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Real Estate Investing
Tips & Strategies to Maximize Profits
By David Dweck
Copyright Notices
David Dweck, P.A. copyright 2009, All Rights Reserved. For personal use only to purchaser of this material. All material is copyrighted for exclusive use by David Dweck, P.A. for consulting and educational purposes. No parts of this document may be reproduced in any form. Anyone other than purchaser who is not authorized to use, photocopy, sell or distribute this material will be prosecuted to the full extent of the law. Contact David Dweck, P.A., 7040 W. Palmetto Park Road, #225 Boca Raton, FL 33433 phone: 954-354-1000.
Notice
From states to counties to municipalities, laws regulating material implied, written or stated in this publication may vary.
Purchaser assumes full responsibility of adhering to regulations in their respective markets. Any and all laws applying from government agencies on real estate practices and transactions become the sole responsibility of purchaser. This publication is designed to provide accurate information. If legal or accounting advice is required, please contact a competent professional.
Chapters
Dedication………………………………………………………..………………….
Foreword.…………………………………………………………………………….
Introduction…………………………………………………………..…………….
Doing Good Business…………………………………..……………….…..
Real Estate Investing 101…………………………………………………..
To Be Licensed Or Unlicensed. That Is The Question..………..
Making A Good Buying Decision..………………………………………
Don’t Wait Until Closing To Choose Your Tenancy..…………….
Rehabbing…The Right Way! ..……………………………………………
How Long Should A Rehab Really Take? ..………………………….
Standardizing Your Renovations and Rehabs..…………………....
Consult a Woman When Renovating A House..……………………
When Listing A Home For Sale…..………………………………………
Discounted Real Estate Services And Junk Fees..…………………
Reasons Things Go Wrong For Landlords in Court..…………….
Create Wealth Through Private Mortgage Lending..…………….
Do Homeowners Have A CLUE?...……………………………………..
Your Image Is Important…Your Reputation Is Everything!.....
Negotiating..…………………………………………………………………....
Partnering..……………………………………......................................
Top 10 Deals..…………………………………………………………………..
BONUS! Motivation..………………………………….………………………..
Dedication
In memory of all the wonderful, creative real estate investors who have passed away but whose knowledge still lives on within us:
-Warren Harding
-Ernie Kessler
-Barney Zick
Foreword
Some of my greatest investments have been in real estate. Whenever I find a potential deal, I call on my mentor, David Dweck.
Over the years, David has given me the thumbs up or down on my real estate investments, and he is never led me astray. Itís rare to find someone that has such vast knowledge of the real estate market yet still takes the time to consider the best interests of his clients. David’s integrity, loyalty and dedication are second to none.
It is not everyday that you will find someone of David is caliber that is willing to share his time-tested success strategies of real estate. A lot of blood, sweat, tears and millions of dollars have gone into gathering this information, and it is all at your fingertips. Unlike most books by real estate gurus, the techniques that lie within these pages actually work and will catapult you to a new level not only in real estate but also in your life. Do not take this book lightly!
Instead, commit to read it at least seven times in order to get fully immersed in this life-changing wisdom.
Stop making excuses like the bubble has burst or the market is bad! This is all nonsense. The real estate market is full of opportunity, but you must listen to someone like David Dweck that has achieved great success in this field.
Now, it is time for you to turn the page and change your life forever!
- John Di Lemme
International Motivational Speaker
Best Selling Author
Introduction
Thank you for investing the time to read this book. It is a collection of writings on numerous subjects within real estate investing that I’ve covered and compiled over the years. If you are just getting started as a real estate investor, I know that you can certainly get a good foundation from this book. If you are a seasoned professional, I am confident you can glean some additional tips and nuggets that will add to your success.
The real estate market has suffered some challenges over the last few years. Through this crisis on both Wall Street and Main Street you can find huge opportunities. My suggestion is once you are done reading this, you may consider obtaining my home study course. Just go to www.worksmarterplayharder.com and you can order it on line. Remember that now is the time “to assume the asset acquisition position”. I encourage and ask you to send me feedback via e-mail at: doingdealsdaily@gmail.com.
Here’s to your success!
TIP # 1:
Doing Good Business
In these challenging economic periods, real estate investors can remain positive and focus on working smart and dedicating ourselves to being real estate entrepreneurs and housing providers.
What is really important, especially during these challenging times, is adding value to your life and to the lives of others. What will be your legacy? What is your calling? Daredevil Developer Frank McKinney’s (www.frank-mckinney.com) legacy will be providing shelter for homeless people both here and abroad, as well as building extremely high-end spec homes.
Real estate investing is a privilege and, as investors, it is our responsibility to be regarded positively and to utilize honorable business practices.
Get involved in a real estate investor association in your community, and be aware of local and regional issues that could affect you. Learn from your mistakes and from those of others. Don’t sweat the small stuff! If you’re just starting, jump on in!
For those of you who have been at it and have reached a plateau, try a new twist.
TIP # 2:
Real Estate Investing 101
If you are new to real estate investing, the following will give you a solid foundation to build on:
Have a plan and stick to it! If you fail to plan, then you plan to fail. It is imperative to remember that you make your money when you buy. If you’re buying to fix and sell, then you need to buy no more than 70% of the after-repaired value. If you’re buying a property to hold in your portfolio, then you can pay up to 80-90% of the after repaired-value.
Put your team in place. If you have a partner, have a legally binding partnership agreement. Surround yourself with competent legal and accounting advisors. It is also good to have a competent Realtor, mortgage broker and title company, and independent general contractors of all trades at your disposal.
Always, always, always have an exit strategy. For instance, if you’re buying to “wholesale” the property to another investor and you don’t wholesale it, be prepared to close on it and “retail” it. If it doesn’t sell retail, be prepared to lease or lease option it.
Go “driving for dollars.” Start by picking a few areas and really get to know them. You can make a lot of money driving in these streets.
Marketing, marketing, marketing and networking, networking, networking. You must spend money to make money, so whether it’s direct mail or classifieds, make sure to market yourself. You need to have business cards and to present yourself professionally. Attend local real estate investor meetings and other investment association meetings/events.
Find a partner, mentor or coach who has been there, done that. He or she can guide you for a percentage of the profits. You must have short- and long-term goals in writing. Do you want immediate cash flow and/or passive income?
Here’s your “don’t do” list: Don’t buy a property that requires a serious rehab. Don’t buy on a main street. Don’t buy in a challenged area if you’re not prepared to handle it. Don’t suffer from the “paralysis of analysis.” Never be an eager buyer or a desperate seller or landlord.
The less you care, the less you do, the more you make. Take a step back from the analysis and make good business decisions. Don’t get clouded by all the excitement and go with your gut. Always put it in writing! Whether it’s contracts, agreements or partnerships: DO IT IN WRITING! Finally, you can never stop learning! Remember learn more = earn more. So again, here’s to your success!
TIP # 3:
To
Be Licensed Or Unlicensed?
That Is The Question…
In fact, that’s a loaded question! There are many different schools of thought with regard to investors having real estate licenses. I started investing first, and then later went for my real estate license. At the appropriate times, I always disclosed that I had a real estate license and don’t feel that in my 10+ years of being licensed that it ever cost me a deal or negatively affected me financially. In fact, it helped me to be more productive and has facilitated more transactions
Overall, being licensed depends on your level of paranoia. I don’t consider it is a detriment, but it amazed me that everybody in Florida and their brother – and mother, for that matter – has a real estate license! In fact, membership in the National Association of Realtors was at an all time high in September 2006 with more than 1,000,000 agents – up 300,000 from just three years ago. Keep in mind that most agents fail, and that many are in it only part-time.
I also have a mortgage license. Private lending is highly regulated because it is lumped in with the predatory lending for owner occupants. I don’t offer owner occupant private loans because it’s too risky for me personally as a mortgage broker, as well as a lender. Otherwise, I see no conflict or challenge with an investor being a mortgage lender.
In case you don’t know, I have a few credos – or “Dweckisms,” one of them being “multiple streams of income all within real estate” (thanks in part to Bob Allen). I like having multiple income streams and generating revenue from both my real estate and mortgage licenses. With this strategy, I can make money in any market. This combination has definitely been a positive and has enhanced my real estate investment business.
TIP # 4:
Make A Good Buying Decision
Don’t overpay. As a real estate investor, you make money when you buy and it’s essential that you don’t pay too much. This may seem very basic, but let me share a few challenges that can potentially eat away at your profits.
I once purchased a single-family house on a main street. Since the “For Sale/Rent” sign was right on the property, it gave me great exposure. The downside was that it didn’t make for a popular sale or rental, since most people don’t want to live on a main street. The upside is, you get a lot of calls off that sign!
The Good News. I bought this particular house for only $14,000. It was loaded with code violations. I repainted inside and out, remodeled the kitchen and bath, put in all new electrical wiring and a breaker box, and installed new appliances and carpeting. I quickly brought the property into compliance, had it rented immediately and thought everything was just fine.
The Bad News. I got bombarded by constant trash, vandalism and tenant turnover at the property. This was compounded by the code enforcement officer finding the property in violation due to all the litter that resulted from the house being on a main street. I opted to sell the property since I wanted the headache to end and sold it very quickly to another investor at below-market price.
The Lesson. Don’t buy in a challenged area -- unless you have a great exit strategy and are prepared to handle the challenges of that area. Don’t put yourself in harm’s way. I bought a duplex that proved to be a never-ending money pit and was plagued by constant vandalism. I even found people living in a boarded up unit without power or water! I was delighted when that property sold and learned a valuable lesson from that particular transaction, too.
Always remember to have a clear exit strategy and see if the property passes the “smell test.” If the deal and/or property don’t smell good, they probably aren’t!
TIP # 5:
Don’t Wait Until Closing To Choose Your Tenancy
There are four ways to acquire title to property: sole tenancy, joint tenancy, tenancy by the entirety and tenancy in common. Co-ownership requires a clear understanding among the titleholders. Only married couples can be tenants by the entirety.
Upon death of one of the spouses, the survivor acquires sole ownership of the entire property. The ownership interest of one spouse cannot be reached by the other spouse’s individual creditors. A joint tenancy also has a “survivorship” feature, but it is not limited to married couples.
A tenancy in common has no right of survivorship. Each individual owner has a distinct, undivided interest in the property, which is freely transferable by will or inheritance and is subject to the claims of creditors. Unless otherwise stated, each tenant in common is presumed to own an equal share in the property.
Remember not to take title to investment property in your own name. Use an LLC, corporation or land trust. Please seek competent legal and accounting advice regarding how you should take title.
TIP # 6:
Rehabbing…The Right Way!
In real estate, “time is of the essence,” and that strongly applies to rehabbing. A “quick in/quick-out” philosophy will save you time and money, because holding costs – utilities, taxes, insurance and general maintenance – add up quickly.
To begin with, you must secure the property by changing locks and having the property appear occupied (put in some old furniture, curtains on the windows, etc.). Don’t leave tools, fixtures, materials or anything of value in plain sight. If you’re trashing out the house with a dumpster, fill it quickly and get it out! In addition, make sure your carpet installer removes the old carpet, the roofer remove his own debris and so on.
Too much can be too much! When it comes to rehabbing the interior, do what’s in line with the neighborhood. You’re not going to live there; your goal is to fix it and sell it, so don’t over-improve. Make the kitchen and bathrooms bright and new looking with lower-cost appliances and fixtures (this applies to homes selling for $250,000 or less). Use white paint inside and beige, gray, yellow or peach tones outside. Hunter green is also popular now. Of course, if you’re in a more upscale area, upgrade your fixtures and appliances. In rougher areas, do not install air conditioners or appliances until the day of closing. Make sure and introduce yourself to neighbors and offer them some money as an incentive to watch the house and report any suspicious activity to you and the police.
The average buyer will love the fact that the house is like new and they’ll love it more if you, as the seller, offer to contribute toward closing costs!!
TIP # 7:
How Long Should A Rehab Really Take???
Whether you are rehabbing to sell or rent, you should plan your work and work your plan.
When purchasing property you should have your estimates in writing prior to closing. In fact, you should have a clause in your contract stating that the seller will give buyer access to property for purposes of estimating rehab costs.
Make sure to always pick neutral colors. For instance: exterior colors should be trendy colors appropriate to the neighborhood, yellow, beige, and gray tones with white trim work well. Interior colors should be flat eggshell white or off-white with semi-gloss on trim, doors, kitchen and bath. Carpet colors should be neutral as well, in either the beige or the gray family. Sometimes you can upgrade to a Berber carpet for very little. For rentals, keep in mind that you might be better off cleaning your carpet and/or dying it than replacing it. You should have a rental unit turned over in less than one week.
If you’re doing cosmetic work only, your rehab shouldn’t take longer than a few weeks. When you get into more involved projects – a new roof for example – you can expect it to take longer. Also be aware that when it comes to permits, some municipalities are easier to work with than others. And you also can expect problems related to contractors not completing the work in a timely fashion.
The nature of the beast. Someone I know recently built a 1,200 square foot house from top to bottom and got a certificate of occupancy in less than 90 days. If he can accomplish a feat like this, then even the most complicated rehab shouldn’t take longer than that. But the reality is that having done all levels of rehabbing, I still run into snags…it’s the nature of the beast.
Remember to always add a “fudge factor” for unforeseen expenses. Good crews are hard to come by. And if you have someone you know who does good work, make sure you keep them happy. I have a long-standing relationship with people such as my handyman, carpet person, tile installer, tile supplier, roofer and so on.
What’s it going to cost? Here are a few appropriate cost guidelines:
Interior painting – $1.00 per square foot including walls, doors, trim and ceilings;
Toilet replacement – $150;
Windows – $200 each/installed;
Exterior paint – $.50 per square foot of surface space;
Exterior doors – $350 each/installed;
Carpet – $10/yard/installed over new pad; and
Kitchen cabinets – $1,200 to $1,800/installed for a small starter home.
Remember these are just approximate numbers. Material costs are on the rise, so these prices may not be totally accurate.