Marty made a ton of profit using other peoples’ money wholesaling properties he’d never seen to rehabbers he’d never met all without ever having to leave his office.
Outdated items we’ve had to remove, replace or repair on our flip projects: galvanized plumbing, Asbestos lined pipes •Asbestos siding •Block foundations •Radiant heat systems •Abandoned wells •Cracked driveways and garage floors.
Permits need to be pulled by: HVAC technicians •Structural repair companies (basements) •Roofers
A process is a conceptual sequence of events that enables people in business to do what they do (i.e. fix and flip a house). Systems are what are used to execute the process (i.e. operating a fix and flip business).
Every business needs an operations manual. (systems in place)
How to Fix and Flip a House WITHOUT Any Construction Experience…
Marty’s Free House Flipping Guide
•Deal Analysis Spreadsheet •Rehab Spreadsheet (Estimate and Actual) •Scope of Work •Production Schedule •Supply List •Final walk through checklist
You have the ca$h required to do the rehab.
1.Walk through the property 2.Photograph the property 3.Estimate the Project Budget 4.Analyze the Deal 5.Write the offer/acceptance 6.Scope of Work/Design plan 7.Rehab Budget (Actual) and Production Schedule 8.Close the Sale 9.Hire the Contractors
Walk Through: Look for obvious signs of foundation issues. Are the floors even? Is the drywall or plaster severely cracked in any areas? Does the home need a new HVAC system?
Are there any additions to the home? If so can you find out if they were permitted. (find out how in the eBook)
Do the neighbors keep their yards tidy? Do they have barking dogs in the backyard?
About 75% of the time I don’t even bother going back to the car to get my camera because something about the home doesn’t feel right. Most of the time it has to do with the floor plan, location on the street, size/shape of the backyard or the neighboring properties. Sometimes they could give you the property for free, but if you can’t reach your target net-profit price, leave it.
Video/Pic the Property
•Exterior from all sides •Garage (if detached) from all sides •All rooms (several of the kitchen and bathrooms) •Mechanical systems (HVAC, hot water heater, electrical service panel) I also write down how many windows and exterior/interior doors will be needed. You may want to consider shooting a video walkthrough as well.
Estimate The Project Budget
Don’t forget to include Project Management.
Get the whole chart on…
Marty’s Free House Flipping Guide
Write the Offer/Acceptance
•Purchase Price •Closing Date •Earnest Money Amount •Inspection period •Financing contingency
Once your offer is accepted you’ll likely have 2-4 weeks to close. Use this time wisely for the next 2 steps:
Scope of Work/Design Plan: •Paint exterior of home, including brick. •Tuck point all cracked brick (get the rest on the PDF)
Rehab Budget (Actual) and Production Schedule
Close the Sale.
Hire the Contractors.
Rehab Process: •Interior •Exterior •Mechanical/Structural
Average cost to replace a roof is $8k.
Get a crash course in foundation/basement repair. We now can quickly identify which basements need drain tile/sump pump systems, as well as those that require repair to the walls. This allows us to negotiate a lower purchase price from the seller. Cost could be as much as $26k.
Upgrade electrical panel to 100amp to accommodate HVAC, etc… generally costs around $1,200 – $2,000. And get the plumber in there to coordinate schedule.
Pay a local interior designer/decorator to choose our material list and help select paint/flooring colors. •Look at other remodeled homes in the area for color and finish ideas.
We now get outside advice, as well as research the area to see what’s popular with home buyers prior to starting any new project.
Where to Find Contractors
Grateful contractors show up on time, go above and beyond what they’re paid to do and stay on the job until they’re finished.
Entitled contractors show up when they feel like it, do as little as possible and have to be constantly pressured to finish their job.
Which would you rather hire?
While he certainly had the resume to be a project manager he didn’t have a very good attitude. He seemed overconfident, even a little cocky. I went against my gut and hired him anyway. It was a disaster. The guy was stubborn, unwilling to learn and condescending to just about everyone on our team. He was also in way over his head.
Be a good listener, observe body language, determine that they have experience and they can get along with others.
- How long will it take you to finish?
- How much will it cost?
Then you can figure out how much they are charging/hour.
We had a painter once send all our trades home (hardwood floor installer, tile installer and carpenter) because he planned to start spraying paint. A week went by and he was still doing prep work (taping and caulking). We lost a huge chunk of valuable time. Now our guys know Manny and I are the only ones that can grant permission to leave the job site.
Have the Realtors on our team walk through every prospective deal we do prior to purchase so that I can have some piece of mind. It’s comforting to know we’re remodeling the house the way today’s buyer wants it to look and feel. More importantly, the Realtors we work with can start sharing our project with any future prospects.
My Realtor, sensing the buyer may have trouble closing the deal, advised me to add a clause to the contract that made the $10,000 earnest money non-refundable after ten days in escrow.
You can read this one hundred times, still there is no substitute for experience. You will make mistakes and pay a tuition for them. Commit to learning the fix n’ flip process! Go gettem Tiger.
Fix and Flip Deal
Make an offer on a Distressed Property
What Marty Considers Profitable Enough To Do The Deal
15-18% of the Net Capital invested in a project
$25k profit (minimum)
i.e Purchase price 150 + rehab 50 =
total 200k x .15 = $30k profit
Continue MARTY Vid #1: Laters (note 2 self)
4 Flipping Boxes
1. Acquisition (find and analyze your deal)
2. Rehab (the house)
3. Sales (sell that house)
4. Capital (find money for your deal)
Acquisition: Wholesalers(title rep. introduce to guy who buys distressed property), realtors(find them – distressed property listing/short sale and auction rep(when market demands it
Rehab: Project Manager, contractors(sometimes raise their prices. Q: is it justified i.e market conditions, find them in the Menards/Home Depot parking lot & you can get referrals from other good contractors i.e plumber knows an electrician, inspectors(before purchase & also perhaps when all work is done)
Sales: Realtor, designer(latest styles and trends/stager(furniture and accent items), title rep(puts house in escrow 1nce you have accepted offer
Capital: Hard $, Private $, Banks
Be Likeable, humble(learn and listen), decisive(when working w/wholesalers(close on the deal)/realtors), pay on time.
How to Estimate Rehab Costs and Determine ARV
What Type of Rehab?
Basic – paint, flooring, fixtures, landscaping, appliances.
Advanced – Basic + cabinets, countertops, mechanicals (HVAC, roof, windows)
Reconfiguration/Addition – Advanced + floor plan changes i.e moving kitchen sink, bedrm/bathrm, or square footage addition
Paint interior $.85 – 1.00/sq. ft
Paint exterior 1.00 – 1.25
Carpet $10-12/sq. yard
Door hardware $30/door
Sod $1.50/sq. ft
Countertops(granite) $35/sq. ft
Roof(shingle) 8,000-10,000; depends if tear-off. i.e size: 1,100sq.ft = $6,600
Windows 300 each
Floor plan changes $20-40/sq. ft
Bath addition $5,000-7,000 (when doing additions ur also remodeling existing, landscaping,
Bed addition 2,500-4,000
Square Footage $90-100 sq. ft (should be pretty safe using this number, manage your crews well)
How to Estimate Rehab Costs
1. Demo (do only what is needed)
2. Rough carpentry/Electrical/Plumbing/Insulation
4. Mechanical installation (HVAC/Furnace)
5. Finish Carpentry (trim, baseboard and window casings)
6. Paint (includes and spray paint)(some prefer to spray trim prior to installation, which is fine if you can schedule it in.
7. Flooring – hardwood or laminant everywhere. Carpet in bedrooms. If hardwood floors, finish just before you put house on the market for sale.
8. Cabinet/Countertop – install in the kitchen, bath and laundry room toward the end of the project. Plumber can then connect to sinks, showers and drains.
9. Finish electrical/plumbing – install lighting and plumbing fixtures.
10. Appliances – install last. That way they don’t get stolen.
11. Final Walk Through – Realtor/wife/anal retentive friend to look for anything that don’t look right.
All construction debris and trash removed
All construction containers/trash cans removed
Yard mowed/weeds and leaves removed
Snow removed – (walkways and driveway)
Doors open/close/lock smoothly
All construction debris and trash removed
Touch up paint for interior/exterior (1 gallon each)
(3) extra keys in kitchen drawer
(2) garage remotes in kitchen drawer
Doors open/close/lock smoothly
Windows open/close/lock smoothly
All outlets/light switches functioning
All light fixtures turn on/off
Light bulbs for all fixtures
Faucets turn on/off without dripping
Hot/Cold for all faucets are correct
Heat set to 60 degrees A/C set to 80 degrees
Appliance clocks programmed
Heat/AC thermostat programmed/functioning
Door/s open and close smoothly
Sometimes have them come back a few days later. Major renovations tend to have dust lingering for 2-3 days.
Rough and Final Inspections
Every city/county/state has different requirements. Find out when and what to inspect. If doing a Basic Rehab, and no permits are pulled, then you won’t need an inspection.
Typical items to meet building code:
– Plumbing, electrical, carpentry, insulation, structural changes, foundation, windows.
During final inspection makes sure everything is functional.
1. Demo(rip siding off – can be time consuming and expensive, start right away)
2. Paint – don’t paint same color as neighbors, choose a complimentary color.
3. Landscaping – green grass, shrubs and weed free mulch/rock. Clean and simple. Mow grass/weekly.
4. Garage(sometimes floor is cracked and have to tear it out, replace driveway). Free of any junk. Trashcans on the side. Typically same color as house and floors get sprayed.
Get exterior done fast. Gets the neighbors buzzing about the beautiful property(especially the front) and a buyer may materialize.
Today’s buyer will pay extra for i.e custom cabinets, hardwood floors and granite countertops. But they won’t pay extra for a roof that don’t leak. Everyone expects these to be fully functional:
- HVAC (heating, ventilation, AC)(If new roof, may need duct work (+ $3,000). If running duct work and gas lines do a meet w/HVAC/drywall/plumber
- Electrical (especially during a reconfiguration) pg36
- Foundation. I.e Addition build without proper footings. Sat below grade and water could seep into the house. I.e Bowing and cracking. If they leak a lot, need drain tile and sump pump system and maybe wall repair… Negotiate lower price w/seller. Could be up to $26k. Get foundation done quickly.
- Roof – look for discoloration, deterioration, curling. Use a ladder or hire an inspector if needed. Get roof done right away.
How to Estimate Rehab Costs
1. Pay a G.C/p.m/specific trade, to walk through the house w/you. (especially if you are totally green so you can plug their #’s into your spread sheet)
2. With the square footage and bedrm/bathrm count, it’s possible to do some basic estimating.
3. Find experienced fix n’ flip investor & ask them what they think. They might have guys that you can use.
You will encounter unexpected things i.e septic tank i.e demo brick fireplace (in order to get cat pee smell out)
How to determine ARV (look at comps from MLS)
1. Inside Subdivision (if there’s 6-10 stop there, if 0-2 then look…)
2. Outside Subdivision
- Feature Analysis (pool, carport/garage, bed/bath, ranch/2story – Wisconsin, ranch/2story not that big of a deal)
- Reverse Compiling (look at highest comp in subdivision & if not enough, out of subdivision – aiming for that standard in your house)(Price/sq. ft – highest comp has 1600 sq. ft & your house has 1400 sq. ft)
- Active Listings (look on internet & view the properties/pics to get ideas for design, features, prices, how long on market, low/high comp per sq. ft, etc.) Look at pending/closed listings. If only 1 active listing in the subdivision – that’s sign of high demand. Know the ‘red hot’ price point in your area, where the homes are flying off the shelf. Price your house based upon demand. If high demand, maybe up the price for a few weeks to see what happens.
What to Look for Before Buying a Fix n’ Flip
- Look at neighbors/neighborhood. What do they have? Huge lots, nice yards/grass is cut, no eye soars that will detract from yours.
- Is your house adorable/desirable, what style is it?
- What type exterior? Roof condition/tear off, replace? Windows ($350-400 to replace, maybe 10k)/how’s the window’s inside condition? Siding needs replace/power wash/paint? Cedar shake gables replace, maybe 2-3k. Anything wonky i.e additions on the house obstructing access to garage/permitted and built correctly? Any other additions/breezeways built correctly? Or you may have to tear down and start over/VERY Expensive. Total for siding could be 3-4k.
- Interior. Nice open concept? Lots of light coming in through windows, once take down curtains? Kuwel fireplace? Replace flooring? Nice size bedrooms? Bathroom/kitchen in style? Are ALL areas heated & have air duct/return? What design changes can you make/island for kitchen/take down wall and have open kitchen to family rm? If there’s money in the budget. Can the addition become a Breakfast nook? Electrical panel been upgraded? Plumbing need update? Cracks/bowing in basement walls?(Might need major work with beams and excavating). Look for moisture areas/large vertical cracks. Could be about 25k basement repair!
- Already up to 40-45k just to get house up to structurally sound(basement/windows)! If decide to do roof, could be another 10k! Now we’re up to 55-60k!
- How’s the AC? new/old… replace? Hot water heater?
- Already up to 55-60k, which does NOT include remodeling the bath/kitchen.(and maybe the hallway?)
- Do comps have 2 baths? Then your house needs to have 2 bath, 1 being Master bath. If it only has 1.5 bath, then will have to create 1 either upstairs or downstairs.
- Cosmetics. Blow a wall out and up to code w/additions, could be another 60-65k. That’s 120-135k to remodel this house!!
- Purchase price $215k, 130k to remodel, ARV about 350k, there’s NO Margin whatsoever in this deal/house. It’s a pass.