Avoid paying too much for your rehab by knowing what its worth when you sell!!

Posted by capitalhomeslp on Nov 2, 2011 in Blog, Brandon McDonald | 0 comments

BIG MISTAKE number 2.  Not getting the ARV (after repaired value) correct.

You’ve got this great house! It’s fully rehabbed and you’re in it for $100,000.00 You think its worth 135,000, this is a pretty good looking deal!  But, its only worth 115,000… wah wah.   Your good deal just turned out to be a nice hobby that you made 5 grand from after you pay 6% in realtor fees and 3% for the buyers down payment (and you will in this price range).   How to avoid this.

Realtors have a lot of resources that help them determine this information.  If you are in an area where homes are all built within 10 years of each other and have homes that are similar in square footage (within 200 sq ft) it should be easy to compare, or comp (industry slang, we’re cool like that!)  You look back over the previous 9 months, not 15, not 24, 9.  9 is how far back appraisers will go to determine value as well.  That’s why we use that number.

If you see 15 houses that have sold that are similar to yours it should be a pretty easy comp, congrats!!  You can move forward with the deal fairly certain that you will create a superior product and be able to sell it in that market.

East Nashville is the best area in Nashville, in my opinion, to mess an investor over!!  Comps can literally change by $50,000 from one street to another!!  Put the same exact house on street “A” and its worth $200,000.00 put it on street “B” and it might be worth $150,000.00 and it takes twice as long to sell!!  This is where a good realtor that is very familiar with the area comes in handy.  They can point you to the good deals and help you avoid the bad ones.

A little common sense goes a long way! Drive the area.  If your street feels much much worse than the street behind it, IT IS!! It wont comp the same in the mind of a buyer just like it didn’t in yours.

I recommend that you leave these areas to do later on.  Find the places that are easy to comp.  This business is hard enough with ALL the info… why guess?

Next Ill cover an area that is near and dear to my heart, Renovation budget!! Asking the house what it needs done to it, and actually listening!! See you next time!!

Creating a cohesive design concept to make people buy your house!!

Posted by capitalhomeslp on Nov 2, 2011 in Blog, Brandon McDonald | 0 comments

Ive spent the last few entries telling everyone about the mistakes that I have made in real estate throughout my career thus far.  In this entry im going to share with you one of the things that I am actually good at!!   Cohesive design throughout the home to create the feeling of “I have to have it!!”  Ill focus on Hardwood floors for this entry.

Every house has a style to it.  My job is to either enhance the homes natural style or change that style without making it a jarring departure from its intended use.

One of the finer examples of this was a home I purchased a couple of years ago in south Nashville.   The neighborhood was all 1950’s ranch style homes.  Ive really grown to appreciate this style of home.  When I first moved to Nashville I thought they were dull and boring.  Ive since realized the potential they have to be spectacularly laid out.  Much like Frank Lloyd Wrights prairie houses they can be converted and upgraded to beautiful horizontal masterpieces that blend into the landscape!

This home was 2300 square feet all on one level, which is large for a 50’s ranch.  The previous owners had done a funky addition on the back of the house that brought the list price from $160,000 all the way down to $80,000 over a year.  People have a very hard time envisioning floor plan changes, so they tend to shy away from them.  These can be great buys if you have vision!!

We took out walls all over the house fixing the floor plan and creating a great open plan that allowed you to be in the kitchen and see the living room, den, dining room and sitting room.

I do Hardwood floors whenever possible in homes.  I love the durability and the warmth they bring to a space.  We used Ebony (almost black) 3 inch wide plank in this home.  The baseboards, door moldings and window trim in 50’s ranches are generally very understated so we painted them black to make them jump out.  Black floors and baseboards?? Seems dark right? Nope!! They seemed to drip up the walls anchoring the very light colors from the walls and the white Kitchen cabinets.

Hardwood coloring is very important!! I love very dark wood but It doesn’t always make sense in certain spaces.  You must not force the home to be something so different that its distracting to potential buyers.   Remember when choosing color that the floors will be a focal point for the space.   They can tame down crazy wall and trim choices, or they can spice up plain and boring.  Provincial is a nice redish brown for taming.  Ebony and Jacobean are very dark and have a lot of variation with the way the wood takes them.  They are more risky and I generally put them in homes with a very contemporary design.  Ive only used light flooring a few times.  Most of it looks cheap to me, but in a very airy space, natural or birch can add to the weightless feeling.

I know I sound a bit like a hippie, but let the overall home design dictate the colors you choose.  Let the home talk to you and tell you what to do!!

HIRE PEOPLE QUALIFIED TO DO THE WORK!!!!

Posted by capitalhomeslp on Jul 5, 2011 in Blog, Brandon McDonald | 0 comments

Now that I’ve got the basics out of the way, I will continue with the public humiliation!

Getting started I would always ask other investors/ contractors what their biggest mistakes were so that I could avoid them.  Lets go back to the first house I ever did and Ill give you a lesson that I still haven’t seemed to learn all the way.  Even though I’ve been told, and told myself a thousand times not to do it!!

NEVER HIRE PEOPLE THAT ARE NOT QUALIFIED TO DO THE WORK!!!!

Example:  I knew from laying hardwood floors previously that it is very tedious, and hard work.  Your back will hurt for a few days and odds are the final product will not be quite what you were hoping for.  I didn’t have a lot of square footage to lay, so I wanted to pay someone to do it.

Where to find this person to lay the floors?  How about the kind-of-sketchy looking guy in the flooring isle at Home Depot that says he will do it for $2 a square foot (that’s a fair price to pay, though we pay $1.50 right now just to lay the pre finished floors).  DONE!!

He followed me to the job because he could start right then!!  I thought this was great!  It is, however, not great at all.  He was in the Home Depot in the middle of the workweek with no other job for the rest of the week.   Logically, it makes sense that a good sub contractor would have stuff to do the rest of the week and I would have to book him for the future.

We got to the house and we agreed to the price.  NO MONEY WAS PAID BEFORE HAND!!!  This is the saving grace in a bad sub contractor situation.  If they do not have materials to purchase, DO NOT GIVE THEM MONEY!!!!! And, if they do have materials to purchase, you call in the payment to the supply house directly.  I cannot emphasize this enough.  Ask me how I found this out…

An hour or two into the guy being there, his “team” showed up.  The kid that must have been no older than 12 started to clean up the debris and the fluffy haired guy (that I kind of recognized) started pulling up the tack strip.  The “fluffy haired guy” was a top 10 American Idol Contestant!!  He was the guy that supposedly had a “relationship” with Paula Abdul.  Yeah, laying hardwood floors.  It was wildly obvious that this was not what he wanted to be doing.  Nor was he good at it!!

The job that my guys would do in a half day,  drug out over 4 days with this sub!! Time is money.  At the beginning of each job I figure my carrying costs (interest, taxes, utilities, assoc. fees etc.)  Normally its like adding another guy to the payroll each day!! He finished and the job was done poorly.  I begrudgingly paid him.

I will admit that to this day I take recommendations from people that I shouldn’t.  it’s always tempting to hire the hourly guy that’s 8 bucks an hour, but you’ll pay WAY more in the long run (in actual dollars for the b.s. and time lost)  There’s generally a reason that person isn’t demanding $20.00 an hour or bidding the jobs the way they should be bid.  It’s a very hard cycle to break free from.  DON’T DO IT!!  Find the guys that do it the right way.  Get recommendations from others, or check out references.

More to come from Brandon’s wide world of real estate mistakes!!