Please take into consideration that this list is a guideline only and you will need to double check certain costs.  There may be variation between the condition of the property, its location, its size, and the quality of the work that is being done.  This list is also not taking into consideration structural issues, as they need to be dealt with on a case by case basis.

Large Items/Entire House

• New plumbing throughout…………………    Approximately $8,000
• New windows (vinyl)…………………………    $350-$400 each
• New shingle roof……………………………….    $350/square foot
(Allow 40% more for pitched roofs)
• New flat roof………………………………………    $2.5/square foot
• Water Heater replacement…………………     $750
• New heater – boiler (no air)………………    $3,500
• New HVAC (with air)……………………….     $6,500 – $8,500
• New electrical service upgrade……………    $1,200
• New electrical wiring throughout………    $8,500 – $12,000 (depending on size of home)

Basement
•Epoxy paint floors………………………………   $1/square foot
•Cement coat walls………………………………   $3.50/square foot
• New floor – pour new concrete…………..   $5/square foot

First Floor
•Flooring (new hardwood)…………………………   $8/square foot
•Flooring (refinish existing)………………………   $2.50/square foot
•Flooring (new carpet)……………………………….   $15/square yard
•New ½ bathroom (with new plumbing)…….   $3,500
•Refurbish ½ bathroom……………………………..   $1,500
•Paint…………………………………………………………   $250-300/room
•Kitchen……………………………………………………..   $12,500 – $15,000
(Includes appliances, tile flooring, cabinets, countertops, backsplash, and electrical)
•Recessed Lighting……………………………………..   $150/light

Upper Floors
•New full bathroom…………………………………….   $5,500 – $8,500
(Depends on difficulty of running water lines)
•Refurbish full bathroom…………………………….   $3,500
•Paint…………………………………………………………   $250-300/room
•Building closets…………………………………………   $400 – $700
(Depending on size)

Standard Purchase Items

Kitchen cabinets…………………     $1,900
Kitchen sink……………………….    $100
Vanities bath………………………     $250
Interior doors………………………     $70
Exterior doors……………………..     $350
Closet poles & shelves………..     $80
Countertops (granite)……………   $1,000
Counter tops (laminate)…………  $400
Bath accessories…………………..    $150
Bathtub……………………………….    $200
Bathroom sink…………………….    $75
Bathroom faucet…………………..    $75
Kitchen faucet……………………..   $100
Toilet………………………………….    $100
Shower diverter……………………    $100
Refrigerator…………………………    $700
Dishwasher…………………………    $380
Range………………………………….    $550
Garbage disposal…………………    $100
Microwave…………………………..    $200
Exhaust hood……………………….   $75
Tile………………………………………    $2/square foot
Light fixtures……………………….    $35 each

As a real estate investor, knowing your numbers is critical.  The above information is to be used as a starting point and guide.  Make sure to double-check with your contractor regarding materials and labor costs.  One final tip: It is always best practice to overestimate your expenses and underestimate your resale or rental value.  If the numbers work in that scenario, it is most likely okay to proceed.

This list comes with the express permission of Steve Cucinotti from First Development Builders, Inc., a full service company that has been in business in Southeastern Pennsylvania and Southern New Jersey for 27 years.   Steve can be contacted at 610-496-0914 or by email at developmentfirst@yahoo.com.  Steve does business in and around the Philadelphia area.

What things do you do when estimating rehab costs?  Feel free to share any tips and ideas below!


Susan, Dawn, & Mary Ann
-The Rehab Financial Team

p.s. have an immediate question? Give us a ring! 877-643-9066

1. Get References from People You Trust

The recommendation from a friend in the business, a colleague, or a neighbor is one of the best sources for finding reputable and trust-worthy contractors.  People you know will give you an honest account of their experience with the contractor and sometimes you may be able to take a look at their work before you meet with them.

 2. Have the Contractor Provide References

Ask the contractor for a list of references who are not related or affiliated with him.   Make sure you get at least 3-5 so you know you are getting legitimate testimonials.

3. Obtain 3 Bids

Ask each contractor that you speak with the same questions. The lowest bid will not always save you the most money and the most expensive bid does not guarantee royal treatment.  Because of the fixed costs of materials and labor, a stunningly low bid can be a red flag. Go with the contractor and bid that is the most economical and makes sense to you.

 4. Compare Apples to Apples 

It is best to make sure written bids cover the same line items. If one contractor added additional items or left certain items off of the list it can be hard to compare each contractor’s price quote evenly. Tip: Create your own itemized spreadsheet and put each contractor’s bid on it to make the comparison easier.

5. Check to Make Sure They Are Licensed & Insured

Ask for proof and then check with your state’s contractor’s licensing board for verification.  There are many contractors that are operating their businesses without the proper licensing and insurance requirements.  This step will serve to filter the unqualified so you know that you are working with a reputable contractor

6. Treat the Bid Appointment Like a Job Interview 

This is your opportunity to evaluate the overall professionalism of the contractor.  If they show up 30 minutes late, it may be a sign that they do not manage their time well.  Are they rude on the phone when you call?  Maybe they will not be the easiest to communicate with during the project.  Ask specific questions to see how they answer and make sure they are addressing your concerns. Trust your gut feeling and if someone makes you feel uncomfortable, it’s advisable to move on to the next one.

7. Know the Time Frame and Parameters of the Bid

It is important to find out the specifics about when the project will start, how many days per week will they be working, and how they expect to be paid.  Make sure that you are both on the same page regarding price, terms, and time schedule of the job.  Include a monetary penalty in the contract if the work is not done on time (ex: $50-$100 off the final payment amount).

8. Understand How the Payment Schedule Works

When it comes to money, make sure you that both you and the contractor agree to the terms and that you have them in writing.  Find out what happens in the case that a new part is needed or if you provide your own materials.  It is best not to pay upfront for work that is not yet completed. Check with your state to find out the laws regarding what percentage a contractor can ask for up front for material costs.

9. Make Sure the Contractor Can Do the Job 

As simple as this sound, there are still many people who hire a contractor that did a great job on a friend’s house, only to find out that the project was in a different area of expertise.  For example, make sure that the contractor who did the plumbing and electrical job for your friend knows how to properly install doors and windows if that is what you are hiring them for.

10. Check if a Permit is Required

Many contractors will assure you that a permit is not needed for a certain project.  This can be a warning sign and is certainly something that is worth double-checking.  Check with your local building department to find out for yourself if a permit is required for the scope of work you are hiring them for.  It helps to do the extra research and familiarize yourself with the permit requirements in your area.

Do not rush into any project.  Fully or partially renovating a home can be an exciting and emotional time, but make sure to remain patient and do your due diligence first.

How do you screen contractors?

Any additional tips that you would recommend?


Susan, Dawn, & Mary Ann
-The Rehab Financial Team

p.s. have an immediate question? Give us a ring! 877-643-9066

LinkedIn is one of the most powerful networking sites today.  It has the highest average household income over any other social media/social networking website and nearly 44% of users are key decision makers.  According to 2011 statistics, 14.8% of the US users are in the Finance Industry.  With over 135 million users on LinkedIn, there are nearly 20 million people in our industry.  LinkedIn is a great place to spend time and bring in new leads for your business.

There are numerous ways to attract leads on LinkedIn.  Here are 4 things you can implement this week:

1. Optimize Your Profile

If you do not let people know who you are, what you do, and how you help people, people will be confused when they come across your profile.  Fill out every part of your profile and make sure to include as many details as possible.  A key component is to use words that are relevant to what you do throughout your profile.  For example, let’s say that “Mortgage Broker in Denver” or “Reverse Mortgages California” best explain your business.  Make sure to use these terms in the following 4 areas:

-          In your headline

-          In your current work description

-          In your summary

-          In the specialties section

2. Answer Questions

From your homepage, click on the tab “More” and then “Answers”.  Spend 5-10 minutes 3 days per week answering questions that are relevant to your market and your expertise.  Make sure to post the most informative answer, add a lot of value, and become a resource for the reader.  A great practice is to send them a private message a day or two later letting them know that you would be happy to connect over the phone if they have additional questions or need anything else.

3. Recommend Your Contacts

If a colleague or a client has a product or service that you have used and can vouch for, leave them a recommendation.   On your contacts’ profiles, you will see a link in the upper right hand corner of their profile called “Recommend ____________”.  The more recommendations someone has on their profile, the more likely others will be interested in working with them.  This encompasses the law of reciprocity; the more recommendations you give, the more recommendations you will receive.  By helping others get more leads, you are helping yourself get more leads as well, and great recommendations on your page could lead to a decision someone makes to contact you or not.

4. Stand Out

The majority of people on LinkedIn do not really know how to use it as a tool and frankly, their profile are fairy bland and boring.  A great way to stand out is to use a video on your profile that automatically plays when someone lands on your page.  You can make it a “Welcome to My Page” video or you could have one of your clients leaving a testimonial and sharing a positive experience they’ve had with your business or service.

Getting More Leads On LinkedIn

Linked has new tools and functions coming out all the time.  Make sure to keep your eyes out for the newest and most effective techniques.  LinkedIn can serve as a place for you to meet potential customers, investors, sponsors, business partners, and more.   Aim to spend 5-10 minutes a day for 3 days per week and make sure you track how your new business is coming in.

Do you have any success stories from LinkedIn?  Has it helped your business?

Susan, Dawn, & Mary Ann
-The Rehab Financial Team

p.s. have an immediate question? Give us a ring! 877-643-9066

p.p.s make sure to keep an eye out next month for more Social Media and LinkedIn tips for mortgage brokers!

One of the best techniques for finding real estate deals under market value is by finding vacant property and then locate the owner.

Regardless of whether or not there is competition in your local market, if you are willing to go the extra step and work harder than the other investors, you will be able to find deals and get in touch with property owners that have not spoken to anyone else.

As most real estate investing best practices do, this requires strategic thinking and planning.

Pick A “Farm” and Stick To It

Focusing your efforts in one area is key to finding deals, building relationships, and becoming the go-to real estate investor.  Many investors spread themselves too thin in the beginning and they never gain any traction when it comes to having a constant flow of properties to make offers on.

Your real estate market will differ depending on where you are located, but make sure to choose a target area with at least 300 homes.  It is also important to pick an area where there is “investment activity”: homes are being rehabbed, there are limited REOs and short sales, there is gentrification taking place, and buyers are active.

Once you’ve picked your farm, it is time to start identifying vacant properties…

What Types Of Properties Qualify?

An important part of identifying vacant properties is being able to locate them by common traits and characteristics.   While we are using the term “vacant properties” to identify this type of home, it is very probable that many non-vacant homes will fit the criteria for a good deal.  Given the obvious boarded-up and run down homes, most vacant properties are not so distressed that someone passing by would notice them as a potential deal… unless they are on the lookout!  Look over and remember the following traits.  You’ll begin to notice homes (that do not have ‘for sale’ signs on them) and they may have owners that are inclined to sell.

•Weeks or months of mail jammed in the front door or piled up

• Overgrown grass, hedges, and landscaping

• Excessive flaking exterior paint

• Rotted or exposed wood

• Lockboxes on doors, railing, or poles

• Boarded up basement windows

• Outdated exterior design

• Zoning/municipal notices posted on windows and doors

The main takeaway is to compare the home to the rest of the block.  If it looks unkempt or out-dated, write down the address.  If you’re unsure as whether or not to write down an address, write it down anyway.

Research And Due Diligence

“It is not the lack of resources, but rather the lack of resourcefulness that truly prevents real estate investors from reaching their investment goals.”

Some of the strategies and techniques below may be different for your market, but that should not deter you.  Having an open mind and thinking creatively about how to find new leads is key to real estate success.

Now that you have a list of addresses, what do you do next?  It is time to cultivate those leads to get as much detailed information as possible.  The more information you can compile, the faster and easier it will be for you or your team to find the owner.

• Search your county court house or online public records

• Lookup the tax record account online

• Have your realtor search their public records access (often times the MLS will have property information that is not available to the general public)

• Use 411.com or other online ‘reverse address’ lookup services

• Use pipl.com if you can only locate someone’s name with no matching contact information

Some of the above steps will require further research.  Don’t shy away though, as this is the step where most other investors stop.  Pick up the phone and contact key people in your market to see what websites and resources they know of.  Call realtors, mortgage brokers, title agents, attorneys, appraisers, etc.  Remember, this is the part that requires some digging and right-brain creativity.  The way your market’s public records and information is stored and accessed will be different, but do remember that there is a path and way to get to the root of what you are searching for.  Spending time in this area can lead to finding leads that are otherwise inaccessible to the rest of the market.

Making Contact

Now that you have a list of names, addresses, and possibly phone numbers, it is time to develop a marketing campaign.

Below are a few techniques that have proven to be successful.

Send A Letter

For all addresses that you have, send a letter.  One of the simplest and conversion-tested letters is as follows:

Re: 123 Main Street, Town, State, Zip

I am interested in purchasing your property.

Please contact me.

Name

Phone Number

Pretty simple, isn’t it?  Most people over-complicate this step and write too many details.  Quite simply, if the owner of the property has interest in selling, your letter cuts right to chase and also incorporates a level or curiosity – a key component of good marketing.

If you do not want to send these letters manually (printing and then hand writing envelopes), there are many great mail services that will automate the process for you.  You will first need to put your addresses into a spreadsheet (such as Microsoft Excel) and then upload them to a website.  Often times the cost is only a few cents over the price of a stamp.  Check out Click2Mail.com and make sure to click on “Letters & Flyers” and follow the onscreen instructions.

Knock On The Neighbors Door

Neighbors sometimes have information that you will not be able to find anywhere else.  Learning how to approach neighbors and develop relationship is another great technique.  Not only will they take you one step closer to the property owner, but if they know you buy property in the area, and they see value in what you are doing, they could become a good source of referrals for your investment business.

Feel free to use the script below until you get comfortable approaching people.  Remember to relax.  You are there to help get rid of the vacant, distressed house that is dragging down the value of their neighborhood.  Write down any information they give you.  Ask for the name and phone number of the owner.  After you finish talking to them about the vacant property, ask them if they know anyone else that wants or needs to sell their home. Offer them a referral fee.  Get them on your team and give them a few business cards.  Also make sure to get their contact information as well so you can put them in your database and develop a relationship.  The more eyes on the street working for you, the better!

KNOCK!  KNOCK!

Investor: “Hi, I purchase property in the area and noticed the home next door.  I would like to purchase and renovate the house, but I have been unable to locate the owners.  Do you have a quick minute to help me?

Neighbor: “Maybe, what is it?”

Investor: “Do you know how I can get in touch with them?”

Neighbor: “No.”

Investor: “Do you know if they have family or friends that still live in the area?”

Neighbor: “Yes.  She has a cousin who lives a few blocks away on Mason Street.

Investor: “Did she ever give you a phone number or any way to contact her?  Do you know her address?

Neighbor: “As a matter of fact she did.   Let me see if I can find it for you.”

(Neighbor finds a phone number and gives you the address)

Investor: “I really appreciate your help, thanks!  If they accept my offer, I will get this place cleaned up and the block will look much nicer.  By the way, if you know of any other people that want to sell a home, I give a $500 referral fee for each property that I buy.  Please keep me in mind – here’s my business card.”

Keep in mind that each conversation will go differently.  Don’t worry if it doesn’t always go smoothly.  Continue to reach out to neighbors and over time you will refine and enhance your process.  Keep this up and soon enough you will have a few key people on your team.  These people will have their ears and eyes open to opportunities for you.

There are hundreds of different strategies to find discounted properties.

What techniques have worked best for you?  Have you found any luck in locating owners of vacant property?

Susan, Dawn, & Mary Ann
 -The Rehab Financial Team

p.s. have an immediate question?  Give us a ring! 877-643-9066

Case Study:  The Woman Who Fell in Love With The Property

We had been working with a borrower for an extended period of time who was looking to purchase her first rehab property.   Because she was new to the rehab business, she was looking for Pennsylvania hard money lenders.  She had formed an LLC and was financially qualified for a loan up to 65% of the after repaired value (“ARV”) of the collateral property, she just needed to find the right property.  After bidding on several properties under $90,000 and not getting an offer accepted, she started making offers on more expensive properties.  Finally, after much effort, an offer she made on a property was accepted.  The property was owned by a bank and listed at $124,900.  Her offer was accepted at $112,000.  She thought that the property only needed a new kitchen and fixing up of the bathrooms, about $35,000 in total.  She also was convinced that the ARV of the property would be at least $275,000.

Things began to unravel fairly quickly.  Her own contractor’s bid for repair of the property came in at a whopping $78,000.  There were far more issues than just the kitchen and bathrooms.  She remained steadfast in her belief, however, that she could still make money on the property, even though the committed amount was now at least $190,000 (purchase and rehab cost), rather than her first estimate of $147,000.   At this point, even if the property appraised at $275,000, she would still have to put some of her own cash into the purchase and rehab, as she was approved for a maximum loan of 65% of the ARV, which would be $178,750 for a property valued at $275,000.  There are few Pennsylvania hard money lenders that will lend more than 65% of the ARV.

Unfortunately, the property did not appraise for $275,000, but came in at $220,000.  When asked why she thought the property would be worth $275,000, it turned out that she had been listening to parties very interested in getting the property sold, rather than doing her own homework.  Even with the increase in rehab costs and lowered ARV, she kept insisting that the she could make money from the project, even though she would have to put about $50,000 of her own money into the purchase and rehab.  The problem is, she had fallen in love with the property and was not thinking of it as strictly a business venture.

In the end, she did not buy the property.  Not because she looked at the economics and determined that based on all of the information available that it was not a good project, but because she could not get a big enough loan to adequately fund the project.  It was a tough situation, because she put considerable time, money and energy into the project that did not materialize, so remember, even if you love the property, sometimes you need to walk away if the numbers just don’t work.

Avoiding falling in love with the property will help you save time, money and energy.

Have you made this mistake in the past?

What tools and strategies do you use to evaluate whether a property is a good investment?

We would love to hear your thoughts, comments, and suggestions.  Leave them in the comment section below.

 -The Rehab Financial Team

p.s. have an immediate question?  Give us a ring! 877-643-9066

In this month’s mortgage broker tips, find out the 4 major areas where all loan officers make mistakes, whether you’re a rookie or a veteran and make sure you don’t do them…

1. Lack of Goal Setting

If you do not know where you want to be, then there is no way of knowing how you are going to get there.  Do you want to close 2 loans a month?  Maybe 6?  Do you know how many new prospects you need to speak to in order to make that happen?  Having clearly defined goals and tracking your numbers are tell-tale signs of top producers.  Implement a simple goal of making 5 calls a day and start tracking your progress.  Why 5?  Because it is easy and obtainable, and after a year has passed that equates to over 1,000 new contacts made per year.  Not bad at all!

2. Lack of Investment

A lot of people are trying to go at this business alone, the old fashioned way.  They do not read books, they do not go to networking events, and they do not know the best apps and tools to make their business run efficiently.  With changes in the internet occurring on a daily basis and businesses discovering new ways to market to their customers, it is best to keep on top of relevant information and best business practices related to your industry.  Invest in your business with education and training.

3. Lack of Time Commitment

Do you find yourself setting out to do “social media” marketing, only to find yourself lost 2 hours later looking at your cousin’s photos from their trip to the Bahamas?  Do you constantly check your email 37 times per day?  Ever wonder how much time you spend NOT producing new business and building relationships?  Check out RescueTime.com to track the websites you visit and how much time you spend on them.  On average, RescueTime.com recovers 3 hours and 54 minutes worth of productive time per week per person.  How much is your time worth?

4. Approaching the Business on a Deal by Deal Basis

The 4th and biggest mistake made is to approach your business on a deal-by-deal basis.  It is a recipe for failure and short-term burnout.    You need to approach your business on a client-by-client basis.  Unfortunately, a lot of brokers get a lead, hold onto it until closes, and then forget that person exists thereafter.  I am sure you have all heard of the ‘Pareto principle’ – that 80% of your results will come from 20% of your efforts.  If you foster those key contacts, they could potentially lead to 80% of your referral business.  Implement a follow-up sequence for your clients and work to develop relationships both before and after the closing.

Avoiding the mistakes mentioned here will help you save time, become more productive, and ultimately create a business worth working on.

Have you fallen for any of these mistakes in the past?

What tools and strategies do you use to become more effective in your business?

We would love to hear your thoughts, comments, and suggestions about our mortgage broker tips.  Leave them in the comment section below!

 -The Rehab Financial Team

p.s. have an immediate question?  Give us a ring! 877-643-9066

We believe that it is important for real estate investors to embody and hone in on some skill sets that top real estate investors practice:

1. Real estate investors have homework too.

The more you are able to understand your local real estate marking, best practices, financing processes, and negotiation tactics, the more informed you will be in any real estate scenario.  Remember the party that is most aware, always has an upper hand in either securing a better deal, or knowing when someone is trying to hide something.  When you invest in your personal skill set, your real estate know-how will become equally sharp.  Consider this – take what you read from the gurus and from the internet with a grain of salt.  Each market is different and each transaction is unique.  Talk to the heavy hitters in your favorite neighborhoods and dig deep in regards to the private information.  Really get a firm grasp on how things happen and where to buy.

2. Realist Real Estate Investors 

Sure, we are in one of the best buyer’s markets of all times.  Yes, there are a lot of distressed properties that need rehab and there are a lot of homeowners upside in their current situations.  But that doesn’t mean that every offer you make is going to get accepted.  Remember, it is a numbers game in real estate.  The amount of contracts you get signed is equally proportionate to amount of offers you make.  Tip: If you are not embarrassed to present your offer, then it is too high.  If you do this long enough, you will become more comfortable at presenting your offers.  From there, who knows what kinds of deals you will find.

3. Get your money straight ahead of time.  It always amuses us how many people spend countless hours scouring the MLS, digging though classified ads, and send direct mail to home owners, and then when it comes down to closing, they are running around like a maniac trying to secure financing at the last minute.  If you are a qualified investor and you know these markets, it would be highly beneficial to have your financing lined up and a proof of funds letter in hand to present with your offers.  Do you research and find a reputable rehab lender or hard money lender that you can develop a relationship with.  There is nothing worse than putting in all those hours to get an accepted contract, and then have things fall apart because you were doing things out of order.  This segues back to point 1 – do your homework.

Note: If you are a real estate investors or wholesaler in Pennsylvania, New York, Delaware, Virgina, or Connecticut and are looking for a private hard money lender or rehab lender, feel free to give us a call at Rehab Financial Group and we’ll see if you we can set you up on the right path.  877-643-9066| ask for Susan, Matt, or Dawn!

4. Always overestimate your costs and underestimate the after repair value.  If you can make money in this situation, then you will make money with this deal.   The reason so many investors exit strategies fall apart, is because they over-inflated their after repair value and did not budget for added costs during the rehab.

5. Know what type of property you want.  If you want a bank-owned property, focus on bank owned property.  If you like 3-family homes located within a .6 mile radius from your local college, then stick to that area.  Remember, lack of focus in your investing will make you feel like you are running around blindfolded.  Get focused.  Get results.  And then scale up from there.  Ever met a real estate investor who owns half the block?  Think it is an accident?

6. Real estate is local.  Do not pay attention to national markets (unless you invest in national markets).  Pick a “farm” – a dedicated area that you want to invest in.  Then hone in and focus on the best blocks.  Learn as much as you can at that level first before calculating the rise and fall of average home value in the US.  Smart investors make money no matter the current state of “the real estate market”

As a real estate investor, being smart pays off.

If there is something we can do to help you with your rehabs or investment properties, please let us know.  We are here to help.  Our number is 877-643-9066 and yes, we are real people here ready to develop long-term relationships with qualified real estate investors.