All Forum Posts by: Michael Medinger

I've had a few occasions where I needed to either preserve my margin or saw an opportunity to get to the top of the market when flipping a house.  A great way to make those things happen is to offer a cooperating broker payment (that is, how much one pays to the buyer's agent) a half-tick above market.

Here in southern California, the norm for CBB is 2.5%.  When I need an extra push on my listing, I offer 3%.

It sounds counterintuitive, but it works.  Usually a property offered at 3% CBB has a catch: busted properties, functional obsolescence, undesirable locations, or what have you.  In cases like this, the catch is that the seller wants top-market offers from well qualified buyers!  When the payday for a buyer's agent is higher than normal -- and furthermore that you are selling in a high priced neighborhood -- the incentive to get that contract becomes very high.  A good agent will push that property very hard.

As a side effect, buyer agents on my 3% CBB listings have bent over backwards to ensure that the transaction goes smoothly.  No muss, no fuss.  Only kindness, courtesy, and very well-qualified buyers who go along with my seller-friendly yet perfectly reasonable terms.

I recently sold a property in a neighborhood with historically low turnover.  As a complete fluke, there were more concurrent listings when we needed to sell than at any point since the crash.  Another property with the exact same layout, and also remodeled to a similar value of my own property, was listed at 5% lower than my own intended sales price.  Ouch.

And so I offered 3% for that property as compared to 2.5% elsewhere.  I sold at my target price to a fantastic buyer, and closed faster than the property down the street.  Cash value: I paid out an extra $4,000 in order to get $20,000 more than the other guy.  I'll call that a win.

Consider that as an extra tool in your chest, @Steven C. Suarez.  It may or may not be right for you, but it might be worth your while.  Chat with your Realtors and see what they think.

This.  One of the best pieces of advice I can offer to a new investor is to take Accounting 101 at the community college and pay attention.  The college in my area offers a follow-up class, Accounting for QuickBooks.  It's been quite helpful to me.

For current or prospective licensees, Accounting 101 will count toward a real estate license.  Here in California, it's a prerequisite for the broker exam.

When I started with my family's fix-and-flip enterprise, we were the goose that laid golden eggs.  We bought with cash, had a real estate broker in-house, a contractor with 40 years experience, and sterling credit (when we needed it, which was almost never).

And even then it was a hard uphill battle.  We had a lot to learn, and it took years to surround ourselves with a worthy team: an honest and helpful escrow officer, an energized title officer (who was tremendously helpful when we started looking at trust deed sales), and specialty subcontractors who were actually worth a damn.

The beautiful people on HGTV surely went through the school of hard knocks themselves.  Even the proud and mighty Armando M. types work hard for a living.  Contrary to the radio commercials, this is NOT something one can do while binging on Cheetos and Netflix.

Come with imagination, creativity, and a hard work ethic.  Those without these qualities probably won't even gather all of the resources necessary to be in this business anyhow.

Great post, @Wendell De Guzman

I can't speak for the Frisco market (I don't even have a Twitter account!) but here in San Diego County, about two-thirds of the buyers on my listings are retirees of one stripe or another. This includes relatively young military retirees buying with a VA loan.

It sucks for working class people, but nobody is forcing them to stay in places where jobs don't accommodate them well, like San Jose or Honolulu.  There are plenty of places to live where one can find good pay, affordable homes, and a very decent lifestyle.  One should never expect--nor believe that they deserve--to live in Paradise Town. 

And if there comes a day when my reach exceeds my grasp, better opportunities are a U-Haul rental away.

Oceanside is indeed your ticket.  Specifically, check out the San Luis Rey neighborhood, zip code 92057.  I love fixers, and I love this neighborhood.  Most houses were built between 1960 and 1990, and many unlock a lot of value with a bit of TLC.  As for proximity to the beach, CA 76 makes getting there easy.

Happy hunting!

edit: For disclosure, I have listings in this area from time to time.

I'll throw out a devil's advocate notion conditionally in favor of turnkey properties and positive opportunity cost.

It's well-known that if you buy a turnkey property (and is indeed in good condition) then you can get a renter into that property and begin to cashflow sooner rather than later.

Consider also the intrinsic value of the property.  Here's a video by Phil P* that describes the concept in detail: in short, the intrinsic value is the sum total of the costs of building or replacing a property.  The number will vary from one location to another, but suppose for the sake of argument that in your target area, the cost to build new is at or around $100/sq.ft.  If you are able to consistently buy turnkey properties at below this value, then you have a good value -- especially if you have reason to believe that local prices are likely to go up (new employment coming to the area, Main Street restorations, or other identifiable trends).

The area I buy in has turnkey properties at $40-60/sq.ft and the local cost to build is at roughly $100/sq.ft.  I am uncertain about any organic source of appreciation -- the local economy is a bit stagnant -- however the cashflow is good.  And so I remain confident in my decision to buy when everything pencils out.

Turning to the pitfalls of buying turnkey properties however, please understand that these require the same levels of due diligence that a BRRR property does. Starting out as an absentee landlord and relying on the word of a self-interested and distant real estate agent and his lazy brother-in-law home inspector will get you in a heap of trouble. Do the right thing, protect yourself, and assume nothing regardless of what kind of property you intend to buy.

Good luck @Account Closed!

*edit: Linking to a Phil P video is not an endorsement of his service.  I just like good information whatever its source.

@Rosston Smith

I don't know about you brother, but for me doing landscaping is pretty zen! :)

It's important to know one's own limitations and choose battles wisely.  Aside from items that are well outside my expertise and/or credentials (granite, termite remediation) I cannot, for example, make DIY carpet installation pencil out better than a professional contractor.  I could do carpet if I really had to, but it's awful work and takes up too much friggin time to be worthwhile!

I read the comments section of the article and it amounted to half of the people screaming about scams and the other half shilling for the companies named in the article.

Is it too good to be true?  Dunno.  If it's all good and fine, then sign me up for a deconstruct-and-rebuild for every house in La Jolla...

Dear BP members:

If you need help learning the basics of fix and flip real estate, please keep reading this website.  Ask lots of questions and this wonderful community will help you increase your knowledge base.

If you have a few thousand extra dollars and need help learning how to transact real estate, maximize your margins and secure the best financing available, then hire a Realtor with experience in trades and investment.  Ask lots of questions and learn all you can.

If you have a few thousand more dollars and need help learning how to do the literal nuts-and-bolts of home repair, then hire a contractor who is articulate, patient, and willing to mentor you.  Show up every day, ask lots of questions, and get your hands dirty.

Sometimes the best way to learn how to do something is to simply do it.

I've never once had any success arguing with an appraiser or trying to convince them of anything whatsoever.  Indeed, it's in their own interests to be 'right' and therefore more professional than your average Joe.  And it is also in their own interests to not allow the banks hired by them shower homeowners with cash like it's 2005.  

(Not saying that's what you're up to, but rather just trying to explain the other point of view.)

As an investment strategy, consider selling immediately if your refi doesn't work out.  If you did indeed buy well under market then you should be in a great position to cash out - and then some - at retail.