Let me break it down for you like MC Hammer. I buy crappy houses in Maryland, I fix them up and make ‘em look real nice hon (said with my Bal’more accent), then I sell them. Boddabing, Bodda-Freakin’ Boom. Problem is, I need some sweet wholesale real estate deals like now, and that’s where you come in. I’ve got the dough, and I’m looking for deals right here.
I’ll pay a minimum of $10,000 for a wholesale fee. In fact, last year I paid two wholesale fees in excess of $40,000. Bam! I come with cash (that’s what she said), and I can close in just 30 days. I’m not interested in landlord junk or warzones, as I value my sanity…and my life. Homes must be in decent neighborhoods in Baltimore, Howard, Harford, Anne Arundel, Prince George’s Counties or DC. Come on, hook a brutha up!
You come across a wholesale deal, you call me first. After all, you wanna deal with the #1 real estate rehabber in Maryland, don’t you?
As you all know by now, I’m pretty obsessed with design and layout. I just can not stress the importance of a modern functional layout. Simply put, I believe all my homes sell faster and for more money because I take old houses and make them REALLY shine by giving them modern and open layouts that function exactly the way consumers want houses of today to work.
With bigger kitchens, eat-at bars, master bedrooms with private baths, big closets, family rooms equipped with wiring for media – today’s homebuyer expects these types of amenities even when they are buying houses built 100 years ago.
As I’ve said before, making such vast design changes takes great vision and knowhow. Many of you asked, how I do my drawings? Quite honestly, I don’t do drawings except for my kitchens. In almost every case, kitchens must be professionally designed so that you don’t end up with a room that won’t easily accomodate standard cabinet sizes. In all other cases, my homes come to life from my vision matched with the skill of my contractors.
Last night I came across an online and totally free tool to help you with design and layout. And, even better – you don’t have to be a rocket scientist (is any one actually a rocket scientist anymore) to use it. This thing is easy-peasey.
Its called AutoDesk HomeStyler and again, its free! The link will take you to the Google Chrome store. If you are not using Google Chrome to may be able to go directly to the AutoDesk site to find the tool. I simply added it as an App to Google Chrome and it runs perfectly in my Chrome browser.
Hope you have fun with it! Let me know you thoughts.
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I used to ask the following question a lot while talking with newbie investors. Before I get to the question however, you should know that I often asked it during a time in which when money seemed to flow like crap through a goose to any investor who could simply fog a mirror.
The Question: If I could give you a 100% iron-clad guarantee that I will personally find you five deals next year that will make you $40,000 each – would you quit your job today?
Inevitably, the newbies would all answer yes. So what does that tell us? The #1 fear of investors a few years ago was DEALS. They all worried; “Can I find enough deals to satisfy my income goals?” And admittedly, I used to also worry about the same thing. Listen up ’cause I’m only gonna say this once! GREAT DEALS ARE FALLING FROM THE SKY! They are everywhere! I can not keep up with all the CRAZY good deals happening all around me. So what’s the bottle-neck in today’s market?
RE INVESTING TIP: Successful investing comes down to 4 CRITICAL variables:
- Education – Do you know enough to truly capitalize on an opportunity
- Deals – Are they out there? Do you know how to find them? Are there enough deals to sustain you?
- Money – Do you have money to take down the deals? Is it easy to obtain? What will it cost you?
- Contracting – Ugh – need I say more?
Listen up again - Education, Deals, and Contracting…that’s the EASY part!!! Any one can master those three critical variables, but in this market if you don’t have money – YOU ARE OUT OF THE GAME, period! There are very few banks who will lend money on a investment deal – and if they do, they are gonna want a LOT of your skin in the game. And, if you can’t prove that you have experience – forget it! You won’t even get a foot in the door of the few banks that ARE lending
That’s the cold facts, people. The cold hard truth of today’s market. I am on a quest for money and I want you to come me.
CHECK OUT THE BRIEF VIDEO BELOW FOR INFO ON MY NEW QUEST!!! AND BE SURE TO COMMENT!
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I received an email a week or so from Brett Neely; a reporter with National Public Radio (NPR). That was pretty astonishing given the fact that my political views align more with Rush Limbaugh than with most every reporter on NPR. Brett said he was doing a story on the housing market and while researching, he came across my little blog here on Al Gore’s world wide web.
After a few minutes of chat, Brett asked if he could come hang with me for a few hours. Anyone who knows me, also knows that regardless of your political views, I “LOVES” to show off my pretty houses. I of course obliged Mr. Neely. The result of our time toegther was a news report filed for radio and for NPR’s blog. Pretty cool, stuff. I’m all tingly just thinking about it.
As a newbie (several years ago) I always dreamed of being featured in a story by the Baltimore Sun. Well, I haven’t reached that goal yet, but this is pretty close.
For those of you interested in hearing what some Americans think of us RE investors, you MUST go immediately to the blog link below and read some of the reader comments. I was fascinated to see all the venom aimed at little ole’ me. Heck, I’m just out there everyday trying to make a better life for my wife and for my kids – and the readers of NPR’s blog think I’m some fat cat who lights my cigars with hundred dollar bills, all while stepping on the necks of the tired masses.
You gotta read this: NPR Blog Link
The link to the audio is here
The Homebuyer Tax Credit is over and with it – so it seems went the buyers. As you know, purchase contracts had to be ratified by April 30th, 2010. I just wanna talk real quick about the run up to April 30th, then the time just following April 30th – and then today. Also, I really want to get all of your feelings on what’s happening in your town.
In Maryland we got crushed in February with two huge and historic snow storms – VERY uncommon for Maryland. Following the blizzards we had record cold, so no melt and NO buyers trying to get out there in all that crap to look at houses. They turned out to be the perfect storms. The pent-up demand coupled with the looming end of the tax credit actually created a buying frenzy, the likes of which we have not seen since the mid-2000′s. We sold 5 houses in less than a week or two on market – and we had multiple offers above list. Thank you Lord, and thank you US Gov for giving us the incredible artificial market.
Following the April 30th deadline things slowed considerably, but after a couple weeks it appeared buyers came to their senses. They figured they missed the deadline, but still could take advantage of historically low rates. At just over 7% unemployment, we’ve not been affected too much by the downturn in the economy in my town, but I think we’re every bit affected as anywhere else in the country by a tremendous lack of consumer confidence. That said, the phones were ringing for showings and following the end of the credit, we got a couple deals under contract in May.
Fast forward to the last 14 days. Much like the entire east coast, we’re under the jackboot of the “dog days of summer.” Its HOT! Real HOT! And folks, I’m here to tell ya; you can do some sweating in Baltimore when its 98 degrees coupled with 90% humidity. Talk about some “Schweddy Balls.” The result: The phones are dead! I mean, its like the calls just stopped as of about 6 days ago.
What’s going on in your town? I want to hear from you, especially if you’re on the east coast, or if you’re trying to sell houses right now. Chime in.
I received more comments on my last post than any previous post. Looks like I struck a cord, huh? I could (and should) write a book on how to not get taken by contractors, but before I do, I’ll just share all my info here. Just call me, Mr. Good Karma! So this will be the kick off post; Part One of a series of posts on How To Sucessfully Work With Contractors so that you can (one day) be a Professional FullTime-Rehabber like your old pal; Craig Fuhr.
Let’s begin our journey with what NOT to do.
As an example, let’s say you’ve just purchased a crappy house for $68,000. Because you’re smart, you did your homework and have a pretty good idea that the rehab should cost about $65,000. Comps in the area suggest a back end (ARV) of $215,000. Sounds like a sweet deal, huh? <Shyly> Yeah, its one I just did.
You close on the purchase, and like every rehabber, you’re just busting at the seams to see some dust fly. So you set up a meeting with a contractor. If you’ve been doing this as long as I have, you’ll want to to swing some hammers THAT day! Time is money, right? Hold on there, Speed Racer. First thing you need to do is, get out a fresh pad of legal paper and a shiny new pencil. As you walk through your crappy house, understand (I mean, really internalize) that EVERY rehab no matter how big or small has a rhythm and rhyme. It has a flow. And, you can never go against the flow. Like the Ten Commandments hewn into stone, so is the precise logical workflow of a rehab. Do ya’ hear me? Don’t mess with the flow! You wouldn’t start drywalling before the plumbing was done, right? So, go through each logical step of the flow – and associate each step with a precise cost.
Something like this: demo will cost $7000.00, framing will cost $5500.00, roof $4500, mechanicals $21,000.00, doors & trim; $2500.00, windows… You get the picture, right?
If you follow my directions, at the end of this process, you will have a very basic Scope of Work (SOW). Now, let’s say you’ve decided to let a General Contractor handle the whole process for you, and miraculously, he agrees that you were right – the cost of the rehab will be $65,000.00. The first thing he’ll want is money. Like most greedy penniless bastards, he’ll have the balls to demand 1/3 of that $65,000.00 up front before the first hammer is swung. Get out your calculator. Mine says, “Are You CRAZY? OUCH! Don’t do it! That’s $21,400.00!”
I have a really fancy calculator.
First things first; how about getting something in writing? I’ve never been a fan of a written contract with contractors mainly because I know you can’t take blood from a stone. 99% of these guys have no money, so even if a judge finds them in breach of even the best contract – how do you suppose he’ll make the contractor pay you if the contractor has no money! What I do do (I said, “do do”) is make the basic Scope of Work (from above) into a much more detailed document. This post is not about writing a detailed SOW, so I won’t get into all the gory details here – but know this – once the formal SOW is developed, the contractor then signs it, and it becomes the work blueprint and best contract you’ll ever have.
So you have a signed SOW, and there he is; Mr CON-tractor standing there with his hand out waiting for a super-fat $21,400.00 check. You’re ready right? You’ve got your SOW and you’re swollen checkbook is burning a hole in your pocket. Wait! Hole on! You’re still not ready to go! You can not give him a dime yet. Doing so would be a GRAVE error and would be going against the natural work flow!
Stay tuned. I’m just gettin’ started here. I’ll tell ya more in my next post!
I want to hear what you have to say about Part 1 of How to Successfully Work With Contractors.
Its been a very trying past few months. I had a contractor quit while in the midst of 5 jobs, and another contractor quit while working on 1 house. So there’s been many lesson learned and I’m gonna share them with you – ’cause that’s what I do. I share. I play nice. Amongst all the craziness I will tell you that I have remained remarkably calm, which is not a DNA level trait for me. The state of calm is learned, people.
So, sorry for the radio silence on the blog. OK – let’s get to those lessons! When dealing with contractotrs, keep the following ion mind:
I Give You My Word. If a contractor talks too much, promises endlessly and gives you his word – he’s a liar! Don’t trust him. For those of you working in the Baltimore, MD area – take it from your boy Craig; Avoid Joe Chavis of Joe Chavis, LLC. As much as it pains me to say so, Joe is just not a trust worthy guy. If you come across him – read all of the lessons below – and proceed with GREAT caution.
The Money Grabber. Never give money up front. NEVER! Don’t even think about it. Whether dealing with subs, or generals, most contractors will ask for 30% up front. If your job is $10,000 that’s $3 grand. If its $50,000.00 – you’d be shelling out $15,000.00 just to get the ball rolling. While I know it seems crazy – most of us have done this without even blinking an eye.
You wouldn’t pay a heart surgeon before he gave you a new ticker, right? How about a mechanic? Would you pay him for a new tranny before he put it in your car? Then why – why do we pay freakin’ CON-tractors (notice the “con” as in Con-Man and Con-trary) a dime before they get rolling? Why? My guess; because they have the balls to ask for it! If they didn’t ask, would you offer? Of course not!
If you MUST pay up front – pay ONLY for materials but not for labor.
Tony The Tiger. All contractors – EVERY single one, sooner or later “flake.” NO Contractor is problem free. NONE! Ok, maybe 1% are problem free, but even they “flake.” Knowing that they are all basically ticking time bombs, why then would we offer to give them such large checks before any work is done? But – that is a trap I’ve fallen into many times. If you’re guy is “shit-hot,” and always delivers, ask yourself this – “What if his truck broke down, or his wife left him, or if he got sued, or had a serious emergency?” Who would get paid first? Who would be taken care of first? You or him? And – if his small buffer of savings ran out, how would he use that FAT check you just gave him?
They ALL flake!
Extreme Makeover to Extreme Dud. Be wary of ANY contractor who finishes the demo in a day, then slows down to a grind just after the demo. ANYONE can swing a sledgehammer. A lot of newbies get impressed when they see such a stark change in their rehab in such a short period of time. Again, demo is easy AND cheap. Any gorilla can do it. Don’t be impressed.
The Artist. Some of these guys think they are Picasso. They’ll make you believe that good work takes time. Bullshit! The VERY best drywallers I know are also the fastest drywallers I know. Same goes for painters, trim guys, plumbers…and right on down the line. These guys make money by being good AND fast. You can’t make money in this business by being a quality supplier only. The best guys are stacked with jobs because they deliver quality and speed. Stay away from Picasso!
Quick Draw McGraw. Every job begins with a great scope of work and a draw schedule that clearly defines how the money will be paid once that work is complete. When you’re doing one rehab or ten, its so easy to get away from the scope and draw as long as you see progress. But folks – the Empire State Building was not completed in record time and on budget by straying from the blueprint. A well-defined scope and draw are your precise blueprints for success.
Unscrupulous contractors have learned to manipulate the draw when they start to get behind. Here’s how it works; You don’t follow the rules above and you pay the contractor some money up front. He uses up that money for his growing crack habit – and now he can’t afford to pay for your interior and exterior doors – but maybe his tile guy owes him some money. So, instead of following the draw he does some tile work – then asks, “Hey can I get that money for the tile?”
Your answer should be, “Yup! As soon as you give me those doors!” See, they have to sign off on the scope and draw, and the more you hold that up in their face – the less they have to argue about. Stick closely to your blueprints for success and use every opportunity to point them out to your contractors.
The Partner. This is one of my favorites! Contractors for all their issues are NOT stupid. And, it doesn’t take a brain surgeon to do a little digging to surmise what we investors must be making in profit on these deals. I’ve actually run into guys that felt entitled to a share of the profits. The shift in their demeanor will be subtle, and it usually happens after you’ve done your 2nd or 3rd deal with the same guy.
Here are the signs: The contractor will start to slow down a bit while getting chummy at the same time. Maybe over lunch he’ll say, “Damn – I envy you Craig.” or, “I’ve always wanted to do what you do.”
Then, he’ll say – “Hey Craig, how much did you pay for that house?” or “I saw that you sold that house for $____ dollars – that’s CRAZY!”
Trust me – its happening folks. You’ll think he’s happy for you, but you’re contractor is wondering why he made $5000.00 while you made $50,000.00. At that precise moment, you need to nip it in the bud. Tell him YOU are the investor and that he is the contractor. Period! If he wants a partnership, he needs to put up the money. Period!
Good luck. Follow all of the above, and you’ll be on your way to conquering your contractor issues.
There is no lack of Guru-related products on the market hawking the latest greatest system for finding great probate deals. I personally haven’t evaluated any of those products, but I’m sure there is some good info out there.
So what’s a probate? If you are a real estate investor, you should know (if you don’t) that houses previously owned by dead people often represent great deals. I’ll be frank (as if the previous sentence wasn’t frank enough), I don’t do a whole lot of marketing these days. I really don’t have to. But, if you are wholesaler, you’re number one job is to develop a great buyers list, you’re second most important job is to develop great sources for a never-ending stream of deals. Probates can be an excellent source.
I had an astounding revelation when it comes to marketing for probates, and I’m sharing my brilliant twist with you in the short video below. Check out the video and let me know what you think. Am I on to something, here?
When I was but a budding, fresh-faced real estate investor, I couldn’t wait to get off of work, or get up on a Saturday morning to go out to look a bunch of houses. “Driving for Dollars,” is the term most often used – and to this day, I still think its a great way to find distressed properties. Its also a great way to farm your neighborhoods and to find new neighborhoods to invest in.
I would kiss my wife (then fiance’) good-bye, load my pockets with a few of my favorite cigars, stop at the Starbucks for a Vente’ black, and I would just drive. It gave me time to think, time to dream, and time to plan. Most importantly, it got me in touch with what the heck was out there. Hell, if she didn’t call me home – I’d be out there until it got dark.
Learn from my mistakes though. Use your time wisely. Pick a farm area first and know EVERY house in the area. The ONLY way you can do that is to “drive for dollars.” Its all so simple, really.
I don’t really need to do a whole lot of driving for dollars anymore, but as I was driving to my first house this morning I must have seen six or seven houses that jumped out at me. Spring is the VERY best time to find deals. Check the video for why…
From The Washington Post
(Can’t believe they didn’t interview me! I need a better publicist.)
By Ovetta Wiggins
Washington Post Staff Writer
Sunday, April 11, 2010
The house on 29th Street in Mount Rainier is a shambles. Mold and mildew cover the walls. The carpet reeks of urine. A chandelier in the dining room and dingy white curtains in the windows are the only reminders that the house was once a home.
Despite the condition of the house, it is just the type of property that Granzow, his business partner, Patrick Ricker, and other investors have been snatching up in Prince George’s County since the housing bubble burst about three years ago. Granzow and Ricker bought the home on 29th Street a few months ago.
The properties are inexpensive. They are inside the Capital Beltway. And they are in communities where redevelopment projects and new construction are underway.
Granzow and Ricker said their company, Property and Industry Coordinators, has bought and renovated eight homes in the past year. Most of them are in Mount Rainier and Hyattsville. Bright Lusk Properties, a family-owned business in Hyattsville, has bought three since 2008. All are in Hyattsville, one of the Prince George’s communities hit hardest by the foreclosure crisis.
Last year, Prince George’s had 13,412 foreclosure filings, more than any other jurisdiction in the state. A filing could mean that the homeowner received a notice threatening foreclosure or that the property was sold at auction or was repossessed. The county, with 13.8 percent of the state’s housing units, had 31 percent of the state’s foreclosure filings.
Under the circumstances, housing and foreclosure experts said, it is no wonder that investors are eyeing places such as Hyattsville, Mount Rainier and Capitol Heights, communities with older housing stock near the District line.
“These are desirable locations,” said state Del. Doyle L. Niemann (D-Prince George’s), who has sponsored a number of bills dealing with foreclosure in recent years and who prosecutes mortgage fraud as an assistant state’s attorney. “Mount Rainier and Hyattsville are strong and attractive communities to folks, even in the current economic recession.”
Maryland does not track what happens to homes after they go into foreclosure or how many of those homes are bought by investors, said Raymond A. Skinner, state secretary of housing and community development.
But Skinner said it seemed likely that people would be looking for bargains and that many investors would focus on older communities, where the prices are lower and the chances of resale are greater.
Rebekah Lusk, a resident of Hyattsville and a founder of Bright Lusk Properties, said she chose to buy a house in the county’s Lewisdale section because her company wants to be part of the redevelopment effort in the city. All of its properties have been renovated and are being rented out.
“Our goal is to be active investors and be involved in the community,” she said. “We don’t flip. That’s not our goal. We’re not looking to put properties back on the market when there are so many already on the market.”
Niemann said the properties would otherwise become increasingly blighted or would be scooped up by speculators with no ties to the community.
Ricker said that he has made a living brokering real estate deals and investing in new developments — his company’s offices were raided by the FBI in 2008 during a probe of a proposed development near the Greenbelt Metro station — but that he had to refocus when the market dried up.
As he drives his black Cadillac Escalade through Mount Rainier and Hyattsville, he searches for signs of neglect in the neighborhoods. Brown lawns. Weeds. Missing curtains. He is looking for any possible indication that a homeowner is in foreclosure.
“When the bubble burst, I said, ‘Why not buy some of these homes?’ ” he recalled.
Instead of going to auctions, Ricker negotiates with lenders to arrive at an acceptable price.
He bought one house in Brentwood for about $100,000. He gutted it, installed marble countertops in the kitchen, new appliances and new bathroom fixtures, and he transformed attic space into a master bedroom. He said the house will sell for about $300,000.
“The positive is that they are not fly-by-night speculators who want to make a quick buck,” Niemann said. “Yes, they are making a return on their money, but there seems to be a strategy to make the community stronger.”