Owner: BayAreaREI URL:www.BayAreaREI.com Join Date: Tue, 03 Jul 2007 01:31:48 -0500 Rating:0 Site Description: San Francisco Bay Area Real Estate Investing, Brokerage and Development Site statistics:Click here
My Daily Rant: Flippers and (Lack of...) Landscaping 2007-07-02 15:45:06 When I become a gazillionaire, I am going to form a clandestine organization that saves flippers from themselves by landscaping their properties in the middle of the night. What is it with flippers and their fear of landscaping??? I can’t tell you how many properties I have written off from the curb simply because the flipper's idea of landscaping is to mow the grass and throw a load of mulch onto the dead spots and call them planters.
The trend I see in my markets (and namely Walnut Creek and Lafayette) is to spend way too much money on the interior and then skimp on, or totally neglect, the landscaping. To me, the interior work is somewhat formulaic: hardwood floors, travertine baths, stainless appliances, and neutral colors. The idea is to spend the money in the kitchens and baths and then make sure that nothing really sticks out – either positive or negative – throughout the rest of the house. Every flipping book or show will tell you a Read more:Daily
, Landscaping
How to Save 20-25% at the Home Depot 2007-07-01 12:10:07 Want to save money like a licensed contractor at Home Depot
? Home Depot offers a significant discount for orders over $10,000. Now, I realize that $10,000 is a lot to spend at Home Depot, but I’ve found that with careful planning at the beginning of the project, a large remodel can usually get close to the 10k mark. All you need to do is think of absolutely everything you will need to complete the project (this task becomes significantly easier on the 2nd and subsequent projects). Make sure to estimate the building materials needed as well, and not just the obvious light fixtures, kitchen and bath fixtures, vanities, etc. Don’t forget to look online if you don’t see exactly what you want in the store for a specific item, you can often find an array of special order items online that are not on display in the stores. Also, make a trip to Home Expo and see if you like anything there, and write down the SKU. Home Depot and Home Expo are the
Financial Details of the Walnut Creek Flip (Flip Numero Uno) 2007-06-26 23:34:51 When I was first looking into real estate flipping while working at my last (ever) job, I was disappointed by the relatively few sources of actual numbers for deals similar to those in the San Francisco Bay Area. Most of the deals I saw were either 1.) deals on Flip This House, Flip That House, Property Ladder, or some similar delusional show about flipping in Fantasyland where carry costs and broker fees somehow pay for themselves outside of the deal, or 2.) deals in areas where the purchase price is $150,000 for a 4 bedroom house on 2 acres. The reality in the Bay Area is housing prices approaching $750,000 for a 3-bed 2-bath starter home, where the deals with the ability to make a return proportional to the amount of risk are few and far between.
The link below is the ‘Results’ page in my Excel Pro-Forma model.
Download walnut_creek_flip_final_results.pdf
This was my first flip, and was certainly not a home-run (more like an infield single), but I w Read more:Financial
, Walnut
Great Post on Valuations on BiggerPockets.com 2007-06-25 15:14:57 I ran across a great post on BiggerPockets.Com regarding investment property valuations. If you haven't already guessed, I am not a big fan of most real estate agents. Some of them are great, but most of them are not - due largely to the low barriers of entry to become an agent. There is no shortcut to determining valuations of your potential investment acquisitions - and certainly don't jump into anything based soley on an agents sales comp analysis. Check out the article for more details... Read more:Great
What Topic Would You Like to See? 2007-06-25 12:33:53 Ever wondered how to analyze land purchases? Would you like more details/pictures from my current or past flips? Curious about how to get started in flipping? Well, this is your chance to help determine the content for the next post. Please post your comments to this post, and I will select a few of the topics for the next few posts. I want this blog to be as helpful as possible, so please post your comments!
New Renovation Project in Layette, CA 2007-06-24 18:03:26 I closed on a 3 bedroom, 2 bath, 1148 sq ft renovation project in Lafayette, CA on May 25. This asking price was $550,000 – which is good considering a typical 3/2 is about $850,000 in this area. The location was perfect – the best schools in the area, and the backyard is adjacent to an open space preserve. I toured the property the day it came onto the market, and when I walked in the place, I knew it was a little too good to be true. And by too good to be true, I mean the inside of the house was a complete disaster.
I immediately called the listing broker to get a feel for the offer situation, and she informed me that the property already had 4 offers, and that I had until 5pm to get my offer in. Apparently, she thought the house was a complete tear-down, and was not salvageable. I thought I had found a free lunch – and so did at least 4 other people.
I ran the numbers, and made an offer at $585,000. Turns out that a total of 12 Read more:Renovation
, Project
Get Thee to the Nearest DRE Licensing Office 2007-06-23 01:27:34 As you know, I am a licensed real estate broker and Realtor. I had purchased a few primary residences prior to business school and somehow imagined that becoming a broker took years of training and experience. In spite of this, I decided to look into getting my license just to see what was needed (I hate ‘giving’ money away, and felt that being my own broker would help ease my pain). As it turns out, all you need is some patience, a 4-year college degree, and some high-school level test taking skills and you can have your own bona fide brokers’ license to purchase and sell properties at your leisure without paying 6% per transaction. As an added bonus, you can have access to the brokers’ most cherished and closely guarded possession – MLS data. Here is a breakdown of the steps needed:1.) Take 8 college level courses laid out by the DRE - or exempt out based on your coursework in college (accounting and economics are commonly exempted out of
Places for Good Deals on Remodeling Supplies 2007-06-22 12:14:23 Another question I am frequently asked is where to find the 'deals' on materials for renovations. Here is a list of some of the suppliers that I've been happy with.
The Sear's Appliance Outlet is a good place to find appliances with slight cosmetic blemishes for about half price.
Sear's Appliance OutletSan Leandro1936 West Avenue 140th(510) 895-0546
Granite Expo is a cheap place for granite, cabinets (though I don't like many of their styles), tile, and is also a decent place for toilets and bath fixtures. These guys are not necessarily the cheapest installers, but they will install on short notice, which is always a plus.
Granite Expo3401 Mandela PkwyOakland(510) 652-6898
While you're checking out the Sear's Appliance Outlet, stop across the street at KWW Cabinets. This is a great place for cabinets (I bought the 'Spicy Walnut' style cabinets for my Walnut Creek flip here), and is also good for tile and granite, range hoods, sinks and vanities.& Read more:Places
, Remodeling
, Good Deals
Finding a suitable renovation property 2007-06-22 05:34:51 I often get asked what I look for in an ideal flip house. Rather than take the obvious approach and simply say “buy the ugliest, most neglected house in the best neighborhood”, I want to explain how I quickly look at the numbers to see if the house is worth the time and effort. I have a nasty Excel (proprietary model, I might add) model that cranks out every excruciating detail of the flip financials, but the chart below will suffice to explain what I look for in general terms.
First, I pull comps from MLS (this is where having a broker license comes in handy). I pay particular attention to the comps to make sure I am selecting similar quality to my proposed finished renovation with the same school district, similar bedroom and bathroom count, lot size, etc. I then plot the comps against my tentative purchase and exit prices to see if everything looks reasonable before doing any further analysis. As you can see above, I am purchas Read more:property
Getting Started in Real Estate Development 2007-06-21 13:25:33 A few years ago, I sat on a real estate career panel at my alma mater (Stanford Graduate School of Business). I put together a hand-out for students looking for jobs with real estate developers with little to no prior experience in real estate. It seems that this hand-out has become popular with students and career services over the past few years, so I thought I'd post the highlights here. Some of the hand-out provided guidance on courses and the like, so I filtered out the irrelevant material.
Places to look for jobs:
· Hotjobs, Monster.com, Careerbuilder.com, any other online site. These sites list a surprising number of jobs with developers, real estate private equity, and hedge funds with an interest in real estate development. I'm continually amazed at the high-level jobs listed on public sites.
· Informational interviews offer a fairly easy to get in front of develope Read more:Estate
, Development
, Real Estate
, Real Estate Development
7 Steps to Selling Your Home without a Realtor 2007-07-04 02:26:06 Disclosure: I am a licensed real estate broker and Realtor
(though that isn't what I do for a living).
In this post, I’m going to tell you how to recoup that wad of cash you spent on fireworks in Chinatown by telling you how to sell your house without a Realtor. There, I said it. Despite what you've read all over the place, you can sell your home without the help of an agent.
Before I moved to California, and before I got my real estate broker's license, I successfully sold a home in St. Louis without the help of a broker. I read plenty of articles telling me that trying to sell a home without professional help is crazy, and that my house would sit on the market indefinitely until I got smart and crawled back to my agent to bail me out. If you feel confident that you can negotiate well, and are reasonably adept with Google searches and the like, there is no reason you shouldn’t give it a go just like I did – at least for the first few weeks on
Renovate Your House for Less & Sell for More Money (Part 1) 2007-07-06 23:33:30 I am amazed at the amount of money most flippers spend on their renovations. Even more amazing is how poorly this money is spent. I don't claim to be an expert, but I do know I can out-shop most Hollywood movie starlets any day of the week -- let alone your typical house flipper. I can do this because I am forced to buy quality on a budget. The key to making money on a flip is to splurge in a few areas, and buy lower-priced quality products for the rest. Here is my list of Do's. Part II of the post will highlight the Don'ts
Do:
Do buy a quality range. The range is the workhorse of the kitchen, buy a decent one. I buy all of my appliances on Craig's List, and I make sure they are brand new. All other appliances are quality stainless steel appliances, but not too high end. Craig's List will save you thousands if you keep an eye out everyday.
Do spend money on the kitchens and baths, but do so intelligently. Go to K Read more:House
, Money
Renovate Your House for Less and Still Sell for More Money (Part 2) 2007-07-11 00:17:06 And here is the second post on the Do’s and Don’ts of renovating for less and selling for more.
Don’t impose your personal taste. Keep colors and materials neutral and tasteful. This does not mean painting everything white. It does mean that your colors should be nearly white and neutral.
Don’t buy expensive bath and kitchen fixtures. No one will really notice the difference between a $400 faucet and a $125 faucet.
Don’t buy closet organizers. I made this mistake on my first flip, and no one even noticed during my open house.
Don’t modify the floor plan beyond the original roof. If you have to build an addition, then you bought the wrong flip property. Additions usually disrupt the flow, and you will never get a reasonable return for the time and money invested.
Don’t wire for Cat-6 and surround sound (caveat: if you are flipping luxury homes, then this is a requirement. On starter homes, it is a bit frivolous a Read more:House
, Money
9 Investment Properties that are Worth a Look 2007-07-16 12:18:26 I realize that searching the MLS on public sites is difficult, since it is impossible to search by fields that actually matter to investors, such as: $/sf, 'fixers', 'cosmetic upgrades needed', etc. Here is a list of fixers that I found in MLS today. I like to search in areas where I am least likely to get shot - so this leaves out: Oakland, Richmond, Antioch, Pittsburg, etc. Please contact me if you would like any additional information on any of these properties.
Address
City
List $/SqFt
List Price
SqFt
BR
Bth
PB
Gar?
YrBlt
Lot SqFt
2454 TANAGER CIR
CONCORD
278
$504,900
1816
4
2
0
Y
1960
6,000
2495 MAPLE AVE
CONCORD
280
$665,000
2371
4
4
0
Y
1942
7,150
1812 OAKMEAD DR
CONCORD
318
$389,000
1224
3
2
0
Y
1958
6,000
6893 PENN DR
DUBLIN
321
$600,000
1867
5
2
1
Y
1965
Read more:Properties
, Worth
How to Work Less and Make More on Your Next Flip 2007-07-18 16:17:51 I may never live this down from my general contractor, but luckily no one has told him about this whole ‘internet’ thing so I’m sure he will never read this post anyway: one of the most important things you can do to ensure success in flipping real estate is to partner with a general contractor. I quickly learned this lesson mid-way through my first flip. I grew up woodworking, and had plenty of experience with framing, electrical, tiling, etc., so my intention on my first flip was to do the majority of the work myself. For the remainder of the work, I used my Stanford MBA to negotiate what I thought were fantastic deals with subcontractors. True to my word, I did about 75% of the work, and the project took an extra month and went $25,000 over budget. I still made money on the deal, but I left a lot of money on the table because I took too long and paid too much for my subs.To make a long story short, no matter how much experience you have -- and eve
My Prediction for the Highest Appreciation in the Bay Area 2007-07-19 12:12:58 I'm posting an excerpt from an answer I posted on Trulia. Pete Flint, the founder of Trulia and a classmate of mine from business school at Stanford, asked me to prepare an answer prior to a meeting he had with a San Jose Mercury News reporter. (Sorry for the shameless name-dropping, but I'm trying to drum-up some publicity here, people). The link to the thread is here, and the link to the San Jose Mercury News article is here.
Call me old-school, but I strongly believe that—over the long term—housing prices follow job growth and school rankings. Job growth has a more immediate effect on price appreciation while API rankings have a longer term lasting effect on property values. API scores are highly correlated with higher property values on average, but are not necessarily tied to short-term fluctuations in prices. Still, I always consider school ranking before making a real estate investment decision in the Bay Area.
My belief is that if all Read more:Prediction
New Opportunities and Real Estate Connect 2007-07-26 00:40:36 I haven’t posted in a while, but my blog has had the unexpected (but fully intended) effect of creating a lot of potential deals. I’ve been busy tracking down several potential opportunities over the past week.
I’m also getting my prepared for the Real EstateConnect
in San Francisco next week. If I’m going to plop down nearly a grand to attend a conference, I’d better make sure I’ve got my game plan ready. I’m curious to hear if any of my readers are attending the conference. Drop me a comment and let me know… Read more:Opportunities
Bay Area Depreciation by Zip Code 2007-08-02 23:46:50 DQNews.com has an interesting list of residential resale values for each zip code in the Bay Area
. The table compares June 2007 to the prior year and shows absolute and percentage changes in sales volume and median price. I'm glad to see this data, since it confirms my earlier hunch about the flight to quality in a downward trending market. In Contra Costa county (my neck of the hood), the better school district zip codes of Lafayette, Moraga, and Orinda are worlds apart, and are faring much better, compared to the eastern part of the county (Antioch, Pittsburg, Oakley, etc.). This is not to say that the 'good zips' won't get hit later -- and I think they will -- but it shows the importance of buying in the right areas to decrease market volatility risk exposure. There is still money to be made in these market conditions, but it is critical to stick to the fundamentals and make sure you are making money on the purchase of the property rather than hopin
Lafayette Flip Update 2007-08-01 23:02:36 I haven’t mentioned my flip in Lafayette in a while, so here is the skinny. After some initial issues with the Contra Costa Building Inspectors, we finally passed our rough electrical, plumbing, and framing permits. I always get a kick out of inspectors that decide that they don’t want to inspect that particular day and find one small item that is not completed, and then decide to charge $60 for a re-inspection fee and promptly leave. This happened for the better part of two weeks. Each time, my contractor asked that the inspector please take a look around and tell us what else what the inspector is going to fail us on tomorrow, but to no avail. So, as soon as the issue was corrected, we were failed the following day for something that should have been disclosed to us the prior day (I mean really, what am I getting for my $1000 in permit fees?). Most renovations are not done with permits primarily because most municipalities make the process more Read more:Update
FSBO & Misaligned Incentives among Real Estate Agents 2007-08-05 23:12:49 The question of whether or not to choose the FSBO route is not as cut and dry as some agents would have consumers think. I've run into more than my fair share of agents that don't do their clients justice for the 3% commission on a 900k house in the San Francisco Bay Area. As such, I would recommend any savvy individual to attempt to sell their property themselves if they are so inclined.
The people I run into in the San Francisco Bay Area (as well as likely readers of this blog) are college educated, and I feel confident these individuals are more motivated, more incentivized, and more competent than the average agent to sell their own home.
I believe part of the problem lives in the misaligned incentives of the agent and seller. Agents care little about the last 25-50k in sales prices - as it has little effect on their commission at the margin. The commission doesn't change too much between, say, $800k and $850k (roughly, an additional $750 on a $12,000 commission), so the agen Read more:Incentives
, Estate
, Estate Agents
San Ramon Real Estate Market Trends 2007-08-05 02:03:48 I compiled some data on San Ramon, and wanted to share. San Ramon is an interesting beast in the Bay Area, since the interstate divides the town in two, and results in a reasonable representation of Contra Costa county as a whole.
I pulled comps for 92 properties that have sold in San Ramon since April 1, 2007. I only pulled comps that were sold between $700,000 and $850,000. San Ramon varies widely depending on which side of I-680 the property lies.
The average list price (again, within the range of $700k and $850k) was $788,677, the average sales price was $777,549, for an average price of $11,127 BELOW list (1.41% below list). The most that a home sold ABOVE list was $36,000, and the most BELOW list of $72,500.
Here is some data for June 2007 versus June 2006 for the two San Ramon zips (data courtesy of DQNews.com):
Zip: 94582 (aka "Great" San Ramon zip)Median Sales Price: 871,500 Read more:Estate
, Market
, Trends
, Real Estate
Heated Debate on FSBO on Trulia 2007-08-05 01:16:41 If I stop posting suddenly, its because I was offed by some rabid real estate agents on Trulia who were infuriated that I suggested that a homeowner might be able to sell their home by themselves... Agents have a place for the majority of home buyers and sellers (my mom and dad), but there are also a ton of well-educated, computer savvy individuals who are more than competent enough to sell a property themselves without the worry that their agent's incentives are misaligned. Here is the thread on Trulia Voices. The real nasty (i.e. interesting reading) stuff is coming to my personal email :) Agents... gotta love 'em...
The National Association of Realtors doesn't have a "Black Ops" division, right??? Read more:Heated
, Debate
Overpricing and Effect on DOM 2007-08-07 16:00:27 I’m getting to the point where I need to start thinking about marketing my Lafayette flip, so I decided to crunch some numbers via a regression analysis (what… how do YOU crunch the numbers?). My goal was to calculate a reasonable list price for my flip that weighs additional holding costs against a higher list price - assuming that a high list price will most likely result in my flip sitting on the market for a longer period of time.
For those of you who forgot your statistics, a regression analysis is an attempt to determine the effects of a set of variables on a dependent variable. The idea is to have enough quality data fed into the analysis so that the precise effect of incrementally changing each independent variable (say, adding a single bedroom) is measured against the dependent variable (what the model is attempting to predict -- in this case, the sales price of the home). By examining enough data, the regression analysis gets closer and closer to
Fixed Income Market Meltdown? 2007-08-06 16:57:51 I'm not sure, but I think Jim Cramer of CNBC's Mad Money is somewhat upset about the Fed holding firm on interest rates. Watch the old timer blow a gasket on this video at Inman News. Cramer is always animated - which is part of the appeal of Mad Money, but dude, he is really pissed this time... Read more:Fixed
, Income
, Market
, Meltdown
Great Foreclosure Site for Investors: ForeclosureRadar.com 2007-08-13 13:25:15 I ran across a great site for real estate investors looking to capitalize on the current foreclosure market: www.Foreclosure
Radar.com. Kudos to the forums at FlippingPad for providing a chance to run across Sean and his foreclosure site.
The site is locally owned and operated by Sean O'Toole , who is an experienced and successful real estate investor in his own right - having bought over 150 foreclosed properties. The site offers several features that I've been unable to find on other subscription sites, most notably up-to-date auction status (so you don't have to go to the courthouse steps only to find out that the property you're interested in has been postponed...), and a great mapping function that shows the location of all REO's proforeclosures, and auction properties. The search functionality is unparalled, and allows for easy filtering and sorting of data to make analysis easier in the current flood of foreclosed properties. To top it off, the subsc Read more:Great
, Investors
Get a Free Market Report for Lafayette, Moraga, Orinda, and Walnut Creek 2007-08-13 11:40:51 Send me an email if you would like me to put you on my weekly email list that includes a free detailed market report for any city in Contra Costa County, including Lafayette, Moraga, Orinda, or Walnut
Creek and all others. I'm paying a good chunk of change for the reports, and the research is really good. Please make sure to include the cities you would like to receive weekly. Enjoy! Read more:Market
2 Absolute Must-Read Books on Real Estate Flipping 2007-08-15 12:20:51 If you have seen any book on flipping real estate, chances are I have read it. Some of them have a nugget or two of wisdom, but most are crap. 90% of them are irrelevant to investing in high-priced areas, and 95% of them have a vastly different philosophy on how and what to renovate than I personally subscribe (not that the approach is wrong, just not my approach). The two books I recommend to get a good feel for flipping real estate come from two unexpected sources:
1.) Find it, Fix it, Flip it, by Michael Corbett. Michael is a day-time soaps star (Young & the Restless, Ryan's Hope, etc. - if you're into that sort of thing). Believe it or not, this is the best book that I have seen on flipping real estate in high-end markets. Michael & I share almost identical philosophies on how and what to flip. This book is less about the nuts and bolts of the business, and more about what you should renovate to maximize value in a flip. Read more:Absolute
, Books
, Estate
, Flipping
, Real Estate
Buy Low and Rent It Out, My Friends... 2007-08-29 00:09:30 If you're not looking for properties to buy in the coming months, you should be. Mario Pinedo, a real estate investment specialist down in San Jose, and a fellow blogger, said it best in his post today. Cost of ownership and rental rates are finally starting down the path of convergence. You would be wise to be a buy-and-hold buyer of rental property in the coming months. Read more:Friends
Enter the Magical World of Property Ladder & Flip That House 2007-08-27 13:47:02 Last night, I had a chance to catch-up on my backlog of flipping shows on Tivo: Flip That House
and Property Ladder
(the rest are too dramatic and unrealistic even for me). If only I could flip houses in Fantasy Land where all of these shows seem to take place. Here is a typical scenario on these shows:
1.) Take one lottery-ticket buyer from the local liquor store, and place the label 'real estate investor' on said individual.
2.) Pay 350,000 for a house that is barely standing on its rotting foundation.
3.) Spend 4 weeks and $30,000 (or insert your own ridiculously low number here) to gut the kitchen and baths; replace the mechanical and electrical systems, drywall, install new hardwood floors, stainless appliances, landscaping, new roof, plus a few mishaps with contractors and subs along the way.
4.) Sell immediately for $550,000 (even though the stated comps only support $475,000).
5.) Make a cool profit of $170,000.
Geez, where to begin. I'm not sure abou Read more:Magical
, World
Lafayette Flip Update 2007-09-18 21:08:14 I can't think of a better way to jump back into the fray after a 3 week hiatus than discussing the raccoons and turkeys that are taking over the yard on my Lafayette flip. I'm still about a week away from putting my flip on the market, and the raccoons have decided to roll-up my new sod and dig for grubs, while a flock (?) of turkeys are throwing the mulch in the flower beds all over the place. I didn't realize that having a property on the edge of an open space would present such interesting challenges. My plan for retaliation is a lawn sprinkler armed with a motion-sensor. I will either keep the turkeys and raccoons from destroying my landscaping, or invite cougars down to take a shower... Read more:Update
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