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Tuesday, February 12, 2013

Business Fundamentals to Flip This House

9:19 AM
Just back from my Caribbean cruise with the National Real Estate Investors Association. We had several nationally-known real estate investment speakers aboard, with nightly Q&A panels and day-long sessions while we were at sea.
I will be reporting on what was covered during my "Adventure of the Seas" investment cruise. First up as a speaker was Andrew Cordle, Cash Flow Investing specialist, Investor, Author, Educator Hedge funds are changing the dynamics of the residential market today. Andrew Cordle went from broke to flipping 22 houses simultaneously by focusing on the business of rehabbing house, rather than on individual deals. Hedge funds do not want to do more extensive repairs; homeowners want out. This provides great opportunity for real estate investors. Flippers can put great inventory on the market now and sell it fast. Andrew Cordle looks for $30K profit on every flip. His formula for becoming financially free in five years is as follows: Purchase house at $65K, owning F&C Year One: three flips, one rental (buy F&C; live on $25K) Year 2: quit job, 6 flips, buy two rentals F&C 3: 8 flips, 3 rental 4: 9 flips, 4 rentals 5: 10 flips, 5 rentals What is your one year, three year, five year business plan? How many investors have $500K to buy property? How many know where to invest? Leverage? buy all cash? what type of rentals? 3 steps to create financial momentum: Change Capital Cash flow Cordle asserts that the main difference between occasional flips vs 8-10 is systems and organization 1. Organize materials by SKU list (acquisition managers) Stop being all persons to all things; must have team Cordle used custom designers who built SKU list; design features, that the investor then creates a scope of work for Project Manager Entire process of rehabbing house should be systematized, using checklist and SKU #s 2. Organize procurement Email to rep at Pro Desk in 24 hours with price 3. Delivery to job site; all materials delivered from store 4. Organize your recordkeeping Hire bookkeeper (account temps.com); separate binder for each property (w duplicate at office) - with at a glance summary; legal paperwork; contracts; receipts; before, after and progress photos Project manager gets copy on job site, and one at office; one central location for all important papers; "Car Office" to keep in car from job to job - good for real estate business This binder is a real time Saver - with tax information all in one place Create Change Mindset, Map, Mentorship Mindset: Organization, direction, motivation, education Map: Business Plan Mentorship: where to find who you need Creating Capital: Rehabbing is the best way to create capital fast Investors can make more profit using systems to cut rehab time in half Excel spreadsheets of what needs to happen each day- too difficult to keep up with spreadsheets, created software to do this; Cordle tries to keep Days On Market as short as possible; he had three properties selling this week in absentia and bought house without seeing it through his acquisition team. When he is finished rehabbing, his goal is to have the best house for sale in his neighborhood; and to move as fast as possible. $100-150K is his list price point; do not cut corners in bathrooms and kitchens; buyers getting ideas from TV design shows; Cordle recommends pendant lights, custom mirrors, two vanities for $250@, mosaic tile wall ($350), glass tile floor; different shower tile w accent tiles and big shower heads- white subway tiles, grey grout, accent tile off mosaic wall. These finishes cost a little more, but really sell a house. Cordle also recommends using local furniture stores to stage houses and they are able to advertise at the house. 20 wow factors that sell houses can be found on Cordle's website: financialmomentum.com His website also shows list of projects coming soon; case studies on market, and more. Four pipelines of real estate business -find, fund, fix, flip Marketing: $0 spent on marketing to acquire deals, by using wholesalers, FSBO, agents, REO brokers Monies to do flips; right now Cordle has more money than houses Price, product, promo, presentation - the four p's of marketing

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