Sale Flipping For Homes

Everyone has either seen television shows or heard about flipping homes for sale. This real estate strategy involves buying homes for sales for a low price, renovate the homes, and then reselling them for a profit. Some of these professionals make their living by regularly buying and flipping homes for sale making a profit. They sometimes juggle several sales and several renovations at any given time. It is important to know that there is an art learning how to flip a house and make a profit instead of losing money. Make sure that you understand any restrictions and all applicable zoning laws on construction that may apply. From purchasing to flipping, many set a ninety-day time frame.

Step one

Before you even look at homes for sale to buy and flip, you need to determine how you will finance this venture. If you have a background in real estate or construction and have excellent credit, it may be possible to sure from your bank a line of credit. If you do not have these things, you may have to come up with a more creative way to finance a house for sale to flip. This can include finding a partner who will advance the cash that is needed.

Step two

Once you have the financing in place you can start to look for a likely house to flip. There are many characteristics in a house for sale to flip that you want to look for.

• It must be affordable so you can make a profit when you flip the house. You want to purchase the house for the lowest price you can. Check out houses that have been on the market for a while. Talk to the owners to see if they would accept a lower offer because they are tired of waiting for their home to be sold.
• Make sure that the home you are looking at is salvageable. When flipping a house for sale you should only deal with sound properties. Make sure that the foundation is in good shape and you only have to do minimal upgrades to the plumbing and wiring. The roof should also be sound. If any of these are a problem, you may spend more in repairs than you can get back when you try to flip it. Cosmetic renovations can usually be done without spending a lot of money.

Step three

The location of the property is also important. Avoid buying a house for sale in neighborhoods that no one would want to live in. Make sure that the neighborhood will attract many buyers. You want to make sure that when you flip the house you make a large profit or at least break even.

 

The Advantages Fix and Flip Loans

Buying a real estate property, repairing and selling it quickly tends to be a profitable recipe. However, a key component of this recipe to success is access to capital. If one does not have sufficient funds but is interested in rehabbing a property, a hard money lender who offers a fix and flip loans could be a great financing option. These loans are structured in such a way that allow a purchaser to quickly acquire the property and have access to a reserve of funds for construction and renovation costs.

Buying a real estate property, repairing and selling it quickly tends to be a profitable recipe.

Advantages of Fix and Flip Loans

There are many advantages to fix and flip loans and the demand for this source of funding is steadily increasing in the real estate investment industry.

Four key benefits include:

    • Quick Approval: Getting approved for a fix and flip loan is a far quicker process when compared against the traditional banking system. If the borrower has submitted the requested documents, a private lender can approve the loan within a couple of days whereas a traditional financial institution can take at least a month. In addition to the significant longer wait time for bank loan approvals, the borrower will be required to submit numerous documents and clear multiple conditions as part of the process.
    • Any Property: Properties in varying states of the condition can qualify for a fix and flip loans. Whether the property is bank owned, a short sale, a foreclosure, or in a dilapidated state, a borrower is still likely to find a hard money lender willing to fund the deal. Once again, a borrower may not have the option of funding these types of real estate opportunities with a bank. Banks are very risk averse and have strict rules in place as to what type of property they can accept as part of their loan portfolio.
    • Zero Prepayment Penalties: If you take out a loan from an established bank, you may be hit with penalties should you have the opportunity to pay the loan off before the maturation date. This is called a prepayment penalty. Most fix and flip lenders will not subject you to this fee.
  • Repairs Covered: When you buy a property with the intention to flip it, a significant portion of your budget will be spent on construction and renovation costs. A fix and flip lender will usually set up a loan reserve which will cover repair costs of the property in addition to interest. This can alleviate a lot of stress and pressure for builders and developers since they don’t have to worry about spending money out of pocket for repairs or payments.

Teaming up with a solid lender who understands your property, the local real estate market, and is willing to help you throughout the acquisition, construction and selling process is vital. When choosing a hard money lender, keep the following in mind:

    • The lender must have sufficient experience in the industry. A private lender that has deep roots in the real estate investment market will not only be able to offer you a better deal but will also have numerous contacts that will prove helpful along the way – from recommended settlement companies, to permit expeditors and other preferred vendors. This can prove to be a great asset as speed, quality and efficiency is the name of the game in the fix and flip world. The less time you need to spend vetting companies and contractors is more money in your pocket.
    • Check the history of the lenders to ensure that they are genuine and have a good track record. It may be worth taking a closer look at lenders that tempt borrowers with “teaser rates” or a “no documents” underwriting process. As with most things in life, if it seems too good to be true – it usually is.
  • Finally, you should check out what previous or current customers have to say. Is the lender responsive and knowledgeable? How many loans do they have on the street? Do they have good ratings on Google or the BBB? Just as the lender performs due diligence on their borrowers, the borrowers should, in turn, conduct due diligence on the hard money lender. It’s a partnership and both parties need to be solid and committed to the process in order to ensure success.

 

Tips To Get Success In Real Estate

Make your fortune in real estate. It is not that hard once you get the hang of it. Real estate flipping can be an extremely high paying career, but I see way too many people give up on it. The turnover in this industry is exceptionally high. I noticed the high turnover early on and have watched to learn why some people kill it while others disappear. This has been important to monitor to help myself and my clients last in this amazing business.

I have been in the real estate field for the last 16 years and my hard money lending company finances around 150 deals a year. Here is what that experience has taught me about being a successful fix and flipper.

Mindset: This is where it all starts. For the last 3 years, I have felt myself fall into a little lull and have realized that this occurred because of my mindset. Your mindset could be a lot of things, but the basic concept is that what you believe will happen… does. Sometimes just convincing your mind that you will hit a goal takes work. Not to mention the work that it takes to actually hit that goal.

Focusing your mind on positivity is a great start, but you really need to believe you deserve the success you desire. Meditation and affirmations are fantastic ways to accomplish this.

Hustle: Nothing is going to be given to you. When I was going through my struggles to hit some financial goals, I had to keep reminding myself of this. Times can get hard and things can feel unfair, but the reality is, no matter how much you don’t want to believe it, you are the only one responsible for your success. I would tell myself this over and over. “If I want it, I need to earn it” I had to get up in the morning. I had to deal with the problem on my plate. I had to stay up late or work on the weekend. I had to put in the work to get the results. Because I decided to be successful, I decided to work hard.

Network: As we have learned. It is not what you know, it is who you know. I constantly try to team up with people smarter than me, that can both help me learn and help me get results. This has resulted in millions in profits. I also feel very lucky to have a network that can solve just about any problem I run into. If I am rehabbing a house and run into a problem, I have a list of people I can call for help. If they don’t know how to help they will know someone who does. I lean on my attorneys, my CPA, partners, wholesalers, and other professionals on a regular basis.

Education: To make my top five list you know I believe this is important in your success. Constant improvement is essential and the exciting thing about this, especially early in your career, is that growth is exponential. As you learn and implement ideas into your business, your business grows at a faster and faster pace. Obviously, for this to work you will need to learn AND implement. Many people learn all about investing and never invest. That comes down to the investor mindset. That’s why, I believe, you need all five of these essential keys to be a great fix and flipper. The good thing is this is possible for everyone, including you.

Access to Money: So, this one might be self-servicing because I am a lender, and this could fall within the Network category but let’s face it, if you don’t have money you don’t do deals. Money can come from many sources including cash you have in the bank, money you borrower from institutions, partners, private and hard money loans. Many times, you will need a combination of these sources to get a deal done or to maximize profits. This can all be learned as part of your education or you can choose to work with a professional that can advise you on the best way to navigate this complicated subject.

 

How To Increase My Market Value

The development of a $1.9 Billion dollar professional football stadium down the street from your current business location is usually a good thing. There are always those who may garner a real property value increase due to the stadiums location but then realize that the traffic from the new venue may destroy their ability to do business or it may make renting their building to a tenant or tenants more difficult. You can have a huge real property market value uptick and still lose your tenants or lose the utility of your building for its current use at the same time.

Appraisers are always asked “how much of a property value Increase can I expect?” It’s not something that can easily be answered because, as you know, each property is different and each will benefit more or less from the stadium development.

If you own a single-family residential home located 5 miles away from the planned stadium I wouldn’t hold my breath regarding appreciation, the stadium may provide some great entertainment to you if you can afford to pay for it but you will likely pay more in taxes for its construction than you will ever gain from your homes appreciation.

The domed stadium planned for Las Vegas is going to be developed west of Interstate 15 and thus west of the Las Vegas Strip in an area dominated by smaller existing industrial building development.

Thus, it is likely that many industrial properties located near the planned domed stadium site will likely increase in value over the next few years. If you look at other professional stadiuhe dome, but they can’t offer you that many choices. ms, I have, you will find that there are (look at the AT&T stadium in Arlington, TX for example) 30 to 50 restaurants surrounding it. Las Vegas is full of Strip based restaurants but do fans traveling in and out of the dome want to deal with the Strip just to get some food? Yes, they will sell you food inside of t

Industrial land often sells in Las Vegas for a price near $10 per square foot but fast food restaurant ground sells closer to $25 per square foot. There appears to be some upside potential for those willing to transition their properties from industrial to commercial, and much of the area surrounding the proposed Las Vegas dome stadium has already been planned for a tourist commercial use.

Arrowhead Stadium in Kansas City, MO is isolated from most private development, and the Bank of America stadium in Charlotte is isolated by highways. The Los Angeles Chargers stadium (StubHub Center) adjoins Cal State University and still has nearly 15 fast food restaurants close by.

Properties have to be evaluated on a case-by-case basis and owners have to follow how the areas near the planned stadium are transitioning. If the stadium had been planned for the Strip side of the freeway there would likely have been much less potential for stadium-related development given the relatively high prices from the influence of the Strip, but west of the I-15 there are more possibilities.

The transition of the area away from small industrial users to stadium related uses will offer an opportunity to current owners and to investors who can benefit from locating close to the stadium.

 

Learning How To Closing Deals In California

Looking to buy a house in Northeast Los Angeles – NELA, as it is known – but unclear of the process and amount of money needed? A licensed Realtor can help you figure it out. But for ballpark purposes, it might help to do some preliminary study on your own.

NELA is, after all, one of the hottest markets in all of Los Angeles. Not just the obvious neighborhoods like Glendale and Pasadena, but in smaller, lesser-known neighborhoods.

You might be in love with the schools in Mt. Washington, the housing inventory in Highland Park or the neighborhoods of Eagle Rock, but you have to work through some of these details before you can call any of those places home.

Much is made about closing costs in real estate transactions, and yet these vary for several reasons. The single largest expense, the real estate commission, is covered by the seller (who pays the commission in a split between the buyer’s and the seller’s agents).

Fees the buyer will need to pay at the closing come with some variation; the following are the largest of such costs at closing:

  • Homeowner association fees – If the property is a condominium the seller might be in arrears with the homeowners association, in which case you will find this out before entering the sales contract. In distressed circumstances (foreclosures, near-foreclosures and short sales), these fees might amount to thousands of dollars.
  • Private Mortgage Insurance (PMI) – If your down payment is less than 20{b01fda100cf65558b06f1840d5ab4a7fc2864e24121e3aed812c5299696a8fb7} of the price of the property, you will be required to insure the mortgage at between 0.3{b01fda100cf65558b06f1840d5ab4a7fc2864e24121e3aed812c5299696a8fb7} and 1.15{b01fda100cf65558b06f1840d5ab4a7fc2864e24121e3aed812c5299696a8fb7} of the loan amount.
  • Origination fee to the lender – Even while you fix your dreams on a Victorian in Glassell Park, a two-unit duplex in Garvanza or fixer-upper in Hermon, you have to go through a large amount of paperwork with a would-be lender to prove your creditworthiness. And yes, they do charge fees at closing for all that fun.
  • Points – These enable you to change the terms of the loan to your favor if you pay one or more percentage points toward the mortgage amount. If you have the cash and plan to own the property for a decade or longer, paying a point or two upfront can save you much more over time.
  • Prorated property tax – As the LA tax year begins on July 1, you will need to cover whatever remains in the year in advance from the day of the closing.
  • Insurance premiums – Protecting the property (as required by all lenders) from damages and liability is required at closing also.
  • Escrow fees – Third parties performing escrow services need to be compensated for that work. Note that fee structures are not fixed or regulated by the state of California, but are generally set according to the size of the transaction.

Technically speaking there are multiple fees that will be part of the buyer’s closing costs but which the seller automatically pays for in a reimbursement. These include the city transfer tax, documentary transfer tax to title and the owners title policy. Multiple other fees under $500 (average) costs include the lender appraisal fee, credit report fee, prorated HOA fees, courier services related to the transaction, notary services, archiving fees, recording trust deed (to title), and loan tie-in fees.

Note that the process of looking at houses and negotiating a price, and perhaps that of qualifying for a loan, are typically more time consuming than the closing itself. An experienced realtor will be able to advise you on all these details, invariably to the point where you are told how much money to bring to the closing and in what form.

 

All About Echo Park Estate

From LA’s earliest days, people have wanted to live in the storied neighborhoods of NELA. In a densely populated area where residents are always in the process of coming and going, there are always homes for sale in Echo Park at any given time. Since the early 1920’s, the real estate here has been in demand and that is how it is today. Why? Let’s take a closer look and see what the numbers say.

This is an eclectic city located in Central Los Angeles about ten minutes from Downtown. At the center of the city is the renowned Echo Park Lake in Elysian Park, which is the site of special events like the Lotus Festival. It is northwest of Chinatown and Downtown, northeast of Westlake and south east of Silver Lake.

It is split in to four districts.

• Angelino Heights – This area is known for the beautiful Victorian homes that are preserved by the city’s ordinances.

• Elysian Heights – This area is historically known for being the home of famous counter-culture artists, filmmakers, architects and political radicals.

• Historic Filipino town – This section is located in the southwest section.

• Victor Heights – A lovely area scattered with Bungalows and Stucco homes that share breathtaking views of Los Angeles and the Civic Center.

Throughout the four districts, the most common types of homes are Bungalows, Cottages, Victorians and Stuccos. According to the 2000 U.S. Census there were 40,455 people in there. Spread over 2.4 square miles there were approximately 16,868 people per square mile. This makes Echo Park one of the highest density areas in Los Angeles County. The median household income was $37,708, which is low for Los Angeles County. The average household size was 3.0, which is average for the county.

This city has a high Walk Score of 83/100. This means that most errands can be accomplished on foot within the city. This city’s transit score is 62. This city has good transit and provides its residents with many public transportation options. These include the Metro Red and Metro Purple Line, numerous bus routes and ride sharing options from Relay Rides. This city received a bike score of 49 because of the steep hills and minimal bike lanes.

According to Zillow, the average home value in Echo Park is $795,100. This value has increased 14.4{b01fda100cf65558b06f1840d5ab4a7fc2864e24121e3aed812c5299696a8fb7} since last year and Zillow estimates it will continue to rise 4.3{b01fda100cf65558b06f1840d5ab4a7fc2864e24121e3aed812c5299696a8fb7} to $829,000 over the next year. The average price of homes that are currently listed is $742,450. The median list price per square foot is $618, which is higher than the Los Angeles average of $451. The average rental price is $2,967 a month. Zillow has given the Market Health a score of 8.2/10, which is very healthy in comparison to other markets across the country. This is based on a series of metrics including how fast the homes are selling compared to the past rate. Echo Park’s prime location and thrilling culture will be sure to keep the housing market rolling for many years to come.

 

Tips To Increase Property Values

Real estate investors live and die by their ability to add value. With no added value, there are no profits. This is true with any business, but what makes real estate such a great business and a great investment, is the number of ways you can add value and cash in on big profits. Here are three ways you can add value to your properties.

Upgrades and Repairs: OK, this is the obvious one and is the reason fix and flippers can make money. Some repairs add a lot more value than it costs to do. The more creative you are with the improvements, the more value you can add. For example, I have a client that adds square footage to every house he buys. He really likes the inner city properties because they are the hardest to add square footage. You either need to finish an unfinished basement, or add a second story. There is not typically enough land on the lot to add an addition by increasing the foot print of the property. This client does a lot of basement finishes and “pop tops,” but where he has made the most money is the basement that is only 5 or 6 feet deep. He will go in and dig out the basement to a full 8 or 9 foot height and then finish it. Something most investors would not think of, so he is able to get the deal most other investors pass on. I have also seen some investors find houses that don’t really fit into a neighborhood and they make them fit. This could be limited bedrooms or bathrooms or funky floor plans. All of that can be changed. Obviously many cosmetic fixes like kitchens and bathrooms add a lot of value too. There is a lot more to it than this, but the idea is to buy a property at its true ‘as is’ value, (don’t over pay), and then add value with the repairs and upgrades.

Owner Finance: I love this one because it is so easy to add value with very little to no work. You will need to wait to cash in on your profits, but it is a way to increase a sell price significantly. You can also use this strategy to defer tax gains over a few years, instead of taking a big hit all in one year. When you have a property for sale there are a limited number of buyers for the house, although right now that pool of buyers seems pretty big. If you can increase the pool of buyers, the demand for that one house increases, which forces the price to go up. Someone that cannot qualify for an ordinary loan, limiting the supply of houses to choose from for that buyer, will likely buy your property. That also increases the price. You are adding value by giving them the chance to own a home that they normally would not be able to own. For this value, you should be compensated with a higher price and a decent interest rate on the profits, while you wait for the buyer to refinance and pay you off in full.

Shared Units: This is one area of real estate that I have not dabbled in, but it is extremely inviting. The idea here is to sell your property to multiple buyers. You are seeing this a lot in resort towns. It is always a vacation or second home. Have you ever been to a time share presentation? They are pretty enticing aren’t they? About 13 years ago my ex wife and I were in Florida and got sucked into a time share sales pitch. We decided to go because they offered us free tickets to Disney. We sat there for about an hour and a half and then the hard sale came. They were very good at selling the “idea” of the time share and had my ex wife sold. She asked me to move forward with the deal, but I could not bring myself to do it. I told her that I was not comfortable with an emotional purchase and that we needed time to think it through. “Can I please have our Disney tickets?” was my response. As we rode back to the hotel that afternoon, I started thinking about the math. Each unit can be sold to 52 different people because your purchase only gets you 1 week a year. Add that to the annual maintenance fees and the numbers are staggering. I know people who have flipped time shares successfully, because you can get them for free or near free on Craigslist, but it is not an investment I was interested in. With that said, I have considered doing a half or quarter share on a house in a ski town in Colorado. In this scenario, you are sharing a house with 1 to 3 other people so there is a ton more flexibility. You can use or rent out your weeks and you can be guaranteed valuable high demand weeks every year. It is a way to get a second home without the full expense. From the seller’s point of view, it is a way to get more for the house. ½ a share of a house is going to cost the buyer more than ½ of the fair market value. I have seen business plans from investors that would buy a house and quarter share it out. The idea was that after they improved the property and sold ¾ of the house to 3 different buyers, they would own the last ¼ free and clear. Obviously this strategy will work best in areas where people want second homes. The downside is if there are any improvements or major issues. I can see there being disagreements, so this is something you would want, as a buyer, to work out with all the other owners in writing before you buy.

 

Financial Factors on Real Estate Business

It is unrealistic, silly and potentially, harmful, to your best interests, to look at, or consider real estate, in a vacuum. Many factors impact this market, on a broad basis, in addition to the many personal considerations, one should consider. This article will briefly, attempt to evaluate, consider, and discuss, some of these economic factors, including the economic ramifications, of market conditions, job – related, interest rates, etc. Failure to consider these risks wasting certain qualified buyers’ time, as well as sellers’ potential price, and how long getting one’s home sold, might take. This will attempt to consider these factors, in an easy – to – understand, manner.

1. Market conditions: Why is there, either, a buyers or sellers market, and will a particular trend continue, and for how long. The easiest explanation is often, supply and demand, but that does not explain, why these conditions exist. Is there something, in the national, or international economy, which is driving specific market conditions? Some considerations include the public’s faith in the strength of the present economy, and whether they perceive, it will continue, and for how long. Another is the inflation rate, and perceptions of its impact.

2. Job – related: How strong and growing is the present job market? Are incomes rising, enough, to drive prices up? What price range and social group, does a particular area, appeal to? How close to transportation, how long a commute, and whether it’s convenient, affect prices. Similarly, for many potential buyers, the most important consideration is the community’s school system, and what it offers. Many factors go into determining pricing, within a local area.

3. Interest rates: Since, the vast majority of buyers, use a mortgage, monthly carrying costs, which includes principal repayment, mortgage interest, real estate taxes, and escrow, are major issues. Relatively, small rises, in the rate of interest, affect, both, the amount one qualifies for, as well as their monthly payment. It also makes a huge difference, in determining, whether to use a fixed, or adjustable, type.

Obviously, someone must look for, and purchase a home, which meets or exceeds their needs and dreams, while being affordable, and making one avoid the House – rich, home – trap. The better informed, educated, attentive, prepared, and realistic, a potential buyer, the better his eventual results. Similarly, homeowners must understand their local market, and proceed with realistic expectations.

 

Tips To Get ARV Before Buying Home

The biggest reason fix and flip investors lose money is they make mistakes estimating the after repaired value (ARV). Getting the value and the repair budget right, or at least close, is essential to your success. Analyzing numbers on a deal is easy, but coming up with the numbers to plug into your formula can be tricky. Here are five mistakes I see investors and real estate agents make when they are trying to nail their ARV.

Not Adjusting Comps: It is well known that we value real estate from comparables, or comps. Comps simply means comparable properties that have recently sold or are for sale. We also know that we want our comps to be in the same area and the same size. But what if you can’t get something that is exactly like the house you are trying to value? Have you heard the term “apples to apples”? This holds true in real estate. If you cannot compare an apple to an apple, you need to adjust the comp to be an apple. Let me elaborate.

Let’s say you have a 1,200 square foot house. You find a great comp, but it is 1,400 square feet. To use the 1,400 square foot comp, you will need to take the price it is listed or sold for and adjust the number down to compensate for the house being larger. Basically, the subject property is expected to sell for less because it is smaller in size.

The mistake is to not adjust comps and using a larger house as the value. Adjustments do not stop at square footage, however. Common adjustments could be garage stalls, bathrooms, amenities, view, basements, and location, which can all impact value.

Location: I often hear that a standard for location would be within quarter or a half mile from the subject property. I guess that is OK, but my question would be is this a radius we are looking at? Most often, that is exactly what investors and agents do. Take a half mile radius. The problem with that is you might be pulling comps in neighborhoods that are not similar. Sometimes crossing over a river, rail road tracks, or a major arterial can completely change the area appeal. It is much better to look at the map and try to stay in the same area or neighborhood, which very well could mean comps that are farther away than other options.

Other mistakes when it relates to location is negative site influences. On busy roads, close to liquor stores, across from commercial space, on a lake or off a lake and distance to public transportation can all play a role. The last thing you want to do is try to value a house on a busy road and only use comps inside the neighborhood. Buyers will demand a better price for the negative influence of the busy road. Knowing you need to make an adjustment for location is the biggest issue, but the problem is how much of an adjustment will you need? Well that is why property valuation is an art and not a science. You will be guessing here a little, but here are two good ways to accomplish this:

  • Find a comp that sold with a similar influence and use that as one of your comps, even if it is a little older or farther away.
  • If you cannot find a good comp with a similar negative influence, try to find an older comp with the influence (even several years old) and compare that to houses without that influence and see what the price difference was back when it sold. Knowing how much of a discount was needed for the location in the past can help you craft an educated guess on what it will be today.

Square Footage Adjustment: With the exception of newer developments where all the houses are similar, using a price per square foot model is a mistake. I do see real estate professionals, even ones that have been in the business a while, find an average price per square foot in the area and multiply that by the square footage in the subject property. You can get lucky and get close to accurate on this, as long as the size of the subject property is very average and comparable to the comps, but it is more common to miss your value using this strategy. The actual adjustment for the difference in size above grade will be closer to 1/4 to 1/6 of the average square footage price in the area. You can ask four different appraisers and get four different answers for how they come up with the adjustment to use for size. I will typically use 1/5 of the average price per sq foot in the immediate area, unless the average price per sq foot is pretty high, then I will use 1/6. This is not a formula, this is just a quick way for me to get close.

Let’s assume you are in an average neighborhood and you use 1/5 to keep this simple. Going back to our example of the 1,200 square foot subject and the 1,400 square foot comp. If the average price per square foot in the area is about $140 and the comp sold for $200,000 I would adjust the $200,000 sold price down $5,600 so the adjusted value of my comp is $194,400. Confused? Let’s look at the math. Starting with the average price per sq foot in the area, I would divide that by 5. $140 PPS / 5 = $28 PPS. In our example, there is a size difference of 200 feet, so I multiply 200 by $28 and get $5,600. Since the comp is larger than the subject, I would expect the subject to sell for less, so I subtract the adjustment. $200,000 – $5,600 = $194,400. Remember, this is the indicated value using one comp. You will want to use several comps to get an even clearer picture of value.

Finally, above grade square footage is much more valuable than below grade. Even though you can double your finished square footage, you will get nowhere near double the value for the house. It is extremely rare for us to see a finished basement add enough value to even cover the cost of finishing it. I would call some appraisers in your area to see what they adjust for basements, both finished and unfinished, or dig into comps with basements and without to try to find what an adjustment should be. In the markets we lend in, we will typically see $10 to $15 a foot for unfinished space and another $10-$15 for finished space.

Bedroom Adjustment: This is an easy mistake to make, but in most cases, we don’t see a difference in values for bedrooms. A 4-bedroom home does not necessarily sell for more than a 3-bedroom home. If the houses are the same size and one has an extra bedroom, it is likely giving up something that a buyer may want; like a formal dinning room or a master suite, or it could just mean that the 4 bedrooms are all small, while the 3-bedroom home has 3 roomy bedrooms. Buyer appeal is based on their needs, so it is unfair to say that a house is worth more just because it has an extra bedroom. Except for rare cases, we do not see our appraisers adjusting for bedrooms. If a home is bigger and has an extra bedroom, it is worth more. In that case you are capturing the increase in value in the sq footage, not the bedroom count. If you adjusted a comp for size and bedrooms, you would be making two adjustments for the one room.

Believing Someone’s Opinion: I just had a client lose $10,000 on a deal because he believed the wholesalers opinion of value. He was pressured to give a large deposit on the spot to secure the home and did not have time to do his own research. Based on the comps provided by the seller, the deal worked. When he brought the deal to me, I quickly saw errors in the comps that were provided. I showed him why the comp selection was flawed, and how he would need to adjust the comps to get a more accurate value. One comp was twice the size above grade!!! The very next day my client went to the wholesaler armed with the data I provided and asked for his $10,000 back. The wholesaler denied the request and then spread the word that Pine Financial is way to conservative. My response is that if you want a lender to fund bad deals, we are not your lender. I would rather pass on a deal than fund something that my client is sure to lose money on. Investors choose to work with us because we are not about the deal, we are about the relationship. We have no trouble giving you the advice you need to build a successful real estate investing business.

 

Tips To Resale Your Value Before Renovate

When doing renovations, people rarely think about long-term resale value. Most families just want a really nice place to live and they work to create their forever home. However, life can be unpredictable. So while it is joyful to make a dream home, those dreams need to be balanced with an understanding of whether or not those granite countertops or that second story are good investments in the long run.

What is resale value?

We hear the idea of resale value quite often pertaining to real estate. The ideal is to buy a property that is a good investment and to have its value appreciate. Good maintenance and appropriate renovations help ensure that when it comes time to sell again, the property has gained equity and you’ll make money.

However, the amount of money you’ll make depends on market appreciation. Which is why it’s important to make improvements that fit the property and the neighborhood.

Location the key factor to consider

If you’ve bought a property by a highway or another not-so-great location, you probably got it for a good price. If that location’s value doesn’t increase during the time you own it, you’ll probably have to sell it for a similarly good price, even if you’ve done a lot of work on it.

Many property owners invest in renovations that aren’t in keeping with the neighbourhood. As a result, they end up selling for less than they invested, which can be heartbreaking.

Before you renovate, look at what has been selling around you – at what cost for what quality? If the most expensive home in your neighborhood sold for $400,000 after being completely renovated, it doesn’t make sense to style your house to a value any higher.

And really, how special are those $10-per-square-foot tiles anyway? Go with the $5 tiles instead.

Focus your investment to one or two elements per room. Make pricey items such as granite countertops, a fancy backsplash, or a higher end faucet; work like show pieces, similar to a piece of art.

Smallest may be best when it comes to resale
As for adding a second story to create more space for an expanding family, it may be worth it in the long run to hunt for a bigger home.

If you invest an extra $100,000 on a two-bedroom bungalow in a neighborhood full of two-bedroom bungalows, you may never recover that full investment. It may be a much better idea to take your equity and find a larger home in a neighborhood where your investment will hold and even grow in time.

When it comes to resale value, it’s always better to have the smallest house in an area with mansions rather than a $600K house surrounded by $300K houses.

Of course, creating a joyful home should always be the first priority. Just make wise decisions that will bring you prosperity and happiness for years to come.