Attention all real estate investors!  HUD is proposing to eliminate ALL seller financing with two lame exceptions:

• Seller lives in the home, or
• Seller becomes a licensed mortgage originator

Passed last year, the federal SAFE mortgage act passed last year preserved the right for sellers to make up to five seller financing transactions per year without needing a mortgage originator license.  But that law was passed subject to HUD’s approval as “compliant” with the intention of the federal law.  This means that, for those states which do not have a ‘compliant law’, the SAFE act allows HUD to implement licensing for those states.  HUD has since issued proposed rules which would no longer allow seller financing for non-owner occupied homes.  This is a disaster for real estate investors trying to capitalize on the high-inventory and poor lending environment we currently face!

HUD is soliciting comments on these proposals and the Deadline for filing Comments is February 16, 2010.

Please contribute and do your part to help our industry comment to HUD on this issue.  Efforts to affect this law will not be successful unless thousands of individual investors communicate that we are opposed to this the rules.  Please submit your comments to HUD today, here are the links:

To read the proposed rules, go here – http://www.regulations.gov/search/Regs/home.html#documentDetail?R=0900006480a6b033

To file your comment, go here – http://www.regulations.gov/search/Regs/home.html#submitComment?R=0900006480a6b033
and fill out the form.

Here are some sample message to relay to HUD:

• Mortgage bank loans are not available on many types of properties today
• The current lending climate has made traditional bank financing impossible for some borrowers
• Seller carry financing is a solid way to help the housing industry recover
• These rules would prohibit even partial seller financing – e.g., a “owner carry second”
• Many investors own a property free and clear and would like to get interest on their investment
• Million of Americans own a property other than a primary residence
• Mobile homes are more difficult to sell with bank financing, and there are LOTS of them

Please comment TODAY and help our industry.  It only takes 5 minutes.

This will be music to investor’s ears everywhere!  We no longer have to wait and plan to hold for 91 days to contract and sell fix and flip projects to first-time home buyers.   This will translate to lower holding costs, more projects, and higher quality inventory for buyers.  Some investors may choose to pass along the savings to buyers, many will likely choose to retain better margins on properties in this competitive environment.  Thank You FHA and HUD!

90 Day Flip Rule

“Section 203.37a(b)(2) of the FHA regulations, 24 CFR, is hereby:

• Waived for a period of one year,
• Effective February 1, 2010 through January 31, 2011,
• Arm’s length transactions only
• Specific appraisal conditions must be met if property value increases more than 20%

Read the Press Release about the Waiver online at the Official HUD and FHA 90 Day Flip Rule Waiver Announcement

Read the actual Waiver of Requirements 24 CFR 203.37

If you have questions of FHA’s Property Flipping Waiver, please email FHA at: info@fhaoutreach.com or visit: http://www.fhaoutreach.gov/FHAFAQ

4155.2: 4.7

Congratulations investors and real estate investor associations that on the successful grassroots lobbying and information dissemination that helped make this change possible.   Let us all continue to work together to rebuild the housing market from the ground up and remodel the housing stock that has been neglected to improve our neighborhoods and communities.

One of the Craziest, Weirdest Wholesale Deals Ever

This is a wild story, even for seasoned real estate investors. It’s a bit long, so you might want to get comfortable, grab a cup of coffee or a beer (depending on the time of day). Read it and weep. And then cheer at the end.

One of the biggest challenges in the business of real estate investing is finding title companies and escrow officers that understand our business. I just finished working one of the craziest wholesale transactions of my career, and the difference between the level of service offered by the big brand name title company and a small investor friendly title company was astonishing.

The name of the famous title company shall remain under blogging disguise from Google search and alert bots, and named in pictures only (worth a thousand words, what good return on investment!). But I will gladly name the unprecedented service offered by Fernon Meeks of Axis Title and Escrow in Denver for saving the deal and making some amazing moves. She is an investor herself, who decided to get into the title business. Her motto, by the way, is “We Stay Open so You Can Close.” I can vouch for that. (You rock, Fernon).

Real Estate with Lots of Hair

Now, I will admit that this deal had a lot of hair on it.  So I did cut some slack to folks.  Here are a few of the crazy circumstances:

• The property was foreclosed by the lender at the Denver Public Trustee and then listed as REO;
• It had numerous encumbrances wiped at foreclosure, but a federal criminal restitution lien (wow) remained attached to the property, with twelve month redemption rights. (hmm, this 10 foot pole is kind of heavy!)
• The property had been placed under contract 3 or 4 times already and fallen out due to title issues (big surprise) and also unsuccessful wholesalers who could not find a buyer etc. It got a lot of attention because it is in the hot Highlands / Jefferson Park neighborhood of Denver.
• The REO listing agent was in the process of being fired because so many contracts had been placed on the property that did not close.
• It was being “flipped” using transactional funding (flash cash) to an end buyer. Thanks to Short Funding for killer service too.

Is that enough craziness for a title examiner and escrow agent yet? Here’s more:

• The bank REO asset manager / listing agent had actually double contracted the property! Once to our company and again to the wholesaler who ended up having the only contract that would close (because if the contract fell, the bank was jerking the listing agreement). We had been in back-up position twice and legal stuff was flying everywhere.
• The wholesaler who had it under contract, and then re-contracted to us, had borrowed the earnest money from someone who sounded like a crazy mafia Italian guy (who called me checking up on the deal!).
• At this point all earnest money was hard (non-refundable to all parties). So if anything went wrong all the parties were like dominoes falling down, and would be pretty upset.
• Oh, one last thing. The wholesaler had “misread” one of the Amend-Extend agreements from the Bank REO and thought he had a discount that was invalid. So, his specific performance contract to me was for MORE than he was buying it for.  Bad Dog.

What Else Could Go Wrong?

Like I said, lots of hair. But here’s the real kicker, and where the title company tale starts. After all the crazy lien stuff was negotiated and resolved, and we figured out a way to resolve the double contract and back-to-back closing, it was discovered that the legal description of the property was incorrect. What else could possibly go wrong?

Next was the blame game for who screwed up the legal description. The listing agent blames the title company. The title company blames the public trustee. I’m sure the public trustee would have blamed the previous owner, but alas, he was in prison for mortgage fraud! How in the world do we get this deal closed?

This is point when the title processor decided to stop returning phone calls and emails and the deal went into limbo. Behind the scenes, and in preparation for closing the Side B to C transaction, Fernon at Axis was researching the problem with the legal description. She told me later that it had been incorrect for more than 10 years and at least one sale transfer.

So, we needed a survey, fast! The big title company ordered it and received a corrected legal description. Yeah!  BUT, now the title examiner was complaining that his commitment did not match the new (correct) legal description. Dumb investor to smart title company lady:   “That should be an easy problem to solve, Miss. Just change the title commitment to match the survey, right?”

To my absolute disbelief, the big famous title company was not willing to do this (I still don’t understand why). Instead, they called the surveyor and asked him to “correct his survey to match the title commitment!” Excuse me? You’re planning to use the WRONG legal description on my deed and your company will be “insuring over” the defect? Wow.

Thankfully, small customer service driven title company closer was privy to all this and was in the background preparing a title policy that included the service of filing the “accurate” survey at the County. This procedure would finally have the property and the legal description match, and insurable title from Side B closing forward and forever more. So my initial policy from the big bad title company was moot.

The Closing Finish Line!  After all was said and done:

• The wholesaler got back his borrowed earnest money back, and paid back the mafia guy.
• Wholesaler’s buyer agent reduced her commission (bless her) to account for mystery discount to get deal closed.
• Transactional funding company covers the short-term loan to wholesaler for Side A of the transaction
• I receive deed and title commitment insuring over improper legal, but re-insure with a new title company that makes everything legitimate and insured.
• I sell the property to the final end user, who was extremely patient throughout the entire process, and he now owns a great rental property.
• I take the rest of the week off, (we concluded at 4:30 p.m. on Friday).
• I send Fernon at Axis Title Company a really big thank you card and a bottle of wine.

End of crazy title company tale:  Small, investor friendly title company 1, big famous title company, zero.

Did I mention I love this business?

Real estate investors, brokers and agents are as guilty as any other industry practitioners at using jargon and abbreviations that seem commonplace to us, but are often confusing to our clients and customers. As a reminder to slow down and explain these important terms and concepts, especially to new clients, here is a list of the most common jargon and simple explanations:

• ARV – After-Repaired Value. The estimated resale or new appraisal value of a property after remodeling or repairs are complete.
• CMA – Comparative Market Analysis.  A report run by a real estate professional to estimate the value of a property for a listing.
• CAP  (Cap Rate) = Capitalization Rate.  A measure of the quality of an income property investment based on income and expenses expressed as a ratio. (NOI/COST=CAP)
• COCR – Cash on Cash Return.  A simple calculation of the return on initial cash invested relative to annual cash flow. (cash flow/initial investment).
• DBA – Doing Business As.   Business name registered as ancillary to the actual entity or person filing taxes or bank account deposits.
• DOT – Deed of Trust.  Document filed by a lender to publicly show proof of loan or lien on real property.
• FHA – Federal Housing Administration. The federal agency in the Department of Housing and Urban Development that insures residential mortgages.
• HOA – Homeowners Association.  A group that governs a subdivision, condominium or planned community or other real estate with a common purpose.
• HUD – Housing and Urban Development.  The United States federal department that administers federal programs dealing with housing.
• I/O- Interest Only (loan). A type of loan amortization in which the principal balance of the loan neither increases nor decreases.
• IRR – Internal Rate of Return.  The average annual compound rate of return received by an investor over the life of their investment.
• L/O – Lease Option.  A written agreement between a property owner and a tenant that allows the tenant to use a property in exchange for rent, but it also gives the tenant the option to buy the property for a certain price within a specified time period.
• LLC – Limited Liability Company.  A legal structure for businesses which is designed to combine attributes of corporate and partnership structures.
• LOI – Letter of Intent.  A document outlining an agreement between two or more parties before the agreement is finalized.
• LTC – Loan to Cost.  The ratio of the price paid for a property to amount of the loan used to finance the purchase.  Often used to calculate a purchase AND repair or build costs.
• LTV – Loan to Value.  The amount of money being loaned (borrowed) against the appraised value.

• MLS – Multiple Listing Service. Local or regional service that compiles available real estate for sale by member brokers including detailed information, generally computerized and online.
• NNN – Triple Net Lease.  A lease in which, in addition to the rent, the tenant is required to pay for property taxes, insurance and maintenance.
• NOI – Net Operating Income.  Annual income after all expenses (property taxes, ins., & maintenance) except debt service (mortgage payment).
• NOO – Non-Owner Occupied.  Homes that are acquired specifically for investment purposes, also a type of loan for investment property.
• OWC – Owner Will Carry (owner financing).  A type of financing in which the seller accepts a promissory note as a portion of the purchase price. Also called owner or seller financing.
• PITI – Principal, Interest, Taxes and Insurance.   The total monthly payment a borrower makes to the lender.  If private mortgage insurance is required, that will be included in the amount as well.
• PMI – Private Mortgage Insurance.  Insurance paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-To-Value Ratio is greater than 80%.
• POA – Power of Attorney.  A written authorization to an agent to perform specified acts on behalf of his principal, usually to sign closing documents. This may be granted as either a general or a limited power.
• POF – Proof of Funds. A document by which the principal’s bank states that the principal owns the funds required for the transaction.
• REO – Real Estate Owned. REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.
• ROI – Return On Investment.  A measure used to evaluate the quality of an investment or to compare different investments. Return/Cost expressed as a percentage or a ratio.
• SFR – Single Family Residence.  A standard home with no common areas, or sharing of common walls intended to be occupied by 1 family.

Old House Sewer Pipe Problems:  When Don Nichols visited our real estate office recently, I asked him about his Denver sewer line inspection company. Specifically I wanted to know how it relates Realtors who are buyer agents shopping for older houses in the central Denver area with aging sewer infrastructure.

Here is a recap of the questions answered in the short video below offering tips and advice to Realtors, real estate investors, home buyers and home owners about the importance of understanding sewer inspections and repair costs.

• Beware the Sewer Line Repair Salesman
• How much does it really cost to fix a broken sewer line?
• Question the repairs being suggested by plumbing companies
• What are the hard costs of sewer line plumbing repairs?
• Is the Denver city main verified or that a sink hole?
• #1 TIP? Make sure they are putting the camera down YOUR sewer line!

It’s so refreshing to meet people who are really good at what they do, and can explain technical and mysterious jargon in plain English.  Don offers a unique perspective when it comes to the costs and risks of sewer line problems: in addition to being in the plumbing business with his dad since childhood, he was a Remax real estate agent for more than 8 years.

I did some online research for common sewer repair questions related to real estate agents and home buyers.  I was surprised to read that in many parts of the country sewer repair inspections are rare and not recommended by Realtors to their buyer clients.  Sewer inspections seem to be more commonplace in Denver real estate transactions, but there was also a lot of misinformation, mostly by people who Don calls “plumbing repair salesman.”

Thanks to our Special Guest and PMRE Approved Vendor, Don Nichols

Don Nichols
Certified Sewer Inspection
Denver, Colorado
303-847-9805
http://www.certifiedsewerinspection.net/

Medical marijuana might seem like an odd topic for a real estate blog, but bear with me and I will explain. There are three interesting social trends happening in Denver in 2009, two have been publicly and proudly announced, and one is a little more underground, but buzzing:

A Growth Industry:

• Solar and “green” movement
• Exercise and “health” movement
• Medical Marijuana “growth” movement

Growing the Green Movement

Seems from the headlines that Denver Colorado is becoming quite enlightened!  New “green” service and construction businesses are prolific, and yoga studios are popping up everywhere. These businesses are having a positive affect on the small commercial real estate market locally. But would you believe that the medical marijuana movement in Denver is also having an interesting and tremendous impact on real estate owners, landlords and the legal community?

Property owners and managers advertising rental property are receiving multiple requests for leases on everything from single family houses, all classes of retail centers and even some industrial buildings. These tenant applications are from a new “growth industry.” Namely from well financed entrepreneurs seeking to open medical marijuana growing facilities and retail dispensaries.

The Landlord’s Legal Problem

Despite being offered premium rents by qualified (financially) and permitted use businesses by the City of Denver, most property owners are being advised by their attorney’s to not lease to them. The reason is that while state law allows for this type of use under Amendment 20, Federal law still prohibits the controlled substance. The risk to owners (as explained to me by our attorney) is that Federal seizure of the property is possible.

Consequently, this phenomenon has also been a boon for specialists in the legal community. I know several sophisticated property owners who are spending tens of thousands on lawyers trying to find ways to minimize the risk of signing leases with these business owners. Their fear is having their properties “go dark” during any Federal legal issues that may arise.

The economic risks are interesting to calculate. One dispensary owner I talked with plans to reserve 15% of gross proceeds for legal representation. The question we are trying to answer is how much should a property owner reserve, and how significant is the rent premium for leasing to this type of user?

The Foreclosure Factor

The calculation becomes more interesting when you factor in the distressed condition of many properties and loans in the commercial real estate sector.  If an owner has significant equity in the property and is in no danger of foreclosure or financial distress,  then leasing to a medical marijuana grow facility or retail dispensary may not be worth the risk.  But to the growing number of distressed property owners who are having trouble finding tenants and making mortgage payments, the risk reward calculation changes. If an owner is teetering on losing a commercial property to the bank in foreclosure, perhaps he or she will be more interested in signing a premium priced lease?

This scenario has happened often enough in our office recently that it has become newsworthy and worth sharing with other real estate agents, buyers and investors:  Our buyer clients are getting a competitive advantage in the 1^st time home buyer and investment property markets because of a mortgage strategy, and by working with a specific type of financing company – FHA approved mortgage banker that underwrites and funds locally on a warehouse line.

Too many offers, too long to close

Fastest Loan, Lowest Rates

Are you shopping for a house in the Denver real estate market, or an agent representing a buyer, in the $300K and under price point?   Are you experiencing stiff competition for good properties that are priced correctly?  Here’s an explanation:

• Moratoriums on foreclosure properties and REO inventory hold backs
• Inventory is down to historic lows in the lower price ranges
• 1^st Time buyer demand is high for remodeled houses and sweat equity bargains
• Investor demand for flip and rental properties is feverish

The most common challenges we hear from our agents and buyer clients:

• Multiple competing offers for good properties and losing deals
• Challenging lending environment and changing rules
• Very long underwriting timelines for loan approvals
• An over correction on appraisal values that are below market price

How do you compete in this market for the best priced properties?

We have had success lately winning contracts by offering shorter closing times to the seller or listing agent.  All things being equal, shorter escrow periods get attention.   Most sellers are motivated to close quickly, especially investors who have remodeled a house for resale.  Also, with the first-time homebuyer tax credit deadline fast approaching, it is doubly important to have confidence in your lender’s ability to get the loan done quickly.

Use a mortgage company that directly underwrites your loan

There are many articles online about the differences between mortgage brokers, mortgage brokers, and correspondent lenders, so I won’t go into detail in this post.  But the key difference for buyer, seller and agent alike is the time-frame for underwriting and funding.   In order to write offers for fast closes, you will need to work with a finance company that underwrites and approves loans in-house.  The best companies are approved to sell bundled loans directly to FHA.  Ask!

Brian Neufuss is the mortgage lender that we have worked with for the past several years.  And he deserves some accolades for his work recently in building relationships and getting loans approved locally and quickly with far less “red tape” than any other that we’ve worked with.  He has benefitted our clients and real estate investment business, but has also impressed listing agents whom our clients have purchased through.

Please know that this is a freely given endorsement and recommendation of Brian’s expert services with no intent other than to thank him.  He has consistently pushed deals through for us with the lowest possible rates, whether for owner-occupant, first time home buyer, investment property or refinances.  Please feel free to contact him to ask questions about his business and system at the following number or use our Contact Form on our website and I will forward to him (we don’t put email addresses on the website for the spam bots to grab).

Fastest Loan Approvals in the West

Brian Neufuss, Mortgage Banker

Denver, Colorado

303-250-1841 direct line

*Private and Hard Money Loans also available for Investors

In 2009 we have had a lot more requests and questions from clients about using IRA funds to purchase investment real estate for fix and flip projects and rental properties.  So I thought I would post an FAQ with answers.  Here are the Top 5 Questions from 1^st time investors using their IRA funds to buy income property:

#1 How do I get access to my IRA funds to buy a house?

In order to begin the process, you will need to establish a self-directed IRA account.  It is unlikely that you will be able to obtain this type of IRA account with your current brokerage or bank.  A quick Google search will retrieve many custodians who help investors open IRAs for real estate purchases.  After comprehensive due diligence of many of these companies, we have selected Equity Trust Company for our own accounts and recommend that our clients include this company as part of their selection process for a custodian.  Consider account and transaction fees, allowed structures, types of entities, consulting and customer service when selecting a custodian.

#2 Can I get a Loan in my IRA to purchase investment property?

Yes, you can get a loan for up to 65% of the purchase price of a property in your IRA using what is called a “non-recourse” loan.  This type of loan is not personally guaranteed by you, it is only secured by the property within your IRA account.  One of the leading lenders in Colorado serving IRA customers is First Bank.  They have a specific and streamlined program that we highly recommend.  You can read about all the plan and property qualifications at this link called Loans to Purchase Real Estate in your Retirement Account.

#3 What kinds of property can I buy using my IRA funds?

Within your IRA, you will have many options for real estate investments.  The most common is purchasing property directly and getting fee simple title.  The title will be held in the name of your IRA, not your personal or business name (with or without leverage or loans).  Another option is buying into ownership of LLC’s or Limited Partnerships that own and operate income property.  Your IRA may also be a lender that holds a mortgage on a property that pays interest to your IRA that is secured by real property.  This is called investing in notes (promissory notes).  In the first two examples, your IRA is the owner of a property, and the last example your IRA is a lender to an owner of the property.  Any of these can be good investments for your retirements funds, all of them have risks and should be only be undertaken after careful consideration.  After all, these are your life savings!

#4 How can I get the Money out of my IRA?

Well, here’s the bad news and the good news:  You cannot pay yourself or take profits or cash-flow from real estate investments in your IRA and put them in your pocket today.  Sorry.  But, the good news is that you are doing yourself a favor by growing your net worth and savings and that will increase your borrowing capacity and ability to do deals outside your IRA accounts for current income or short-term capital gains.

What do I do First? Or How Do I Get Started?

Sometimes this is the first question, and sometimes it’s the last!  I always recommend that investors (especially novice investors) begin the process by interviewing and hiring two experienced and competent advisors.  First, an accountant and second an agent or real estate investment advisor.  It is critical to choose real estate professionals that understand the benefits and risks of investing in real estate (whether in your IRA or otherwise).  Be aware that there are many accountants and real estate agents that are very knowledgeable about normal transactions, but there are only a limited number that specialize in investment property, and even fewer who understand IRA rules and regulations.  In other words, don’t just hire your brother-in-law!  Seek out people who have been where you want to go.  Find people who have an existing team that you can use; leverage other professionals who have paved the way for you!

NOW is the time to get started, Happy Investing!

If you or someone you know is interested in these types of IRA real estate investments, please us the Contact Form for additional information.

I was having a pretty normal day at the office, comping properties, checking on email etc.  Until a pleasant looking woman arrived unannounced just after lunch and handed me her card:  Special Investigator for the Denver District Attorney. Ouch.  She asked me if I had a few minutes?  What else could I say, but “c’mon in…”

I asked what it was about, and learned that a certain property that we purchased and then resold last year was under a fraud investigation.  A fraud, apparently, that is becoming more and more prevalent in today’s real estate market and investors need to be aware:  people selling property that does not belong to them.   She asked me to pull the file for the property and then asked for copies of several of the documents.   Lots of weird questions ensued:  Please describe the seller’s, height, weight, distinguishing features?  She then showed me some pictures.  What do you remember about the ex-wife?  Excuse me?  What ex-wife?  I remember the son and the mom from closing, that’s it.  And they did not look anything like the people in the pictures!

Interesting thing was that we DID receive a call to the office earlier in the year from a person who complained that someone had sold her house without her permission.  But she sounded kind of crazy and we get calls from weirdos a lot in this business, so none of us really thought much about it.  But remembering that call, all of a sudden I felt like I was starring on the TV show Law and Order, so I had to ask:  “Should I be calling my attorney?” She sweetly replied that is was not necessary at this point (right), and informed me she is “a cop, not an attorney.”  (whew?)

So the story goes, apparently the “seller’s” of this particular house may not have had the right to sell the property.  This was a mild case compared to the blatant fraud that is happening with other deals, according to the investigator.  In this instance the husband “allegedly” removed the ex-wife from the deed with a Quit Claim deed without her permission and then sold the property and kept all the proceeds.  In my head the question kept coming up:  Am I in any way responsible for this?

After a pretty long cop-like conversation, I’m pretty sure I convinced her that our office and business had nothing to do with the Quit Claim deed and alleged fraud.  Although she admitted there were some red flags.  The organized groups that commit this type of fraud use a team of investors and agents, have in-house notary and use small private title companies to close the transactions.  We have that in common with the criminals.  Thankfully, we do keep impeccable records of our transactions and we were able to provide all documents she requested.  And the dates confirmed that our affiliated people or companies were not involved with the forged signature on the deed.  She also made phone calls to the title company and all the employees who were involved in the transaction and all our “stories matched.”

The investigator suggested that we make some procedural changes to our buying system which I would like to pass them along to other investors:  Ask for and get a copy of the driver’s license of the person who is signing the purchase contract at the time of signing. Make sure the driver’s license matches the title work, and be watchful of strange title occurances (like Quit Claim deed, power of attorney, etc).  We have previously left this type of identity checking to the title closer and never paid much attention during escrow if the title work came back clean.  In all my years of investing, this has never happened to me before, and hopefull will never happen again based on the new procedure.  Investors, keep a sharp eye out for this type of fraud!

Estimating repairs, staying on budget and working with contractors is perhaps the most mysterious and difficult aspect of the business of flipping houses.  As any good investor will tell you, you make your money when you buy.  But all too many investors LOSE all the profit in the remodeling or rehabbing process.  Here are the three most common mistakes made by novice fix and flip real estate investors:

• Under-estimating repair costs
• Over-improving properties
• Under-improving properties

General Contractor Guidelines:

• Begin interviewing contractors before you find a project
• Determine cost plus or complete bid procedure
• Pay contractors timely, but don’t let them get ahead of you on payments
• Obtain lien releases with every check you write

Before You Begin Repairs and Remodeling:

• Switch over utilities the day you close!
  • The title company may offer to help, but don’t trust that they will do so timely.
  • Contractors will not be able to start repairs without the utilities.
  • Avoid delays by contacting the utility companies before you close about any special procedures if the house has been vacant for a long time.
• Change locks, change lock box code, secure property by boarding up any broken windows and doors.
• If you are replacing windows, measure and order them right away.  It can take up to two weeks for delivery, the timing will be perfect if you order them first.
• If you are replacing the roof, pull a permit right away and put it in the window prior to beginning demolition work.

Specific Order of Fix and Flip Repairs:  

1. Clean-Out Crew: Many distressed properties will have been occupied by very messy people!  Be sure to budget $250 for each dumpster as well as labor to clean-out the property.  In some cases the full scope of the project will not be known until after the clean-out is complete.
2. Demolition Crew: At this point you will have a full scope of the project planned.  The demo crew should remove EVERYTHING that you plan to remodel.  Cabinets, vanities, tile, carpet, old plumbing, old HVAC, any drywall where new electrical or plumbing needs to be run.  Many investors make the mistake of trying to save and work around certain items in the house.  Ask your contractor:  it is often less expensive to start fresh with than try to save costs by reusing items.  Doors are a prime example.  Strive to have a “clean slate” and work environment after the demo is complete.
3. Roofing Contractor. Always fix the roof first! There is nothing worse than having fresh new drywall ruined during a rainstorm by a leaky roof that you planned to fix later.  Pull a roofing permit and put it in the window on day one (before the demolition).
4. Foundation and Structural, including Framing. Make repairs to foundation, beams, supports, joists, concrete etc.  When the structure is solid you may begin framing new walls and the rest of the project.
5. Windows Installation. The timing of the windows installation is often tricky because they likely need to be ordered and delivery times are a few days to a few weeks.  The interior framing, rough plumbing and mechanical work can be in process, but windows should be installed before the interior drywall work is completed.  You should also plan window installation to not interfere with exterior paint schedule.
6. Gutters / Soffits / Exterior Paint. Correctly perform any brick, framing, or siding repairs or your paint job will not last.  Exterior paint is usually a 3 day process.  Day 1, scrape, day 2 prime, day 3 paint.
7. Rough HVAC. Install furnace, ducting and accessories for A/C if part of scope (condenser can be later).
8. Rough Plumbing. Copper or PEX plastic tubing is becoming popular.  It is less prone to theft and easier and faster to work with.  Check your local building codes.  Have the lines snaked at this time.  Install tubs.
9. Rough Electrical. Many codes have changed recently and inspectors are very keen to improper electrical repairs.  Make sure you install panels, GFI outlets and wiring correctly, to code, with a permit.  Or you will regret it later.
10. Drywall / Texture. Another 2-3 day process for drying times, budget accordingly and keep everyone out of the way of the drywall crews.
11. Cabinets / Trim Carpentry. Install doors and trim.  If there are thresholds or trim that must wait until after tile or vinyl flooring, be sure to schedule a follow-up visit from carpenter for final touches.
12. Interior Paint. Yes, use bland colors even if it hurts your sense of style.  Pick your sheens correctly, semi-gloss for kitchen and bath ceilings, eggshell for walls.  After completion, schedule a touch-up session with the painting contractor to coincide with day before carpet install.  Mark and save extra paint!
13. Counter-tops in kitchen and baths. If you are using Formica you can have it installed by the carpenters.  If you are using tile granite, use the tile team, and if you are using slab granite order immediately after cabinet installation and have it installed by the fabricator.
14. Tile / Flooring (not carpet). Install all bathroom, kitchen and tile flooring.  Make sure to keep tub drains covered to keep mud out.  Finish or install hardwood flooring.
15. Finish Plumbing and Electrical. Install all trim kits, fixtures, faucets, outlets, lighting, switches, ceiling fans, vent covers.  If you did not replace tubs, have them re-glazed at this time.
16. Install appliances, final touch-ups.  Painting / trim, order landscaping, measure and order blinds if applicable.
17. Full Construction Clean. Vacuum ducts if not replaced, clean-out ALL debris, scrub bathrooms, kitchen, broom clean garage.  Wash the windows (yes, wash the windows!)  Make it SPOTLESS!
18. Install carpet. Again, this is the very LAST thing you do inside the house (except staging).  Change the lock box code at this time.
19. Final Exterior. Landscape mulch, rocks, address numbers, mailbox, welcome mat and flowers on front porch. (this can be done earlier in the process if you would like to get the “street appeal” set for the house while it is being remodeled.

Finish Schedule Tips

• Know your market. For example, you may not need to use slab granite in the neighborhood where tile granite sells just fine.
• Budget more than you think you need to for street appeal.  I see so many novice investors spend too much money inside the house, but not enough on landscaping and exterior appeal.  Buyers may not even get out of the car if you don’t have street appeal!
• Colors are critical, but not in the way you may think.  The old Realtor creed is correct, buyers should not notice the colors, they should notice the house.
• Light staging is better than heavy staging.  Use rugs to define spaces rather than large pieces of furniture.  A few pictures and well placed mirrors on walls, a Chinese screen, lots of plants and accessories in the kitchen make the biggest difference for the lease cost.

Architectural Types and House Product Tips:

• Buy houses with good floor plans.  A house with some sort of functional obsolescence will be difficult to sell even with great finishes.
• Purchase homes that are 50-70% of your city’s median value for the largest buyer audience and least risk.
• Do NOT purchase homes that have significantly different architecture than the neighborhood homes (odd-balls)
• Ranch style houses with 3 or more bedrooms and 2 or more bathrooms have the widest audience for sales.
• Victorian houses and early 20th century houses (old houses!) are the most difficult to remodel and have the most cost over-runs

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