www.sunrise.sh/images/SEC/10KSB-2006 to bdo 2007-4-13.doc

TAG:  real estate marketing 

Published Time: -

Filetype: doc

Filesize: 701952

Contents at a Glance Introduction .................................................................1 Part I: Laying the Foundation for Successful Flipping......7 Chapter 1: Wrapping Your Brain Around the Idea of House Flipping ..........................9 Chapter 2: Do You Have the Right Stuff for Flipping? ..................................................23 Chapter 3: Devising an Effective Flipping Strategy ......................................................39 Chapter 4: Building Your Dream Team ..........................................................................49 Part II: Fiddling with the Financials of Property Flipping....................................................65 Chapter 5: Guesstimating Your Potential Profit ...........................................................67 Chapter 6: Securing the Funds to Fuel Your Flip ..........................................................79 Chapter 7: Trudging Through Some Taxing Issues ....................................................101 Part III: House Hunting with an Eye for Flipping ........111 Chapter 8: Scoping Out a Fertile Neighborhood ........................................................113 Chapter 9: Hunting for Houses in Your Target Area...................................................127 Chapter 10: Inspecting the Property with an Eye for Rehab ....................................143 Chapter 11: The Art of Haggling: Negotiating a Price and Terms.............................163 Chapter 12: Closing In on Foreclosure Properties .....................................................181 Part IV: Fixing Up Your Fixer-Upper ...........................199 Chapter 13: Prioritizing and Planning Your Renovations..........................................201 Chapter 14: Giving Your Property a Quick Makeover ................................................217 Chapter 15: Perking Up the Curb Appeal ....................................................................233 Chapter 16: Dazzling the Crowds with Updated Kitchens and Baths......................249 Chapter 17: Sweating Through Some Moderate Makeovers .....................................265 Chapter 18: Reconfiguring Spaces and Other Structural Overhauls .......................277 Part V: Sold! Selling Your Rehabbed Home .................291 Chapter 19: Marketing Your Home ...............................................................................293 Chapter 20: Staging a Successful Showing ..................................................................305 Chapter 21: Negotiating the Sale to Maximize Your Profit ........................................317 02_043458 ftoc.qxp 10/16/06 9:40 AM Page vii COPYRIGHTED MATERIAL Part VI: The Part of Tens ...........................................329 Chapter 22: Ten Signs of a Great House Flipping Opportunity.................................331 Chapter 23: Ten Renovation Cost-Cutting Strategies.................................................335 Chapter 24: Ten Common House Flipping Blunders ..................................................341 Chapter 25: Ten Strategies for Surviving a Slow Market ...........................................345 Index .......................................................................349 02_043458 ftoc.qxp 10/16/06 9:40 AM Page viii Table of Contents Introduction..................................................................1 About This Book...............................................................................................1
Conventions Used in This Book .....................................................................2
What You’re Not to Read .................................................................................2
Foolish Assumptions .......................................................................................3
How This Book Is Organized...........................................................................4 Part I: Laying the Foundation for Successful Flipping .......................4
Part II: Fiddling with the Financials of Property Flipping..................4
Part III: House Hunting with an Eye for Flipping ................................4
Part IV: Fixing Up Your Fixer-Upper .....................................................5
Part V: Sold! Selling Your Rehabbed Home .........................................5
Part VI: The Part of Tens .......................................................................5 Icons Used in This Book..................................................................................5
Where to Go from Here....................................................................................6 Part I: Laying the Foundation for Successful Flipping ......7 Chapter 1: Wrapping Your Brain Around the Idea
of House Flipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Grasping the Concept of Flipping and Its Challenges................................10 Spotting distressed property . . . and property owners ..................10
Making a few minor (or major) alterations .......................................11
Reselling your rehabbed property for big bucks .............................11 Flipping Ethically: The Good, the Bad, and the Illegal ..............................12 Flipping illegally: Real estate fraud and other scams ......................12
Flipping legally: Buy, fix, and sell........................................................13 Determining Whether You’re Ready for Flipping .......................................13
Devising Your Own Surefire Flipping Strategy............................................14
Assembling a Team of Advisors and Experts .............................................14
Managing the Moolah ....................................................................................15 Estimating your profit..........................................................................16
Getting your mitts on some ready cash ............................................16
Keeping more of your hard-earned cash by handling taxes wisely .......................................................................................17 Finding and Buying a Property Ripe for Flipping .......................................17
Rehabbing Your Fixer-Upper to Maximize Your Profit ..............................18 Putting your renovations in order......................................................18
Applying a little makeup......................................................................19
Tidying up the exterior........................................................................19
Focusing on kitchens and bathrooms................................................19
Making moderate changes ..................................................................20
Overhauling the structure ...................................................................20 02_043458 ftoc.qxp 10/16/06 9:40 AM Page ix Selling Your Renovated Pad ..........................................................................20 Setting the right price ..........................................................................21
Marketing your property .....................................................................21
Sprucing up your house for a showing..............................................21
Making the big sale...............................................................................22 Chapter 2: Do You Have the Right Stuff for Flipping? . . . . . . . . . . . . . .23 Tabulating Your Time Budget .......................................................................23 For the time-strapped: Part-time flipping..........................................24
All the time in the world: Full-time flipping ......................................26
Delegating time-consuming tasks.......................................................26 Shaking Your Piggy Bank ...............................................................................28 Figuring out how much you need to get started ..............................28
Finding cash to fuel your flip ..............................................................29
Taking stock of your financial health.................................................29
Honestly evaluating your debt tolerance ..........................................30 Taking Your Personality Pulse ......................................................................30 Would you categorize yourself as a couch potato? .........................31
How do you perform in a crisis?.........................................................31
Do you have organizational expertise?..............................................33
Are you good with people?..................................................................34
Can you ask for (and get) what you want?........................................35
Do you like juggling numbers?............................................................35
Can you handle rejection, failure, and success? ..............................35 Ensuring That Your Family Is on Board.......................................................36 Getting the okay from your spouse....................................................36
Keeping your kids and pets in the loop.............................................37 Gathering the Essential Tools of the Trade ................................................38 Chapter 3: Devising an Effective Flipping Strategy . . . . . . . . . . . . . . . .39 Surveying Different Strategies ......................................................................39 Buy into a hot market ..........................................................................40
Buy low, do nothing, and sell quick ...................................................41
Buy low, apply makeup, and sell quick..............................................41
Buy low, renovate, and sell high.........................................................42
Buy low, move in, renovate, and sell high .........................................42
Buy, hold, and rent ...............................................................................43
Invest in new construction..................................................................43
Focus on a niche market .....................................................................44
Flip contracts (or do it all on paper) .................................................45
Cook up your own strategy .................................................................46 Drawing Up a Detailed Plan Well in Advance..............................................47
Devising a Plan B: Surviving a Flip That Flops ...........................................47 Chapter 4: Building Your Dream Team . . . . . . . . . . . . . . . . . . . . . . . . . . .49 Hooking Up with a House Hunter — A Quality Real Estate Agent ...........50 Recognizing the value of agents .........................................................50
Picking an agent with the right stuff ..................................................51 Flipping Houses For Dummies x 02_043458 ftoc.qxp 10/16/06 9:40 AM Page x Recruiting Moneymen (and Women)...........................................................53 Finding financiers .................................................................................54
Hiring an accountant............................................................................54
Obtaining sound investment advice ..................................................55 Consulting a Title Company to Cover Your Back .......................................56
Locating a Valuable Appraiser......................................................................56
Adding a Real Estate Lawyer to the Roster ................................................57
Lining Up a Home Inspector .........................................................................58
Contacting Contractors and Subcontractors .............................................60 Acting as the head honcho .................................................................61
Tracking down top-notch contractors and subcontractors ...........62
Contracting with contractors and subcontractors..........................62
Finding a handyman and other helpers.............................................64 Part II: Fiddling with the Financials of Property Flipping ....................................................65 Chapter 5: Guesstimating Your Potential Profit . . . . . . . . . . . . . . . . . . .67 Making Money in Any Market .......................................................................68
Ballparking a Realistic Resale Value ............................................................69
Subtracting the Purchase Price and Closing Costs....................................70
Subtracting the Cost of Repairs and Renovations .....................................71
Subtracting Your Holding Costs ...................................................................73
Subtracting the Cost of Selling the House...................................................74
Ka-Ching! Projecting Your Potential Gross Profit .......................................75
Subtracting Uncle Sam’s Cut (in Some Cases) to Get Your Net Profit .....77 Chapter 6: Securing the Funds to Fuel Your Flip . . . . . . . . . . . . . . . . . .79 Grasping the Power of Working with Borrowed Money............................80
Unleashing the Equity of Your Current Home ............................................81 Recognizing the risks ...........................................................................81
Refinancing your mortgage .................................................................82
Taking out a second mortgage with home equity loans and lines of credit .............................................................................83 Making Yourself Look Good to Prospective Lenders ................................84 Determining what you’re worth in dollars and cents ......................85
Checking and correcting your credit report .....................................87
Avoiding mistakes that can sabotage your loan approval ..............90 Bargain Hunting for Low-Interest Loans......................................................91 Winding your way through the mortgage maze ...............................91
Playing the numbers game when you compare loans .....................94
Finding eager lenders online and off..................................................95 Exploring Other Creative Financing Options..............................................96 Passing the hat among friends and family ........................................97
Borrowing from a private investor.....................................................97
Establishing effective partnerships for the long haul .....................98
Investing your retirement savings in real estate ..............................99 xi Table of Contents 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xi Chapter 7: Trudging Through Some Taxing Issues . . . . . . . . . . . . . . .101 Estimating the Tax Man’s Take from Your Flipping Profits .....................102
Maximizing Tax Savings from the Sale of Your Principal Residence .....103 Proving “principal residence”...........................................................104
Qualifying for the two-out-of-five-years rule ...................................104
Taking the ownership test.................................................................105
Splitting hairs: Special circumstances .............................................105 Slashing Your Capital Gains Through Careful Deductions......................106
Deferring Taxes: Rolling Your Gains into Your Next Purchase ...............107
Selling Your Home at a Loss (Ouch!) .........................................................108
Paying Income Tax: When Flipping Houses Becomes Your Occupation.......................................................................................108 Part III: House Hunting with an Eye for Flipping .........111 Chapter 8: Scoping Out a Fertile Neighborhood . . . . . . . . . . . . . . . . .113 Pinpointing House Flipping Hot Spots.......................................................114 Tagging neighborhoods with the right basic traits........................114
Finding your focus..............................................................................115
Identifying areas in your price range ...............................................117 Taking the Pulse of the Real Estate Market in a Neighborhood .............117 What’s the annual appreciation percentage of the average home? .....................................................................118 How many homes are currently for sale?........................................118
How long is the average home on the market? ..............................119 Evaluating the Good and Bad in a Neighborhood....................................120 Spotting the signs of a good neighborhood ....................................120
Seeing the warning signs of a declining neighborhood .................120 Taking Other Neighborhood Factors into Consideration .......................121 Grading local schools ........................................................................122
Digging up crime statistics................................................................123
Exploring the business climate ........................................................124
Getting the lowdown on planned neighborhood improvements .................................................................................125 Chapter 9: Hunting for Houses in Your Target Area . . . . . . . . . . . . . . .127 Focusing Your Search on Affordability and a Particular Property Type.........................................................................127 How much house can you afford? ....................................................128
What style and features do you want in a house?..........................129 Digging Through Property Listings, Ads, and Publications....................130 Searching MLS listings with the help of your real estate agent....131
Scanning the classifieds for key words............................................135
Poring over real estate magazines ...................................................135 Flipping Houses For Dummies xii 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xii Panning for Gold in Special Markets..........................................................136 Homing in on homes “For Sale By Owner”......................................136
Getting the scoop on foreclosures ...................................................137
Probing probate properties ..............................................................137
Scouting for government-owned properties ...................................138 Generating Additional Leads ......................................................................141 Chapter 10: Inspecting the Property with an Eye for Rehab . . . . . . .143 Packing for Your Inspection Mission .........................................................144
Finding the Perfect Candidate for a Quick Makeover..............................147 Poor but promising curb appeal ......................................................147
Cosmetically challenged, inside and out.........................................147
A second-rate showing ......................................................................148 Assessing Potential Curbside Appeal ........................................................148
Taking a Big Whiff, Inside and Out .............................................................150
Inspecting the House for Big-Ticket Items ................................................151 Focusing on the foundation ..............................................................151
Examining the siding..........................................................................152
Giving the roof and gutters the once-over ......................................152
Glancing at the windows, inside and out ........................................153
Evaluating the plumbing....................................................................153
Exploring the electrical system ........................................................153
Checking out the furnace and air conditioner................................154
Adjusting your eyes to the lighting ..................................................155 Discovering Some Promising Features ......................................................155 Rooms with character and class ......................................................156
Hardwood floors hidden beneath the carpet .................................157 Getting a Feel for the Kitchen .....................................................................157 Gauging the hangout factor...............................................................157
Noting what the kitchen already has ...............................................158 Paying Attention to Bathrooms..................................................................158 Understanding that size matters ......................................................159
Recognizing a diamond in the rough ...............................................159
Spotting water damage in floors and walls .....................................160 Roaming through the Rest of the House ...................................................160 Touring the bedrooms .......................................................................160
Spreading out in living rooms, dens, and other wide open spaces ...........................................................................161 Looking at laundry rooms .................................................................161
Stepping into closets, attics, and basements .................................161 Are These Walls Optional? Envisioning a New Floor Plan ......................162 Chapter 11: The Art of Haggling: Negotiating a Price and Terms . . .163 Planting the Seeds for Successful Negotiation .........................................164
Digging Up Pertinent Information about the Seller..................................165 xiii Table of Contents 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xiii Making an Offer They Can Refuse (but Will Consider)............................166 Calculating a price..............................................................................167
Proving you’re earnest: Money talks ...............................................168
Dangling additional enticements......................................................169
Convincing the seller to sweeten the deal ......................................170
Protecting your posterior with weasel clauses ..............................171
Pitching your offer .............................................................................173
Handling counteroffers ......................................................................173
Ducking common negotiating pitfalls ..............................................174 Tending to the Details: Inspections, Appraisals, and Walk-Throughs ...175 Inspecting the house from the ground up.......................................175
Ordering an appraisal ........................................................................178
Taking one final walk-through...........................................................179 Crossing Your Eyes and Dotting Your Tees: Closing the Deal ................179 Chapter 12: Closing In on Foreclosure Properties . . . . . . . . . . . . . . . .181 Getting Up to Speed on the Foreclosure Process ....................................182
Boning Up on Local Rules and Regulations ..............................................183 Procedural stuff ..................................................................................183
Different types of foreclosures .........................................................184
Taxes ....................................................................................................185 Picking Your Point of Entry into the Foreclosure Process......................185 Pre-foreclosure....................................................................................186
Foreclosure..........................................................................................188
Post-foreclosure..................................................................................192 Purchasing Foreclosure Properties Step by Step.....................................193 Step 1: Finding a property .................................................................193
Step 2: Following the paper trail.......................................................193
Step 3: Inspecting the property ........................................................195
Step 4: Bidding on a property ...........................................................196
Step 5: Surviving the redemption period ........................................197 Part IV: Fixing Up Your Fixer-Upper............................199 Chapter 13: Prioritizing and Planning Your Renovations . . . . . . . . . .201 Spotting Trends in Home Renovations......................................................202 Visiting open houses with an open eye ...........................................202
Doing a little home show surveillance ............................................203
Developing an eye for attractive landscaping ................................204
Gleaning advice from a renovation mentor.....................................205 Prioritizing Your Projects............................................................................205 Tackling essential repairs..................................................................206
Gauging renovations to get the most bang for the buck ...............207
Adding inexpensive, last-minute touches .......................................208 Flipping Houses For Dummies xiv 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xiv Delegating Duties .........................................................................................208 Identifying do-it-yourself projects ....................................................208
Getting a little help from your friends .............................................209
Flagging jobs that require professional expertise..........................209 Drawing Up a Tentative Budget..................................................................211
Coming Up with a Game Plan .....................................................................212 Switching on utilities and ordering materials.................................213
Tackling underlying problems first ..................................................214
Working from the top down ..............................................................214
Working from the outside in, or vice versa .....................................215
Allotting sufficient time for your projects.......................................215 Chapter 14: Giving Your Property a Quick Makeover . . . . . . . . . . . . .217 Sprucing Up the Yard ...................................................................................218
Freshening the Façade.................................................................................221
Touching Up the Interior.............................................................................224 Renovating from room to room ........................................................224
Updating the kitchen..........................................................................228
Spending quality time in the bathrooms .........................................229
Modernizing the bedrooms...............................................................230
Making the basement look livable....................................................230
Attending to the furnace and hot water heater..............................231 Chapter 15: Perking Up the Curb Appeal . . . . . . . . . . . . . . . . . . . . . . . .233 Landscaping 101...........................................................................................233 Doing the bare minimum ...................................................................234
Revitalizing a tired lawn ....................................................................234
Designing an adequate landscape ....................................................235
Creating the proper setting for your plants ....................................236
Strategically positioning and planting your greenery ...................237
Adding the final touch: Fresh mulch................................................237
Maintaining the landscape ................................................................239 Tidying Up the Driveway and Walkways ...................................................239 Asphalt driveways..............................................................................239
Concrete driveways and walkways ..................................................240
Stone or brick walkways....................................................................241 Making Entryways More Inviting................................................................241 Refinishing the front door .................................................................241
Refurbishing the front porch ............................................................242
Adding some finishing touches ........................................................242 Refreshing the Outside Shell of the House ...............................................243 Laying a new roof ...............................................................................243
Repairing or replacing gutters ..........................................................244
Retooling the siding ...........................................................................244 Glamming Up the Garage ............................................................................247 xv Table of Contents 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xv Chapter 16: Dazzling the Crowds with
Updated Kitchens and Baths . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .249 Giving Kitchen Cabinets, Countertops, and Sinks a Facelift...................250 Refinishing or replacing cabinets.....................................................251
Updating hardware for a quick cosmetic job..................................252
Resurfacing or replacing countertops .............................................252
Installing a new sink and faucet........................................................253 Modernizing Kitchen Appliances ...............................................................254 Deciding whether to install appliances ...........................................254
Adding or replacing the dishwasher................................................255
Roaming the range, oven, and cooktop ...........................................255
Installing a space-saving microwave................................................256
Choosing to keep or replace the refrigerator .................................257 Bringing Bathrooms into the 21st Century ...............................................257 Checking and repairing bathroom walls and floors.......................258
Refinishing or replacing tubs and showers.....................................260
Dealing with la toilette .......................................................................261
Updating the sink and medicine cabinet .........................................262
Adding or improving ventilation ......................................................263 Chapter 17: Sweating Through Some Moderate Makeovers . . . . . .265 Giving Your Home Some New Glasses with Updated Windows .............265 Knowing your window options.........................................................267
Trimming the cost of new windows .................................................268 Replacing Drab, Weathered Doors .............................................................268 Doing the quick fix with a new storm door .....................................269
Replacing an entry door ....................................................................269
Repairing or replacing sliding glass doors......................................270
Installing new interior doors.............................................................272 Putting on Your Own Floor Show ...............................................................272 Laying down affordable vinyl or linoleum flooring ........................273
Refinishing hardwood floors.............................................................273
Laying new hardwood or laminate flooring ....................................273
Adding ceramic tile flooring for a touch of class ...........................275 Chapter 18: Reconfiguring Spaces and Other
Structural Overhauls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .277 Attending to Essential Structure and Infrastructure Repairs .................278
Knowing When to Leave a Floor Plan Alone (and When to Change It) .........................................................................278 Identifying Load-Bearing Walls ...................................................................279 What is a load-bearing wall? .............................................................280
What difference do conventional and truss roof frames make?...280
Is this wall load-bearing? ...................................................................281 Maximizing the Use of Existing Space .......................................................281 Gunning for more room by knocking out walls ..............................282
Raising the ceiling ..............................................................................282 Flipping Houses For Dummies xvi 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xvi Designing a whole new kitchen ........................................................284
Adding a bathroom ............................................................................284
Spreading out to an attached garage ...............................................285
Transforming a porch into a room ...................................................285
Creating a room in the attic ..............................................................286
Deciding whether to convert a basement into living space .........286 Building New Rooms from Scratch ............................................................287
Adding or Renovating a Back Deck or Patio .............................................288 Part V: Sold! Selling Your Rehabbed Home..................291 Chapter 19: Marketing Your Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293 Harnessing the Power of a Real Estate Agent to Market and Sell Your House ....................................................................293 Knowing why you should hire a seller’s agent ...............................294
Negotiating with an agent during the selling process ...................295
Taking advantage of your agent’s access to the MLS ....................296 Setting an Attractive Asking Price .............................................................296 Don’t be greedy...................................................................................297
Understand the current market........................................................297
Know the price you need to make the profit you want .................298 Offering to Help Secure Attractive Financing ...........................................298
Becoming a Real Estate Marketing Maven ................................................299 Choosing a method of contact..........................................................299
Planting a For Sale sign on your lawn ..............................................300
Listing your home online...................................................................301
Designing, printing, and distributing flashy flyers.........................301
Advertising your home in the classifieds........................................302
Hosting an open house to build word-of-mouth buzz ...................304 Chapter 20: Staging a Successful Showing . . . . . . . . . . . . . . . . . . . . .305 Jazzing Up the Front Entrance....................................................................305 Primping the landscaping and walkways ........................................306
Buying new welcome mats ................................................................306
Adding a planter .................................................................................306
Attending to the minor details..........................................................308 Less Is More: Hiding All but the Bare Necessities....................................309 Maximizing the minimal ....................................................................309
Decluttering the house ......................................................................310 Furnishing a Vacant Property .....................................................................313
Appealing to the Senses ..............................................................................314 Lighting up the house ........................................................................314
Keeping your house smelling fresh and looking pretty.................315
Playing soothing music......................................................................315 Stepping Out When Lookers Step In ..........................................................316 xvii Table of Contents 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xvii Chapter 21: Negotiating the Sale to Maximize Your Profit . . . . . . . .317 Comparing Seemingly Similar Offers .........................................................318 Does the bidder have financing? ......................................................318
How earnest is the bidder? ...............................................................319
What else is the bidder asking for? ..................................................320
What conditions has the bidder included? .....................................321
How soon does the bidder want to close? ......................................322 Mastering the Art of Counteroffers............................................................322 Submitting a counteroffer .................................................................323
Leveraging the power of multiple offers .........................................324 Shuffling Papers and Other Legal Stuff at Closing ...................................325 Having the right folks represent you ...............................................325
Prepping for closing ...........................................................................326
Sealing the deal with paperwork ......................................................326 Part VI: The Part of Tens ............................................329 Chapter 22: Ten Signs of a Great House Flipping Opportunity . . . . .331 Chapter 23: Ten Renovation Cost-Cutting Strategies . . . . . . . . . . . . .335 Chapter 24: Ten Common House Flipping Blunders . . . . . . . . . . . . . .341 Chapter 25: Ten Strategies for Surviving a Slow Market . . . . . . . . . .345 Index........................................................................349 Flipping Houses For Dummies xviii 02_043458 ftoc.qxp 10/16/06 9:40 AM Page xviii