Tag: rehab

Rocker turned real estate pro
14 Mar 2014

Rocker turned real estate pro

Jenelle Isaacson is the hip owner of Living Room Realty. After starting her company 5 years ago while pregnant, Jenelle credits her creative background, fresh approach and attitude towards real estate to her success.

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Full Name: Jenelle Isaacson
Location: Portland, OR
Started investing in: 2001
Years spent investing in real estate: 13
Estimated portfolio size: $3.5M, 5 properties, residential and commercial real estate

As a woman in the real estate industry, what inspired you to get started?
I had previous success in sales in an art and jewelry gallery. During a conversation with my step mom, who had been selling real estate for a few years, she encouraged me to take those skills and see what I could do in real estate. I loved houses, interior design and had just bought my first house at age 26 which empowered me to make the leap into the industry.

When did you start investing and how did you get started?
A few months after getting my real estate license and helping a lot of my friends buy their first houses and fix them up, I found a house in my neighborhood that was a great value and snatched it up. My dad had just retired from teaching and we decided to fix it up as a family.

Besides each of us choosing to repaint the front door 3 times, we were on the same page. Each of us brought a different skill and that little house ended up making us a $7,000 profit each. Success! I got the bug from there.

What do you love most about investing in real estate?
Creating community. Every house, development and project is a chance to bring something new to a community. Putting together my team of contractors, lenders, inspectors and tradespeople feels like family.

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Also, my favorite deals are those that come to me from the most unexpected places.

It’s in those moments that I realize how a healthy, diverse community has supported my success.

I played in a girls punk band up into the time I started my career in real estate. Years later, a drummer in a band we played with saw I was now the owner of a real estate company. When he needed to sell his house, he came to me knowing I would be able to relate to him.

We worked together to help him get out of a tough financial situation and one of my partners ended up buying the house, rehabbing it and turning it into an amazing home for herself. It feels good to know that my connections made in the art and music world make me relevant to business in a way that I would not be without that experience. Everyone came out a winner.

Have you encountered any challenges that you think are unique to being a woman in real estate?
Being a woman in real estate can be challenging. I am petite and look younger than I am which can lead to people underestimating me, but I have learned to turn that into a strength. When I was first starting my real estate business, I endured a lot of sexism.

I often got asked if my company was just for women, a comment that always surprised me seeing that most people in residential real estate are women. Our company actually had a higher ratio of men to women than our competitors, but when I looked around at the other firms in our market, we were the only one of our size that was owned, operated and managed by women. I think this is what makes us even more competitive when it comes to going after market share.

It’s also a misconception that has benefited us at times. The majority of home buyers are single women who are attracted to our brand and company because we have so many empowered women who are successful in real estate.

What is your biggest accomplishment so far?
I think buying my first commercial property has been my biggest triumph. I managed to put together financing for a commercial building in 2009 after the market crashed. A lot of banks laughed at me, I was a realtor with a new realty firm in the depth of the housing crash. I also had a 2 month old and an 18 month old.

Getting together the finances and business plans to the banks was one of the hardest things I had done and not being discouraged was a real test of grit.

When I finally found an advocate at a local bank and some help from the city, we were able to put together the deal. I felt proud of what I had done and owning a piece of real estate on a popular main street in the city felt like a major achievement.

Have you made any poor investment decisions?
I’m lucky in that I don’t have any nightmare stories, but I have made decisions I would do differently. I wish I would have held on to more property in the beginning of my career, rather than flipping it.

At the time, I needed the capitol to work with and didn’t have the connections I do now for financing so selling property freed up the money I needed to rehab or purchase. Bringing in partners and getting more creative are things I consider now that I didn’t before.

Do you recommend women get into property investing? What would you advise a young woman who is thinking about getting into real estate investing?
Definitely, yes. Women generally have very good instincts for houses and neighborhoods.

My biggest piece of advice is to be selfish!

Don’t put your boyfriend on the house as a way to show him you trust, care, love, etc. him. Time after time I see women put their boyfriends and partners on their real estate purchase. Women want to share “home” and mistake making a home as needing to share an asset.

What do you think are the most important things every investor should know when investing in real estate?
Know yourself first, your threshold for risk and your ability to see a project through. Believe in yourself, no one knows more than you, has more talent, luck or opportunities than you do. You will learn along the way. Know your market, values and demand. If you are weak in any one of these, hire someone who can help you.

What are your investing goals for the future?
I would really like to do more commercial projects where I can take more risks and be an active collaborator in shaping the businesses that I lease to and develop for. A whole market concept or micro retail in an urban setting also sounds exciting with a residence on top for me and my family.

Flipping success in a smaller city
20 Dec 2013

Flipping success in a smaller city

K&V Investment Group is a real estate company focused on distressed property rehabilitation, management and investment sales. Their goal is to grow their portfolio steadily, aiming for long-term success through all economic and real estate market fluctuations.

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Company: K&V Investment Group
Co-founder: James W. Vermillion III
Location: Lexington, KY
Years experience: 3
Number of properties flipped: 2-9 currently under contract

Why did you decide to start flipping real estate?

I initially became interested in real estate because of the abundance of options. With so many strategies, financing options and types of investments, it was only a matter of figuring out which strategy best fit my goals and personal situation. After researching, I decided rehabbing was a good starting point.

How did you get started?

After I decided to start rehabbing, I teamed up with a personal friend and we spent several months learning all we could about the business. As we were learning, we constantly developed and modified our business plan until we felt comfortable enough to start executing.

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With our business plan in place, we set the foundation for our flipping business. We formed a Limited Liability Company (LLC), met with potential lenders, became licensed agents and began our search for contractors. At the same time, we were hunting for our first property to rehab. We went to foreclosure auctions, searched the MLS and bid on online auctions, all with no success. While frustrating, we continued searching until we got our first property under contract.

How do you decide where and what to buy?

We look for properties in desirable areas that we can buy at a discount, which enables us to renovate the property and exit with a profit. You cannot rely on one indicator to analyze a property and need to consider as many variables as possible to ensure you are purchasing the right property at the right price.

How do you find your properties?

We search the MLS daily and do our best to keep tabs on the market and maintain an awareness of changes in conditions. In addition to using the MLS, we discuss investing with other real estate investors which can lead to opportunities. Recently, we have seen the market tightening up and have expanded to several smaller cities and towns where there is less competition.

K&V bathroom before and after

How do you finance your real estate investments?

The majority of our purchases are financed through the commercial lending portion of a local bank. The lender finances both the purchase and rehab costs, which leaves us responsible for the down-payment, closing costs, holding costs, renovation costs beyond the approved budget and any other associated costs.

In addition, we have started using a hard money lender when a fast closing is required or we are unable to get financing from the bank. In a few circumstances, we have also used private funds and plan to expand that method in the future.

What are the most common rehabs you have to make when flipping a property?

First impressions are critical to buyers, so enhancing curb appeal is important to make a quick sale. While landscaping and exterior improvements do not always need to be drastic, presenting a clean, attractive property will go a long way in getting people in the door.

Once in the door though, we provide a “new” looking home that is consistent throughout.  I always recommend rehabbers budget for a professional paint job, new light fixtures, interior doors, door and cabinet hardware, floors, etc. There are times when not all of those items will need to be replaced, but unless they look brand new, we upgrade them.

How long does it typically take for you to complete a flip project?

Usually between 4-6 months, although project lengths have varied from less than 2 weeks, to 9 months.

What are some ways you sell the property once you have completed the rehab?

We start by marketing the property while the renovations are underway. This can lead to a contract to sell before the property is even completed, limiting the holding expenses. When it comes to marketing our completed rehabs, we do not do anything special. Since we are licensed and real estate agents, we list the properties ourselves.

K&V living room before and after

How much do you typically make on a flip?

Unlike many rehabbers, we have experienced a wide-range of profit levels due to the range of properties we have flipped. Rehabbers in larger markets are able to focus on a few areas where most properties are very similar, thus they have little variance in purchase price, holding costs, rehab costs and ARV.

Being in a smaller market, we have had to take on a variety of projects, from historic single family properties, to townhouses and duplexes. In addition, the scope of work in our projects has ranged from primarily cosmetic to complete renovations.

Have you lost money from a flip?

While we have made our share of mistakes, we are fortunate to have not lost any money on a project. I credit this to focusing a lot of energy on analysis ahead of purchasing and including contingency funds in our budget for unexpected events or holding time.

What is the most common way people lose money when flipping properties?

There are several very common errors that lead to most failed flips. The first is overpaying for a property. The profit in flipping comes primarily from the purchase, so being able to identify solid flip candidates and purchasing them for the right price is a critical step. Overpaying for a property dooms the deal from the beginning.

Another common mistake is underestimating the rehab budget and timeline. Investors are notorious for using best-case scenarios in determining the renovation cost and timeline, which leads to blown budgets and additional holding costs.

The other major mistake I have seen repeatedly is overestimating ARV, again, due to using best case scenarios during analysis. This happens when rehabbers pick comps that support the top price point, and ignore those that validate a lower price.

What are some things you recommend staying away from when trying to increase a property’s value?

There aren’t any specific aspects I would warn investors about, just make sure you do your due diligence. We have rehabbed properties with foundation issues, water damage, mold, etc., and while many investors look at those problems as red-flags, we look at them as potential opportunities. The key is to make sure you are aware of the issues and are able to accurately budget for the solution.

Not sure what house flipping is? Read our article 4 essential house flipping rules for beginners to learn more!

Making 20% returns on part-time rehabs
29 Nov 2013

Making 20% returns on part-time rehabs

JS2 Homes is an investment firm that specializes in buying, rehabbing, redeveloping and reselling single family and multi-family properties.

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Company: JS2 Homes
Name: Justin Silverio
Location: Methuen, MA
Years experience: 2
Number of properties flipped: 8

Why did you decide to start flipping real estate?

My father has owned a general contracting company and has owned rental properties since I was born and was always encouraging me to buyrental properties to create passive income. None of this really interested me until about 6 years ago when I was working 70+ hours at my accounting job and knew there had to be an easier way to build wealth.

I’m a big researcher, so I spent the next several years researching different real estate strategies to identify which I would enjoy the most and which had the greatest potential to build capital. That’s how I decided on rehabbing.

How did you get started?

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Since I had a full-time job, I discussed the opportunity to partner on the rehabs with my father. I would be responsible for the acquisition, cash management, marketing and would assist on the sale end, while he would project manage the subcontractors on a day-to-day basis.

Once we understood our roles, I created a business plan to pitch our business to several local banks to gain funding. We had multiple banks that agreed to lend to us so the next step was to actually go out and find a property.

My first deal came from a real estate agent that I had been networking with for some time. He was also a rehabber and provided insight into what the property could be once completed. I walked through the property, taking pictures and notes and came up with a rehab budget. Once I was confident in my numbers, I submitted an offer and it was accepted.

To this day, I am working full-time and rehabbing part-time. For others that have a full-time job and want to start flipping properties on the side, I would say that the most critical component to achieving this is to create systems and procedures so that you can minimize your involvement in your rehabs.

JS2 kitchen rehab

How do you decide where and what to buy?

We start by looking in areas that we are familiar with. We also spend many hours driving through neighborhoods, talking to local real estate agents, attending open houses and researching demographic studies, immigration and business trends to understand what towns, neighborhoods and streets are most desirable and have the largest potential for growth.

This research provides us with the information of what types of houses our buyers want. For instance, we know that we will have an easy time selling a 3 bedroom, 2 bathroom colonial-style property, but will have some difficulty selling a 2 bedroom 1 bathroom bungalow.

We are constantly researching trends and what homebuyers want so we can adapt appropriately. This is crucial to our success and the success of our investors.

How do you find your properties?

We tap into multiple channels to find our next project. Here are some of the things we do on a consistent basis:

Because of our consistency, we have been able to get a deal through just about every one of these techniques.

How do you finance your real estate investments?

We fund our projects using contributed cash from a business line of credit and/or rehab loans from community banks. We have also created solid relationships with the local banks that have provided favorable rates and the flexibility to close deals quickly. Each project is analyzed to identify which funding source makes the most sense, how quickly we need to close and which source(s) will provide the greatest return on our cash.

What is your typical budget on a flip?

Most of our rehabs range between $70-85K.

What are the most common changes you make when flipping a property?

Most of our projects require major cosmetic repairs. This includes fully gutting a house, reconfiguring floor plans, rebuilding walls and/or remodeling kitchens and bathrooms. It’s hard to find a property where only minor cosmetic rehabs are needed.

How long does it typically take for you to complete a flip project?

The amount of time to complete a project varies depending on the amount of rehabbing a property needs. We have completed projects in as little as 3 weeks and have some that took up to 10 weeks. A good standard to go by is that it will take 1 week for each $10K of work needed.

JS2 living room rehab

What are some ways you sell the property once you have completed the rehab?

To begin with, we always list our properties with our in-house real estate agent. We also perform a market analysis a week prior to listing the property to identify the market value of the home. In a sellers market, we will list the property at market value and in a buyers market we will list slightly below market value to ensure a quick sale.

We also try to incorporate special features in our properties that you wouldn’t typically find in other homes selling in the price range (i.e., granite countertops, hardwood flooring, tiled bathrooms, high end appliances, etc.) and always have large “We Buy Houses” signs on our properties. These signs have provided us with several homebuyers also.

How much do you typically make on a flip?

We typically make a minimum of 20% return on our investment.

What are the most common ways people lose money when flipping properties?

Two of the most common ways people lose money is by overestimating the ARV (After Repair Value) and underestimating the rehab costs. The ARV is the price at which the investor believes the property will sell for on the back end of the project.

ARV – (rehab costs + purchase, holding and selling costs + profit) = purchase price

As the flipping formula is based off the ARV, overestimating the ARV will result in an inflated purchase price. Once an investor buys at an inflated price, the only flexibility in the flipping formula (assuming the rehab cost is accurate) is the profit. Therefore, the investor’s profit will be reduced due to the inaccurate ARV.

Similarly, if an investor underestimates rehab costs and all other variables in the flipping formula are accurate, the profit will decrease.

What are some things you recommend flippers always rehab?

Most people have heard that kitchens and bathrooms sell homes and we would have to agree. Some other aspects, although smaller in cost, that we recommend updating are door hardware, new carpeting and putting a fresh coat of paint on the walls.

We also recommend that rehabbers research their markets. If a typical home in the price range that a rehabber is going to sell a home has laminate flooring or carpeting, use laminate flooring and carpeting. You don’t need to spend the extra money on hardwood flooring and tile because you won’t get the return on your investment.

Not sure what house flipping is? Read our article 4 essential house flipping rules for beginners to learn more!

Rehab doubles after repairs
15 Mar 2013

Rehab doubles after repairs

Cole Melcher of Premier Properties of Nashville seemed to have gotten lucky with his first rehab project: the perfect house, great loan terms, and a valuation that more than doubled the initial purchase price after repairs.

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Name: Cole Melcher
Current location: Nashville, TN
First real estate investment: A 3-bedroom 2-bath home built in 1958 and located in Madison, TN. It was bought in January 2012 for $60K and is currently valued at $145K to $150K.

How did you know that this particular property was available?
I wanted to make sure that I found the perfect property for my first rehab to help minimize the potential of losing money on the deal. I searched for about 6 months and eventually found one on the Housing and Urban Development’s (HUD) website.

It was a foreclosure that was in really bad shape. HUD does its own building inspections when they foreclose but I ordered one as well and compared the two.

before and after 1

How did you finance your first real estate investment?
I financed this property with a conventional loan for the house and a construction loan to cover the cost of the repairs. The lender required a complete list and description of what I was planning to do to the house. I then had the house appraised based on those repairs to determine the after-repair value.

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Can you tell us more about your loans?
I found an amazing local bank that was willing to finance the deal without needing a large down payment and had really good terms. First State Bank lent me the money, and they required 15% down on the initial loan of the house and no down payment for the construction portion. I put down 15% of my own money from savings to secure it.

You might think that this put the bank in a high loan-to-value (LTV) situation but by the time the rehab was done, the house was worth a lot more than the total balance of the loan – at about 71% LTV.

What was the biggest challenge in buying your first piece of real estate?
The biggest challenge was staying on schedule. I had initially created a ballpark estimate of the time needed on each project but found that some tasks took more time than originally planned.

Also, when you start tearing down walls and pulling up floors, unexpected things are bound to happen. For example, when ripping up the vinyl flooring in the bathroom, I found that the subfloor had rotted out and needed to be replaced.

before and after 2

If there was one thing that you’ve learned from your first deal, what was it?
I really enjoyed my first rehab but I found that I am great at doing some things myself and not so great at doing others. In the future, I plan on hiring someone else to do those things and factor that added expense into the budget.

I have also found that many people seem to look down on real estate investors. People think that investors take a property from someone who can’t afford it and then make money from their misfortunes. I completely disagree with that sentiment.

Investors acquire properties from people who have already lost it, or help people prevent a foreclosure by buying it from them before they actually lose their home. The investor is taking a risk and deserves to be compensated for it.

before and after 3

When I started fixing up this house, I found that all the neighbors around me started doing things to improve the look of their houses, like fixing broken shutters, cleaning up the landscaping, and cutting down dead trees. One even had their house painted because they didn’t want mine to look better than theirs.

Rehabbers bring property values up. Rehabbers buy houses that no one else wants and turn them into a house that anybody would be proud to live in.

The Dirty 30: Success through rehabbing
30 Jan 2013

The Dirty 30: Success through rehabbing

Well here it is – our final “Dirty 30” young investor! Doug Medvetz of Round Table Partners did not want to wait for his job to provide him with the success he wanted. Through the help of a local investing mentor, he and his company are now staking out their own success through rehabbing property.

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Name: Doug Medvetz
Current Age: 31
Location: Greater Boston, Massachusetts
Started investing at: 30, a 2-family house in Hyde Park, MA wholesaled to another investor

How much real estate do you currently own?
My company and I are currently active in the rehabbing side of our business. We are generating capital to purchase apartment buildings with 6 units or more in Greater Boston and Western Massachusetts.

How did you get started in property investing? What inspired you to put your money in real estate at such a young age?
The inspiration was to have more time to spend with my family. I have been interested in real estate investing since my college years and I decided to get started because my career was not taking me where I wanted to be.

Your generation seems to be redefining what it means to be successful. What does success look like to you?
Success to me is NOT working a 9-to-5 for someone else.  It is also living life on my terms and not trading my time for money in the corporate world.

What’s your best advice for someone wanting to start investing early? Do you have any investing mentors?
I have been mentored by the FortuneBuilders group, by Marina Hauser in particular.

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My best advice is to educate yourself and to not be afraid to put yourself out there. Go out and network; there are a ton of people out there who are willing to share their experiences.

What are your future investing goals? Can you share a little bit about your plans?
My future goals are twofold:

  1. Raise enough capital through rehabbing in order to purchase buy-and-hold properties and support my family and business; and
  2. Take some of our capital and start a lending company for beginning investors to help them get started.

Thanks Doug for wrapping up “The Dirty 30”. A personal thank-you also to every, single one of our dirty 30 investors who openly shared their investing journeys so far so that you, a fellow investor, can elevate your results. We will also like to take this opportunity to thank our readers for supporting us in our first month of launch. Hopefully you’ve had more than a good dose of inspiration from these young guns! 

Next month, directly as a result of your feedback, we are sitting down the new, beginner investor and getting all the inside info on their very first property transaction. It could get ugly. Happy investing!

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