finding and managing “profitable” real estate opportunities in your own backyard
TRANSCRIPT
Finding and Managing “Profitable”
Real Estate OpportunitiesIn Your Own
Backyard
2746 Marshall Way, Curtis Park
820 45th St, East Sacramento
“The Residences” at Granite Bay Golf Club
Custom Home in Serrano
Featured Property in “Sacramento Magazine”
Custom Home in Serrano
$5.3m Napa Valley Farmhouse – New Construction project
17 Ways to Find Deals That Work
Agent pocket listings Multiple Listing Service (MLS) Expired listings from MLS For Sale By Owner (FISBOs) Craigslist and other internet services Websites – pay-per-click and other lead sources Bandit signs Door to door knocking
17 Ways to Find Deals That Work
Flyer services Direct mail Auctions – Property Radar – courthouse steps Bankruptcy – courthouse record searching Probate – looking for “letters” – courthouse Divorce – courthouse records City and County Dangerous Housing Tax lien sales Sherriff and Marshall service
What are YOU good at?
What is going to work for YOU?
What RESOURCES do YOU have?
• Time•Money• Expertise• Relationships
WHO is your CUSTOMER?
End User – Homeowner – Landlord – Renter
Flipper – Wholesaler
Other…..
What is the MARKET doing?
What is YOUR Market doing?
How do you know?
This is a RELATIONSHIP business
How are you Building Relationships?
What is the KEY To
Making Money
In this BUSINESS?
• Project Evaluation– UPFRONT Due Diligence
• Project Financing– can make or break your deal
• Project Management– Mitigating the risks UPFRONT
Project Evaluation• Due Diligence – inspections, surveys, planning,
permitting
• Highest and Best Use • “Subject To” BPO or Appraisal• Market Conditions and Timing• Scope of work• Budget Estimate• Target ROI – Risk Tolerance
Project Financing• Source of Funds – Hard, Private, Conventional, Cash
• Cost of Money – interest rates, points, fees
• Term – how long do you NEED the money?
• Loan extensions - can be costly + points, fees
• Loan to Value Ratio – how much cash is in the deal?
• Hidden costs - prepayment penalties, minimum interest, 3rd Party Inspection fees, etc
Project ManagementManaging – • TIME – project timeline • MONEY – Fixed budget• SCOPE OF WORK – Stick to the plan• CONTRACTOR – experienced, communicator
What did you Forget?
• Property Taxes• Insurance – Hazard, General Liability, Builder’s Risk
• Closing Costs• Staging?
Evaluating Profitability
Top down approach
AFTER REPAIR VALUELess
Rehab costsLess
Financing costsLess
Carrying and Closing CostsLess
Net Profit (What you get to take to the BANK)=
PURCHASE PRICE (What you can AFFORD to pay)
What’s the #1 question
I get asked
all the time?
“How do I keep my project in budget?”
It’s all about the …..• The “Vision” – Architect, Designer, Contractor• Comprehensive Scope of Work• Line Item Cost Breakdown - CONTINGENCY• Project Timeline - Milestones• Qualified Contractor – who understands
concept of TIME = MONEY
It’s all about the ....• Construction Contract
• Fixed Price or Cost Plus (%)?• Fixed Bids from subs or Time & Materials?• Late Penalty and Early Incentive clauses
• Don’t deviate from the PLAN• Unexpected issues?• Increased scope of work and costs?
• THAT’S WHAT THE CONTINGENCY IS FOR!
Mandy SnellArchitectural Design, Project Management
(916) 765-2880
“Wealth is a Team Sport “