LLC 50/50 Profit split between investors & management team Referred to as norm in reference books Expenses paid for management team but no salary All decision making with management team Investors are silent partners One flip at a time, then dissolve Minimum $20,000, no max. Profit payout based on % offund. Target Min. Fund: $200,000 Monthly feedback meetings for investors on progressFix ItFind ItFlip ItNewFund
  36. 36. Discussion Topics Using realtors (terms & conditions) Investment amounts Investor say-soFix ItFind ItFlip ItNewFund
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