How long have you been involved in real estate investing? What were some of your jobs before doing real estate full time?

3 years.

We rehab and flip houses. My wife and I do Real Estate on a part-time basis. We still work full time jobs, Monday through Friday, 8:00 to 5:00. I am an Information Technology Manager and she is an Executive Assistant.

How did you first get started in real estate? What strategies do you use and Why?

It was kind of a fluke when we got started.  We went to help a mutual friend move a refrigerator out of a basement.  When we got there she said that she and her brother should sell the house because it is just rotting out from under them and neither one has the money to repair it.  The brother lived in the house, she did not. They had inherited it.  We made them an offer right there that day.

The strategies we use are simple.  We stick to the guidelines we have set for ourselves and we learn something from each project home we do. Our guidelines are as follows: Residential neighborhood, not a busy street.  Think children. Close to home. You will be traveling back and forth and you know the area. Single family, low end homes that need updating. 60’s 70’s style. See the potential, look past the clutter. Do as much as you can within reason.  It’s more money in your pocket. Do not use the cheapest or the most expensive.  Cheap will show. Stay neutral in your choices.  Your taste may not be everyone’s tastes. Think like the next buyer when you are buying to rehab and sell. (I try to visualize a young couple buying the house with intentions of raising a family in the neighborhood. And it may be their first home.)

Why?  Because our system seems to work for us and it’s easy to repeat.

What types of financing do you regularly utilize?

We utilize the Equity in our primary residence for deposits to purchase, repairs for rehab, and mortgage payments while the property is being repaired for resale.  We obtain a low interest adjustable rate mortgage on the balance, which is paid in full when the property is sold short term.

How did you go about finding properties?

Word of mouth actually works.  We let people know that we are looking for tired neglected homes in good neighborhoods.  We signed up with several real estate agents who email us on a daily basis with new listings.  Set your criteria and the emails keep coming.  Work closely with an agent and they will understand what you are specifically looking for.  We have an agent who calls us and says they have a new listing which will be going MLS tomorrow, want to get in and see it today?  Drop what you are doing and go see it. We’ve walked through many houses just to find the next project.  Look at 10 to 15 to make the offer on 1. The last home we bought was from a letter we left in the mailbox.  We knew that the owner had passed away and the estate was thinking of selling.  Our letter stated that we could save them some money if they chose not to use a Real estate agent. Bingo! A week later we were negotiating.

What is your average purchase price?

Homes in our part of the country are expensive.  We have no magic formula that we use.  The guidelines we follow are simple; first the house must be in a residential neighborhood, not a busy main street.  We look for homes that have not yet been updated, 1960’s and 1970’s.  We stay in the low end market of single family homes. We try to think, young couple, moving from a condo, maybe a small child. We investigate what similar homes are selling for in the same area.  We estimate our costs for rehabbing the property.  Then we make our offer.

This can be a gamble but, if you negotiate to waive the home inspection and tell the former owner you will clean out anything (within reason) that they leave behind, it can help cement your offer. We’ve paid

$315K for a 3 bed 2 bath colonial.
$ 293K for a 3 bed 1 ½ bath ranch.
$ 349K for a 3 bed 1 ½ bath ranch.
$ 445K for a 17 room farmhouse with carriage house & barn

What is your average net profit per deal?

It varies obviously. Each property is unique. We’ve profited anywhere from $150K to as little as $25K.

Describe your first deal and how much you made on it?

It’s funny, our first deal we made the most money. That’s probably why we still do it.  We made $150K in 3 months. The market timing was just right. It was at its peak.  We bought the house from a private party, no real estate agents involved.  The house had been neglected for many years.  It was owned by a brother and sister who had inherited it when their mother passed away some number of years ago.  Neither party had the money to put into it so when they casually mentioned selling it, we jumped at the opportunity.

We officially owned it the first week of July. The dumpster was delivered the next day. We gutted the kitchen and bathrooms. We replaced all the windows with Low-E Vinyl tilt wash double hung windows. The hardwood floors were all refinished.  Every room was re-painted. A new front door, back door and garage door were installed. The back deck was built larger and the decking replaced with Trex low maintenance decking. The kitchen floor was tiled which accented the new maple cabinets and the granite counter tops. We put in a ceramic cook-top stove, new dishwasher, garbage disposal and a single pull out faucet in a gorgeous black under-mount sink.  The electric service panel was updated from fuses to circuit breakers and the water heater was replaced.

Late September, early October the house was ready for sale.  I pushed myself that summer because I did not want to carry it through the winter months.  We found out that the timing was perfect. I understand there are two times on the year when the housing market is hot. Spring is first and then Fall.  We felt so attached to the house that we chose to sell it on our own.  We purchased ad space in the local news papers. We paid a sign company to create a lawn sign which looked more professional than the run of the mill orange “For Sale by Owner” signs.  We also created a web site which include, photographs, details,
descriptions, and flyers.

My wife did a tremendous job on the presentation of the open house.  Remember it was October in New England. We had bails of hay, corn stalks, pumpkins, gourds, flowers, candles, cookies and hot apple cider for soon to be guests at our first open house.  That open house could not have gone any better.  It was text book.  We had people crawling all over the house. Kids were running around the back yard and on the deck. It was a perfect sunny fall day in New England. We had people coming in, looking around, and then leaving to go get friends, husbands, wives, and relatives to come back.  Some of the comments we heard were, “Is this a new house”, “You certainly didn’t scrimp on the appliances”, “We could move right in without doing a thing”, and “I’ve never seen this many people at an open house before”.

We had 4 serious offers that night!  Since we were selling it on our own, we could make our own decisions.  We told people we would be accepting offers until Wednesday at 5:oo pm.  The final offer was nearly Ten thousand dollars over our asking price.

We bought that house for $315,000 and sold it for $479,000 in about three months.

Describe your biggest deal (purchase price) and how much you made on it?

See question 7 above. That was our biggest deal so far.

What was your worst deal and did you loose any money on it?

Well, so far we’ve been lucky and not lost money.  We did have a house that we tried to sell on our own but had no luck so we gave it to a Real Estate agent. We had to come down on our price and pay commissions which cut into our profit. We also have a home now which we may have over paid a bit.  It will be up for sale in the next two weeks (March).  We’ll see how the housing market is this Spring of 2006.

Any favorite real estate web sites, books, software, mentors etc.? Is there anything else you want to add?

The websites that I like the best are the ones that give me the information on recent sales of homes in our area.  It sets a benchmark for me.  I also visit a site which gives me the details on the properties. Details like, Square footage, owner information, taxes, town evaluations, property dimensions and so on.

I don’t really have any favorite web sites as far as “how to” real estate information goes. I do not like being inundated with “buy my books” or sites “hawking software”.  I enjoy reading articles from real people. How they deal with real problems they may have encountered.  You learn from those stories. Mentors, I don’t have anyone but I do wish I had started this many years ago.  I hope to influence my children in a positive manor with real estate.  Maybe I will become their mentor in some way.

In closing, I’d like to reiterate; Stick with the guidelines that you establish for yourself. Set goals and time lines.  Always track your spending. The more you can do on your own, the more money stays in your pocket. But be reasonable, time cost you money too. Do not cheap-out. It will show when you re-sell. Stay middle of the road. Keep neutral in your choices. Always paint with a neutral off-white color.  It matches anyone’s décor. Always replace flooring materials, again neutral colors. Kitchens and bathrooms are the two biggest areas of concern aside from anything structural. Pay attention to them.  Heating systems should be cleaned.  Water heater should be replaced. They’re cheap enough and why give the home inspector something to write about.

I mentioned before about negotiating with the previous owner on you’ll help with the clean out and they can leave behind stuff they don’t want. Several points of interest; 1.) yard sales 2.) Donations.  Get a receipt for tax purposes to offset your gains. Both help with word of mouth advertising for your impending sale.

Exterior curb appeal.  Clean up any clutter and throw it away.  Trim the bushes. Cut the lawn.  Add a new door mat and put some flowers around.  Replace the window shutters, or better yet, paint them.  Seal coat the driveway for a fresh look.  These are all low cost ideas that can help sell your home. The hardest part is taking the first step which obviously involves a bit of risk on your part.  Once you start, you’ll wonder why it took you so long.

Good luck

Kelley Schevis

KSchevis@Hotmail.com