Here’s his best advice to other REIs

“It is far too easy to quit when a few of the inevitable real estate problems arise … your vision must inspire stronger motivation and action than the paralyzing disappointments.”

He should know. Almost 10  years ago David Toynbee suffered a traumatic head injury at the age of 25. He was  given “a 50-50 chance of dying or being a quadriplegic.” With a strong will to continue his life, he defied the odds and walked out of the hospital three months later. The following year, he regained his ability to read, his driver’s licence and job.

Quite and inspiration to anyone in a devastating accident. But David went on to defy the odds and tried his luck at flipping houses. We picked his story because his strategy aligns so much with what we teach here at Part-Time REI. 

His Strategy

Like any good student, David read up on his subject. He found inspiration in books on real-estate investing . And furthermore gained the investor mind set and the motivation to purchase his first investment property. He also joined the Langley, B.C.-based Real Estate Investment Network to learn more about building a portfolio of properties. Something else we recommend; surrounding yourself with like-minded people.

He is primarily a buy-and-hold investor, focused on generating cash flow from his properties. Cash flow is “the most important factor in sustainability,” he says. Adding key points to finding good areas and opportunities to add value with renovation improvements and/or changes of use.

David soon realized that after a few years, his first investment property had more equity in it than what he could possibly save after 20 years in his day job. This was the first realization that real estate investing was an avenue worth investigating for him.

He has also learned valuable lesson on leveraging the right people in his business. Once he hired a property manager with out interviewing them and outlining his expectations. That hurt him more than it helped him he says. Lesson learned.

Do you have a success story that you would like to share with Part-Time REI?

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The Big Basic House turned out great. Here are the great after shots of the house after our team remodeled and repaired the whole home.

Front of the House after remodel

Basement

The basement is looking a lot better than when we first saw it with the failing sump pump damage.

Windows

All windows were replaced due to improper installation and water damage.

Kitchen

What a big difference updating the kitchen has done for this house.

Bathrooms

Both bathrooms were updated and finished with neutral colors.

Thanks for checking back and seeing how The Big Basic House turned out!

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The survey found that San Francisco was the third favorite city for foreign investors, with Houston and Los Angeles coming in at four and five, respectively. The U.S. remains the most “stable and secure” country for investment by a wide margin of more than 50 percentage points over second-place country Germany. This is the widest margin since before the crash of 2008.

Check out this video from CNN for further explanation on the current US Housing Market.

The U.S. remains the country providing the best opportunity for capital appreciation. It also leads the ranking for planned real estate acquisitions in 2014, with nearly 50 percent of respondents projecting a modest increase in their U.S. portfolio size and 20 percent projecting a “major” increase. “Foreign investors’ continued and growing interest in the U.S. real estate markets reflects fully functioning capital markets for both debt and equity that provide access to a broad range of investment opportunities,” said the association’s Chairman, Steven Hason.

Experts seem ambivalent on business investment and its potential importance or benefit to U.S. housing. “The lower-than-average homeownership rate and swarm of investor purchases might or might not be a long-term model for U.S. housing,” wrote S&P analyst Devi Aurora earlier this week.

The latest data from the National Association of Realtors, which was released last summer, showed that foreign buyers had scooped up $68.2 billion of single-family homes in the U.S. in the year ended March 2013. That’s about 7 percent of the total U.S. market. That number is slightly down from the $82.5 billion invested during the same period of 2012, but up from 2011. The fastest growth in foreign buyers was from China and Canada as much of the media is reporting now.

So what are you waiting for? You are already living in the best place in the world to invest. Check out our Flipping Houses University to see how you can get started.

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As 2013 started we saw a recovery with the real estate market start off as slow as a snail. But as the 2nd quarter started we started to see the new light of day. By the 3rd quarter we were seeing numbers the real estate market hadn’t seen since the 2008 crash. The fourth quarter hit so many records in real estate that it had many experts predicting another real estate bubble.

As we’ve said many times in our blogs, things are much better in today’s market. Home prices are inching up. Sales are rebounding. And while foreclosure is still a problem, it’s much less of a problem than it was in early 2009. There’s a lot of positive news about housing all over the United States.

While most investors are interested in their local market, we encourage all investors to look at the big picture. Something all investors need to stay aware of. Not to say that we don’t encourage you educate yourself on your own market; this is important as well. Do the research and tell us what you think 2014 holds. Here are several outlets on opinions of real estate trends and what the market for 2014 has in store for investors in real estate. What are your 2014 real estate predictions?

http://www.cbsnews.com/news/top-10-real-estate-trends-for-2014/

http://www.gayapolis.com/news/artdisplay-realestate.php?artid=27478

http://realtybiznews.com/2014-a-time-for-change-in-the-real-estate-market/98723164/

http://retradio.com/predictions-2014-real-estate-2/

http://www.cbsnews.com/news/5-predictions-for-housing-in-2014/

http://realestate.msn.com/2014-housing-outlook-home-prices-head-higher

http://www.pe.com/business/business-headlines/20131230-2014-predictions-whats-ahead-in-real-estate.ece

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!

Let’s look at some of the main areas of focus of The Junk House.

Kitchen

As you can see the kitchen is very dated with a color appliances we haven’t seen since maybe Reagan was in office. The cabinets are nice though and we may be able to refurbish them.

Bathrooms

The bathrooms are also very dated and will need some work. We will definitely get get of the pink paint and the patterned wall paper.

Ceiling Leaks

We noticed a few leaks in the ceiling during our initial run through. We will have to get to the bottom or “top” of this problem as a ceiling leak can mean a problem with the roof. We will know more once we get the roof inspected.

Basement

Junk, junk and more junk. So this is where this house got its name; from all the junk left inside. As you can see we have quite the feat ahead of us going through the basement and clearing it out. Only then will we have a clear view to assess any problems with the walls and/or foundation.

Here are some other before shots of The Junk House. Stay tuned to see how it gets flipped!

Bonus Room

Wood Paneling

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First the basics. We want to of course look at interior and exterior doors. There are a wide range of types, materials, and styles. Understanding each type and where it will work the best will assist you in choosing  the ideal doors for your flip.

Interior doors are typically lighter and thinner than exterior doors because they don’t have to provide security or resist weather. There are several types of interior doors available. Some of these include hollow-core doors with wood veneer or hardboard faces, embossed panel doors to look like panel, louvered doors– used for closets or laundry areas, but most types can be installed as hinged doors, pocket doors, bypass sliding doors, or bi-fold doors.

Detail of front red door.

Probably NOT the best color for your flip’s front door.

An exterior door is usually designed to make a statement. Take for example this RED front door we used to finish out “That 70’s Home.” Quite an eye catcher to the passer-by.

Since it is the first impression a lot of folks will have on your flip. Of course it is the age old conundrum of form vs fashion as the primary function of an exterior door is security and energy efficiency. Types of exterior doors include front entry doors and back doors, which may be paneled, flush, or have glass inserts and/or designs in them.  Materials include: wood, fiberglass, or steel. Wood can be very versatile, but pricey. You will need to decide if this will match the look of the rest of the neighborhood

Solid-core wood-veneer flush doors are going to cost you less. Fiberglass is also a good pick since it is durable and flexible enough to be installed in any climate. It will not warp or rot and is low-maintenance. Steel is practical and long-lasting. All of these can normally be painted too.

Here’s a look at the most common door types and their main function.

Door Types

Single-acting doors are hinged on one side and open in one direction. These are the most common and  standard doors you find on the interior of houses.

Double-acting doors open in either direction. Double-acting doors work well between a kitchen and a dining room, but can pose a hazard if two people try to go though at the same time.

Closet bi-fold doors

Bi-fold doors have two panels that fold to one side. They are often used on closets or pantries.

Bypass doors have panels that slide past each other. They are often used on closets where there is not enough space for a swinging door. Only one side of the closet can be open at a time.

Exterior sliding doors usually have one fixed panel (glass) and one panel that slides normally used on a baloney, patio, or deck.

French doors have rectangular glass panes, or lights, from top to bottom. They are often hung in pairs, opening from the sides, as exterior doors to a garden, patio, or deck.

Bathroom pocket door

Pocket doors actually slide into the wall. They are perfect for a space where there isn’t room for a door to swing open like a pantry or an enclosed toilet in a master bath.

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Home prices on the rise

According to Bloomberg.com, prices for single-family homes climbed in 88% of U.S. cities in the third quarter. This is attributed to buyers competing for limited inventories that included fewer discounted foreclosures. This is turn, has caused the median transaction price to rise  from a year earlier in 144 of 163 metropolitan areas measured, the National Association of Realtors says in a recent report.  That means a third of all areas had double-digit increases. Pretty amazing news. But what do rising home prices mean for flippers?

It is important to keep in mind that cities with the biggest price appreciation are the ones that had the larger bubble busts and thus a lot more ground to make up. So it makes sense that those areas would have a strong home price appreciation off a low starting point. With cities such as San Francisco and San Jose, California, approaching records, the growth is unsubstantiated making mush of coastal California overvalued.

October rounded out the 3rd quarter with asking prices for residential real estate increasing more than 11% on the year according to Trulia.  This is creating a huge opportunity for flippers all over the country. More sellers are wanitng to put their houses up for sales for fear of “missing the window of opportunity. And further analysts are not yet concerned about a bubble, but quickly rising prices  do often trigger this type of behavior for consumers. Jed Kolko, Trulia’s chief economist stated,  “Although October’s asking home prices rose at the second-slowest pace in seven months, prices are still rising unsustainably fast,” says  “Even though the market is far from bubble territory, we still see the effects of fast-rising prices, including investors flipping homes and would-be sellers waiting longer to put their homes on the market.”  However, price rises are not occurring evenly across the country, however, with some areas seeing more activity than others so it is important to do your research and make sure you know your market.

Here are some current date stats on home pricing:

Trulia reports that the average home asking price rose by 11.7% from October 2012 to last month.

October saw only an incremental rise in home asking prices, at 0.6%, but the year-over-year figure is the largest jump since the housing bubble popped back in 2007-08.

According to recent data from CoreLogic (CLGX), home prices rose 10% from the second quarter of 2012 to the second quarter of 2013 — a figure unsurprisingly close to the 11.7% rise in home asking prices.

So while rising home prices is not necessarily a bad thing for real estate investors, it is imperative to act in a timely manner. Don’t wait to start flipping houses when all the good deals are gone and you miss your window to flip while prices are on the rise.

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Here is a look at some of the main focal points of “That 70’s House.”

Kitchen

Quite a contrast to what it looked like before.

Bathrooms

Family and Dining Rooms

 Basement

Wet Bar in basement

Landscaping/ Front Elevation

What the front of the house looks like now

Detail of front red door.

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Exterior Steps

Here’s an overview of what we are doing with The Money “Drain” House.

This house is a 3 bedroom, 2 bath Bi-level with a 4th bonus room on the lower level and an attached 1-car garage.  The house is located on a corner lot in a good established neighborhood.  The target buyer is a first or second time home buyer and the target price point is slightly above the median selling price for this neighborhood.  Attractions for the house are the open kitchen floor plan, a finished lower level with a second bathroom as well as the large corner lot with fenced yard.  A problem that we would end up running into is a water drainage problem at the lower level patio which causes water to get into the basement.  This problem was solved by digging a trench to the natural drainage ditch and burying a drain pipe.

The REHAB plan:

• Remove overgrown shrubs and freshen the landscape beds

• Paint interior

• New carpet, vinyl, and tile throughout.

• Salvage kitchen cabinets by painting them, and install new counter tops and appliances

• Remodel both bathrooms.  Add wow factor with ceramic tile tub surround instead of plastic surrounds which were in all the comp houses.  Also ceramic tile flooring in bathrooms.

• Upgrade all lighting fixtures

• Add tile floor in the lower level entry from back yard

 The One Challenge to Highlight

The first hard rain revealed a problem that the lower level patio was not draining and causing water to get into the house.  Immediately had the general contractor assess the situation and determined that a drainage path was needed to the natural ditch in the front.  We are resolving this problem but we want to stress the importance of having a contingency factor in your profit analysis.  By doing this we will be enabled to still make a good profit even after this unplanned expense.

Stayed tuned to see how The Money “Drain” House turns out.

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MarketWatch reports :

For the market as a whole, flips of single family homes fell 13% in the third quarter, according to new research from RealtyTrac, with investors earning a gross profit of nearly $55,000 on each property. But at the higher end of the market, homes seem to flip as quickly as a griddle full of hamburgers. Flipping increased 34% among homes worth $750,000 and over, 42% among $1 to $2 million houses, and 350% for properties worth between $2 and $5 million.

Flipping tends to be most common in cities with a large supply of expensive homes. (To qualify as a flip, a home must be purchased and subsequently sold again within six months.) In fact, more than three-quarters of all high-end flipping took place in five markets: The New York metro area and Los Angeles, San Francisco, San Jose and San Diego.

What’s behind these quick turnarounds? “Flipping happens when prices are rising rapidly even if price levels are low,” says Jed Kolko, chief economist for real-estate firm Trulia.

It’s possible to double the value of a home, says Jeff Salgado, a San Francisco-based realtor. Investors could buy a dilapidated home for $1.2 million, invest $600,000 and sell it for $2.4 million, he says. “Our buying community is driven by the biotech and high tech sectors. These people are brilliant at what they do, but a good portion of them don’t know the difference between a screwdriver and a hammer.”

The Challenges in This Market