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Get in the flippin game flipping homes presentation - joleen halloran keller williams

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Get in the "Flippin" Game - Information for the new "flipper" or for those interested in buying distressed properties.

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Get in the flippin game flipping homes presentation - joleen halloran keller williams

  1. 1. Get in the “Flippin” Game! Presented by: Joleen Halloran, Keller Williams Platinum Partners Sponsored by: Midwest Lending The Bug Man Chicago Title
  2. 2. Are you a flipper? • What is your motivation? • What is your skill level? • What do you want to get from this experience? • What is your patience level?
  3. 3. Benefits of Flipping • Profits • Creative License • Manage the job your way • Fun!
  4. 4. Risks of Flipping • Financial Loss • Stress • Physical Injury
  5. 5. Mitigation of Risks of Flipping • Financial Loss (research properties, sound investment decisions based on facts, good marketing, cost analysis, contingency planning) • Stress (planning and scheduling, contacts and networks, time off, good support system) • Physical Injury (contractors, insurance, take care of yourself!)
  6. 6. Main Components of Flipping • Financial • Property (Buying and Research) • Execution of Reconstruction • Selling
  7. 7. Financial Component • Cash • Loans (Construction and Hard Money) • Home Equity • Investors
  8. 8. Property Component • Finding the right home Find a realtor that understands your needs Understand your limitations on re-hab skills or costs Location, Location, Location • Knowing your market area Be comfortable and confident with your target area Utilize realtor provided comps to verify your plan • Determining the offer and selling price Estimate your costs and your desired profits *** Don’t forget to include your quiet costs (holding costs, cost of money, cost to sell)
  9. 9. Check Out These Local Opportunities • Great Buy 130K - HUD • Great Buy 88K – Fannie Mae • Great Buy 68K – Great Flip MLS # 16443211 1003 SW Lea $68,000 3 bd/2ba
  10. 10. Bridges Company -- Offer Calculator Finished Price 9 NW Noel 119000 Materials Cost 22800 Dumpster 600 Garage Doors Replacement 500 Carpet (Approx 2.25 sp ft X 400) 800 Tile (1.29 x 1000 sq ft downstair) *Includes grout and underlayment Includes Kitchen, 2 bathrooms) 1500 Wood Floor in Living Rooms (spprox 2.79 sq ft X 350) 500 Deck 400 Exterior Repair 500 Guttering 0 Plumbing 1300 Electrical 1900 Knock Down Ceiling Application 400 Kitchen Cabinets and Hardware 1800 Equipment Rental/Finish Existing Floors 200 Doors (1 French@299 + 2 or 3 replacement) 600 Concrete Work 2500 Paint 1500 Lumber (misc updates) 1000 Misc Hardware (vents, knobs, ect) 250 Drywall and supplies 2500 Counter Tops 700 Hot Water Heater 0 Furnace 0 Window Glass Repair 1800 Roof 0 Permits/Inspection 0 Utility Bills 3@100 0 Air Conditioning Unit 0 Lighting 350 Appliances 1200 Total Rehab Cost (inc. labor) 30100 Total Holding 3400 Labor Cost 10 weeks @ 700 7000 Total Profit 25000 Landscaping (Fencing, Flowers, Seed, Misc) 300 Realtor Fee 0 Blue indicates areas for improvement in pro Mortgage Payment 4 pmnts @ 550 2200 Contingency costs 0 Closing Costs 1200 Profit 25000 Offer Price -60500 Actual Offer Price 61000 (+ = amount that needs to be taken Difference to out of budget) make up in (- = amount that can be added into budget 500 budget) Finish time 10 weeks Market Time 14 weeks
  11. 11. Execution Component • Make your plan Define your flow and understand contingencies and constraints Determine task schedule (don’t over commit) Plan your supply purchases • Understand your money flow Be aware of constraints for draws to pay contractors or purchase supplies. Always keep an eye on your budgets • Adjusting your plan Adapt your plan for budget or schedule to keep on target
  12. 12. Execution Component Expense Tracking Worksheet 6/20/2010 Joleen Halloran -- 9 NW Noel Lee's Summit, MO 64081 Loan # Beginning Balance 35600 Date Actuals Sales Tax @ .0766 Actual Cost Category Description Purchased At 10/20/2009 $1.41 0.11 $1.52 Plumbing Plumbing Supplies Home Depot 10/16/2009 $20.78 1.58 $22.36 Lumber Misc. Rough In Supplies Home Depot 10/19/2009 $0.72 0.05 $0.77 Plumbing Plumbing Supplies Home Depot 10/16/2009 $325.00 0 $325.00 Trash-Clean Up Dumpster Sunshine Disposal 10/9/2009 $41.14 3.13 $44.27 Lumber Misc. Rough In Supplies Home Depot 11/5/2009 $279.00 0 $279.00 Labor Labor Costs Paul Cotton 11/5/2009 $3.99 0.3 $4.29 Lumber Misc. Rough In Supplies Owens Lumber 10/27/2009 $258.03 0 $258.03 Lumber Misc. Rough In Supplies Home Depot 10/27/2009 $97.57 7.42 $104.99 Lumber Misc. Rough In Supplies Home Depot 10/29/2009 $190.42 14.47 $204.89 Plumbing Plumbing Supplies Home Depot 10/22/2009 $350.00 0 $350.00 Labor Labor Costs Jon Renfro 10/22/2009 $474.00 0 $474.00 Labor Labor Costs Paul Cotton 10/22/2009 $200.00 0 $200.00 Labor Labor Costs Greg Belcher
  13. 13. Execution Component Summary Budget CONSTRUCTION COST BREAKDOWN Owner___Joleen Halloran___________ Job Location:___9 NW Noel Lee's Summit, MO 64063 Contractor:___Greg Belcher_____________ Contractor Phone:____816-305-4397________________ Labor and Materials Estimate Suppliers and Contractors Actuals Variance Amount (+/-) Plans and Specificiation 1s 0 0 Permits and 2 Survey 0 0 0 Excavating- Backfill 3 Grading 0 0 Piers Footings 4 Foundation 0 0 Waterproofin 5g 0 0 Steal and 6 Iron 0 0 7 Lumber 1000 1716.88 -716.88 Carpentry 8 Labor 0 0 Trash-Clean 9 Up 600 461.47 138.53 10 Roofing 0 0 0 Brickwork, Block or 11 Stone 0 0 12 Guttering 0 0 0 Cement Slab 13 and Walks 2500 0 2500 14 Plumbing 1300 2194.13 -894.13
  14. 14. Execution Component Financial Analysis Joleen Halloran - Loan #87241 9 NW Noel, Lee's Summit, Missouri Loan Closing - Funds Title Budget Amount Available (9/30/09) Draw #1 (10/5/09) Draw #2 Interest Payment #1 Interest Payment #2 Draw #3 (12/11/09) Rehab Costs $ 30,100.00 $ 6,500.00 $ 6,500.00 $ - $ - $ 6,500.00 Interest Carry $ 5,500.00 $ - $ 302.03 $ 303.25 Contingent/Other $ - Total: $ 35,600.00 $ 37,564.62 $ 6,500.00 $ 6,500.00 $ 302.03 $ 303.25 $ 6,500.00 Remaining Funds: $ 37,564.62 $ 31,064.62 $ 24,564.62 $ 24,262.59 $ 23,959.34 $ 17,459.34 Loan Balance: $ 40,724.38 $ 47,224.38 $ 53,724.38 $ 54,026.41 $ 54,329.66 $ 60,829.66 * Loan can be advanced up by $78,289 per loan commitment. * Draw #1 was for $7,000 which included $500 reimbursement of down payment and $6,500 for rehab.
  15. 15. Selling Component • Begin your marketing early Stick our sign and flyers in the yard as soon as you can Staging Emphasize your ―Wow‖ factors Place the time and effort to create curb appeal • Don’t wait – call your realtor Determine your timing to get house on the market
  16. 16.
  17. 17. Ready to Start? Checklist Do your homework (money, properties, products, techniques, suppliers, contractors) Before you begin – research and feel comfortable with your resources and methods.
  18. 18. Ready to Start? Checklist • Make your plan and set your limits – set objective goals • Obtain your financing • Get a realtor (hint hint – I am a realtor) • Look and procure your property • Put your budget and schedule together • Execute your flip project
  19. 19. Ready to Start? Checklist • Start your marketing • Sell your home • Celebrate and start planning your next project!!
  20. 20. General Tips and need to know facts • Be Prepared to work hard • Don’t forget that the money is made when you buy the property – not when you sell it. • Include your ―Wow‖ factors into your budget and your plan • Re-hab appropriately to your price point!!
  21. 21. General Tips and need to know facts • Develop a strong network of contractors, suppliers and support services • Add value to your property any time you can (additional bath, open up dated floor plans) • Look for easy updates that add value and beauty - (fireplaces, cabinet facing, knobs and pulls)
  22. 22. General Tips and need to know facts • Expect to run into unknown issues • Keep your cool • Don’t forget the importance of curb appeal (flowers and shrubs are cheap and the payback is big)
  23. 23. Distressed Property
  24. 24. Rules: Traditional vs. Distressed • They’re different! – Price Knowing these differences – Speed will give you clear expectations—and help – Decision-Making you get what you want! – Communication – Negotiation
  25. 25. Rules – Price Traditional REO • Priced to sell by • Seller motivation and institutions with no emotion play a big part emotional stake Short Sale • Priced by listing agent and owner; bank must agree to this price
  26. 26. Rules – Speed Traditional REO • Offers get quick reply • Normally proceed with • Last-minute closing all due haste delays common Short Sale • Slow offer response • Acceptance brings fast close
  27. 27. Rules – Decision-Making Traditional REO • Bank or lender decides • Homeowner/seller decides Short Sale • Seller decides what offer to accept; lender must approve
  28. 28. Rules – Communication Traditional REO and Short Sale • Good communication • Banks, listing agents expected but not pressured by volume— always practiced hard to reach • Buyers must insist on— and provide—great communication
  29. 29. Rules – Negotiation Traditional REO and Short Sale • Negotiation common on • Some negotiation price, condition, and possible with Fannie terms Mae REOs • Short sale negotiation rare—properties sold ―as is‖
  30. 30. Seize the Opportunity Six Realities Define Your Opportunity 1. Buyer’s market—capture value now! 2. Mortgage rates are great, but for how long? 3. Affordability—home buyer dollars going further 4. Number of foreclosures remains high 5. Foreclosure inventory nearing peak 6. All parties motivated to sell Percentage of buyers who bought distressed property tripled from 2008 to 2009.
  31. 31. Opportunity: 203k Loan FHA-backed Home Purchase and Renovation Program – Purchase price and documented repair/rehab costs bundled in one loan – One set of closing costs – 3.5% down; can be gifted – Eased qualification standards – Loan limit range $271k-$730k – Possible energy-efficiency add on
  32. 32. Foreclosure Trends – Moving Up!
  33. 33. What’s Stopping You? What have you heard that concerns you about buying?
  34. 34. Ignore the Myths 1. Myth: Foreclosures are mostly low-end, in poor condition, and in bad areas. 2. Myth: Foreclosures have lots of title problems including liens.
  35. 35. Ignore the Myths 3. Myth: The best foreclosures get sold in bidding wars. 4. Myth: Loans are hard to get for foreclosures.
  36. 36. Ignore the Myths 5. Myth: Foreclosures take a long time to close and aren’t worth the wait. 6. Myth: The best opportunities have already been snapped up.
  37. 37. Be Ready to Go 1. Motivation + 2. Preapproval = Success + 3. Expert Advice
  38. 38. Be Ready to Go 1. Strong Motivation Know your “Big Why” Have criteria set and be prepared to make decisions. Be ready to communicate clearly at all times.
  39. 39. Be Ready to Go 2. Preapproved Wallet Whether all cash or financed, solid buyers are the winners in this market.
  40. 40. Be Ready to Go 3. Expert Distressed Property Agent on Your Team In this market, more than ever, you need great representation! Quality advice counts.
  41. 41. Let’s Get Started— Now Is the Time What Questions Can I Answer? Name: Phone: Email:

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