All Forum Posts by: Marcin Chojnacki

Phoenix Rising Home Staging & Interior Design. 

Beautiful designs, great interior designers, great communication. 

Hope that helps!

I get asked this question a lot...is staging really worth it? The answer isn't as simple as it may seem. Many pro's will always say yes! I will say...IT DEPENDS.

There's many unique situations in real estate where your project will not fit the model or blueprint that might be considered as a "business standard". Standards vary from market to market so I will be explaining my experience in the Chicago land market.

BENEFITS 

- For starters your home will literally look like a model home! Many people are unable to visualize how the house they are viewing will look once it's furnished, this follows the same concept of why you shouldn't walk a prospective buyer through your flip until rehab is fully complete; visualizing a finished product is difficult for many.

- Quicker resale times. Staged properties on average sell much quicker than their non staged counterparts. You are knocking most potential buyers off of their feet as soon as they walk in the door. 

-Higher sales prices. On average staged homes also will sell for a higher price than a non staged home. When deciding whether or not to to fork over the few grand it will cost you to add designer furniture into your property always remember this: A few thousand dollars will ALWAYS be less expensive than a $10,000 price drop to increase traffic. 

-Amazing photographs. I'm not sure on the exact percentage here, but I think it's safe to say that 90% or more of individuals (especially first time home buyers) start their search online. Your pictures literally will make the first impression on shoppers. As they always say "You never get a second chance to make a first impression". 

-You literally give the buyer's agent and the buyers a place to sit and discuss. I personally think this is very beneficial. Let's use a vacant house for example: Buyer's walk in, they like the home but don't love it. They want to discuss price, terms, etc with their agent. There is literally no place to sit so they do it standing up in an empty house with an echo. Not a very comfortable situation to be in when deciding on a VERY big life decision. The more comfortable your buyer's physically feel, the more comfortable they will be with deciding to move forward with your property. With a staged house you provide them the atmosphere needed to feel comfortable enough to make a decision. Add some beautiful aromas, set the perfect temperature and voila!...HOME IS SOLD.

-Wow your buyer's appraiser. Many people will fail to factor this in before making their decision. Just like your buyers were amazed, when they decided to submit the offer to purchase your home, their appraiser likewise is human and can be subject to the same wowing effect! This can increase your chances of the home appraising out for the offer price (or higher) and will prevent you from having to cancel a deal or be forced to lower the price. However this does come with some restrictions; which I'll use to lead into the disadvantages of staging (or when you shouldn't stage). 

DISADVANTAGES (OR WHY/WHEN YOU SHOULDN'T STAGE):

-Appraisal. I know this sounds like I'm contradicting myself but let me explain. When you are selling a property in a neighborhood where EVERY house is almost identical, then it will be VERY hard to get the property sold for a premium. Even if potential buyers love your house (because of the staging) and offer you more than comparable listings, your home will likely not appraise out for more than the one down the street. This is especially true in areas where the sales prices are under 200k. Even if you wow your appraiser he will see that all surrounding homes are the same size, same beds, same baths, same layout, etc. While his breath may be taken away by the beauty of your home his analysis later on will quickly bring him back to senses as almost all his comps are very very similar. 

-Money. Yes staging costs money and it is not cheap. A good staging company that uses top of the line furniture, designers, photographers can easily run you over $3,000. As stated above, in the advantages section, this is still lower than a possible price drop of 10k. However this concept doesn't apply as well when your resale price is mid to low 100's. If you are selling a property for 120,000 and you know similar properties have sold for about the same amount, it will be very very hard for you to get an extra 5k on the resale end of your home. In this scenario the total cost of staging is 2.5% of the value of the house (that's a big chunk!). It is much easier to get an extra $10,000 to even $50,000 on a property that's worth $500,000. On this home the total cost of staging is a mere 0.6% of the value of the house. It's much easier to recoup the cost of staging by enticing your buyers on properties that are more expensive. The $3,000 investment can put an extra $10,000-$50,000 in your pocket on higher end homes.... much much much harder to do if your home is worth $120,000. 

As a general rule of thumb, anything over a $200,000 resale price I stage and anything under $200,000 resale price I do not. Many times the more expensive the home, the more unique the layouts can become, the more the buyers, buyers agents, and appraisers will be able to sway in your favor. 

Attached are a few photos of a property we flipped that we staged. It sold in 5 days for $255,000 (about $15,000 more than current comparables were suggesting).

Thanks for reading and Happy Investing!

Respectfully,

Client is wholesaling a property in Lockport. Property is on a slab foundation and needs minimal work. The numbers are as follows:

Purchase Price: $78,000 (higher than list, but where client needs to be).

Closing Costs (BUY): $2,000

Rehab: $25,000

Holding Costs: $1,500

Closing Costs Sell: $2,000

Commissions 3% (We waive our side of the commission for investor flips): $4,500

BREAK EVEN: $113,000

Sales Price: $150,000 (a well done rehab will get you this no problem, we would start at 155k or 159,500).

PROFIT: $37,000

Message/email me for more details/comps.

@Cliff Mccue $1.29/ sq ft. Material cost.

@Aaron Mikottis Full interior rehab (electrical, plumbing, kitchen had all new drywall, nee plywood was added on top of old subfloor boards, trims, casing, doors, water heater etc.). Everything was done except for hvac.

As for the exterior:

New tear off roof with 1/2 ply as required by village, new garage door and opener, new garage siding, drywall inside garage, siding on home was repainted, new lights, new shutters, basic landscaping, new exterior doors.

I did not GC the job. 

@Shannon K. I'm not 100% sure what the floors are called. It's a laminate tongue and groove type flooring. It's a floating floor (no nails or glue, cheaper for install labor). As long as you leave expansion gaps (as recommended by manufacturer) by the walls it never has issues with buckling or coming apart. We don't go too dark (no chocolate) as then every spec of dust is visible. We also make sure that there are grooves on the joints where the floorboards meet (this gives a greater impression of real hardwood, beveled edges in other words). These were purchased at floor n decor (tile and flooring store in Chicago land area). Home Depot lately has affordable decent quality flooring. 

Hope that helps.

My two cents:

Personally, I think section 8 is great. The turnaround times are very low and keeps my vacancy rates almost nonexistent. What many people fail to realize is that there is such thing as an "overqualified tenant". What happens after a one year lease with a tenant who has good credit and good income?... They buy their own house!...Many times with non section 8 tenants you will be looking to fill your property every year or every 2 years with a new tenant. 

Section 8 tenants stay for years! I've never had a problem with having a section 8 tenant pay their portion (as you may know if they do not pay they lose their voucher). As long as I can verify that they've received their full security deposit from their last landlord then I know for the most part that they are clean and keep the property to high standards. Yes, I have bi yearly or quarterly inspections done so I do keep a keen eye on my investments as well.

Where I rent I actually get more from section 8 than what market rent currently is so that's another added bonus in my area. 

As for property management. I believe that when you are first starting out property management should be avoided as long as you are using a reputable agent who has knowledge on rental properties. When you buy your first rental it's important to maximize returns. Personally, I have multiple properties and I've never seen the value of property management. I have a full time contractor (who works on my rehabs as well) that I use for service calls. My tenant will text me, I forward it over to my contractor and they determine a time for the repair to take place. For leasing I use a leasing agent who is VERY experienced in qualifying tenants, and rental payments from tenants are direct deposited into my LLCs bank account (section 8 or not).

By using effective people who most people will use anyways in their real estate business I find it very easy to be able to efficiently manage a good number of properties. I do however have a very good, trustworthy, and economical contractor. I know these can be hard to find :)

I hope that helps.

Happy Investing!

Most recent deal under contract! Will be listing a Joliet and Wheeling property soon. Rehab them right, price them right, and sell them fast!

On to the next one :)

Streamwood IL Property.

Numbers:

Purchase Price: $88,000

Closing Costs (Purchase): $1,200

Holding: $600 (Bank gave an additional $2,000 tax credit at purchase closing..shhhh). 

Rehab: $39,000

Commissions: $4,350

Closing Costs (Sell SIde, EST): $2,500

BREAK EVEN: $135,650

SOLD FOR $174,000 NET ($179k with a 5k credit).

PROFIT: $38,350

Many people are promised riches in real estate through attending seminars, education workshops etc. "Become a millionaire using $0 of your own money!!" Yes wholesaling can be very profitable and while it's very enticing to get started jumping in feet first, always be careful when trying to accomplish your first wholesale deal. Here is a basic list of things to watch out for and things to consider before getting your first property under contract.

1. BE CAREFUL WHO YOU BUY FROM - Not all properties are eligible for wholesaling and many others will not be eligible for contract assignments. 

a. Many bank/government owned properties come with 90 deed restrictions when purchased. Yes, this means title cannot be transferred for 90 days after your closing!! This can turn a potential wholesale deal into a nightmare. 

b. Many other REOs can come with owner occupant periods ranging from 15-30 days in which ONLY owner occupants can purchase them, another buzzkill!  

c. Other banks will prohibit you from assigning the contract to your end buyer. This means a double escrow (double closing) has to be completed. In this case you would need to make sure you have cash available to handle your original acquisition (transactional lenders work as well). 

Examples of properties to watch out for:

-Fannie Mae (Deed Restrictions. owner occupant periods, no assignments)

-HUD (owner occupant periods, no assignments)

-Many Short sales can come with deed restrictions.

-Bayview (prohibits contract assignments)

-BOA, Wells, Chase, PNC, TCF, and others prohibit assignments.

2. FOCUS ON THE BUYERS AND NOT THE PROPERTY - This is very important when starting out. Who cares if you have the best deal in the world if you have no one to sell it to? Focus on creating a buyer's list or even finding one individual who is an aggressive buyer to sell your property to. I've seen countless first time wholesalers lose their EM deposits simply for the fact that they did not have anyone in their network to sell it to. Find the buyer first, then risk your earnest money. 

This, of course, is a little different if you actually have cash to close. If the deal is good enough you can physically close on it, list it on the MLS, and you should have numerous agents showing it to their investor clients.

3. END BUYER FINANCING - Where are the funds coming from for your end buyer?This is a very important question that you will NEED to know the answer to. The easiest of course is if your end buyer is cash. However, there are many restrictions if your end buyer is receiving financing. Always check with their lender to make sure they can get a clear to close based on the wholesaling circumstances. 

IMPORTANT FOR DOUBLE CLOSINGS/LISTING AS-IS AFTER CLOSING FOR A PREMIUM - Most lenders (excluding hard money) will not originate a loan if the seller on the contract is NOT the individual/entity on title. In most wholesale (double closing deals) you will be listed as the seller on the contract (contract between you and your end buyer) but you do not yet own the house therefore your name will NOT be on title. In this circumstance the lender can stop the deal dead in the water. 

If you are closing on the home and then listing as-is be very careful with FHA buyers. FHA has a seasoning requirement of 90 days (title of property cannot change hands more than once in the last 90 days). The date on your contract (between you and your buyer) would have to be dated 90 days AFTER you originally closed on the home. Trying to work with an FHA buyer (there are plenty out there) can greatly delay your timeline and can scare many potential FHA buyers away.. Do not take the buyer's agent's word on time-frame of closing (many agents are clueless to this rule, always contact the buyer's lender).

4. TEST THE WATERS - Nowadays many property owners will grant you a few days (after offer acceptance) to submit earnest money. That means you can officially be under contract today but your earnest money may not be due for another 4 days. There is actually now a section in the NAR contract (contracts that many agents use) for you to fill in how many days after contract acceptance you would like to submit Earnest funds.

Try this; put the property under contract, send it out to all of your buyers, if you have no interest in the first few days then possibly it's a home not worth pursuing. On the other hand if you receive a lot of interest then you know you can confidently move forward with submitting your earnest money deposit. Remember, even if you win the contract and decide to back out, due to no interest, you can always use your attorney review period (common is 5 days) to back out of the contract with no repercussions. DISCLAIMER - This does not work on investor HUD properties as effectively as they require EM to be delivered within 24 or 48 hours with little to no chance of getting it back once submitted.

5. WATCH OUT FOR MUNICIPALITIES - Be VERY careful on what town you are buying in. There are some towns in the Chicago land area that will not allow investors to "instantly flip a home". This can be very troublesome when doing double closings (double escrow). Be careful of the towns that have pre-close inspections on properties. These towns might  make you sign an affidavit stating you will repair all code violations within a specified time frame after closing. They will not issue a transfer stamp, for the resale of your home, until repairs are complete and final inspection is cleared. Some municipalities that do pre-close inspections will allow an immediate sale as long as your end buyer signs the repair affidavit. Always call the municipality to make sure you can double close a property.

6. TITLE COMPANY/ATTORNEY - Use a title company and attorney that is knowledgeable on municipality rules. Make sure they know the ins and outs of double closings, assignments, and wholesaling transactions. Check your local title company rate cards to make sure they are competitive with other companies. Always try and build a good relationship with your title company/attorney. The more deals you bring them the bigger discounts you might get!

7. WHERE IS YOUR DEED - Your title company/attorney will hep you with this. Always make sure where the deed is/will be located! Your end buyer will not be comfortable closing at a double closing if the original deed, or a copy of the recorded deed, is not present. Copies of unrecorded deeds do not fly so well with attorneys as they aren't deemed reliable. If you plan on actually closing and relisting the home as-is for a higher price make sure your deed was hand delivered to the county. This will ensure a much faster recording time-frame vs. mailing it to the county. Mailing the deed to the county can take up to one month for it to get recorded!

8. FINANCING - With a contract assignment usually this isn't an issue. However if you are double closing and you do not have the funds to close make sure you find a reputable transactional funder to fund the purchase side of your deal. Many companies will require the end buyer's funds to be at the title company before they will wire their funds. Always call your lender to find out their requirements so that your transaction go can smoothly.

These are just the basics and yes wholesaling can be harder than some people think. With a little work, dedication, and the right team you can potentially build up a lucrative business in a relatively short period of time. 

Thanks for reading and as always; Happy Investing!

Respectfully,

2 Level Bungalow. ARV in the 170's. Needs updating but not in terrible shape. Call/text me for more details 630-329-7800.

Thanks,

Marcin Chojnacki

Real Estate Investment Broker / Analyst

Chase Real Estate

Mobile/Text: 630-329-7800

Office: 630-527-0095

E-Fax: 630-701-1296

Email: [email protected]

Web: flipchi.moonfruit.com