The Complete Guide to Flipping Properties

[Pages:241]THE COMPLETE GUIDE TO FLIPPING PROPERTIES

THE COMPLETE GUIDE TO FLIPPING PROPERTIES

Steve Berges

John Wiley & Sons, Inc.

Copyright ? 2004 by Steve Berges. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Berges, Steve, 1959? The complete guide to flipping properties / Steve Berges. p. cm. Includes index. ISBN 0-471-46331-0 ( pbk.) 1. Real estate business. I. Title.

HD1375.B429 2003 333.33--dc21

2003053493

Printed in the United States of America.

10 9 8 7 6 5 4 3 2 1

CONTENTS

Acknowledgments

ix

Chapter 1 Introduction

1

Background

2

Real Estate: A Sound Investment

4

Leverage: The OPM Principle

6

Economic Housing Outlook for the Next Decade

8

Chapter 2 Flipping Properties Defined

11

Three Primary Classes of Flippers

13

Scouts

13

Dealers

15

Retailers

17

Using Options To Flip Properties

19

Clearly Defined Objectives

20

Entry Strategy

22

Postentry Strategy

23

Exit Strategy

23

Chapter 3 The Value Play Strategy

25

Buy-and-Hold Strategy

26

The Value Play Strategy

29

The Value Play Selection Process

31

Property Location

33

Price Range

35

Physical Condition

35

Chapter 4 Ten Ways to Locate Properties

45

Real Estate Agents

45

Classified Advertising

49

Real Estate Publications

51

Local and National Web Sites

51

Real Estate Investment Clubs

54

Bank REOs

55

v

 Contents

Marketing

56

For Sale by Owners (FSBOs)

60

Vacant Properties

61

Foreclosures

62

Chapter 5 Valuation Methodologies

65

How to Know How Much Is Too Much

66

Valuation Methodologies

66

Replacement Cost Approach

66

Income Capitalization Approach

68

Sales Comparison Approach

70

Chapter 6 Financial Analysis

73

The Texas Two-Step

73

Multiply Your Efforts by 22

82

From Residential to Commercial

93

Chapter 7 Seven Steps of Successful Negotiations

111

The Psychology of Negotiating

111

Comprehensive Knowledge of Market

114

Degree of Seller's Motivation

115

Backdoor Exits

119

Concessions

121

The Red Herring Technique

122

The Money-Talks Approach

123

Chapter 8 Financing and Closing Considerations

127

Conventional Mortgages

127

Mortgage Brokers

129

Local Banks

130

Lines of Credit

131

Owner Financing

133

Partnerships

135

Your Business Plan

136

What Every Borrower Should Know about Credit Scores 137

Underwriting Guidelines

140

The Closing Process

142

Chapter 9 Assemble a Winning Team of Professionals

149

Scouts and/or Dealers

150

Office Manager

151

Property Rehab Manager

152

Local Lender or Mortgage Broker

153

vi

 Contents

Real Estate Attorney

153

Title Company

154

Real Estate Agents

155

Chapter 10 Three Keys to Maximizing Your Potential

157

Postentry Planning

157

Doing It Yourself versus Hiring It Out

159

Increasing Your Property's Marketability

163

Preplanning

163

Heightening Visibility through the MLS

164

Offering a Marketable Product

166

Competitive Pricing

167

Offering Incentives

167

Summary

168

Chapter 11 The Three Principles of Power

169

The Principle of Vision

172

The Principle of Passion

178

The Principle of Autonomy

180

Appendix A Property Inspection Checklist

183

Appendix B Owner and Subcontractor Agreement

195

Appendix C Sample Real Estate Forms

201

Appendix D Sample Personal Financial Statement

219

Appendix E

223

Appendix F symphony-

225

Index

227

vii

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