August 2007

Investment Exchange

An educational real estate newsletter

Rehabbing real estate

Rehabbing run-down or outdated real estate and reselling the properties for sizeable financial gains can be an extremely rewarding enterprise.

We often refer to these as "fixer-uppers" or "handyman specials," meaning that after initial purchase these homes require repairs prior to reselling them for maximum profit.

And the faster a buyer can improve a home and get it back on the market, the more money he or she is likely going to net.

There are several real estate programs on television these days that depict first-time rehabbers purchasing dilapidated homes, making repairs and selling them for staggering profits ... all in 30 minutes.

We're here to tell you upfront that it is nowhere near as easy as it looks on television. However, rehabbing real estate can be done successfully — even by an amateur — if you take the time to understand the process and make smart decisions.

In this edition of Investment Exchange, we will highlight a few resources and important tips that current and future rehabbers should consider to help achieve their real estate investing goals.

For example, Foreclosure.com offers a dynamic array of real estate training opportunities in addition to the vast educational content available in our Learning Center and elsewhere throughout our Web site.

From online Webinars to small-group retreats with accomplished industry experts, Foreclosure.com now features the most reliable investment property information and critical resources you need to get and stay ahead in the real estate market.

There are also some basic rehabbing tips to always keep in mind, which we will share for your benefit throughout this educational real estate newsletter. And as you gain knowledge through experience, it's important to add to them, ensuring that your next rehab is more lucrative than the previous.

Let's get the snowball of cash rolling.

Web site search tips

Be the first to know

In real estate, timing is critical. Sometimes just one day — or even a few hours — can mean the difference between a huge profit and a missed opportunity.

Therefore, we want you to be the first one on the block to know about a hot rehab deal as soon as it is listed on Foreclosure.com with our frequent email listing alerts.

In addition to foreclosure properties, we showcase preforeclosure, tax lien, bankruptcy and other distressed listings on our Web site that are often available for up to 50 percent less than market value.

And while our comprehensive nationwide database of more than 1.8 million listings is simple to search, we understand that it is sometimes hard to keep up with all the amazing bargains that we add to the site at least twice each day, including weekends and holidays.

That's the reason we pioneered FREE email listing alerts, which are conveniently delivered directly to your inbox. In short, these notifications alert you to the latest property updates we list on our site in the precise zip codes that you pre-select.

Even better, there's no obligation whatsoever to sign-up and receive FREE email listings alerts, which can be set up in literally just a few seconds thanks to our quick three-step process.

Foreclosure.com makes it easier than ever before to stay on top of the best real estate deals in your area. So sit back, relax and let us do the work for you!

To receive frequent email listing alerts from Foreclosure.com about the latest rehabbing opportunities in your target market click here.

It's the head start you need to be a successful real estate rehabber.

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Hot off the press

Rehabbers as seen on television

From "Flip This House" to "Flip That House" to "Property Ladder," the list of home improvement programs on television is long and getting longer.

These shows, which are all similar yet different, often showcase rehabbers purchasing homes, making improvements and reselling them for big profits — all in 30 minutes or less.

Thanks to the magic of television (and the editing process), however, these shows rarely convey all the hard work, knowledge and dedication it truly takes to pull off such a feat.

Indeed, it is much more difficult than it looks. And even the situation behind-the-scenes isn't so cheery. Look no further than a recent article in the Pittsburgh Post-Gazette, which attempted to find these reason these shows are such a success.

Here's a snip from flipping expert "Property Ladder" host Kirsten Kemp:

"For the most part we try to cast people who are novice flippers, but this year we decided to go with some people who have some experience. But it turned out to be the train wreck as usual."

The article went on to explain:

Kemp said it's not easy to shoot these shows. Selling the house almost always takes longer than the flippers expected, and camera crews have to be there every step of the way. A lot of flexibility is needed — especially in dicey neighborhoods.

While we stress caution (some programs have been accused of "scripting" episodes), these home improvement programs often offer helpful rehab tips, which can provide "soon-to-be" real estate investors with some great ideas and fundamental skills.

Having said that, the messages that come across in these programs can be misleading and general. Therefore, we want to share a few additional points to keep in mind when it comes time for you to rehab properties.

First and foremost, it's important to know your limitations when you're new to real estate investing. If you're just starting out, don't get in over your head with a home that requires a tremendous amount of love and attention.

Understanding a local real estate market before making an investment is perhaps just as important because it can mean the difference between success and failure. Research neighborhoods and learn as much as possible about comparable home prices so that you will be able to recognize a bargain on Foreclosure.com the moment you come across it.

In addition, set a reasonable budget and stick to it. Do your homework — such as pricing out new appliances at the local home improvement store or reaching out to several contractors to find the best rates — prior to getting involved in a renovation project.

If a home appears to be in really bad shape — but you feel it is a goldmine — pay the extra cash to have a professional inspect the property. Problems with the roof or foundation, for example, can be hidden beneath the surface and be costly to fix.

And any big expense could significantly decrease your eventual profit.

It's easy to become disillusioned with the numerous home renovation shows that dot the television landscape. Rehabbing homes is an excellent means to earn a tremendous amount of money — but it's not a sure-fire solution.

We just want you have to be careful and understand that rehabbing homes requires a fair amount of leg work and a large investment of time and money.

Put simply, it's not easy — or as fast — as it looks on television. But it is possible — people just like you do it everyday!

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Our success stories

Rehab Tips from a Foreclosure.com subscriber

In 1990, Ron Gendreau moved from the Boston area to the sunny shores of Deerfield Beach, Florida, in search of a better life for his growing family.

He was already an established Realtor® from the "Bay State" and was looking to take his career to a much higher level in a promising market that was about to explode. It was a bold move, but one that Ron felt deep down would be in the best long-term interests of the young Gendreau clan.

Boy ... was he right.

"Risks are a big part of being successful — something I learned early in my real estate career," said Ron. "The difference between success and failure, however, often depends on whether or not the risk is thought-out and calculated. I did my homework and was confident I could thrive in the South Florida housing market."

Ron pounded the pavement and scanned the newspapers for employment opportunities and real estate deals from the moment he crossed over the Georgia state line and arrived in the "Sunshine State." Eventually, he saw an ad in the paper about marketing and selling real estate investment properties such as foreclosures.

Now, the better part of his experience had been with traditional real estate sales. However, the idea of distressed properties was not only new to him, but also intriguing.

"Most buyers are always looking to spend the least amount of money," said Ron. "It's human nature to try and spend less and get more, especially when it comes to homes. There's a widespread perception among the general public that foreclosures offer more value. And more often than not, this is the case."

Ron began working for Investments Plus, which was a successful real estate firm headed by the future founder, president and CEO of Foreclosure.com, Brad Geisen. At about that time, Brad began to use his accurate and popular foreclosure lists to rehab properties then resell them for a profit.

Working hand-in-hand with Brad, the one-time Realtor® from Massachusetts was quickly learning the ins-and-outs of rehabbing foreclosures. Before long, Ron was out on his own criss-crossing the state, purchasing, renovating and selling distressed real estate to the tune of up to three properties per month.

It was trial by fire.

"Hands on experience is really the best way to learn this business," said Ron. "I tell people all the time, you just have to get off your couch and get your hands dirty. It's a rewarding experience that is well worth the risk."

Today, Ron is still rehabbing properties; however, he has slowed his breakneck pace to about one per month. Over the years he has learned a lot about the industry and has a few pointers for Foreclosure.com visitors.

According to Ron, a successful rehabber should keep the following in mind:

• Caution: Know your limitations and do not bite off more than you can chew. If you have a full-time job, rehabbing more than one property on the side at a time is insane. Don't jump overboard without a life preserver, either. Ease your way in with a few projects that require relatively simple repairs.
• Location: It might sound cliché, but finding the ugliest house on the prettiest block is the cardinal rule among rehabbers. These homes are easier to sell and often don't need as much work than properties in rundown parts of town.
• Condition: Find homes that are in solid shape and do not need more than $10,000 to $30,000 in repairs. Steer clear of homes with major structural and/or physical damage such as electric or plumbing when first starting out.
• Character: Sometimes homes might be in bad shape, but have a little something extra that sets them apart from others in the area. It could be an extra land lot or physical attribute such as a wraparound porch. The point: Look for subtle differences that you can take advantage of to impress buyers.
• Labor: Absent a reliable contractor, contact county labor pools and temp agencies to find workers willing to do the heavy lifting. Try your best, however, to find qualified and reliable tradesmen in skill areas such as electric, plumbing, etc. Assembling a good team is one of the more important ingredients to successful rehabbing.
• Focus: Bathrooms, kitchens and flooring sell homes — don't let anyone tell you otherwise. Research demographics in the area and try to create environments that appeal to the local buying market. Remember, this is not your home and you are not going to live in it. And just because you should concentrate on these three areas of the home, doesn't mean you should neglect other needy areas. Find a balance and make it work.
• Marketing: When the time comes to sell your investment property, don't settle for just listing it with a Realtor in MLS. The goal is to sell as fast as possible, therefore, promote your rehab with open houses and in other ways to attract more potential buyers.
• Qualify: Too often, rehabbers find great buyers who don't qualify for loans, wasting valuable time and resources. The solution? Ensure that interested buyers are prequalified prior to sitting down at the negotiating table.
• Flexibility: Just because you purchase and rehab a home doesn't mean you need to sell it. In fact, renting is a very viable option, especially in markets that will correct in a year or two. Sometimes to get full value — and more — on your investment it is smart to rent it out and wait until the time is right to sell.
• Foresight: Once you begin to get comfortable rehabbing properties and doing them more often, it will be important to keep the momentum rolling. Therefore, while you're working on one project, you should be out prospecting for others that can be ready to go once you close the house at hand.

As you can see, there is a lot that goes into rehabbing a property, from research to closing. Don't let it deter you, however, from getting your feet wet.

Remember, it's better to try and fail then never to try at all.

But by following these basic guidelines, knowing your limitations, learning from your mistakes and experiences, and taking smart risks, failure should not be an option.

Good luck!

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Site feature spotlight

Learn the ropes
from the pros

In yet another move to offer our subscribers the best all-around real estate information on the Internet, Foreclosure.com has introduced a series of educational 90-minute Webinars.

The first of these online training sessions focused on how to use our Web site to find the hottest deals in your target market.

Our Webinars are live, which means that you can get real-time answers from the experts to those burning real estate questions that keep you awake at night.

We've partnered with some of the top real estate minds and gurus from around the nation who will share their secrets to success, providing information that you can use right away.

Visit Foreclosure.com frequently for details about how and when to tune into our Webinars. These educational workshops are something that you are not going to want to miss!

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Real estate tax news

Tax credits for rehabbers

To preserve the historical integrity of certain homes and neighborhoods, federal and state programs often offer rehabilitation tax credits.

Rehabilitation usually includes renovation, restoration and reconstruction — not additions or new construction — on older homes or certified historic structures in various locations throughout the nation.

For example, in Baltimore City, Maryland, the state offers a property tax incentive program that saves owners of landmark designated properties and real estate located in the city's historic districts thousands of dollars each year.

The federal government also offers rehabilitation credits, which are applied to costs you incur for rehabilitation and reconstruction of certain buildings. Generally, the percentage of costs you can take as a credit is 10 percent for buildings placed in service before 1936 and 20 percent for certified historic structures.

For more information about the federal rehabilitation tax credits visit IRS.gov.

These types of programs encourage property owners in these areas to complete rehab projects by rewarding them with tax credits. And as a future rehabber, it's a money-saving opportunity that you can capitalize on if you are in the right location.

Ask a local Realtor® for information about rehabilitation tax credits, as well as whether or not your rehab is located in a historic district. If he or she doesn't know the answer, make a call to the local town hall or municipal building to find out more information.

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