Fixin’ & Flippin’ in Today’s Real Estate Market – Nashville Main Presentation – June 14th spea
May 22, 2010 by editor
Filed under Nashville, main speaker
An Unfiltered Q&A with Fellow Investors
REIN Members Ray Burkhalter, Mark Hayes and George Mitchell have mastered the art of fixing and flipping properties. And at the June meeting they will be sharing tips and secrets including:
- Which improvements add value (and which don’t)
- Importance of a detailed property inspection
- Which properties make the best investments
- How to make the most money when you sell
Ray Burkhalter has been an active Real Estate Investor in Tennessee since 2004 and a real estate agent from 2009. After 12 years working as a mechanical engineer, he made the transition to full time investor in 2008 and opened Sugarbush Investment Group, Inc. with his wife Gail. Together they have purchased over 30 properties using a combination of owner financing and private lenders. They currently own and manage 16 investment properties in Rutherford County. A number of their investments have employed the fix and flip strategy which they continue to use on a limited basis today.
Mark Hayes was born and raised in Asheville, North Carolina, and is a 1997 graduate of Vanderbilt with a degree in Civil Engineering. From 1997 to 2001, Mark was a project manager for a geotechnical engineering firm. In 2002 he started RE Investing. Mark worked 5 part-time jobs for the next two years to pay the bills & worked on real estate during the day. He has been a full-time Real Estate Investor since January, 2005, having renovated over 35
homes. He currently has 35 rental units but his specialty is rehabbing homes to sell in the West Nashville area. He rehabs 6-8 homes per year.
REIN member George Mitchell made his first real estate purchase when he was 18 years old. He has built new houses, renovated multiple properties from houses to small apartment complexes, and is a licensed real estate agent. George buys, sells, and manages properties throughout Nashville.
Here is a question I would like asked of the panel:
How do you find the money for investing when you are first getting started?
Panelists:
Ray Burkhalter – investing since 2004
Mark Hayes – investing since 2002
George Mitchell – investing since 1966
What did you do before real estate?
GM- construction; family in the business
MH- civil engineering, financial services
RB- engineering for 12 yrs
Why did you choose to invest in real estate?
RB- tired of income ceiling at job
MH- tired of old job, late nights, wanted to work for self
GM – family history in real estate made him interested; wanted to make $35 an hour
Do you have a spouse on board with you?
RB- yes – her property management knowledge very helpful
MH- yes – great sounding board
GM – been there, done that
What type property do you specialize in?
GM- 2/1, 800 sf, no storage, no garage; EZ to rent; EZ to sell; EZ to fix yourself when it needs repairs; first-time homebuyers love them – bigger pool of buyers; also looks for deals for his clients
MH- single-family, duplexes; now only does 37209 with ARVs of up to $200k; property close to his home and hates waiting in traffic when traveling to check on contractors or show rentals
RB- anything that’s a good deal
How do you find deals?
GM- I’m a real estate agent, so I can find my own deals on MLS; agents can be a good source for investors; drive for dollars; death notices in the newspaper; old car on blocks in front yard
MH- Uses MLS as an agent of American Heritage Realty, but doesn’t represent others; For Sale By Owner (FSBO); Yard Sales; Word of mouth – family and friends and other investors in REIN; being an agent has fees and continuing education requirements; uses another agent to sell his properties – doesn’t do it himself
RB- An agent, too; the easier the deal is to find, the faster it is gone; $1500-$2k/mo ad budget to get sellers to call him: postcards; flyers on doors; ads in newspaper; goes in as a Buyer first – then considers listing their property for them
How much rehab is too much?
GM – just needs to be a deal
MH – started slowly and built over time; the numbers need to make sense or location is bad or return is too low
RB – don’t want to spend more on rehab than the profit; start on something simple when you are new – carpet and paint
What trends are you seeing in the market now?
GM – today’s market can be influenced by anything; not just demand; you must be better educated today
How do you fund your deals? (your cash, someone else’s cash, your line of credit, your home equity line of credit, etc.)
RB- owner financing; private lender; HELOC; self-directed IRA; last option: local bank
MH- constructions loans with newer local banks (Franklin Synergy Bank, Avenue Bank, Cadence Bank, Reliant Bank, INS Bank, First State Bank); hard money lender; HELOC; cash
GM- owner finance; private lender (your momma)
How do you know if a given deal is a deal for you?
GM- $10k-$20k profit with little effort – buy at $60k and sell at $100k in 30-60 days; knows investors he can wholesale deals to with just a phone call; don’t be greedy: take a little profit and leave some $$ in the deal for your buyer
MH- $30,000 profit after rehab is done; $40k-$50k if more involved; 20% may not be a good figure – more or less may be good – but $30k minimum is his target
RB- first determine what it will sell for after repairs are made – be conservative and don’t get attached to the deal; remember holding costs (lawn care, utilities, insurance); likes 20% margin, less % on higher-priced houses.
Where can first-time investors go for money to buy deals if they don’t have a rich Mom to loan you money?
FHA loan (if your credit is good); Hard-Money Lender; Partner who will put up the money; owner may provide the financing for you
How do you determine whether to flip or keep a house long-term as a rental?
RB- depends on the neighborhood: some are better for flipping and some for long-term renting; 3 bed/2 bath homes move fast for quick sales
MH- your personal situation may determine this – do you need the money now? Or are you trying to build equity for retirement? Neighborhood demand
GM- depends on your need for cash now; “I’m a treasure hunter… I want to hold something for a while and then cash it in.”
How accurately do you feel you need to estimate your repairs?
GM- ask a contractor to give you a bid; within 10%
Do you often find surprises after your initial inspection once you have begun to rehab a house?
GM- not with experience
MH- does heavy rehabs and knows everything needs to be replaced – no need for a home inspector on these deals; yes, I find surprises all the time but my ‘buffer’ of 10% saves me
RB- asks his trusted contractor if he is unsure; crawls under the house himself to check for mold, etc. Surprises happen.
Can you walk us through a recent deal you have done?
MH- $43k, 1000sf, master bath could be easily added to increase value and take it from a 2 bed/1 bath to a 2/2; $45k repairs; sold for $145k = profit of $30k to $35k after taxes
RB- listed for $219k; bought for $115k ; repairs $50k; holding time of 5-6 months; profit of $40k
Do you do your own work?
MH – no; only uses contractors referred by others
What do you do to a house to add value?
MH- crown molding in kitchen and living room; recessed lights in kitchen; 6-foot privacy fence; deck (even a little one); prefinished ¾ inch hardwood floors in LR and kitchen and maybe one bedroom; make your house look a little better than the other homes on the market in that neighborhood. Would use laminate in rentals but not in flipper homes.
GM- not everything you see on HGTV adds value; granite counters; every homebuilder has a show house that you would LOVE to live in. Note their paint color and landscaping and use those colors and ideas. Buyers buy ‘shine’ and a lifestyle we all want to live.
What is your 5 or 10-year goal?
GM- retire
MH- sell half the rentals and pay off the others; get into multi-family deals for income; do a handful each year
RB- flipping is just a paycheck; wants to use profits to pay down houses