Tag Archives: renovate or sell

The Cost of Selling Your Home Without a Real Estate Agent

Everybody likes to save a little money. So when Rossana was ready to sell her condo a few years ago, she figured she could save some cash by selling it herself — without using a real estate agent. After all, her property was in a hot real estate market and she thought: “How hard could this be?”

Rossana, a busy mother of one, had become overwhelmed juggling her daily responsibilities in addition to managing her rental condo. She had grown tired of being a landlord and dealing with a revolving door of tenants — so when the family currently renting it was moving out, she decided that it was time to sell.

In hopes of saving some money, Rossana chose to sell her condo herself instead of working with a real estate agent. She thought: How hard could it be? She figured it would be easy to just hire a company that charges a flat fee to photograph the condo for her and advertising the property online. After all, she could handle the rest of the details herself. Right?

What she quickly discovered was that this approach didn’t work.

Missed Opportunities

“I found the service I used was not the best,” Rossana says. First, she says the service might have turned off potential buyers with unprofessional photos, “Honestly, I could have done a better job if I had done it myself.”

Second, when it came to marketing her property, Rossana says the marketing plan wasn’t aggressive enough to expose her condo listing to a large population of potential buyers. “My condo just didn’t get the same visibility if it would have had on MLS.”

Her condo was not widely promoted, and the service she used was not authorized to advertise on Realtor.ca (also known as MLS), which is many Canadians’ first stop when starting their home search.

Low Buyer Confidence

Rossana found buyers who had real estate agents wouldn’t come to view her property since she was selling it herself. “I think they lacked confidence that the sale would go through, or that it would be a complicated process because I didn’t have an agent.”

While she wasn’t getting a great deal of interest, Rossana still had to be on-site for open houses over the weekends. “I was living at the other end of the city at the time, so the commute was terrible. It was so much work, but I wasn’t getting much traction.”

Less-than Attractive Offers

When offers did get presented, they were far below the listing price. Plus, agents came in very confident with their clients’ offers, and Rossana didn’t feel she had the experience to handle these types of negotiations.

“I felt people were trying to take advantage of me, because I was trying to sell on my own. And I didn’t have the full picture of the market. I didn’t have the background to stand up to those low offers.”

Making the Decision to Hire an Agent

After more than five weeks of trying to sell the property on her own, Rossana decided to list her home with a professional real estate agent, after getting a referral from a friend.

“I immediately saw the difference in having a real estate professional in my corner,” Rossana recalls. “She offered staging, took really nice photos, and her level of professionalism was so impressive. And when there was an offer coming in, she was able to negotiate on my behalf.”

In the end, Rossana sold her condo — about two weeks after hiring an agent — and for a price she was very happy with.

“I really underestimated the amount of time an effort needed to sell a home myself. For anyone looking to sell their home, I highly recommend working with a real estate professional.”

Reasons to Use a Real Estate Professional

Rossana’s experience is a valuable tale for those thinking of taking a DIY approach to selling a home. While there is a cost to selling with a real state agent in the form of commission, the cost to sell without one may be greater.

Here are five benefits to working with a real estate agent:

  1. Market Knowledge. Rossana’s real estate agent knew what comparable condos in her neighbourhood had sold for, and the inventory on the market at the time. This enabled her to have an informed perspective on a reasonable listing price and acceptable end selling price.
  2. Visibility and Presentation. From professional staging to high quality photos, Rossana’s real estate agent presented her home in a highly attractive manner that was appealing to potential buyers. And because she could list the property on Realtor.ca, those looking for properties online could browse the photos and features of Rossana’s condo 24/7.
  3. Administration and Coordination. One of the things that Rossana underestimated was the time commitment required to sell a home privately. Her real estate agent took care of all the showings and open houses, allowing Rossana to be completely hands off until it came time to review an offer.
  4. Professional Real Estate Networks. As an established agent, Rossana’s real estate agent could connect with others working with buyers in the neighbourhood, and present the property to those in her network, further widening the net of potential purchasers.
  5. Negotiation Skills. Rossana’s real estate agent had significant experience negotiating deals and was in a great position to get Rossana the best possible price for her condo — Rossana didn’t have to do any of the negotiating herself.

Thinking about selling your home? Let Rossana’s story be a reminder of the benefits to working with a real estate professional.

Not sure how to find one or what to look for in a real estate professional? Discover Seven Things to Look for in a Real Estate Professional for some valuable tips.

Source: RoyalBank.com – By Diane Amato February 19, 2019
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The 8 Things You Need To Know To Avoid Losing Money In Real Estate

We all know those people who frequently lament their decision to invest in real estate. Constantly blaming the market, or real estate as an industry, they believe the entire process is predicated on luck and timing, an exercise in chance. For people who have lost money investing, it’s easy to sympathize with them-but are their beliefs regarding results being beyond their control actually accurate?

Many who bought property between 2001 and 2007 lost money. These were years where prices aggressively increased, largely due to loose lending practices that allowed people to buy homes they could not afford using loans that were only temporarily manageable. Prices continued to climb until these loans reset, at which point houses fell into foreclosure, prices continued to drop, and the overall housing market spiraled into chaos.

But was this truly unavoidable or impossible to predict? Is it justified to live in fear of something like this happening again?

If you believe the answer is “yes”, you’re not likely to get started investing in real estate. The constant fear of an anvil dropping on your head like a looney toons cartoon will prevent you from ever taking any serious type of action. This will also prevent you from having any serious chance of success. The consequences for incorrectly assuming real estate investing is a gamble are grave.

If you believe the answer is “no”, it begs the question-what are the factors that prevent someone from losing money in real estate? Is it just a matter of timing the market? Is it found in getting only great deals? Or are there more pieces to the puzzle?

If we can understand what causes folks to lose money in real estate, we can take preventive measures to ensure it doesn’t happen to us. While no investment is without risk, smart investors understand there are certainly precautions that can be taken to mitigate that risk. In my nearly ten years of investing in real estate I’ve found there are certain steps to take that have a big impact on avoiding the wrong deal. I’ve spent a considerable amount of time listening, interviewing, and speaking with real estate investors. I’ve found patterns in what went well, and I’ve also seen patterns in what led to things going horribly wrong.

The following is a list of the things I’ve noticed often lead to catastrophe. Avoiding these mistakes will greatly increase your odds of real estate investing success.

Negative Cash Flow

If you want to make money in real estate, you should plan on holding an asset for a long period of time. Good things happen when real estate is owned over the long haul. Loans are paid down, rents tend to increase, and the value eventually goes up. The number one problem preventing investors from winning the long game is buying a property that loses money every month.

Don’t buy real estate assuming the price will go up and you can sell it later (this is an issue I’ll cover a little later). Nobody knows what the market is going to do. This is why trying to time the market is a bad strategy to base your decisions on. Instead, only buy properties that generate more income each month than they cost to own. By avoiding “negative cash flow”, you are protected from market dips or stalling home prices. You only lose money in real estate if you sell in unfavorable conditions or lose the asset to foreclosure. Ensuring you earn positive cash flow each month will put the power for when you exit the deal back into your hands.

For more information on how to analyze a rental property, click here.

Lack Of Reserves

If lack of cash flow is the number one culprit for losing money in real estate, lack of reserves is number two. Too many variables are involved in owning rental property to be able to accurately determine when unexpected expenses will hit, and how much they’ll be. Whether it’s an HVAC unit going down, a roof leak, or a water heater busting, there will always be something you need to repair or replace.

None of this takes into consideration evictions, destroyed property, and more. While you’ll eventually end up positive if you hold a property long enough, there will be times when your bleeding cash. Having a sufficient amount of reserves during these times is crucial to your success. Conventional wisdom suggests keeping six months of expenses in reserves for each property. While this number can vary for individual people with unique financial situations, make sure you have enough set aside to comfortably weather the storm when Murphy’s law hits.

Following The Herd

As Warren Buffet stated, “Be fearful when others are greedy and greedy when others are fearful”. While many of us know this to be true, the fact remains too many people still follow the herd. Many bad decisions are made when they are based on what others are doing, rather than basing them on sound financial principles.

It may be tempting to follow the herd, but understand it is a false sense of security. Just because everyone else is buying doesn’t mean you should too. In fact, it may be the opposite. The best deals I ever bought were purchased when no one else was buying. The only reason they were for sale is because someone else lost them who originally bought them when everyone else was buying! Make decisions on fundamentals like cash flow, ROI, equity, and a solid long term plan-not on what you see everyone else doing.

Betting On Appreciation

This is the number one reason I’ve seen for those who lose properties to foreclosure. Amateurs buy a house assuming it will go up in value and they can sell it later. Professionals buy under-valued properties in solid locations that produce positive cash flow. This gives them the flexibility to exit the deal when it makes financial sense to do so. When someone bets on appreciation, doesn’t have positive cash flow, and doesn’t keep accurate reserves, they are gambling on the market continuing to rise to bail them out from a risky investment.

Buying in Bad Neighborhoods

While we all know the first rule of real estate (location, location, location), there is also still the temptation to buy a questionable property in an area that seems too good to be true. When it seems too good to be true, it usually is. While homes in undesirable locations can look great on paper (read, in a spreadsheet) the reality is they almost always look better in theory than they’ll be in practice.

When you buy in an area where good tenants won’t want to live, you’ll be forced to rent to less than desirable tenants with lower credit scores, less reliable income streams, and a worse rental histories. The cons just won’t justify the pros. Having to pay for multiple evictions, destroyed homes, and theft will cause even the most stalwart investors to lose their cool. Avoid the temptation and only buy in areas where reliable tenants want to live.

Underestimating Rehab Costs

Whether you’re a total newbie or a seasoned pro, everybody makes this mistake. Experienced investors assume their rehabs will go over budget and over schedule. They prepare for this by writing these overages into their budgets and planning for them accordingly.

There is no use in running out of money with 10% of your rehab left to go! You can’t rent out the property and can’t generate income unless 100% of the property is ready to be dwelled in. Don’t be the person who makes the mistake of buying a property then running out of money before it’s ready to be rented out. Don’t bet on contractors, don’t bet on estimates, and don’t bet on numbers in a spreadsheet. Make sure you bet on yourself and have enough money set aside to finish your rehab, even if you’re told that’s unnecessary.

Planning on Doing The Work Themselves

All too many people have assumed they would save on a deal by doing the rehab work themselves rather than paying someone else. While there are some people who can pull this off, it’s a mistake to assume you can pay too much for a property, or not have enough in reserves to pay for the work, simply because you plan on doing the work yourself.

It’s been said “The man who represents himself in a court of law has a fool for a client.” The same can be said of the person who assumes they’ll do the rehab work themselves to avoid budgeting correctly. You don’t know which direction your life will take, what time you’ll have later, or what unexpected problems will be uncovered once you start the rehab. If you’re able to do the work yourself, consider that icing on the cake-just don’t count on it.

Failing to Educate First

The final lesson I’ve learned from those who have lost money in real estate is that they didn’t understand what they were getting into until after they had committed to purchasing a property. Certain decisions like buying a property, starting a rehab, or putting money into a deal, can’t be taken back once they are made. The time to realize you’re not prepared, or it’s the wrong deal, is before you pass the point of no return.

If you want to invest in real estate, that’s great! Start by educating yourself now, before you’re committed, then use that information to help you make the best choice possible. I wrote the book “Long Distance Real Estate Investing: How to Buy, Rehab, and Manage Out of State Rental Property” to help save others money by learning from my mistakes. I document my systems, strategies, and the criteria I use to make my own decisions so others can avoid catastrophe. This is just one example of ways you can invest a very small amount of money to save yourself thousands of dollars in mistakes.

Reading articles like this show a propensity for avoiding mistakes and saving money. I encourage you to read as much as possible before jumping in. Other resources include websites like BiggerPockets.com, podcasts, and online blog sites where you can learn from the wisdom of others.

No investment is without risk, but that doesn’t mean we need to live in fear. Start by avoiding the eight mistakes I’ve outlined here and you should be well on your way to growing wealth through real estate.

Source; Forbes.com –Real Estate

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20 Common Home ‘Renovations’ That Can Accidentally Lower A House’s Overall Value

When it’s time to sell their house, a homeowner will want to do everything they can to increase its market value. Of course, they’re aiming to turn the best possible profit, so that means they’ll need to ensure their home is in pristine condition when realtors bring around potential buyers.

You’d think a home with all the latest bells and whistles would be a surefire target for buyers, but the truth is there are plenty of upgrades that actually decrease a home’s value—and therefore make it far less marketable than comparable listings. You’ll never guess some of the ways putting money into your home can actually work against you!

1. Fancy light fixtures: While you might think adding dramatic touches to your home’s decor would make a listing more appealing, it can actually turn potential buyers away. If the light fixtures don’t match the style of the home, it can be a huge turn-off.

2. Wallpaper: Wallpaper is notoriously difficult to remove, and sometimes the choices in patterns can be a little too “in your face.” Instead of fancy designs, go with neutral paint instead. This allows the buyer to envision their own decorating—and it makes for an easier sale for you!

3. Textured walls: As with wallpaper, ornate textures on walls and ceilings can be a real pain to remove. Instead, check out textured wall decor; it’s far easier to remove, not to mention it’s usually cheaper.

4. Unique tiling: Many people have a tendency to lay down tiles that fit their own personal style, but chances are a potential buyer won’t have the same taste. Go with a traditional neutral floor and customize your space with a unique (and easy to remove) rug instead.

5. Carpeting: According to a study, 54 percent of homebuyers are willing to pay more for hardwood floors, which means homes with a lot of carpeting are less desirable. Carpets show their wear earlier, and colors and styles are usually based on personal preferences.

6. Bold paint: Bold and vibrant paint colors usually turn off potential buyers since the hues here are limited to the current owner’s preference. Fortunately, repainting rooms is an easy and affordable fix—and it’s a worthy investment.

7. High-end kitchens: In 2015, the national average for a kitchen remodel was a little less than $60,000, but the resale value was only priced at $38,000. To avoid spending so much on a project that will cost you in the end, only focus on the aspects of a kitchen that truly need sprucing up.

8. Luxury bathrooms: As awesome as a whirlpool tub is, it can be difficult to clean and sometimes hard to step into for some people… and that will deter buyers. A simpler walk-in shower appeals to more people looking to buy a home.

9. Home offices: Modern technology has allowed for more and more people to work from home, and they usually convert a bedroom into a personal work space. However, that can knock as much as 10 percent off a home’s value. If you have to use a bedroom, avoid bulky desks and shelving units so the room can easily be converted back.

10. Combining bedrooms: Combining two bedrooms that are next to each other to create a bigger room is perfectly fine for couples without children, but if they don’t plan on living there forever, the removal of one bedroom will knock down a home’s value.

11. Closet removal: Some people make the decision to turn large walk-in closets into other spaces, but this can actually hurt a home’s resale value. People will always need closets; they won’t always need a larger bedroom or bathroom.

12. Sunrooms: Sunrooms are actually some of the worst renovations to make to a home when it comes to return on investment! Homeowners need to think carefully about how much they’ll actually use the space before splurging on the expensive addition.

13. Built-in aquariums: These aquatic additions might make a home feel modern, but they require a massive amount of upkeep that many potential buyers aren’t willing to put in. Opt for a standard stand-alone fish tank instead.

14. High-end electronics: As cool as in-home movie theaters and other high-end electronic equipment may be, they usually throw off potential buyers who aren’t looking for these types of luxuries. Certain built-in technologies can also quickly become outdated.

15. Swimming pools: Many people might think swimming pools increase a home’s value, but it’s actually the opposite. Sure, if a buyer has children who will use it every day, that’s one thing—but many times, people see pools as money pits!

16. Hot tubs: Just like pools, hot tubs are always a gamble. The constant maintenance can throw off a buyer, and they’re also potential hazards for small children. Portable hot tubs are a much smarter investment if you truly want one.

17. Garage conversions: Some homeowners park in their driveways so they can renovate their garages into custom spaces like home gyms. However, many buyers actually want to park in their garages, not work on their lifting form.

18. Intricate landscaping: Unless the person buying your home is a landscaper who intends to maintain an intricate garden, costly outdoor decor will deter potential buyers. Keep gardens beautiful—but easy for upkeep.

19. Messy trees: No one likes to spend their afternoons raking up massive piles of leaves, but many types of trees will ensure that happens every year. If you plan on planting vegetation, keep in mind which types will create a huge workload come autumn.

20. DIY projects: Many people come up with unique ideas while they’re living in their home, and they put the effort in to make the renovations. However, not everyone is going to want something like an attic bedroom when they’re looking to buy! Keep that in mind.

The takeaway? Don’t over-personalize your living space! Keep it neutral and appeal to as many potential buyers as possible. If you’re putting you home on the market any time soon, don’t make these mistakes!

Share these tips with your friends below!

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Flipping Houses for Profit – Tips for How to Flip a House

Several years ago, I became friends with a young woman who was just getting started in real estate. She became a real estate agent, learned about renovation, and made a ton of money flipping her first house. Thanks to some luck and some serious persistence on her part, she ended up on an HGTV show about flipping houses, where she appeared in several episodes as part of an Atlanta investor team.

The show made it look simple: find a cheap home for sale, put some money and sweat equity into fixing it up, then resell it for a huge profit. So I asked her if flipping houses was as easy as it looked on TV.

She laughed and shook her head. “We make it look easy,” she said. “But it’s risky, backbreaking work. It can be fun, but if you don’t know what you’re doing, you’re sunk.”

So how do you know if you’re up to the challenge?

What Is House Flipping?

House flipping is when real estate investors buy homes, usually at auction, and then resell them at a profit months down the road. Can you make money doing this? Yes. Can you make a lot of money doing this? Yes. But you can also lose everything you own if you make a bad decision.

Risk vs. Reward

Imagine buying a house for $150,000, investing another $25,000 in renovations, and then…nothing. No one wants to buy it. You now have to pay for your own rent or mortgage, plus the mortgage for your flip property, as well as utilities, home insurance, and property taxes. You might also have to pay for home staging and realtor fees when the house finally sells. All of this cuts into your potential profit.

According to CNBC, house flipping is the most popular it’s been in a decade, yet the average return for flippers is lower than in previous years. Thanks to a hot housing market that’s raising prices, low inventory, and soaring rents (which drive even more people into home buying), it’s getting harder to make huge profits.

The average gross profit on a house flip during the third quarter of 2017 was $66,448, according to ATTOM Data Solutions. That’s more than many people make in a year, and it lures plenty of newcomers who dream of quitting their day jobs and becoming full-time investors. However, the investors making this much money really know what they’re doing — and even they still go bust sometimes.

RealtyTrac found that in 2016, 12% of flipped homes sold for break-even or at a loss before all expenses. In 28% of flips, the gross profit was less than 20% of the purchase price. According to RealtyTrac senior vice president Daren Blomquist, 20% is the minimum profit you need to at least account for remodeling and other carrying costs.

House Flipping Requirements

If you’re still reading, it means you’re relatively unfazed by the high risks of house flipping. Here’s what you need to get started.

Great Credit

You can’t get into house flipping with lousy credit, end of story. Unless you have enough cash to pay for a home and all necessary renovations, you’ll need some kind of loan. And lending standards are tighter than they used to be, especially if you want a loan for a high-risk house flip.

Your first step is to check your credit report to find out your score. Federal law allows you a free credit report from each of the three national credit reporting companies every 12 months, so this won’t cost you anything. You can get your free credit report from AnnualCreditReport.com or by calling 1-877-322-8228.

If you don’t have great credit, it’s time to start building a good credit score now. Pay your bills on time, pay down your debt, and keep your credit card balances low. There are plenty of other ways to improve your credit score, so take the time to do everything you can. The higher your credit score, the better interest rate you’ll get on a home loan. This can save you thousands when you start house flipping, freeing up more of your money to invest in the house itself.

Last, make sure you know what hurts your credit score. For example, taking out too many credit cards at once lowers your score. You don’t want to do anything to hurt your score in the months before you apply for a loan.

Plenty of Cash

If you want to flip a house, you need cash. New investors get into financial trouble when they buy a home without a sizable down payment, then use credit cards to pay for home improvements and renovations. If the house doesn’t sell quickly, or if renovations cost more than expected, suddenly the investor is in way over their head.

Don’t be that guy. If you want to flip successfully, you need plenty of cash on hand. Most traditional lenders require a down payment of 25%, and traditional lenders are where you’ll get the best rate. When you have the cash to cover a down payment, you don’t have to pay private mortgage insurance, or PMI. Most PMI costs between 0.5% and 5% of the loan, so having to pay this each month can really cut into your profits.

Loans for flips also have higher interest rates. According to TIME, most investors take out an interest-only loan, and the average interest rate for this type of loan is 12% to 14%. In comparison, the interest rate for a conventional home loan is typically 4%. The more you can pay in cash, the less interest you’ll incur.

There are several ways to build cash in your savings account. Use an automatic savings plan to make saving money each month effortless. Or find ways to earn extra money on the side and then use this money to build your cash reserves for an investment.

If you’re buying a foreclosure from a bank or through a real estate auction, another option is to take out a home equity line of credit (HELOC), if you qualify. If you have enough in savings and manage to find a bargain-priced home, you can buy the home and then take out a small loan or line of credit to pay for the renovations and other costs.

What Makes a Good Real Estate Investment?

Not every house makes a good flip. Just because a home is selling for a rock-bottom price doesn’t mean you can put money in it and automatically make a fortune. Successful flippers are very discerning about the homes they choose to invest in. Here’s what should you look for in a potential house flip.

Great Location

Expert house flippers can’t stress this enough. Find a home in a desirable neighborhood or one that’s on its way up. You can improve a house all you want, but it’s next to impossible to improve the personality and safety of a neighborhood on your own.

Start by researching local cities and neighborhoods. Look for areas with rising real estate sales, employment growth, and other indications the town is thriving. Avoid neighborhoods with a high number of homes for sale; this could be a sign of a depressed local economy or a sign that neighbors are leaving due to crime or development.

Next, research the safety of each neighborhood you’re considering. Homes located in or near high-crime areas will be next to impossible to sell at a profit. Use crime mapping services like Crime Report and Spot Crime to find out what’s happening in the neighborhood. You’ll also want to check the National Sex Offender Public Website to see if any registered sex offenders live near the home.

According to Fortune, in 2016, flippers in the following cities saw gross profits of 80% or more of the price they paid for their homes:

  • East Stroudsburg, Pennsylvania (212.1%)
  • Reading, Pennsylvania (136.4%)
  • Pittsburgh, Pennsylvania (126.8%)
  • Flint, Michigan (105.8%)
  • New Haven, Connecticut (104.8%)
  • Philadelphia, Pennsylvania (103.7%)
  • New Orleans, Louisiana (97.6%)
  • Cincinnati, Ohio (88.5%)
  • Buffalo, New York (85.1%)
  • Cleveland, Ohio (83.8%)
  • Jacksonville, Florida (81.8%)
  • Baltimore, Maryland (80.8%)

That said, there are also some markets that show signs of over-investment. This means inventory is so low and demand is so high that flippers are paying above-market prices for homes, which can drastically reduce net profit. According to Fortune, these ultra-hot markets include:

  • San Antonio, Texas
  • Austin, Texas
  • Salt Lake City, Utah
  • Naples, Florida
  • Dallas, Texas
  • San Jose, California

If you’ve found an affordable home in a neighborhood that’s on its way up, your next step is to research the local schools. Homes in good school systems sell faster, and command higher prices, than homes in mediocre or poor school systems. Use websites like GreatSchoolsSchoolDigger, and Niche to see rankings and reviews of local schools.

When considering an investment home’s location, you also need to think about its proximity to your primary residence. Remember, you’ll be working on this house daily in the weeks and months to come. Don’t invest in a house too far away from where you live or work; you’ll spend more money on gas and it will take longer to fix up.

Sound Condition and the Right Renovations

If you’ve ever done a home renovation project, you know some nasty surprises can be lurking just below the surface. And nasty surprises like black mold or a cracked foundation can ruin you financially.

Look for structurally sound homes, especially if you’re considering buying an older home. You may not have the opportunity to have a home inspected, especially if you buy it at a real estate auction. So you need to learn what to look for or bring someone knowledgeable about building, electric, and plumbing to look at the home with you and determine if it’s a good buy.

Focus on homes that only need some quick updates to resell.  Refinishing kitchen cabinets, adding new hardware, fixing up the yard, and updating paint and carpeting are all relatively inexpensive projects that can transform a home.

What should you avoid? A house that has mold, needs a roof replacement, or needs rewiring will require some serious time and cash to update and sell. Make sure you know which updates and repairs you can afford to make, which repairs you can’t afford, and which home improvements will increase the selling price of the house. Bear in mind that some home improvement projects can decrease resale value.

When you estimate the cost of any job, experts advise adding 20% to the final total as it will always cost more than you think it will.

Last, when considering a home, don’t forget to factor in the cost of building permits. These can cost anywhere from a few hundred up to several thousand dollars, depending on the type of work involved and the city you’re in. Not accounting for permit costs is a rookie mistake that can quickly ruin your renovation budget.

Market Value

Make sure the price of the home is below its value on the local market. Try to buy the worst house in a great neighborhood, versus the best house in a lousy neighborhood. The worst house in a great neighborhood has nowhere to go but up in value, due to the value of the other homes in the area.

Although you can search the web and see millions of foreclosed homes for sale, never buy a home without seeing it in person. This is the biggest mistake new flippers make. Keep in mind that an online photo gallery only tells part of the story. Out-of-date photos, awful neighborhoods, and black mold are just a few of the horror stories of foreclosed homes found online. Always investigate a property yourself before you decide to buy.

When you buy a home to flip, it’s important not to over-value the home by investing too much in renovation. You want to improve it just enough to make a healthy profit and keep it on par with what’s selling in the neighborhood. If you put too much into the home, you won’t make your money back.

home made from wood with word written market value

How to Flip a House

If flipping were as easy as finding a cheap house online, buying it, and selling it for a profit, we’d all be real estate billionaires. You must educate yourself before you even start looking at homes. Here’s what you need to know.

1. Learn Your Market

First, research your local real estate market. Where do people want to live right now? What kind of house do people want to buy right now? Don’t speculate about up-and-coming neighborhoods. Remember, you want this house sold fast.

2. Understand Your Finance Options

Next, become an expert on home financing options. Will you buy a house with cash? Will you apply for a home mortgage loan or take out a HELOC? Make sure you understand the ins and outs of home financing before you apply for a loan or make an offer on a house. This will allow you to make the best decision for your circumstances.

3. Follow the 70% Rule

Analyze how much house you can afford and how much you can afford to lose on any deal. Experienced flippers follow the 70% rule when analyzing how much they’re willing to pay for a house. This rule states that investors should pay no more than 70% of the after repair value (ARV) of a property minus the cost of the repairs needed.

Let’s say a home’s ARV (or value after necessary repairs) is $200,000, and it needs $30,000 in repairs. The 70% rule states that you should pay no more than $110,000 for this home:

$200,000 (ARV) x 0.70 = $140,000 – $30,000 (repairs) = $110,000

This rule is a good guide to follow when you first get into house flipping as it can help you avoid overpaying for a home.

4. Learn to Negotiate

The less money you invest in a house, the more money you can earn during the flip. Good negotiation strategies will help you effectively haggle with contractors and other workers.

5. Learn How Much Average Projects Cost

Do you know how much it costs to recarpet a 1,000-square-foot home? Rewire a house? Build a deck? Landscape a yard?

Every project is different, but with some experience, you can learn how to estimate the costs of many home renovations and get an idea if a particular home is a good buy or not. One of the best ways to build your experience with this is to do some renovations on your own home. This can also give you a general idea of the type of projects you like to do and which projects you’re better off hiring out.

Know which home improvements increase a home’s value and focus on these projects first. These might include upgrading kitchen appliances, repainting the home’s exterior, installing additional closet storage space, upgrading the deck, and adding green energy technologies.

6. Network with Potential Buyers

Network extensively and talk to potential buyers before you even start looking for a house to flip. Do whatever you can to build relationships with future buyers. If you have a buyer lined up when you purchase an investment home, the home sells as soon as the updates are completed.

You can also save money long-term if you take the time to get your realtor’s license, which will enable you to broker your own deals and avoid paying another agent.

7. Find a Mentor

If you know a successful house flipper, ask if they’d be willing to mentor you. You might even want to consider offering this person an incentive to be your mentor.

For example, ask if they’ll mentor you in exchange for a small percentage of your first successful flip. This way the mentor is motivated to tutor you, and you’ll be sure to get a high-quality education. Offering a financial incentive also enables you to approach experts you don’t know personally since being compensated for their efforts will make them more receptive.

8. Research Listings and Foreclosures

Many websites provide foreclosure listings. Some of the most popular include:

You can also find foreclosure listings through real estate company websites like Re/Max. Under search filters, select the option for “foreclosures.”

Your local newspaper is another source of foreclosure listings. Legitimate auctioneers put notices in the legal section of local papers, and you can usually find their specific listings by visiting their websites.

Another way to find foreclosures is through a bank. Search for a particular bank along with the letters “REO,” which stand for “Real Estate Owned.” This simply means that the homeowner no longer owns the home; the bank does. This search will take you directly to each bank’s foreclosure listings.

Once you find a home you want to buy, check out its background with BuildFax. For $39, BuildFax provides a comprehensive background check on a home. You can review extensive details about the home’s history, including repairs, remodeling, and additions. This can help save you money.

For example, let’s say you want to buy a home whose listing indicates its furnace was replaced 10 years ago. When you run a report on BuildFax, you learn the furnace is closer to 20 years old. You can now go back to the seller and negotiate a much lower price.

9. Make an Offer

Once you find a home you like, it’s time to make an offer. If it’s a great house selling for a low price, you might have competition. For many flippers, flipping is a full-time job, and they will likely know about this house too. You can sneak by the competition by targeting a neighborhood and going door-to-door making offers.

Before you make an offer, make sure you know the highest price you can pay for a house and still make a profit. This includes your estimate for repairs, interest, and taxes. Remember to pad your estimate by 20%. If the homeowner or bank won’t sell to you for this price, walk away. It’s better to keep looking than risk going broke from a bad investment.

10. Find Good Contractors

If you have some solid DIY skills, you might opt to do some or most of the renovations yourself. This can save you a significant amount of money – if you know what you’re doing.

Knowing when to DIY and when to hire a contractor is crucial. You should only tackle projects you’re sure you can do well and on budget. For projects you can’t do on your own, you need to find a great contractor.

A general contractor, or GC, is a building professional who manages the whole renovation project and hires their own subcontractors to do the necessary work. Hiring a GC can be expensive; they’ll add 10% to 20% onto what their subcontractors charge when calculating your final bill. However, they can be worth their weight in gold if you find a great investment opportunity, can’t do the work yourself, and are willing to incur the extra expense.

A good contractor can help you avoid costly renovation mistakes and save you a significant amount of time on a project. This means you can get the house up for sale faster and make fewer mortgage payments. If you’re flipping a house while working a full-time job, hiring a GC is probably a necessity; someone has to be available at the house to oversee the work at least part-time, or the project will never get done.

A general contractor will also be in charge of obtaining the necessary building permits. This means their name will be on every permit, and they’re responsible for making sure the job is done right for every inspection. Make sure to apply for permits as soon as the sale is final to save time and get the process moving.

Start building a network of contractors you trust, including plumbers, electricians, and landscapers. Services like Angie’s ListPorch, and HomeAdvisor can help you find reliable professionals in your area. When you interview a contractor, ask yourself the following questions:

  • Did they arrive on time? Contractors who are habitually late will waste your time and slow up your renovation project.
  • Do they have quality references? Ask for references and call them. If a contractor doesn’t provide references, don’t waste your time dealing with them.
  • Did they reschedule your appointment multiple times? Again, if they have a problem with time management, it will affect your renovation.
  • Are they organized? Disorganization wastes time.
  • Can they supply a professional, accurate bid? Any bid they provide should be detailed and on paper. A verbal quote and a handshake won’t cut it with a flip, at least at the beginning of a relationship when you’re just learning whether you can trust this person.

It’s a smart idea to start building a network of quality contractors before you make an offer on a house. Remember, it can take a long time to find good help, and you don’t want to start this process after you invest in a home and are making two mortgage payments each month.

Keep in mind that most experienced flippers try to have a home bought, renovated, and relisted in 90 days. That’s a quick turnaround time, and for your first few flips, it might be out of reach. But the longer your home is tied up in projects, the less profit you stand to make; that’s why it’s so important to carefully weigh whether you should do the work yourself or hire help. Doing it yourself might save you money upfront, but if it takes you three times longer than a professional, it might not be worth it.

11. Relist and Sell

Many flippers end up listing their homes with a realtor. Realtors eat and sleep real estate, have access to buyers, and can list your house in the Multiple Listing Service (MLS) database. They also know the current market fluctuations and have the skills and network to get you the best price quickly.

You can also choose to sell your house yourself. You’ll save money in realtor fees, but in some markets, you might end up waiting a long time for the house to sell. In addition, listing and showing a house takes time. If you can’t be available every time someone wants to see the house and you don’t want to host open houses, working with a realtor might be the best choice for you.

Final Word

There’s no doubt that flipping houses is a risky business. If you make smart decisions, you can make a lot of money flipping. But you can also lose everything if you make a bad investment.

Before you get into the world of house flipping, do your research to make sure it’s right for you. Books like “The Flipping Blueprint: The Complete Plan for Flipping Houses and Creating Your Real Estate-Investing Business” by Luke Weber can tell you everything you need to know to get started and avoid some rookie mistakes.

Have you ever flipped a house? What was your experience like? What do you wish you’d done differently?

Source: Home Value Plus – By Heather Levin  May 23, 2018  –  

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Seven Renovations That Could Backfire and Hurt Your Home’s Value

If you live in an area where homes are selling like hot cakes, you may be feeling exceptionally confident in the value of your property. And as a result, you may be considering a home upgrade you’ve been dreaming of for years. Perhaps you want to add a pool, or maybe you want to add more square footage to your home. Or maybe you’re just aching to do something because you’ve been watching way too much HGTV.

Before you dip into your savings account or apply for a home equity loan, experts say you should think long and hard about your financial investment and your choices. Just because a specific upgrade seems like a good idea right now doesn’t mean it will pay off later. Plus, there are some upgrades that many homeowners regret almost instantly, either because they wind up overspending or because were a bad idea in the first place.

Seven Home Improvements You May Live to Regret

Home remodelers, beware. Spending money to “upgrade” your home doesn’t always pay off, and it could even hurt your home’s value in the long run. Here are some upgrades the experts suggest you steer clear of:

#1: Garage conversion

A garage conversation can seem like a good idea if you need more living space and don’t mind parking in the driveway or street. However, this remodeling project comes with plenty of risk. Not only are garage conversations often done poorly and in a way that makes them look obvious — and awkward — but you can face problems if you remodel your garage without getting proper permits.

Vincent Nepolitan of Planet Home Lending points out another potential problem: When you go to sell, you may find a more limited pool of potential buyers. Not having a garage for buyers to park their vehicle can limit the number of people you get through the door, thus preventing you from getting the sales price you want for your home. This is especially true in areas where all the neighboring homes have garages, Nepolitan says, and in areas with hard winters or sizzling-hot summers.

#2: Converting a bedroom for another purpose

With more people working remotely than ever before, it may seem like a good idea to convert a spare bedroom into an office. This can be a good idea if you only make superficial upgrades like replacing a bed with a freestanding desk. But there could be financial consequences if you pour a lot of resources into the renovation or make structural changes — converting the closet into a built-in desk area, for example — so the room no longer qualifies as a bedroom afterward.

The reason for this? Homes with more bedrooms can fetch a higher sales price and tend to attract a larger pool of buyers, says Georgia-based real estate investor Shawn Breyer. A buyer with two children might insist on having three bedrooms, for example, and be unwilling to consider any two-bedroom homes. They might also be willing to pay a premium to secure a home with a fourth bedroom they could use as a guest room.

The bottom line: When it comes to a home’s value, the more bedrooms the better — so don’t think long and hard before getting rid of one.

#3: Adding a pool

It’s easy to think having a pool would make your life more fun and more relaxing. After all, what’s better than spending a lazy day floating in the water with a cold drink or a good book?

Unfortunately, the reality of pool ownership doesn’t always line up with expectations. Pools may be great for summer, but they’re often expensive to maintain over the long haul, says CEO of Patch Homes Sahil Gupta, and require a lot of work, from adding chemicals to cleaning and maintenance.

And, you may not find your pool quite as fun in a few years’ time. Gupta notes that pools tend to go unused during winters and once kids leave the house, and that they may eventually become a safety hazard for grandkids or pets. (In fact, a pool can increase your home insurance premiums.)

Finally, only a limited number of buyers will even want a pool in certain parts of the country, so you might wind up selling your home for less than you wanted or waiting longer for a buyer as a result.

#4: Kid-related upgrades

While pools are commonly added by families with kids, there are other kid-related upgrades homeowners may rush into without thinking them through, says Julie Gurner, senior real estate analyst at TheClose.com. “Some upgrades consumers tend to regret are, for example, linked to children and their temporary place in the home,” says Gurner.

A solid example would be adding a basketball court to your backyard because your child is really into the sport. “Sports courts require maintenance and take up a large portion of the backyard recreation space,” says Gurner. And not every buyer will want a basketball court in their yard when you go to sell.

Before you go through with a costly upgrade that may only be needed for a few years, consider whether there are less permanent and less costly options available.

#5: Trendy interiors

Gurner points out another mistake that’s often fueled by HGTV mania — following fads and planning your home upgrades around what’s currently “hip.” Gurner points to the recent shiplap craze as an example, noting that the wooden-board wall cover that’s trending now may be the “wood paneling of the future.”

Other ubiquitous home improvement trends that could leave you wincing at your choices later on include stainless steel appliances, open kitchen shelves, brass accents, and basically anything that’s shabby chic. When it comes to fashion and trends, whatever’s “in” now is always on its way out at some point.

#6: Textured walls and ceilings

Speaking of outdated trends: Textured walls are so 1980s, but some people who never got the memo still slap a layer of popcorn on before they paint, even if it’s just to match other rooms in the house. But Breyer says that adding texture to walls and ceilings is a mistake — partly because it can turn off potential buyers when you go to sell, but also because it’s expensive to remove if you change your mind.

Breyer says that, most of the time, it costs $1 to $2 per square foot of space to have textured walls refinished with a smooth surface. Plus, you’ll also face the cost of repainting your walls and/or ceilings after the removal is complete.

#7: Over-improvements

Real estate agent Justin Moundas says that over-improvements tend to leave homeowners regretting their choices. “It never pays to be the nicest or biggest house on the block,” he says. “Often people regret investing so much into the home that it can’t be justified in the resale value for the area.”

According to Remodeling Magazine’s 2018 Cost vs. Value Report, some remodeling projects that don’t offer a great bang for your buck include big-ticket investments like backyard patios (47.6% return), a master suite addition (48.3% return), a major kitchen remodel (53.5% return), and the addition of a bathroom (54.6% return).

Each of these projects may help you enjoy your home while you live there, but they may leave you wishing you had spent your money elsewhere if you move within a few years.

If you want a home that’s a lot nicer than the one you have now, Moundas says upgrading to a different home can be a better deal than remodeling. By finding a different home that already has the floorplan and upgrades you want, you can avoid the hassle and stress of remodeling along with runaway costs.

The Bottom Line

If you watch popular real estate shows on HGTV all the time, it’s easy to think that home remodeling projects always pay off. After all, the stars of shows like Flip vs. Flop and Fixer Upper almost always turn bargain basement homes into spectacular investments, mostly by choosing the right upgrades and getting them for the right price.

But real life is not like television. In the real world, home upgrades are usually only a good idea if you plan to stay in your home and pick finishes that would appeal to the masses if you needed to sell.

Before you spend your hard-earned dollars on a pricey remodeling project, ask yourself what your goals are. Do you want to enjoy your chosen upgrades for years to come? Or are you simply following trends and keeping up with the Joneses? Do you absolutely need to upgrade to make your home livable, or could you get by with the home you have?

Be honest with yourself, and you may find a home upgrade is the last thing you need.

Source:  The Simple Dollar –

Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.

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Top five home renovations that increase property value

home renovations, increase property value, Income properties, real estate, real estate wealth, real estate income, Genworth Canada

Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.

#5 Flooring

Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.

home renovations, increase property value, Income properties, real estate, real estate wealth, real estate income, Genworth Canada

#4 Fixtures

Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.

#3 Bathroom

The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.

#2 Kitchen

Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

#1 An Income Suite

No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.

Source: Genworth Canada

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We recommended our contractor to friends and they hated his work. How can we repair this mess?

THE QUESTION

My husband and I recommended a contractor to friends of ours and they didn’t like the work he did. They not only bad-mouthed him but they also refused to pay. Now he’s upset with our friends, our friends are upset with us and we’re upset with our friends. I’m wishing we never recommended our guy (who has always done great work for us) in the first place. Please help! What do we do now?

THE ANSWER

I hear you. Similar scenarios have played themselves out in our lives a few times and, yes, it is upsetting – to the point where I’ve decided my new policy is not to recommend anyone to anyone anymore.

Why bother? It’s a mug’s game! If it works out, fine. But if not – everyone gets upset.

Example: We had “a guy,” and he always did good work for us. So we recommended him to a friend who, as in your case, not only wound up bad-mouthing him but also stiffing him, financially, for the work he did.

She had some story about how he tried to rip her off. Excuse me, we knew this guy for nearly two decades, and during that time he was in our house more or less constantly, like Eldin the painter from Murphy Brown, if you remember that show. Anyway, I/we knew him backward and forward and inside and out and knew he was above board and would never rip anyone off.

Long story short, I am no longer friends with that (ex-)friend.

Now, I’m not saying be like me and turn your back on your friend. But I truly hate it when someone stiffs an honest, hard-working person.

Of course, you can stiff people. That possibility always lurks in the do-work-now-pay-me-later arrangement.

But to me, it’s like “dine and dash” (where you eat in a restaurant then scamper off into the night before the bill comes): it sucks because civilized society is based on people trusting other people not to do that.

Except “reno and dash” is even worse because (at least in the case of my ex-friend) we’re talking not about hundreds but tens of thousands of dollars – money our (former) contractor could have used/needed to put food on his family’s table.

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And that’s serious, a.k.a., not a joke. When you mess with someone’s ability to earn a living, that is a profoundly uncool thing to do.

So I think you’re well within your rights to speak to your friend, to the effect of: “Hey! What’s up with stiffing [name of contractor here]? That is completely uncool, not only in its own right but also because it reflects on me.”

Not only does it reflect on you, (you could furthermore add), “But now I have to deal with it. I have to apologize to him for hooking you up with him in the first place.”

Expect some backlash. I gave a similar speech to my former friend (the one who stiffed our contractor), and it led to a friendship-ending conversation.

I’m not suggesting you follow my example there (I’m always an advocate of hanging on to friends and all loved ones through thick and thin). “Do as I say not as I do” would be my watchwords in this circumstance.

But I wouldn’t let your friend off the hook too easily. Ask yourself: “What kind of person refuses to pay for work honestly, even if perhaps not-so-wonderfully, performed?”

I’ve had people do work for me I wasn’t crazy about, and I wasn’t crazy about their work-ethic either.

Some of them were just unreliable. A guy who built a set of bookshelves for us comes to mind. He was all like, “Tra-la-la, I’ll come at 10 tomorrow,” and then just wouldn’t show up.

But the bookshelves got built in the end, and it never occurred to me to stiff him, to look him in the eye and say: “You know what, the whole experience was a pain and I’ve decided I’m just not going to pay you.”

I think you should seriously ask yourself if you want a friend like that, and beyond that (even though I’m an advice columnist), I’m not going to tell you what to do, except to say: comport yourself accordingly.

Source: SPECIAL TO THE GLOBE AND MAIL

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