The Real Estate Rehab Investing Bible
"The Real Estate Rehab Investing Bible"
by Paul Esajian
Tags: Flip This House, Paul Esajian, House Flipping, Investor Rehab, Finding Investment Houses, Fixing Houses, A&E
In "The Real Estate Rehab Investing Bible" Paul has created a seven stage system for finding, funding, fixing, and flipping homes that doesn't involve picking up a paintbrush. As he puts it "by getting your hands dirty, you slow down the opportunity to get your money back sooner." Instead, he teaches how to put your money to work to maximize returns.
One of his suggestions is to create a network of people involved in real estate.. This included mortgage brokers, agents, lawyers, contractors, investors, city officials, and others. You can meet them in person at auctions, REIA meetings, home builder association meetings, landlord association meetings, and home or trade shows. Online you can meet them at Meetup.com, Yahoo Groups, Facebook Real Estate Groups, and on LinkedIn. He recommend having profiles on Facebook, Twitter, LinkedIn, Google+, Pinterest, Youtube, a blog, and HOUZZ. Personally, I would avoid Facebook, but the rest seem interesting.
Included in the book is a detailed three-step rehab evaluation playbook (phone, desktop, and in-person). It includes tons of information for anyone planning to locate deals and flip them. Much of the resources from the author are available on this website RehabInvestingBible.com/resources including a repair sheet estimator and deal analyzer. This is an important URL to bookmark.
He also mentions the following valuation sties:
I have also used LifestylesDiscovery.com which does valuation plus deal analysis.
This book provides the perfect step-by-step guide to house flipping and is very detailed. It is comparable to my other favorite flipping book "Flip!" Here are some other topics from the book:
When preparing a request for a hard money loan, a financing request outline is recommended. The financing Request Package should include a cover page, executive summary, property description, location and market information, financial analysis, about the borrower section and any appendices. A template is available on the books website. It is sourced from GrandCoastCapital.com (a national Hard Money Lender).
The maximum offer you should ever make on a property can be determined by the following formula:
(ARV x 70 Percent) - Repair Costs
This was one of the most detailed repair estimate chapters I have read. Again, they advertise a free estimator of their website, but here are some highlights:
* A 1500 sq/ft house will cost $6000 for a new roof. Add $1000 if it is a 2 story home.
* Seamless rain gutters will cost $1000
* Stucco is $5000 per floor
* Windows are $200 each installed
* Paint costs $2 per sq/ft for the exterior
and $1.50 per sq/ft for the interior
* New single car detached garage construction is $7000
* Garage Doors cost $800 single and $1000 double
* Landscaping is $2000 for 6000 sq/ft lots
* New Cabinets, countertops, and backsplash will run $5000
* Kitchen Appliance Packages are $1800
* Full Bathroom Remodel $3000
Half Bathroom Remodel $1500
Master Bath $4500
(extra for plumbing)
* Flooring: Sanding and refinishing $2.25 per sq/ft
Engineered Hardwood $6 per sq/ft
Laminate $3 per sq/ft
Tile $10 per sq/ft
* Drywall: $4 per sq/ft for the house for a total gut job. $45 installed for a 8 x 4' sheet.
* Plumbing: $500 budget per wet location
$6000 to repipe a house
$600 to replace a hot water heater
$1500 for a tankless water heater
* Electrical: $1500 minimum budget for fixtures
$2000 new service panel
$7000 complete rewire
* HVAC: Replace it! $1500 for new forced air unit
$2500 Air Conditioner condenser
* Dumpster rental runs $500 per four ton unit
---Managing the Rehab---
+Stage One: Take Pictures, Measure, and Decide the Work.
+Stage Two: Create a detailed agreement outlining the scope of the work with the contractor.
+Stage Three: Hire a Contractor.
+Stage Four: The Six-Critical Documents
1. Independent Contractor Agreement
2. Final Scope of Work
3. Payment Schedule
4. Insurance Indemnification Form
6. Final and Unconditional Lien Waiver
It is important to use your documents, not the contractors.
+Stage Five: Managing the Rehab
This is pretty easy if you have followed the steps so far.
+Stage Six: Contract Closeout and Final Payments
*Final Certification of Occupancy
*Final Punch List
*Final Lien Waiver Executed
*Final Payment to Contractor
+Stage Seven: Final Touches and Home Staging
Biggest Takeaway: You can setup a "Captive Insurance Company" to help shelter some of your real estate profits. Basically, the LLC that owns the real estate pays the insurance company to insure against some risk. The insurance company is owned by a living trust controlled by you.. After 12 months of holding these premiums, the insurance company can pay them out as dividends. This strategy is mentioned at the end and I have never heard of it, but it seems interesting. It will be something to look into in the future.
Note: This book should be referenced if house flipping is in the cards.
More about Paul Esajian (from the book):
"Paul Esajain (La Jolla, CA; www.fortunebuilders.com) is the founder and owner of multiple successful real estate companies, including the largest and most successful real estate education and coaching company across North America. FortuneBuilders has been featured in INC magazine's "Inc. 500 List" three years in a row. Paul has successfully managed and executed over a thousand residential real estate transactions, some of his projects which have been featured in 20+ episodes and three seasons of A&E's hit TV show Flip This House. As a national speaker, educator, coach, and real estate investor Paul shares his experience and knowledge over a decade's worth of successful business building and real estate investing."