I spent a minute or two at Champions School of Real Estate a couple weeks ago, crashing favored teacher Kelly Logsdon Rush’s stuffed-to-the-gill Real Estate Investment class. Why? She had two fabulous guest speakers: Mark Bloom, owner of NetWorth Realty (what they call a wholesaler, he has offices in 19 cities) and Rob Barney, owner of DHLC Investments, who has loaned more than $130 million to investors. It’s what they call hard money lending, meant for a quick turnaround.
I picked up some tips for us on how to scout for value properties — go to the foreclosure sales, drive neighborhoods looking for dilapidated homes, check the city’s list of code violation citations. A few years ago I was interviewed by one of the local stations, and I said you can find homes sometimes by looking for the wheelchair ramps. Man, did I get flack for that (“insensitive!”) but man, was I right.
Kelly has been teaching this class at Champions for twelve years. She is also a seasoned, licensed agent with Ebby Halliday. And she really knows her stuff. 30 to 40 percent of her clients are investors, and the properties she is involved with market for less time, and fetch higher prices. She has been helping investors flip homes for more than 20 years, so you can see why she teaches it. A few years ago, I needed to get my condo leased lest I bleed reams of cash, and Kelly got it occupied in about two weeks, covering everything from the lease to the pretty towels she hung in the kitchen.
Kelly’s three basic principles of real estate investment are:
You make your money on the buy, not the sale. (If you buy it right, you will be okay. Other words, don’t overpay!)
Location Location location (yeah yeah yeah).
Everything is negotiable: if your first offer doesn’t offend or insult the seller, then you have offered too much.
Kelly says always rehab to the area: you cannot put lipstick on a pig and expect to sell a house if it does not live up to the standards of the homes around it. Buyers just won’t well, buy it.
Men may pay for most houses, but women make the buying decision. What they want: open floor plans, tall ceilings, natural light and hardwood floors. The most important redo areas when rehabbing: the kitchen and master bath.
Rob Barney agreed and re-iterated Kelly’s first principle, “if you make a mistake but you bought right, you have the ability to overcome that mistake,” he said.
“Don’t be emotionally involved in your real estate deals, this is a business, ” he said. “nothing more. Don’t be in a hurry to do your first deal because you want to get started, wait until it’s the right deal that you can buy right.”
Get this one:
“Keep your hand on your wallet. This business attracts folks that may not always have your best interest at heart. Always do your own due diligence, always be skeptical, make sure you can trust the people you give your trust to.”
Then you have to have a team to help you not only buy, but rehab the property you plan to flip. Here’s who you should have as “members” of your Real Estate Investing Team:
Lenders, including wholesale lenders, contractors/subs/painters (really hard to find now), flooring contractors, cabinet makers, fabricators, structural engineer, foundation repair company, professional photographer, Title Company (remember Nancy Carroll?), stager and Realtor, unless that’s you.
I will add, CandysDirt.com.
Mark Bloom: “Buy and hold for the win! Hold some of your assets for the long term. Real wealth creation happens from owning real estate for the long term. Make sure the rents more than cover a fixed PITI (principal, interest, taxes and insurance) payment and let it mature. Buying in and around major metropolitan areas will allow you to benefit from the growth of that city.”
“There is no perfect deal,” he says. “Don’t expect every property to be a home run. Likelihood is you’re gonna learn lessons and probably take some losses before you are able to work the kinks out of your model and repeat it regularly.”
And always keep your eye on the ball, or rather, property.
“Always, always pay attention to the rehab!” he says.
If you do a good job of analyzing future price, and are able to buy right, Mark says the real risk is in the rehab. Don’t let your personal preferences or a contractor persuade you to deviate from what the comps are showing you. Manage the timeline on your rehab intensely. Set the expectations with your contractor from start and stay on the job.
“Don’t be upset if you are over budget within reason,” he says, “but manage and adjust going forward.”
“Every magazine, every blog (ha ha), says the best city to invest in is Dallas… we are the number one real estate investment city in the country,” says Kelly. “So investors have to stay ahead of the game, and work it.”