- The document provides an outline and overview of a real estate investing course, including introductions, market reviews, and types of sales. - Statistics are presented on home sales, prices, inventory levels, and days on market for Fairfax County, VA in January 2011 compared to January 2010. Overall, sales were down while prices rose slightly. - The outlook discusses trends by price range, with strongest sales for homes over $1 million and shortest days on market between $300k-400k and $500k-1 million. Inventory is expected to remain steady.

1. Investing in Real
Estate Basics
Mike Ford
Licensed Home Improvements Contractor
Licensed Real Estate Salesperson
(703) 589-3848
www.TheModelHomeLook.com
mike@themodelhomelook.com

2. Course Outline – 1st Session
• Introduction, Backgrounds
• Student Expectations
• Market Review
• Types of Sales
• Finding the Best Deals
2

3. Who is Mike Ford
Northern Virginia Native
Bachelor of Sciences degree in Business
Administration from Old Dominion
University.
Licensed Real Estate Agent - Coldwell
Banker Residential Brokerage.
Corporate Experience – Fortune 500 Companies – Motorola
Communications & McKesson Healthcare, National Healthcare
Trade Association
Entrepreneur – Owner of The Model Home Look
Community Volunteer – Youth Sports,
Home Owners Association
3

4. Recognizing value in Real
Estate investments
We help clients discern the simple
improvements from the financial catastrophes.
We offer our real estate clients the opportunity to
make improvements that make their homes
more appealing to prospective home buyers.
4

5. The Model Home Look –
Home Renovation Knowledge
is Key
Our clients have been particularly pleased with
our knowledge of home construction, and
appreciate the guidance to improvements that
provide the most significant returns when the
time comes to sell their homes/investments.
5

6. Understanding Home
Values
www.themodelhomelook.com
We help all of our clients identify the home improvements that
will have the biggest impact on their home’s value.
6

7. Is it a good time to invest in
Real Estate?
In a market like this, when
people think things are so
bad in the market, so
horrible and the sky is
falling and property
values are dropping, that's
good news for real estate
investors
7

8. Fairfax County – Sold
Summary, January 2011
Jan-2011 Jan-2010 % Change
Sold Dollar $279,113,480 $316,657,625 - 11.86%
Volume
Average Sold $440,938 $433,184 1.79%
Price
Median Sold $360,000 $350,000 2.86%
Price
Units Sold 636 732 -13.11%
Average Days 77 57 35.09%
on Market
Average List $454,197 $449,308 1.09%
Price for Solds
8

9. Fairfax County Inventory
Jan-10 Jan-11
2,930
2,791
2,579
2,036
1,531
1,190 1,060
867
549 700
318 360
Active New Listings New Under New New Pendings Total
Listings Contracts Contingents Pendings
9

10. Fairfax County Average
Sold Price - January
2 or less TH 2 or
3 BR TH 3 BR 4 BR TH 4 BR Condo
BR less BR
Jan-10 $210,444 $259,548 $378,366 $345,808 $683,079 $397,705 $226,608
Jan-11 $160,000 $258,580 $397,665 $344,844 $681,983 $370,065 $232,436
10

11. Fairfax County – Year
to Date
2010 2011
1550
1200
783
644
New Listings Closed Sales
11

12. Quick Overview –
Regional Data
• The biggest increase in sales was in
homes valued above $1M (+10.9%)
• Property type with the strongest sales
was Single-Family Detached (-1.9%)
• Construction status with strongest
sales was Previously Owned (-3.1%)
12

13. Outlook
As the new year begins, the local housing market
can look very different depending on what price
range you’re looking at. For instance, in the
strongest + 10.9% - 3.1% price range for home
sales—$1 million and above—Pending Sales are
up 10.9 percent over the last twelve months. But
in the $200,001 to $300,000 above range, where
sales are weakest, the numbers have declined by
12.6 percent during the same time period.
14

14. Outlook
Inventory overall is holding steady, having
fallen by 1.2 percent from a year ago. But
Townhomes have seen their supply inch up
by 3.1 percent while single-family detached
homes and condos have both seen their active
listings drop during the same time frame.
New Construction inventory is dropping the
fastest, down 9.7 percent from a year ago.
15

15. Outlook
The price range with the longest Days on
Market Until Sale is the $1 million and above
range, where the average market time is 123.
The ranges with the shortest market time are
$300,001 to $400,000 and $500,001 to $1
million, where it’s taking a comparatively
shorter 72 days for a home to sell, on
average.
16

16. Prices
Median Sales Price was up slightly
1.1% compared to last January,
registering in at $265,000.
If inventory continues to
decline, we could see prices
start to creep up.
17

17. Percentage of List
Price Received at Sale
Jan-10 Jan-11
95.80%
95.30%
93.10% 92.90%
92.30% 92.10%
Single Family Townhomes Condominums/Other
Detatched
18

18. Median Sales Price –
All Properties
Single Family
Townhomes Condo /Other
Detached
Jan-10 $300,000.00 $235,000.00 $215,000.00
Jan-11 $304,000.00 $241,500.00 $210,000.00
19

19. Median Sales Price –
Previously Owned
Single Family
Townhomes Condo /Other
Detached
Jan-10 $295,000.00 $230,000.00 $205,000.00
Jan-11 $295,000.00 $238,000.00 $200,000.00
20

20. Median Sales Price –
New Construction
Single Family
Townhomes Condo /Other
Detached
Jan-10 $410,000.00 $305,118.00 $350,000.00
Jan-11 $407,950.00 $310,450.00 $363,000.00
21

21. Days on Market Unit
Sales
• The average number of days between
when a property is first listed and
when an offer is accepted. Sold
properties only.
22

22. Days on market
80 Days – Down 17.8%
Properties moving the fastest are
in the Core jurisdictions. If
interest rates remain at record
lows, we expect days on market
to continue to decline.
23

23. Days on Market - All
Single Family
Townhomes Condo /Other
Detached
Jan-10 109 74 94
Jan-11 89 60 79
24

24. Days on Market –
Previously Owned
Single Family
Townhomes Condo /Other
Detached
Jan-10 108 74 95
Jan-11 88 59 79
25

25. Days on Market – New
Construction
Single Family
Townhomes Condo /Other
Detached
Jan-10 129 80 82
Jan-11 105 74 79
26

26. Inventory – All
Properties
Single Family
Townhomes Condo /Other
Detached
Jan-10 35,221 9,211 11,858
Jan-11 34,402 9,492 11,733
27

27. Inventory – Previously
Owned
Single Family
Townhomes Condo /Other
Detached
Jan-10 29,759 8,347 10,866
Jan-11 29,470 8,614 10,934
28

28. Inventory – New
Construction
Single Family
Townhomes Condo /Other
Detached
Jan-10 5,462 864 992
Jan-11 4,932 878 799
29

29. Months Supply of
Inventory
• Compares the number of active
listings available to the average
monthly pending sales from the last
12 months. Based on one month of
activity.
30

30. Inventory By Price
Range - ALL
Month’s Supply of Inventory
Jan-10 Jan-11
14.0
11.0
7.1 7.7
5.6 5.9 4.9 5.1 5.0 5.0 5.6 5.2
$200,000 $200K - $300K - $400K - $500K - $1M and
and Below $300K $400K $500K $1M above
31

31. Inventory By Price Range
– Previously Owned
Month’s Supply of Inventory
Jan-10 Jan-11
13.4
10.4
6.8 7.4
5.2 5.5 4.8 4.4
4.4 4.5 4.4 4.3
$200,000 $200K - $300K - $400K - $500K - $1M and
and Below $300K $400K $500K $1M above
32

32. Inventory By Price Range
– New Construction
Month’s Supply of Inventory
Jan-10 Jan-11
15.9
14.3 14.7
13.2 12.9
11.211.9 10.5
11.5
9.6 10.1
8.6
$200,000 $200K - $300K - $400K - $500K - $1M and
and Below $300K $400K $500K $1M above
33

33. Inventory By Property
Type
Month’s Supply of Inventory
Jan-10 Jan-11
6.8 6.8 6.6 6.6
4.7
4.0
Single Family Detached Townhomes Condo/other
34

34. Inventory By Property
Type
Month’s Supply of Inventory
Jan-10 Jan-11
11.9
11.0
5.7 5.9
Previously Owned New Construction
35

35. Inventory
Months Supply is 6.3 months.
6-month is the desired mark for a balance
between supply and demand.
36

36. Summary
Stable Market, Prices starting to increase,
Interest Rates Ticking Upward, Worst is
behind us
37

37. The Wart on the ―National‖
Market
There are millions and millions of
foreclosures or people behind on payments
and the number is growing and growing
every day. Most of those houses don't have
equity because people took out creative
loans, interest only loans, borrowed 100
percent of their money and then when their
payments reset and the markets dropped
everyone lost the equity in their property.
38

38. National Media Pressure
Financial disaster in the housing market
as reported in the media
39

39. Future of Local Market
We expect that rising demand
(propelled by job growth and Federal
spending) will bring traction to the
Washington housing market,
particularly in the Core, as liquidity
returns to the credit markets and
buyers regain confidence.
40

40. Future of Local Market
Inventory is declining and construction
remains low, which will help limit
future price declines, we are now
seeing prices starting to rise again.
Conditions will continue to improve
in the close-in communities, with
recovery arriving in the outer counties
later in the year.
41

41. Northern Virginia -
Best Market for Long
Term Investor
• Local Economy is Stronger than the
rest of the country.
• Government procurement.
• Much of what has driven our local
economy is emotional. Buyers have
been sitting on the sidelines.
42

42. Strong Local Economy
Unemployment Rate
12.0%
10.0%
8.0%
6.0%
Jan-10
4.0%
2.0%
0.0%
Fairfax County National Average
43

43. Cheap Money
Mortgage Interest Rates
• 15 Year Fixed 3.68% APR – 4.29% APR
• 30 Year Fixed 4.10% APR – 4.84% APR
• Mortgages 5/1 Year ARM – 2.89% APR –
3.49 % APR
Rates provided by Bankrate.com.
44

44. Types of Home Sellers
1. Distressed sellers who are headed
to foreclosure
2. Banks who have acquired
property through the foreclosure
process
3. Traditional Sellers
45

45. Short Sale
A short-sale is simply negotiating with
the home owner's current lender(s) to
accept an amount that is less than
they are owed.
46

46. Short Sales
A properly structured short-sale
transaction can be an attractive
alternative and beneficial for all
parties to the transaction.
47

47. Distressed Seller
Eventually, most homeowners facing
foreclosure resign themselves to the
fact that they’re going to have to sell
their home. Agents present options,
such as a short sale, whereby lenders
may be willing to take less than the
balance owed on their homes.
48

48. Short Sale Home
Owner Benefit
The homeowner is able to sell the
property, get out from under the stress
and strain of a foreclosure, and move
on with their lives.
It helps the homeowner because they do
not end up with a foreclosure on their
credit report.
49

49. Short Sale - Bank
Benefit
The bank that is taking the short is able to
avoid the high costs of the foreclosure and
the risk of the property reverting back to
them at auction, which results in additional
costs to secure and upkeep the property.
It is said that every foreclosure property that ends up as an
REO (Real Estate Owned by the bank) costs the lender
approximately $50,000.
50

50. Short Sale –
Investor Benefit
The person buying the property,
whether an investor or home buyer, is
able to purchase the property, usually
at a substantial discount
51

51. Short Sales – A
Simple Solution for
All, Right?
Negotiating a successful short-sale is a
complicated and time-consuming
endeavor.
The banks are overwhelmed, and are
not easy to navigate for the
inexperienced real estate agent or
investor.
52

52. Foreclosure
The legal process by which a
mortgagor of real property loses his
or her interest in that property for
failing to comply with the terms
and conditions of the mortgage
53

53. Foreclosures –
Good Deal?
Good deals are out there, but you can
never assume that you’re getting a
bargain simply because it’s a foreclosed
property. In states where home prices
have risen the most, foreclosed
properties sell within 5 percent of their
full market value.
Source: Study by First American Real Estate
Solutions, a Santa Ana, Calif., company that
maintains a national database of real estate data
54

54. Foreclosure –
Good Deal?
Homes that are discounted are often
located in unstable communities, are
poorly maintained, and require costly
improvements — reasons why the
prior home owners didn’t just sell the
property before defaulting.
55

55. Foreclosure –
Good Deal?
The lenders that own foreclosed
properties are usually prevented from
accepting offers lower than appraised
value, at least during the first several
months that a home is on the market.
56

56. Foreclosure
Risks
CLOUDS ON THE TITLE - Before you bid on a
foreclosed property at auction, make sure you
know what debts are part of the package. Conduct
a title search to determine if any liens or fees are
connected to the property. You may discover that
you’d be taking on the previous owner’s senior
liens (or first mortgages); junior liens (second
mortgages or additional claims against the
property), or tax liens (unpaid property taxes)
57

57. Foreclosure
Risks
PROPERTY CONDITION - Foreclosed
properties have previous owners who are in
financial troubles, thus the upkeep is
usually not maintained.
LOCATION - There are properties that
sound inexpensively priced but they will
not sell high as well despite the repairs
because of their location or neighborhood.
58

58. Traditional Sales
Motivated seller who has to move
because of situations such as job
situation, retirement, family change,
etc…
They are faced with the reality of
market erosion and are now realistic
with pricing
59

59. Finding the best deals?
Where to look?
• Focus on the best locations with
strong rental market.
• Understand how to see the ―bones‖
of the property.
• Take the emotion out of the
purchase.
60

60. Fundamentals of Real Estate
Location, Location, Location
Desirable Rental Market
Public Transportation
Shopping & dining
Affordability
Low Maintenance Costs
61

61. The ―Bones‖
Junk or Treasure?
62

62. Strategy
1. Find a good agent who is a strong
negotiator
2. Have your financing in order to
strike fast
3. Zero in on a target location
4. Zero in on ideal property
63

63. Strategy
5. Understand the costs associated with
renovations – Don’t under estimate!
6. Be patient, and don’t get caught up
in the emotion of the sale
64

64. Investor Resources
Realtor.com, RealtyTrac.com,
65

65. Seller Representation
• Full Service Listing Agents
• Discount Agency
• REO Specialist, Representing Banks
• Auction Firms
• For Sale By Owner
66

66. Invest in Patience – Tax Implications
Investment profit, regardless of whether it comes
from sale of stocks or real estate, is considered
and is taxed at two levels. The tax rates depend on
how long you own the property.
Hold an asset for a year or less and you'll face short-
term gains that are taxed at ordinary income-tax
rates. This could be as high as 35 percent. If your
investment timetable is lengthier, federal tax laws
reward you. By holding an asset for more than a
year, you'll face a tax rate closer to 15 percent.
67

67. Understanding Property
Value
• CMA – Comparative Market Analysis
• BPO – Broker Price Opinion
• Property Condition – Cost to bring it
into today’s standard
70

68. Managing Your
Investment Property
• You’ve done your homework, and
closed on your purchase.
71

69. Section Objective
In this section, we’ll discuss the cost
associated with home improvements
to increase the value of your real
estate investment
72

70. Reasons for Improving
• Pure Enjoyment – (if you plan on moving
into your new home)
• Maintenance - Small problems often lead to
large expenses
• Increase probability of selling or renting
• To appeal to homebuyer or renter
expectations
• To replace the low quality ―builder grade‖
fixtures & amenities
73

71. Avoid Costly Mistakes
• Missing out on big money by not
making the proper upgrades.
• Ignoring simple repairs often lead to
big problems.
• A job done right the first time is
always less expensive.
74

72. Improvement Discussion
• Kitchens
• Baths
• Paint
• Landscaping
• Carpet & Flooring
• Furnishing
• Staging
75

73. Minimum Expectations of
Today’s Buyers and Renters
Reoccurring Buzz Words in Real
Estate Advertisements
• Updated Kitchen & Baths
• Granite Countertops
• Stainless Steel Appliances
• Hardwood Floors
• Open Floor Plan
• New Carpet
• Fresh Neutral Paint
• Show’s Well
• Great Curb Appeal
• Finished Basement
76

74. Minimum Expectations of
Today's Homebuyers
What Sellers Can Control
• Keep a very clean house
• Eliminate pet or food odors
• Remove clutter
• Maintain the lawn and landscaping
• Keep bushes and trees trimmed
• Make sure your furniture fits properly in the rooms
• Clean windows and remove screens
• Turn on lights
• Open blinds & curtains before every showing
77

75. Did you Know?
Within 15 seconds a buyer has developed an
opinion of the property they visit.
Prospects must say ―Wow‖ when they
enter a home!
• Must reflect today’s homebuyer’s tastes.
• Must capture the buyer’s emotions!
78

76. Public fascination with
Interior Design!
The world is fascinated with interior design. If you
have any doubt, you need only tune into HGTV, or
visit Crate & Barrel, Restoration Hardware and
other retailers.
79

77. Kitchen
When remodeling your kitchen for resale,
steer clear of highly personalized looks
and outrageous color schemes.
What to look for:
• Traditional Materials
• Quality Cabinets
• Commercial-look Appliances
• Natural Wood or Stone Floors
• Granite Countertops
80

78. Bathroom
A bath remodel may be a sure-fire
investment, often returning the highest
percent of the cost.
• Must be clean, with no visible signs of water
of mold.
• Caulk and clean grout.
• Replace pink or blue fixtures
• Remove wallpaper
81

79. Tip
Tub & Tile Re-Glazing
A fairly inexpensive way to update a
bathroom is to re-glaze the tub and
wall tiles.
Re-glazing a typical tub and shower
will cost less than $1,000.00.
82

80. Paint
The best investment you can
make is fresh paint!
• Fix nail pops & cracks.
• 3-color with neutral paint color.
• Wallpaper is out, remove it!
• Hire a professional. A bad paint job
will turn off prospective buyers.
83

81. Landscaping
If people drive by your home and are not
impressed they’re not going to walk inside.
• It’s all about curb appeal!
• Fresh Mulch
• Mow the Lawn
• Trim Bushes
• Weed
84

82. Tip
Mulch Dye
Applying mulch dye, which can be
purchased from a specialty landscape
supplier, is a low cost way of making
the mulch look new again.
Expect to pay about $80.00 per gallon.
85

83. Carpet & Flooring
• Worn or outdated carpet should be
replaced
• Dirty carpet should be cleaned
86

84. Staging
Staging is what you do after you've
cleaned, de-cluttered, painted, made
repairs; it's all about dressing the
house for sale.
87

85. Tip
Your home must be clean!
To achieve this level is usually only
feasible by hiring a cleaning crew. In
fact, having a cleaning service return
weekly while your house is for sale is
probably a pretty good investment.
Get your windows professionally cleaned
inside and out too.
88

86. Tip
Eliminate Clutter
Clutter makes homes seem smaller and
disorganized.
Have you ever noticed that the really expensive
stores seem to have an expansive, clutter-
free layout, while "cheap" stores are often a
jumble of merchandise?
89

87. Tip
De-Personalize
Remove objects that your potential buyers won't be able to
identify with. For example, political and religious
items may turn off whole groups of buyers, because
they cannot "imagine" your home as their home.
Buying a home is an emotional decision, and you want
potential buyers to make an emotional connection with
your home by being able to "see" themselves in it.
90

88. Basement Makeover
91

89. New Countertops & Wall Tile
92

90. Granite Countertops
93

91. Countertop & Paint
© 2005 Interior Makeovers
© 2005 Interior Makeovers
94

92. Kitchen Makeover
95

93. Kitchen Makeover
96

94. Kitchen Makeover
97

95. Bathroom Improvement
98

96. Bathroom
99

97. Hardwood Floors
100

98. Basement Improvement
© 2005 Interior Makeovers
© 2005 Interior Makeovers
101

99. Kitchen Cabinets
2/16/2011Mike
Ford
(703) 589-3848 102

100. Home Office
103

101. Formal Living Room
104

102. Family Room
2/16/2011Mike
Ford
(703) 589-3848 105

103. Builders have MODEL
HOMES – Why?
TO CREATE SALES
They understand that buyers want a
home in near-perfect ―model home‖
move-in condition where all the buyer
must do is turn the key in the front
door and move in.
106

104. Reasons Homeowners
Do Not Invest to Sell
their Home?
• Don’t have the time
• Think it is too costly
• Unsure of which improvements yield the
highest return
• Believe their personal decoration style is
appealing to today’s homebuyers
• Believe that a price allowance can be made
when the home is sold
107