Stay tuned to see how the outside and the inside of The Gutted House turns out!!

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This was quite the rehab. Rarely do we have to scrap the ENTIRE house but from the look of the before pictures you can see that this is exactly what was needed. Everything was redone.  Walls knocked out.  Carpet replaced.  About a 1/2-acre of trees removed. An old barn demolished. Septic tank replaced. You name it. Let’s take a look at different items in The Gutted House.

The Outside

Trees and more trees

Front of House Before

Back of House Before

The Inside

Kitchen Before

Bathroom Before

Front Room

A lot of random colors here.

Family Room Before

Purple Stairs anyone??

Bedroom Before

Be sure to check back in with us to see how The Gutted House comes along!

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With Money Magazine’s ranking the city #2 on best places to live, you can be sure that there are plenty of families ready to move into your rehabbed house. According to Money, Louisville is a “great place to raise a family, with well-regarded schools and a safe community. … Locals say the work-life balance in Louisville is hard to beat. Come summer, residents can look forward to weekly events featuring food trucks from local restaurants, beer gardens, live music and much more.”

Last year AOL Real Estate listed Louisville as #10 on their “healthiest market” in real estate. An uptick in manufacturing jobs is behind the bright real estate outlook in Louisville. In the first 10 months of 2012, the city saw a 2.7 percent rate of job growth, according to 24/7 Wall St.

Louisville also saw mild losses during the housing crisis: home prices only dropped 4.7 percent from their pre-recession peak, putting the city at a much greater advantage over the rest of the country. New construction, however, remains slow.

Additionally, Louisville and its surrounding county of Jefferson made Forbe’s “Top 40 Places to Invest in 2014″ this month. Our team has flipped many homes in the Louisville area so we can see why it is being listed as one of the lesser known better places to invest in real estate.

Here’s a look at some of the Derby City’s stats:

Pop.: 1,258,577
Average Home Price: $167,128
Equilibrium Home Price: $201,248
Difference: -17%
3-year Growth Forecast: 15%

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In the first part of our series we talked about  traditional options for your countertops in your flip. In our second installation of countop talk, it is the less ordinary countertop we will discuss. A different countertop could be just the special thing you need to make your kitchen pop!

Tile

Modular and inexpensive, ceramic and porcelain tile offers nearly limitless options for colors and designs. Tile works with almost any kitchen style, from country to majestic Old World.

Pros: It holds its own against heat and sharp blades, and resists stains. If one or two tiles chip or crack, they’re fairly easy to replace.

Cons: Tile’s uneven surface can make it difficult to balance a cutting board or roll out a pie crust. Unsealed grout is prone to staining; standing moisture can damage it and contribute to bacterial growth.

Cost: $10 to $80 per square foot, installed

Concrete

Slightly edgier than other materials, concrete countertops have an industrial chic that fits right into a loft or adds interest to an otherwise traditional space.

Pros: Concrete is extremely versatile: It can be cast in any shape and custom tinted any shade you wish. You easily can add unique inlays, such as glass fragments, rocks and shells. Concrete stands up well to heavy use, although it isn’t as heat resistant as some other surfaces.

Cons: Because it’s porous, concrete will stain without frequent sealing. Small cracks can develop and it can be expensive. Concrete is extremely heavy and will need strong support beneath.

Cost: $75 to $125 per square foot, installed

Soapstone

Soapstone is really coming into its own as a countertop material. It offers subtle, nuanced beauty yet feels humbler than granite or marble.

Pros: Soapstone has a natural softness and depth that fits very well with older and cottage-style homes. Although it usually starts out light to medium gray, it darkens with time.

Cons: Soapstone needs polishing with oil to keep it in top shape. It can crack over time, and it can’t handle knife scratches and nicks and is naturally rough.

Cost: $70 to $100 per square foot, installed

Stainless Steel

Once found mostly in commercial kitchens, stainless steel has slipped into vogue within the past two decades.

Pros:  It’s nearly indestructible, and it resists heat and bacteria, which is why it so popular in restaurants. Very contemporary  and fits in with industrial-style kitchens.

Cons: Fingerprints show  and it can also dent. Pots and pans will clang against the surface. Chemicals can affect its color. Extremely expensive due to the custom fabrication.

Cost: $65 to $125 per square foot, installed

Butcher Block

Butcher block has a classic appeal and always looks fresh. It’s especially fitting for traditional, country and cottage-style kitchens.

Pros: Many homeowners like its warm, natural appearance and tones. Although knives scratch it, many people like the shopworn look it develops.

Cons: Swells and contracts with moisture exposure. It harbors bacteria and needs frequent disinfecting. Oiling is a must to fill in scratches and protect the surface.

Cost: $35 to $70 per square foot, installed

Paper Composite 

Paper countertops? You read it right. Created from paper fibers mixed with resin, this surface is ecofriendly and a whole lot more durable than it sounds.

Pros: Paper composite evokes the look of solid surfacing or laminate but with a warmer sensibility. It’s surprisingly hardy and can withstand heat and water admirably. It’s also a great deal lighter than natural stone or concrete.

Cons: The material isn’t scratchproof and is susceptible to chemical damage. It needs an occasional rubdown with mineral oil, and even sanding, to refresh it. New concept so it can be costly.

Cost: $85 to $125 per square foot, installed

Solid surfacing (Corian)

Made primarily from acrylic and polyester, solid surfacing first was sold under the brand name Corian, which is often (erroneously) used as a generic term for it. Today, it’s made by a host of manufacturers and has enjoyed steady popularity over the years.

Pros: Because solid surfacing is nonporous, it’s virtually maintenance free — no sealing or special cleaning required. Color and pattern options are extensive, with seamless installation

Cons: Solid surfacing can have a patently artificial look and feel, yet can approach the price of natural stone. It doesn’t stand up to hot pans or sharp knives very well.

Cost: $35 to $100 per square foot, installed

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One of biggest questions for a flip is whether to replace or reface the cabinets in the kitchen. Replacing of course is removing the entire cabinet boxes and installing new ones. Refacing involves replacing only the doors of your cabinets instead of the entire cabinet box. Here we discuss the difference and how to tell which option is best for your flip.

What Lies Beneath

If your budget doesn’t allow for new cabinets look into refacing. But make sure your current cabinets are up to snuff first by checking old cabinets thoroughly. A lot of times in older homes, the actual workmanship on the cabinets is really good. We’ve had many flips that have very ugly paint or stain on the cabinets that are dated. But a good inspection has saved us thousands of dollars because we find really nice cabinets under all that paint. For example, in our Flipping House Series “The Junk House” had very dark stained cabinets but they are really good quality so can reface them.

“The Junk House” Cabinets

There are three primary ways to reface cabinets:

1. Refinish or paint existing cabinet and drawer fronts.
2. Install new wood or laminate veneer over existing cabinet and drawer fronts.
3. Install completely new cabinet doors and drawer fronts.

In all three cases, new hardware such as hinges and pulls helps to complete the update.

Replacing

We have had homes where the cabinets are really just not worth saving. If there was a roof leak, for example, like in The Waterfall House where we had to completely rip out the cabinets due to water damage.  Or if we are remodeling the kitchen so that the original lay out of the cabinets doesn’t fit the newly designed kitchen so we have to order new ones.

Be Sure not to Over Improve

You want to make sure to know your market. Do other homes in your farm area have just builder grade cabinets? Then try to reface them and add some nice hardware. you would be surprised how much new hardware can change the look of a kitchen. But if you are in a more posh area you better make sure your kitchen upgrades keep up with the Jones’ so to speak.

The Cost Difference

According to Consumer Reports, the average budget for a kitchen remodel in 2012 was $30,325. And replacing cabinets is typically the priciest part of a kitchen remodel. But when you reface, you’re only buying new doors and drawers instead of the entire cabinet. Let’s be honest, that’s the only part you see right?

Refacing will set you back about $150 to $300 per door opening, according to Consumer Reports. In regards to how much money you’ll save by refacing vs. replacing, that will depend on the size of your kitchen, the style of doors you choose, and the materials.

Most people will want to hire a professional to replace or reface cabinets. This goes back to one of our lessons about leverage. You want to make sure you have the right contractors under you to get the job done right the first time and not take up your precious time.

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One of the ways some flippers make deals is by Wholesaling. Wholesaling real estate provides an opportunity for someone to build income with little capital or credit. Their main purpose is to go out and find a property, get it on a contract deal and immediately  re-sell it to a real estate investor/buyer. You have to be a pretty savvy business person with a lot of know-how to be a wholesaler. Although wholesaling does not require a real estate license, since a license is not required to buy or sell any property that you have an equitable interest, it does take a lot of knowledge of the business. That interest can be a contractual interest (you currently have property under contract) or you actually own the property or the title to the property.

A wholesaler in a nut shell puts property (normally distressed property) under contract and assigns or resells the property to another investor. The investors a wholesaler sells to either use cash, lines of credit, or hard money loans. This allows quick closings on properties that sometimes need extensive repairs.

A Wholesaler’s pure existence depends on two things; finding deals and their network of investors to sell to. Since they have connections they will have access to the deals and opportunities.

Why to use a Wholesaler

(source BiggerPockets.com)

1. They look at it as a business rather than a hobby. They are serious about helping you find deals and the motivated sellers.

2. They provide honest/accurate data. Whether it be after repair value or rehab costs, if you are getting inaccurate (or none at all) estimates, move on.

3. They actually DO MARKETING and/or HAVE CONNECTIONS. The business model is to generate as many leads as possible. To do this, most will use some combination of direct mail, bandit signs, Internet leads, and referrals. Additionally, many will search the MLS for short sales, estate sales, auction properties, and distressed homes. 

 While Wholesalers can seem to be a flipper’s best friend, be sure to do your homework on the ones that make you think you hit the wholesale lottery. If it seems like the deal is too good to be true, then it probably is. Clever Investor has an elementary diagram that helps explain it all.

 Wholesalers play an important role for rehabbers especially those flipping houses in their spare time. They spend hours finding, sorting, and cultivating leads. Theoretically, most if not all of the junk deals are eliminated in the process. This helps rehabbers stay focused on flipping houses and not get distracted chasing bad leads.

For more information on real estate wholesalers check out these links:

 http://www.biggerpockets.com/renewsblog/2011/11/21/why-should-your-work-with-real-estate-wholesalers/

 http://www.biggerpockets.com/renewsblog/2012/08/24/flippers-best-friend-the-wholesaler/

 http://www.biggerpockets.com/renewsblog/2011/08/05/real-estate-wholesaler-definition/

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Time vs Money

Time is money!  While cliche, this statement is absolutely true when investing in real estate and, doubly so if you are investing on a part-time basis.  So how can you make sure that you are not overspending your time and money when flipping houses?  Having good systems is critical.

One of the more important documents you need is Property Repair Estimate Sheet.   This document should include a list of all of the major items (roof, hvac, kitchen, paint, flooring…) as well as cost estimates for each item.  You should complete one of these during your initial visit of every house you look at.  The 2 main benefits of the form are 1) to save you time and 2) to give you confidence to proceed with the deal.

Saving Time

Saving Time

Many rehabbers waste time looking into every dark corner of the house during their initial walk-through.  They may spend hours measuring and documenting every detail to come up with the best estimate possible.  This can be a tremendous waste of time especially since there is a good chance you won’t even get the house. Click here to see our list of houses not to buy.

With a good Property Repair Estimate Sheet you should be able to complete your initial inspection in 15-30 minutes.  The goal is to get a rough estimate (within $5,000) so that you can make an offer.  Simply checking whether the repair is needed and including the corresponding amounts will allow you to total the necessary costs in a few short minutes.  Anything beyond that is a waste of time.

Providing Confidence

Having a list of what actually needs to be done to the property will give you confidence that you aren’t overlooking anything. By referring to your list, you will make sure that no major items are missed.  It is easy to be distracted by something odd in a house and forget to check out every other area.  By referring to your Property Repair Estimate Sheet, you can be confident that you have reasonably captured all items.  The cost of overlooking a missing air-conditioner, damaged roof or cracked foundation is way too high to rely on your memory.

Systems

Having a system will not only make these 2 goals more attainable, but will also remind you that you are running a business and trying to earn a profit. If you have a tried and true system in place, steps that you follow for every rehab, then you will not spend unnecessary time on issues and will have a turn-key process. It will mean every rehab is done consistently.  Also with a system in place it will help to build your confidence that you haven’t overlooked any repairs. You will know how much a kitchen over haul costs so when a contractor over bids you have the confidence to speak up about it. Remember, knowledge is power.

The essential thing to remember is that systems work.  Having good systems in place will make sure everything is done in the most financially sound and cost-efficient way. In the end, systems are what will save part-time real estate investors time and money by preventing costly mistakes.

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Flipping Houses 101:

Important Basics

Despite the fact that HGTV has once again converted its entire line-up to rehabbing and home buying shows, we’ve found there is some confusion regarding what flipping houses really involves. Since our blog focuses on investing in real estate in general and flipping houses in particular, we want to eliminate the confusion.  The purpose of this article is to tell you about the 2 types of flips and why one is better for you and for society.

What is Flipping?–The Book Definition

 ‘A type of real estate investment strategy in which an investor purchases properties with the goal of reselling them for a profit. Profit is generated either through the price appreciation that occurs as a result of a hot housing market and/or from renovations and capital improvements.’

—Investopedia

Speculating

One of the practices that gives real estate investors a bad name is that of flipping houses based solely on market appreciation.  This was prevalent in the early 2000’s in California, Florida, Las Vegas and many other areas of the country.  An ‘investor’ would buy a house on Monday and sell it on Friday for a higher price without adding any value to the transaction.  Speculators are the reason the government introduced the FHA 90-day rule.  Investing in real estate in this manner is no different than buying gold, silver, or pork belly futures for that matter.

Rehabbing

As a real investor you are looking to make profit based on forced appreciation.  This type of flipping houses involves buying a property below market value, completing repairs, remodeling, and/or upgrading the home, and ultimately selling the improved product to a new owner. Foreclosures, Short Sales, and Estate Sales are ideal for this strategy because you can often acquire these properties fairly cheap.  The more distressed the property, the better the deal you can get.

This investment strategy can be done a few ways. First, you can do the rehab work yourself.  This often leads to delays, causes additional stress, and is generally a poor approach especially if you are a part-time real estate investor.  Painting a room is not investing, it is working a second job.  Thus, the second and more recommended approach; hiring professional contractors.  Regardless, market appreciation is a bonus not a requirement.

Haters Win Too

Even if you despise humanity and take no pleasure in revitalizing neighborhoods, helping distressed homeowners, and providing quality homes to buyers; rehabbing is a better method of investing in real estate than speculating.  As a rehabber, you control most aspects of the transaction and aren’t dependent on the market conditions to make a profit.  Thus, you can have predictable and repeatable financial results.

To learn more about today’s topic check out this link here.

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