Historical Neighborhoods! Beware!
Let me first say, I’m a fan of historical neighborhoods, and I’m a fan of preserving these special homes. But, in order to preserve them, renovators need to be able to make these homes inhabitable. I know every city has Historic Neighborhoods, and let me say that it is a bigger hassle then it is worth. Last year, we completed a rehab and it was a challenge. So, the first nugget I want to drop is this: know where your projects are located. If they are located in a Historical Neighborhood, I would be very wary. Because the requirements for a renovation are ridiculous, time consuming and full of bullshit. The Historical overlays will almost always take precedence over any reasonable renovations to bring the house up to code. So, let me drop nugget #2: since there is so much hassle and red tape, every other house in a Historical Neighborhood is going to be a POS. This is because homeowners won’t even be allowed to make renovations, or they don’t want to bother with the permits. Don’t be fooled by this! It’s more a hindrance than anything. So, just for example, I tried to renovate a home in a Historical Neighborhood. What should have taken 60 to 90 days, took seven months! Why? Why would a quick update and rehab take so long? The originals owners didn’t want to deal with the city, so they just put in aluminum windows. As we were trying to change the windows, and follow city code, the neighbors had a fit and we had to wait for 3 months while the city approved our replacements. Besides this, there is an entire process that requires the entire neighborhood to give approval, or to complain, and you have to listen to it all. So, here is the moral: avoid Historical Neighborhoods if you...
Co-wholesale: What is it? Why is it Helpful? How will it Help YOU Grow?
I want to talk about Co-Wholesaling and how you can use this to make more money in your business. First, let’s talk about Co-Wholesaling and explain its purpose. So, what is it? Co-Wholesaling is exactly like it sounds: finding a wholesale deal and then selling that wholesale deal with another wholesaler. Two dealers moving the product together. Now, why might someone Co-Wholesale? Generally, it is because you have a house that doesn’t fit your standard wholesale product and you don’t necessarily have a buyer for that wholesale deal. So, you use your local REI network to find a wholesaler who can help you move the deal to a buyer you haven’t dealt with before. If you’re brand new, this may be a good way to get your foot in the door. This is also another way to establish a buyer’s list you can trust. Or, if you have a specialty property that doesn’t work for the types of buyers you generally work with, you can use your Co-Wholesaler’s contact to move the deal to the right buyer. It is all about knowing your end buyer and getting the product into the right hands. For example, let’s say you lock up a large lot with a little ranch home on the property. You know the property is a knock-down. The entry-level renovators you generally deal with aren’t going to be interested in this property. So, maybe you network with another wholesaler, who puts you in contact with an Infill builder who is looking to parcel the lots and build two or more skinny homes. The Infill Builder will pay top dollar, and you and your Co-Wholesaler move the product for bigger cuts. Everyone wins. Look at what type of house you are trying to wholesale and who your buyer is for your product. Also, get to know other buyers out there and get to know your competition. You can make money with...
Protect your Job Site!
This week’s Golden Nugget is a reminder to always protect your job site. Really, what I want to talk about is preventing your jobsite from being robbed. This is something Guru’s will not talk about because it is not glamorous. So, it’s a subject that often isn’t discussed. I think that if you do enough rehabs, your jobsite will be robbed. I know, because early last year, I had this happen to me. The thieves stole a $4,000 paint sprayer and 45 gallons of paint. For reasons I won’t go into, I think it was an inside job, so we switched subs and were able to finish the project on time. So, how can you protect yourself? I would suggest putting in a little camera that streams to the internet, and this way you always have a visual of the property. This is what I do now. I place the camera (and sometimes, two cameras) facing out from the garage. Here is why: those that are looking to rip-off a property, generally arrive in either a moving van, or a work van. This way, they look like they’re either moving in, or they’re contractors hired to do a little work. So, with that camera, when they back into the driveway and open the garage door, you will get a picture of the license plate, of their face, and an image of their vehicle. The gold nugget here is to emphasize the value of that camera. It is worth the money. Especially when compared to hassle of dealing with equipment being...
A Mechanics Lien? Lock down your bids in a contract!
I want to talk about Mechanics Liens. This quick tip will ultimately save you thousands, and thousands, and thousands of dollars. This is something I have started putting to work in my own business and I know it has helped me. Okay, so, during a rehab, your GC hires a Subcontractor who generally will give you a bid to do the work. They are supposed to keep that bill within reason of that bid. Now, we had a situation in which the bill that I got was significantly different from the bid I had initially received. The tricky part apart about handling this situation had to do with how the Subcontractor felt about our questioning the bill. We thought the bill was wrong and inaccurate. Now, what that Subcontractor can do is get a Mechanics Lien against your company if you refuse to pay the high bill. So, they now have a lien on the property for the amount they feel they are still owed. Attorneys, then, have to get involved. Court dates are filed. Mediation. Arguments. And the Contractor’s Board has to become involved. It’s a big mess and it costs a ton of money. So, what can we do? We now have a document that we have every single Subcontractor sign. It’s a simple document that signs they are waving their right to Mechanics Lien and they have to keep their bill like that of the Bid. Also, the only way they can bill us for more, is if they have a signed changed order approved by the GC or the owner. I suggest every REI renovator have a similar document drafted up by their attorney. Like I said, it will save tons of money and keep your projects from being...
Need Capital? Find Private Money!
How do I get the capital I need to close the deal? This is a question I’ve been asked many times. There is always Hard Money, but this comes with a high interest rate and increased pressure. The other option is Private Money. So, what is Private Money? How do I find it? How do I structure a deal with Private Money? These are all great questions that I want address in this quick tip. Private Money is not institutional money. Generally, Private Money is from a “private” source. Usually, this is an individual, or a group of individuals, who have money they would like to invest for greater returns. These terms are a bit easier to work with, but they’re harder to come by. Maybe 6% to 12%, with 0 to 2 points up front. Private Money can come from many sources, including family and friends. It is best if you can find Individual Investors looking to diversify. But, how do you structure the deal with Private Money? Here is what I do: Be sure the Private Money is ready beforehand and be sure to never touch the money. How? Easy. The Private Money lender always sends the funding directly to the Title and Escrow Company, who then sends a Note and Deed of Trust back to the Private Money Lender. This secures their money by placing them as 1st position Lien, in case I ever balked. I never have and I never will, but our secure method lowers risk, and therefore lowers the interest rate they need to make in return. When the house is finished, then sold, and the deal is finally closed, we make sure to send the loan plus interest and points directly to the Private Money Lenders from the Title and Escrow Company. We get the difference and this is our profit on the job. Like I said, we never touch it, and everyone makes a few bucks along the...
Technology, Business & House Flipping – See How I Organize My Business!
In the middle of last year, a Real Dealz Podcast listener wrote to ask: What software do you use in your business? I hadn’t thought to address this question before, but I thought it was a great question. So, I answered this question in the podcast. Let’s take another look now, and ask what software do I use in my business? Some of the software from this list might seem obvious, and I will be brief, but I would like to also be exhaustive. So, first and foremost, Excel. We use Excel all day, every day. We use it as a database tool to track our mailing lists, organize our mailing lists and control our huge source of mailings. Essentially, it is a Direct Mail Marketing go-to for anyone that is doing REI the correct way. There is also Zoho, which is a CRM software. This is used to track our contacts, as well as keep a big picture perspective on our Direct Mail Marketing campaigns. Microsoft Outlook is used to manage appointments. We also use Microsoft Word. The biggest piece of software, though, is QuickBooks. QuickBooks changes everything. Why? It is how I control the money, and cash flow is the life blood of my business. I want to emphasize that it is very important to know how much cash you have on hand and QuickBooks, if used properly, can track expenses and income perfectly. By doing my own books, this puts me in a position to know exactly where I’m at and to be in complete control. If you’re not tracking your income, you are taking too many risks. You are flying blind and your business is a mess. So, quick lesson: get with it! Organize your...
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