All Forum Posts by: Peter Mckernan

Hey Adele, for the first part, typically the other agent (TRBC) Tent Representing Broker Comp should be given to the listing agent then the listing agent should present that to you.. Or that should be covered (have been) covered in the listing fees. This is really way all the stuff came up with NAR and the lawsuit. The sellers/owners really never got the right information from the get go and then were blindsided when getting into escrow or getting a tenant.

So, this should have been done for you by the listing agent, or if they were listing as a reduced fee then I would have spelled this out prior to getting a tenant or even listing on what you would potentially pay. 

It is a little easier for rentals, list on Zillow rental listings and you should get good exposure there. The bigger players (PM companies and bigger real estate teams that do a lot of listings) get hit with fees from Zillow for listing on Zillow. Single use should be fine. The hardest is getting a lockbox there, and making sure no one comes in unattended. That is the problem, someone comes in unattended changes the locks and says it's their house with utility bills that is the worse case situation (not to scare you, just worse case). 

So getting someone to place a lockbox and then getting your hands on the CAR forms for all disclosures and all is the best situation for lining yourself out from any issues in the future. The CAR forms have the RLMM (lease agreement too), or you can get your own. Walkthroughs and getting vendors to do the work is tough as well, but sounds like you did that before already... 

What I would do is go out and walk properties with a contractor, you will be able to go to really bad properties and stuff that just needs carpet and paint. Once you get there give the contractor the rundown on what you want to do and have him give you a bid. Then once you do that more and more you will get more clear on what the costs will be for you rehab projects. 

This is asking a lot of a contractor to do, so I would give them full transparency on what you are doing and if they ask for compensation then I would suggest to agree to some small compensation or have an agreement that you are going to use him on projects. 

The only really knowledge for rehab costs and SOW as you said "classroom" is when you get out there and start doing the work. 

1. What makes a good fix and flip property?
2. In the eye of the beholder
3. How do I accurately estimate ARV (After Repair Value)?
   Know your comps through and through
4. How can I finance my first flip? (Hard money loan vs. private money vs. traditional loan?)
   Any of the above...
5. What’s a good budget buffer percentage for unexpected costs?
   20% but can be even more... Use a GC to really get the numbers down when you get it locked up in escrow
6. What tools or calculators do you recommend for estimating renovation costs and ROI?
   Your own experience, and your good GC 
7. How do I find reliable contractors and vet them properly?
   Referrals, people in the industry that are using those people.. See their work, do scheduled payments, have everything in writing and make sure you stay on them each time
8. What are common renovation mistakes new flippers make?
   Not knowing the comps and what you can sell it for.. this happens by trusting someone that should not be trusted.. not doing your own comps, and having some of that hopium to what price they are going to get so they push and push. 
9. What renovations provide the highest ROI?
   Bath, bed, curb appeal, updated flooring/paint
10. How do I avoid over-improving a property?
    Look at local properties (comps) and see what they are doing. If they are putting recessed lighting in and you are not, you are not up to comps. If they are putting kit showers in and you are tiling they showers, then you are over-improving the property for what the comps are selling for that means less profit. 
11. What permits will I typically need, and how long do they take?
    This is all dependent on what you are doing. Also, what the city requires to, and each city is different. 
12. What are the biggest legal pitfalls for new flippers?
    Disclose everything, even if you don't think to disclose or think it is nothing.. Tell the buyer, and buyer's agent in writing. Oh and partner disputes.. Contractor issues, contractor not doing the right thing, leaving the job, etc. The city delays, man... you name it..
13. Should I form an LLC for flipping?
    yes, but not a CPA or attorney (the biggest thing for you get a solid OA). Or solid JV agreement
14. Do I need special insurance during the flip process?
    Yes! talk to local flippers they will get you hooked up! 
15. What’s the best way to price and market a flip?
    Use an agent and be inline with comps... don't think your flip is the best out there, be humble when going to list  
16. Should I use a real estate agent or sell by owner (FSBO)?
    Use an agent... The open market is so critical for the value of your property, that is why there are some many issues with this CCP with Compass and Zillow etc. Get it to the MLS and let it sell! 
17. What kind of timeline should I expect from purchase to resale?
    Market dependent 
18. How do I minimize holding costs and maximize speed?
    This you learn with time..
19. What tax implications should I be aware of when flipping homes? (We plan on 1031 Exchange the profits for down payments on LTRs)
    You need to hold as a rental no flips on a 1031

KPIs is what you need to be watching, and you have to have some retained earnings before you try them. Marketing, know you are going to try any avenue for 6-9 months before making a decision to cut it. Have a solid budget in mind too. Also, when you set a budget for PPC you may not be the highest bidder but put out what you can spend, close a deal and chip in a little more. If you are the highest of all time you can get killed each month. The more you place the more you get on leads, but there is a breakeven. 

I have not done FB ads for them, but I have done PPC Google Ads. They have worked well, and are about 125-150 per lead. Spend is ads manager plus market spend (PPC spend), and closing about 4-5 deals off of them within the past 6 months. Not the biggest return as other marketing channels but this does give us some off market deals. 

 Just like Kevin, I have a gap that I have a in my market to get me to a deal to make numbers solid. For example some people use 70% rule.. In my market I use $150K from buy to sell gap to be in a good position to have all the rehab numbers in there and everything else involved added in to make a quick spread then go deeper. These days with more inventory, I am looking at a 200K spread to make it make better sense with market time and where to list to sell. Today with the market having more inventory on the market the numbers need to have a bigger built in buffer.  

 Go from homeowner to rental insurance. Then get the tenant to get a renter's insurance policy. 

This is every market, go deeper on your current market before trying another state. This is the same thing as a person flipping in the same state and wanting to move states due to not finding deals. The better you are at finding deals in a hard market/saturated market the better you are at your job, and then you are irreplaceable. You need to be that irreplaceable guy in Florida where every goes to because you know how to get the best deals. 

Advise, change the marketing.. test each marketing piece you are doing and if there are changes that need to be made, copy, marketing type (mailers to PPC), make the change and put it into test mode to see what needs to be done to get more deals equally more money. 

This is on you to pay the bill. I do have some thoughts for future expenses. 

Does the water bill come to you? If so do you track the increase and decrease in water usage. I have had situations with my properties where I would pay the bill and back charge the tenant, and these bills were every other month. A normal bill was 250.00 with water and trash, and the months it was $300.00 or more I would reach out to the tenant to see if they noticed any issues. One time they told me the water bib outside was leaking, so we had a plumber go out and we had to get the whole service line from the house to the street replaced. This fixed the problem and we were good with no increased bills going forward. 

These things are on you because these are your asset(s) and you want to increase income and reduce expenses. 

Just was a on a call the other day with about 20 real estate agents that are high producers. The one area that they did mention that was doing good was New Jersey, and the guy that I spoke with was talking about it has slowed a bit but their market is still consistently up even with this increase in inventory we are seeing.