No Title

Understanding Repair Estimation

No Author — Wed, 30 Nov 2011 02:43:16 GMT

   If you've looked at any of our amazing deals (and if you haven't, what's wrong with you? Don't you want to make money?), you've probably noticed that the repair estimates we make are very different from area to area.

   Yours should be, too. Let me explain why.

   Although, in a perfect world, we'd all fix up properties as if we were going to live in them-you know, copper roofs, Jacuzzi tubs with rainfall showerheads, and so on-the reality of the investing business is that, in order to make money, we have to do the work that will raise the rents (or minimize the ongoing maintenance) or increase the sales price (or decrease the days on market) by enough to justify the repairs and upgrades.

   Since each property is different, in terms of what "could" be done to it, we've come up with a system that, roughly, tells us what the likely exit strategy might be for any given property, what kind of buyer (retailer, landlord, turnkey rental seller) is likely to buy it from us, and therefore what level of upgrading the property will probably get.

   We base our repair estimates on those assumptions, and thus our pricing, so I thought I'd take a few minutes to outline the details of the system for you.

Neighborhood types and buyer types.

   We, like you, basically deal in 3 different types of neighborhoods in our day-to-day investing. They are:

1.Pure retail neighborhood-Type "A" Properties. These neighborhoods contain properties that can ONLY realistically be renovated and resold, because the neighborhood and price range are such that they'd be unlikely to cash flow as rental. These properties are in bread-and-butter or move-up areas. We call these type "A" properties. Examples of local areas that contain large numbers of these properties are Oakley, North Avondale, Hyde Park, West Chester, parts of Bridgetown, and so on.
2. Low end retail/middle end rental/lease-option neighborhoods�Type "B" Properties. These are starter homes in bread and butter areas that could be retailed, but would also cash flow as rentals or lease/option deals. These are type "B" properties, and there are a lot of neighborhoods that contain them-Forest Park, Delhi, North College Hill, Norwood, Covedale, etc.
3.Pure rental neighborhoods-Type "C" Properties. In these areas, selling to a retail buyer or even lease/optioning is not a reasonable exit strategy. They're lower-income rentals that are purchased purely for the cash flow, or occasionally for resale as turnkey rentals. These properties are type "C", and neighborhoods include Price Hill, Evanston, Madisonville, East Westwood, Fairmount, and others.

   We recognize that these are loose descriptions of neighborhoods; in Northside, for instance, there are Type A, B, and C areas and properties all within a 2 mile radius, and in the same zipcode. In these cases, we sort of rely on 2 decades+ experience in the Cincinnati market to make a determination about the most profitable exit strategies.

   So, anyway, we've also discovered that we have three different kinds of buyers, as categorized by HOW ya'll get repairs done to a property. Interestingly, you loosely divide yourselves by the kinds of properties you buy. Which one are you?

   1.The extreme do-it-yourselfer. If you're in this category, you are literally hands-on with pretty much every repair there is to do to a property. DIYers, sometimes with the assistance of "helpers" (as my dad, a dyed-in-the-wool do-it-yourselfer called them), can be found any given day shingling roofs, hanging drywall, wiring, installing a furnace...not to mention the "easy" stuff like painting. The DIYers are the ones who buy trashed Type c properties from us for a few thousand dollars (no kidding, we recently sold a guy a house for $4,900...he used his credit card to buy ...), put $15,000 in materials in, and rent the resulting property for $700/mo. God bless 'em.

   2.The "all contractors, all the time" buyer. No calloused hands or picking drywall mud out from under YOUR fingernails (or worse, blowing drywall dust out of your nose for a week...if you're one of these, everything from the cleanout to the mechanicals to the cosmetic details are done by paid, licensed contractors, all permits pulled, all details managed by you but not DONE by you. If this is you, you probably retail Type A properties...and good for you for not being a control freak.

   3.The "some me, some them" buyer. Most of our buyers actually fall into this category. If that's you, you leave the hard/dangerous/labor intensive/licensed stuff (wiring, plumbing, HVAC, roof) to contractors with crews and experience, but do the easy/fun/rewarding/ can be done evenings-and-weekends part (painting, hanging cabinets, tiling) yourself. You probably buy Type B deals.

   So given our experience buying and selling umpteen properties (it's in the multiple hundreds, but it cracks me up when wholesalers can say, "I've done 713 deals"-if you can keep track that closely, you're not busy enough finding new deals!), we base our repair estimates on what the most likely buyer is most likely to do to maximize the profitability of any given type of property.

And This is What We Figure You'll Do To Maximize Your Profit...

You probably buy one property at a time, but we buy an average of one a week-some for rental, some for retail, and some to wholesale.

That means that we, like you (unless of course you just let us do all the work and buy our already-evaluated great deals), look at about 20 properties and make about 20 offers to get a deal worthy of offering to you.

   Imagine the challenge of viewing hundreds of properties a year and trying to figure out what you're going to do to them, and thus what the repair costs will be, and thus what the sale price to you can be so that you make lots of money and come back for more, and thus what we can offer.

   That's why we came up with this system for evaluating properties. It makes our life easier, and lets you know HOW we "came up with those numbers". Here we go: see how closely this relates to your actual rehab strategy.

   Type A Properties are meant for retail to a homeowner. We know how picky homeowners are today, and that they don't want to think that they�ll have ANY major repairs for the next 10 years or more. Therefore,

   When looking at type A properties, we do repair estimates as if:
� All work will be done by licensed/qualified contractors
� All cosmetic issues, no matter how minor, will be resolved
� All mechanical systems will be upgraded/repaired as necessary
� Roof replaced unless <10 years old and attractive
� Furnace/ca replaced unless <10 years old
� Windows replaced unless already replaced or historic
� Cast iron soil stacks replaced
� Glass block windows in basement
� Wiring upgraded to minimum 100 amp, circuit breakers, grounded
� Kitchens and baths fully upgraded
� High-end carpet or refinished hardwood; ceramic in kitchens and baths
� "designer" paint colors
� Good landscaping

   Type B properties are more of a challenge, as you might choose to retail, rent, or lease/option them. In any case, the end user is pickier about bells and whistles than renters in lower end areas. To get to the right combination of "pretty", "working", and "affordable", we deal with these properties like this:

In type "B" properties, estimates are as if:
� All mechanical work will be done by licensed/qualified contractors
� All important cosmetic issues will be resolved
� All mechanical systems will be upgraded/repaired as necessary
� Roof replaced with dimensional shingle if more than 15 years old
� Furnace replaced if more than 20 years old or not working, c/a added if necessary
� Windows replaced unless already replaced or historic
� Cast iron soil stacks replaced
� Glass block windows in basement
� Wiring upgraded to minimum 100 amp, circuit breakers, at least 1 grounded outlet per room
� Kitchens and baths upgraded only if in poor condition
� medium-end carpet or refinished hardwood; ceramic in kitchens and baths UNLESS vinyl is in excellent condition
� "designer" paint colors
� Moderate landscaping

   In Type C properties, the goal is rental, which means maximum cash flow, minimum maintenance problems, and the smallest possible up front investment in repairs. At the same time, a house that needs a roof needs a roof, whether it's to be rented or resold.

   After years of watching successful landlords accomplish all of these goals (while not being slumlords), we've discovered that long-term hold properties typically get a different treatment than properties that are intended to be resold within 5 years. Specifically, you folks who buy these properties tend to REPAIR and MAINTAIN rather than replace, where possible.
   And this makes a lot of sense, financially. A new furnace is going to last 15 years and cost $1,500 whether you put it in today or 5 years from now. If you can get another 5 years out of it by spending $300 on maintenance, it makes sense to do so, because what you're effectively doing is setting the depreciation clock back by 60 months. Once that new furnace goes in, it loses $100 a year in value. If you can wait 5 years to put it in, you've effectively saved that $100 a year (and, I hope, ACTUALLY saved the $1,500 replacement cost from your cash flow so that you have the reserves to replace it when it, inevitably, goes out on Christmas day).

   Thus, for these kinds of properties, we estimate a little differently.

In type "C" properties, estimates are be made as if:
� Only mechanical/structural work will be done by licensed/qualified contractors
� Cosmetics will be upgraded only if absolutely necessary, otherwise repaired
� Mechanical systems will be REPAIRED unless missing, failing, or unsafe
� Roof replaced only if 18+ years old, badly degraded, or leaking
� Furnace replaced only if non-functional
� No central air
� Windows replaced only if broken, leaking, or storms/screens not present
� Plumbing replaced only if missing or failing
� Glass block windows in basement
� Wiring upgraded only if missing, service upgraded only if less than 60 amp or on fuses
� Kitchens and baths cosmetically repaired only (refinish tubs, paint cabinets)
� Low-end carpet, refinished or painted wood; ceramic in kitchens and baths only if vinyl is in poor condition
� Neutral paint for easy touchup
� No landscaping-basic yard cleanup and grass planting only

   If you've bothered to read this far, we'd love to have your feedback on whether this system matches up to what you're doing in real life. Leave it here, and don't forget to check out our current money-making deals!

Vena

Our Selfish Reasons for Wanting You to Go to the 2011 OREIA Convention

No Author — Wed, 19 Oct 2011 23:19:08 GMT

It's always in our best interest for our buyers to become more educated about how to buy, fix, and manage real estate so that we can, well, sell you more properties.

The annual OREIA convention is an event that we always tell our buyers to attend, and the 2011 Convention is no different. Here's why:

1. You'll learn to get the money you need to buy properties (from us, preferably) at Jillian Sidoti's all-day "The Money is the Easy Part: presentation. She'll teach you how to legally raise (and pool!) private money so that we never get that, "Oh, it's a great deal, I just don't have the cash" excuse again.

2. You'll learn to rehab more cheaply and more effectively AND sell faster at Robyn Thompson's "How to Turn an Ugly House into a Pot of Gold" presentation. When you don't go over budget, you make more money, and then you buy more houses from us!

3. You'll learn to manage your rentals more or less on autopilot with Mike Butler. When he shows you how to collect ALL of your rents, and do it without breaking a sweat, you'll want to buy more rentals, and we've got 'em

4. We're hoping a few of you will become hard money lenders to give financing to the rest of you. George Antone will teach you how to do that, even if you don't have any money of your own.

5. Chris Johnson will tell you about government grants and loans to rehab the deals we sell you.

6. Shaun McClosky will share how he buys and owns all of his properties free and clear with equity partners--how many of our deals could you buy if you knew THAT?

7. And since the cost of the entire event, including the pre-convention workshops, is less than $200, you won't spend as much as it costs to BUY some of our houses, the way you do at other events.

Vena recommended, Drew approved, and it's all at www.OREIAConvention.com...

P.S. We'd really like you to AVOID seeing Dwan Bent-Twyford, who will teach you to do what we do, and Marko Rubel and Peter Kolat, who will teach you to become killer marketers and find your OWN deals, and Dave Alexander and Joe McCall, who will teach you how to flip pretty houses with no money and no credit. Thanks.

Fun With a Purpose and a Realistic Game Plan

No Author — Thu, 16 Dec 2010 03:39:52 GMT

   If you have gotten a million emails about "Product Launches" over the last year like I have you will probably laugh out loud several times at this short, animated video.

   I have no information to share about where it came from but it really nails the point and should be shared far and wide.

   /http://www.xtranormal.com/watch/8050609/

   So, a realistic game plan. We are adding buyers every week to our list. That's great, I like buyers. They give me money and I sure like that.

   I have noticed, however, that many of them seem to think that we are somehow magic and if they ask for the real estate equivalent of the Bengals winning the Super Bowl that we will able to produce it.

   Here's an example: I got an email from a newly signed up "buyer" the other day asking why he had not been offered a deal from us yet. He had been on our list for 6 weeks and was expecting prompter service.

   I took a quick look at his profile and he wants a house for less than 70 cents on the dollar that doesn't need a "ton" of work...in West Chester or Mason. Oh, he may be willing to stretch out to Hyde Park/Mt Lookout.

   So, do you see the problem? Deals like that are not thick on the ground. Sure, we've had deals in Hyde Park. It's happened, but it ain't all that common and certainly not in the form of paint&carpet jobs.

   We all have a perfect deal in mind, but we have to remember to do the great but less than perfect deals along the way or we will have to content ourselves with one transaction every ten years or so.

   I'm certainly not suggesting you be in such a rush that you do a deal that's less than very good or great. You don't have to. But try to be a little flexible. Expand your mind a just a tad.

   We get everything from great retail deals in nice neighborhoods to trash-flow rentals in sketchy ones. The thing that they have in common is that they will all make money.

   This is a great time to buy, fix and rent especially with an eye to reselling when the market recovers fully. Don't get fixated on a particular kind of investment. We're happy to advise and help you if you want to expand your horizons a little.

   The more kinds of deals you are willing to consider, the more deals we will be able to offer you which equals more money for you and more money for us and the world goes round with everyone happy.

   Stay Tuned,
Drew

The wholesale real estate investment market ISN'T the retail real estate investment market...

No Author — Thu, 25 Nov 2010 02:07:51 GMT

   I got a call yesterday from a guy who was really, really interested in a 4 family that he heard me talk about at REIA...3 weeks ago.

   He was VERY disappointed that it was already sold-his comment was, "you didn't tell me you had other people looking at it!"

   This is probably the 10th time this year that either Drew or I has heard this kind of comment from potential buyers (sometimes they're even mad--some of them apparently think we already have the property sold before we call them, or that we're "only selling to our friends", as one once said. Here's a clue, buddy...if you buy a house from us, you ARE our friend!)

   And I know exactly where all this confusion is coming from.

   You're used to seeing properties--especially bank--owned properties and junkers--sit on the market for months and months while the price drops and drops. You've gotten accustomed to the idea that it's never important to run out and see a property RIGHT NOW, because it'll still be on the market when you "get around to it". You've heard and read that average days on market for real estate in Cincinnati is around 6 months. You just don't see any reason to put aside what you're doing and go see that house TODAY.

   I've got some news for you, people-that's the RETAIL investor market.

   Those properties that sit and sit are always overpriced, and the seller is willing to leave them that way for months (or sometimes years- we recently flipped a property that had been on the market for 1,117 days before the bank finally broke down and sold it to us!), hoping to get some sucker to overpay.

   The WHOLESALE investor market-the one that we deal in-moves much, much faster, and here's why:

   1. We've already negotiated the rock-bottom, no-brainer price that every other investor in the city has been beating their heads against the wall for months to try to get. How? We're magic.

   2. The property has already been evaluated and the repair costs estimated

   3. The title search and termite inspection have already been completed before we ask you for a dime

   4. There are a whole lot of buyers out there who'd rather have all this done FOR them, avoiding the whole "make 20 offers to get 1 deal" slog- especially when they're paying the SAME AMOUNT to us as they would have paid to the seller

   5. And this is an important one: we'd never offer you a deal we wouldn't take ourselves. Thus, if you don't buy it, we'll buy it ourselves. Thus, if you don't act pretty darn fast, it's gone baby gone.

   The last 2 deals we sold were gone in 3 days and 4 days, respectively. And to EXTREMELY experienced investors, by the way- one has done more than 50 rehabs and the other has bought and sold well over 1,000 units.

   So here's the lesson: when you get a call, or an email, or hear about a property of ours at a REIA meeting, and it's in your farm area, I ABSOLUTELY GUARANTEE you it's a great deal...so you'd better go look at it ASAP.

   The wholesale real estate market waits for no man. This is the best time in our lifetimes to buy properties for cash flow and appreciation, and bread-and-butter properties ARE still selling on the retail market. So snatch some of our pre-evaluated properties up, and don't complain to me if the one you really wanted is gone before you see it.

-Vena

Now is the Time to Rehab

No Author — Sun, 17 Oct 2010 23:16:03 GMT

   A buddy of mine owns a successful small business. 4 years ago he bought a new piece of land and stated getting bids on building an entire new facility there. The best looking bid came in right around 3.5 million. He starting hearing rumblings of the the economy taking a downturn so decided to sit on his project awhile.

   A couple of weeks ago, he got the job rebid. The same specs, indeed, the same contractor came in at 2.6 million. He is pretty happy.

   Times are tough, especially in the building trades. You may not be planning a big commercial construction project but even residential rehabs are being done cheaper than we've seen in years.

   Let's take a look at the situation: The real estate market in this part of the country is still depressed. Should you wait to buy until it recovers? NO! You should buy while things are on sale! Buying while prices are depressed and then selling when values recover is slam-dunk investing.

   I'm not suggesting paying full price for anything, not even at the current lowered value. Investors need to buy at a discount of the current After Repaired Value. What I'm saying is if you buy a house now at, say 70% of its current value, fix it up, rent it for a couple of years and then sell at 100% of it's recovered value...you will be grinning.

   So, it's smart to buy now. Check. It's also smart to fix now. There are a lot if highly skilled guys out there looking for work. If you have the work to offer, you can get a great deal. I'm not suggesting cheating anyone or picking someone's pocket. I am saying the law of supply and demand is going to work in your favor. You can get better work for less money than anytime in recent history.

   Let's take a minute to talk about negotiating with contractors. I think it's a mistake to let the contractor name the number. I always show him the job in detail and then ask if he can do it for x dollars. That way I don't have to work at moving him off of his price, he has to try and move me off mine, and he knows I'm serious about my number. By the way, all of our deals here at YouBuyHouses.com come with a professional Statement of Work that specs the job out completely including cost estimates. It's easier for you and your contractors.

   So there you have it, folks. Tis the season to buy and fix and then buy and fix another. This market won't last forever, get in the game.

Stay Tuned...
Drew

We interrupt this blog for a chance for Vena to be P.O.ed

No Author — Thu, 23 Sep 2010 14:51:56 GMT

Hello all you happy buyers;

I thought you deserved a heads up on the scummiest new technique I've seen in...well, EVER, and how to head it off before it costs you money.

There's this dude named Patrick who just launched a $97 e-book that should be titled "How to Break the Golden Rule and Steal Other People's Private Lenders for Fun and Profit".

For less than $100, he's teaching your competitors to look up YOUR purchase transactions in the public record, track down your private lenders, and convince them to jump ship.

Clever? Only if you're a scumbag who wants to be standing in the middle of the tracks when the Karma Train comes roaring through.

I only listened to the PITCH, and I'm so mad I can barely see.

The pitch is, and I summarize, because it's over 20 minutes long:

"Private lenders are necessary in today's market [true], but getting them is work! [also true] There are other people in your market who have done that work already [that'd be YOU], and it's much easier just to write to those strangers and tell them that YOU have great deals you'd like financed [completely frackin illegal]. That way you'll reap the benefits of other people's hard work IN AN SEC-COMPLIANT WAY [impossible--there is NO sec complaint way to make specific offers to people who are not known to you unless you have a public offering, which costs in excess of $40,000 to file]. And I'm not selling you this information to make money [bullshit], I'm doing it to develop a mastermind group for private borrowing [Oh, PLEEEEEEEEEASE invite me to share ideas with a group of people who think this is OK]. So order now, and learn how to do unto other as it would piss you off a lot to have done unto you."

Unfortunately, there WILL be people in your market who think this is just a swell idea--and they'll mostly be newbies with no connections and no credibility of their own. So I suggest to you, dear buyer, that you IMMEDIATELY contact any and all private lenders you have with this message:

---------------------
Dear PL;

  Please be aware that there's a new "course" being sold that's teaching people to find private lenders like you in the public record and approach them with "better" offers--higher rates of interest and so on.

  If you get such correspondance, PLEASE THINK TWICE about responding.

  Any "investor" who needs to do this rather than find his own lenders, or that thinks it's good manners or business practice to approach complete strangers about real estate loans, or that MUST offer higher-than-market interest rates in order to attract money bears some serious investigation.

  According to an article by my mentor, Vena Jones-Cox, the people most likely to take this tack will be those with NO track record (and therefore risky borrowers) or those with a bad track record (who've burned all their own private lenders and are now looking for others to take advantage of).

At the very least, their methods don't conform to the Golden Rule; at worst, you could find yourself in the very unpleasant position of losing money.

Just thought I'd let you know that I am aware of and concerned about what's being taught out there.

Yours,

Me
------------------------

I am just beyond disgusted that this Patrick guy is making money teaching people how to steal your resources. Real estate education has just hit a new low.

Keep fighting the good fight, and resisting the tyranny of idiots.

Vena

P.S. by Mr Drew- This dude says in his pitch that he is leaving this info up for a limited time because otherwise "unscrupulous people" may actually try to steal HIS private lenders. So it's ok to snake lenders from other people, but if you try to take his, you're unscrupulous. Funny and pathetic all rolled into one!

Blogs Sure Suck

No Author — Wed, 15 Sep 2010 04:57:17 GMT

Mr. Drew's inaugural blog post

  I like technology. I am what marketing people call an "early adopter". That doesn't mean that I managed to buy a Lithuanian baby before that Anjelina chick with the bar-fight lips, it means that I tend to latch onto new technology quickly.

   I've used smart phones for 10 years. Think of the iPhone or a 'droid phone only dumber, slower and in grayscale. Yeah. I also once paid 700 bucks for a Palm Treo 600 'cause it rocked, baby! Jason and I made Vena's first website in Microsoft FrontPage. (For the non-technical, that was so long ago that texting didn't exist.)

  My point here is that I'm NOT anti-technology. I have 6 computers in this room and I'm AT HOME.

  But I do hate stupid. And most blogs are stupid. Real estate blogs seem to be even more stupider. (See, I made a joke! I AM funny! People will be sure to link to this bitch now!) Yeah, like that. They want to be all folksy and pretend to be high-minded. "I just want to help educate Mankind." But mostly they are a bunch of Bull.

  The purpose of a commercial blog is to attract attention and traffic. Period. Don't believe the hype! Often they are used as kind of a lame soft-sell. Joe Guru might say in his blog...

  "As I lay on my deck peacefully contemplating my beautiful children as they wiled away the last rays of the summer sun, I was suddenly sad that I could not think of how to help my students achieve massive success with online wholesaling. Then, as a Lark cried out, I remembered that my good and dear friend Boogie Bob had just written a fantastic e-course on that very subject. Dabbing away my tears of joy I called Boogie and arranged a very special offer for my closest and most beloved students."

  Gag me. I've taken some license, sure, but I am paraphrasing the blog of a very successful online real estate guy. My new point is... I won't do that.

  Here is the straight dope. I want you to come back and read this thing often, I want you to subscribe to it and talk about it and "stumble upon" it and link to it and tweet it. I want you to do that so that I can get more traffic and attention so I can sell more wholesale deals so I can make more money so I can buy more stuff. I like stuff.

  What's in it for you? Here is my master plan to get you to do all of those things: I intend to be useful and entertaining. I'm gonna' drop some truth. About real estate, real estate investing, wholesaling, landlording, rehab, all that stuff. I will occasionally (just for fun) pull back the curtain on the Speaker world a little. I will answer your questions! I will disseminate useful information and call shenanigans on the BS. I will try to be funny and even sometimes witty. Sometimes I will rant a little. I may even offend.

  I will talk to you about my deals and any other things for sale as if you were an intelligent adult!

Stay tuned...
-Drew