Brainstorming a business idea

Rehabbing & House Flipping
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Brainstorming a business idea

Hal Cranmer
Real Estate Investor · Lakeville, MN · Member since 2008 · 153 posts · 17 votes

I am a real estate investor and have two duplexes that I'm about to buy and flip. I was talking to my sister-in-law (SIL) who is an interior designer the other day. She and I came up with the idea of using her CAD (Computer-Aided Design) software to 'virtually stage' the duplexes right after I close on them and start selling them using a possible landing page attached to a MLS listing to show the finished product as I am rehabbing. We are just brainstorming and would love to hear ideas that might refine it?


My realtor is telling me that people just have no imagination and can't picture a house fully fixed up. So when I have flipped houses in the past, I have had to wait until it was basically done before marketing it. My SIL's software can make the place look VERY close to a photograph and could show people what the place would look like fixed up. This could potentially solve a bunch of problems for me:

1. It would put the house on the market much more quickly, and possibly save me some mortgage payments if it sells quicker - not to mention get my cash out quicker for the next deal.

2. The buyers may be able to work with her to make some changes to our fix-up (once I had a purchase agreement in place) so they could customize it to their taste. I think we would just give them some basic choices, rather than get crazy and then walk away from the deal.

3. My realtor would have a much better MLS ad to display the listing without having to put actual furniture in the place to stage it, and much sooner.

It looks like people are doing 'virtual staging' already, but we would do it before and while we remodel the place. Everyone else is doing it when the place is ready to go on the market. Sort of the benefits of having some say in new construction without (possibly) the higher costs or longer wait times. I can turn these houses in just a month or two.

I was wondering what people thought and if it make sense to have a landing page to link to from the MLS listing? Thanks. It seems like if this worked for me, it might be something to sell to other investors and/or realtors?

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  • Tom Goans
    Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    @Hal Cranmer,

    You have an exceptional idea. I am a strong believer and supporter of thinking outside the box.

    However, my research indicates most buyers want a "turn-key" property. Many buyers are too busy to consider major renovations. Moreover, they do not have the funds. They were "qualified" at their very highest borrowing limit and are encouraged to spend every cent when buying the property. If they need a new washer and dryer, new bed, new furniture, it is a struggle.

    Another consideration, where are they going to live during the mess?

    Those thoughts are too broad to completely rely on. For you and your terrific idea, understand your target market. This is true of all properties and neighborhoods because all are unique and so is the target market for each.

    What does your target market want? Would they rather spend the time and money doing any enhancements and repairs their way? Do they have the funds? Do they have the borrowing power above and beyond the purchase loan? Do they have a place to live during the renovations and repairs? What about the children?

    These are just some of the questions and considerations I thought about. I am not saying your idea is not exceptional. It makes sense to me. Yet, what about your target market? Deciding on which washer and dryer to buy may be all they want to add to their plate. They have to go to work in the morning and the kids settle into the new school year.

    May I go so far as to caution you about worrying too much about your pocket book and not that of the people who make it possible, the buyer.

    I was renovating my very first rental property in the 1960s. While in the middle of bare floors throughout the house, an airless spray gun in the middle of the living room, there was a For Sale sign in the living room window. I spoke to several people while covered in white paint ... I am a lousy painter. On about the 3rd day, I sold the house. I explained my renovation plans, he agreed, I finished, and we closed the sale in about 2 weeks. My point, the instant you close your acquisition, you can put the property on the market. No delays. If you real estate agent opposes, find a new agent or put a sign in the yard yourself and save the commission.

    Hats off. Great idea.

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  • Hal Cranmer
    OP
    Real Estate Investor · Lakeville, MN · Member since 2008 · 153 posts · 17 votes
    13y

    Thanks. I was thinking that they would close on the house after I rehabbed it, so they don't have to worry about the rehab/fix-up funds/where to live and all that other stuff. I would rehab it the way I want, with a few possible options that I would dictate. That way all they need to worry about is a choice of paint colors and possibly a few appliances as you say.

    My realtor has sold one of my flips in the middle of my rehab, but I just think this might sell it faster if they can see what the finished product will look like. Just thought I would give it a try. If the buyers don't like how it turns out, I just market it like I was before. That way they feel like they can get out of it with minimal cost (possibly their earnest money).

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  • Tom Goans
    Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    @Hal Cranmer,

    You make a great and valid point. Another consideration based on what you just shared, strike while the iron is hot. If someone enters into an agreement while you are making renovations, they will have contingencies in the contract that allows them many methods for backing out. You may find the lag time gives the buyers time to find the finish product that is satisfactory and leave you with an unsold property.

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  • Matt Devincenzo
    Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
    13y

    It sounds like a great idea to me. I work in Civil Engineering, and know the program she is thinking of (or one like it) and it can indeed walk you through a house as if it was already rehabbed. Most of the new construction development projects I work with do this exact thing for both pre-sales as well as to identify possible improvements that make for better units prior to actual construction beginning. I would definitely do it if I were you and see how it goes.

    The other thing is as you hinted at, this is an opportunity to "test drive" this way of doing things. If it works well on this property you may be able to make this part of your business model and do every home this way to reduce holding times and increase sales. So if I were you I would approach this as you would any business development type project and give it a shot to see if you want to include this on every home you do.

    If it doesn't work it was a cost of doing business and trying to improve, so no harm done you won't know until you try it.

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  • Shari Posey
    Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes
    13y

    In our MLS system (southern California) you are not allowed to doctor/Photoshop photos very much. You can't misrepresent the property. There's a company that I use called OBEO that has a feature where the buyers can change the property to see what different paint colors, materials, etc. would look like in the home. Maybe if you clearly demonstrate "before" and "after" in your representation it would be better.

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  • Tom Goans
    Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    @Shari Posey brought up a very good point that probably applies in every market across the country. The impression of misleading a buyer. This may go beyond the MLS or real estate agent relationship. All it takes is one person who feels they were mislead and then files complaints with government agencies.

    I did not fully explain my thoughts on striking while the iron is hot. From the training by master sales people, the most important part of the sale is knowing when to shut up and close. This basically how I would have handled my situation when renovating the previously described rental. At any time during the process and the For Sale sign was in the window, should someone express an interest in buying and finishing the job themselves, if we came to terms, I would pack up and leave and return the airless sprayer as fast as the speed limit would allow.

    As my father always said; "A fast nickel is better than a slow dime." Plus, I would be free to ride my motorcycle.

    W. Clement Stone was an excellent teacher of how to become a top producing closer.

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  • Hal Cranmer
    OP
    Real Estate Investor · Lakeville, MN · Member since 2008 · 153 posts · 17 votes
    13y

    I don't think we would be misleading anyone. It would be the same as new construction companies who show people what their houses will look like when built. They do not get in trouble for taking a piece of dirt and putting up photos of what that piece of dirt will look like after the house is built. I would imagine we would do the same - take a run down house and show picture of how we intend to fix it up. We would make it very apparent that the pictures are what the house would turn into. Is this so bad?

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  • Tom Goans
    Real Estate Investor · Englewood, CO · Member since 2013 · 988 posts · 258 votes
    13y

    Good morning @Hal Cranmer,

    I still think you have a terrific idea. There may be ways to include the idea in your over all business plan.

    As for misleading, I understand your intention. Just remember, there is a woman who came into a pile of money at the expense of McDonald's and a cup of hot coffee. I am still shocked she won the lawsuit, but she did.

    The lesson to learn from this and other similar lawsuits is it is better to be overly cautious in business endeavors.

    Business Cautious

    I still think you have a terrific idea. There may be ways to include the idea in your over all business plan.

    As for misleading, I understand your intention. Just remember, there is a woman who came into a pile of money at the expense of McDonald's and a cup of hot coffee. I am still shocked she won the lawsuit, but she did.

    The lesson to learn from this and other similar lawsuits is it is better to be overly cautious in business endeavors.

    Other lessons learned is what is taught in law classes. A judge will favor the underdog over the “expert”. It is also taught the side that drew up the legal agreements will be discounted. This is because they are presumed to have a better understanding of the agreement.

    Again, your idea is terrific.

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  • Hal Cranmer
    OP
    Real Estate Investor · Lakeville, MN · Member since 2008 · 153 posts · 17 votes
    13y

    Thanks Tom. I agree that it is a crazy world out there in the courts. I will definitely take your advice and move slowly on this.

    Good morning to you as well!

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