By Glenn Curtis

Many people assume that they can simply 1) buy a house, 2) apply a fresh coat of paint, 3) trim some bushes, and then 4) resell the home at a profit. Unfortunately, this process, called “flipping” is not that easy. After all, if it were, everyone would be doing it. There are several skills and people that every potential investor/flipper should have in place before even considering entering into a real estate transaction of this nature.

(If you’ve ever watched shows on HTGV or TLC on flipping houses, some of them make it look so easy, and it is just an unfair portrait to paint. First of all, you have to remember that the shows are filmed in the USA, where banking laws are much different, thus allowing for lower costs to the flipper. Also, building supplies are often much cheaper, thus allowing the flipper to make more money. Want a laugh? Google some of the ‘stars’ of those shows and see the trouble they are in.)

Here are the top five “must-haves” you’ll need to succeed in this endeavor.

1. A Group of Experts

While a house flipper can certainly go it alone, it will certainly help to retain individuals that are familiar with the legal, accounting and construction ramifications of flipping houses.

Flippers typically work against the clock, so they must renovate a home on budget and then turn it around and sell it before the financing costs eat up their profits. In any case, a bevy of experts including a real estate agent, a lawyer, a contractor or renovator, an accountant, a home inspector and an insurance agent can ensure that the work is completed in a timely and efficient manner.

2. A Handyman or Knack for Home Improvement

The house flippers that make the most money buying and selling homes tend to be handy people. That is, they have the ability to step in and lend a helping hand when time or money constraints kick in. Most flippers can do things like change a sink, install a countertop, do basic electrical or plumbing work, and/or shingle a roof.

Why is being handy so important?

The obvious answer is that if you can do the work yourself, you won’t have to pay someone to come in and do it. However, there are other advantages to being handy as well. For example, there are times when it will be impossible to get an electrician to install an attic fan on short notice. There are also times when a job must be completed without warning at the last second in order to obtain a certificate of occupancy. In these instances, having the ability to navigate your way around a tool box is very valuable.

3. A Good Lay of the Land

The buyer should know about the area in which they are buying property. A buyer should know, for example, what characteristics (acreage, number of rooms, type of home, etc) are the most desirable in the area in which they are looking to buy. Equally important is knowing what houses in the general vicinity have sold for and if there is likely to be any future development in the community (such as a new school, condominium or shopping center) as this could affect supply and demand.

4. A Good Estimator

By definition, house flippers attempt to buy a property and then resell it at a profit in relatively short order. In order to do this, however, the flipper must typically make some structural and/or cosmetic changes to make the property more appealing to the next buyer.

If the flipper underestimates the costs associated with the refurbishment he or she may be exposed to large monetary losses. Therefore, a flipper should be familiar with construction materials (their use and their cost), as well as local construction codes, the cost of local labor and the time it should take to do a given job.

This is no small feat. In fact, it takes even the most seasoned construction professional many years before he or she is aware of all the nuances that exist. In any case, before becoming involved in “flipping”, be certain of your abilities to estimate a job in terms of both cost and time.

5. A Dose of Patience

One of the biggest obstacles to making money in the real estate market is that buyers tend to overpay for a given property.

Why do buyers overpay?

Typically, buyers become emotionally attached to a property or develop some other bond with it, which in turn forces them to enter into a contract on less than favorable terms.

However, savvy flippers have the ability to avoid emotional purchases, and the desire to find diamonds in the rough and properties on the cheap. They also understand that if they aren’t buying a property at a favorable price and with favorable terms, it makes sense to simply move on to greener pastures.

The bad news is that patience is a difficult virtue to teach and hone. In general, either you have it or you’ll lose a lot of money trying to learn it.

The Bottom Line

While quitting your job and becoming a full-time house flipper may sound like an attractive proposition, be sure that you have these five “musts” before investing in a real estate project.

(There are many better and easier ways to make money through real estate investing – come to one of our FREE Millionaire Real Estate Investor workshops to learn about them. Click the link at the top-right of this blog to get information about when the next workshop is being held.)

In my recent update on the Milton Ontario real estate market, I made a comment that eluded to the thought that perhaps a house is sold too quickly when it is sold with multiple offers within 24 hours of it coming onto the market. I’m now going to elaborate on that thought for you.

As a Realtor, when working with a client, I have what is known as a fiduciary responsibility to my clients. The definition of fiduciary, as found on Wiki is:

“A fiduciary duty is the highest standard of care at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal”): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.”

One of the reasons that homeowners hire Realtors to sell their home is so that they can get fair market value for their home. According to the Ontario Real Estate Association, fair market value is determined when a willing, informed buyer and a willing, informed seller come to agreement after the property has been reasonably exposed to the marketplace. Yes, this is not an exact quote, however, this is the essence of the definition as drummed into every Realtor who is licensed in Ontario. Another thing that I am convinced that most Realtors never consider is that there is usually more than one buyer for a home, and it is the Realtor’s job to attract and negotiate an offer with the best buyer for that home.

I gotta ask you, how can 6 or 12 or 24 hours possibly be considered to be ‘reasonable exposure’ to the marketplace? I challenge any one of my colleagues to convince me, or a judge for that matter, that this is even remotely close to reasonable exposure! After all, people work, they go away on weekends, etc.

Don’t get me wrong, I know there are times when a seller wants the process finished immediately, however, they are few and far between. I have to believe that if the vast majority of sellers were advised that it would be good for their home to have 3, 4, or 5 days exposure to the market, they could still get multiple offers AND get more money. Realistically, how many people are going to turn away $5,000, $10,000 or more in exchange for keeping their home ‘showings-ready’ for an extra couple of days? Would you?

I’ve been saying for most of my career as a Realtor that one day, somewhere, sometime, some smart lawyer will launch a class action suit against the real estate industry over this matter, and I have to say that I would be fully supportive of such a suit.

I’m not naive, I know that waiting a couple of days for offers could cause some people to walk away; it could, but it’s not likely when there is a drastic shortage of inventory. Heck, this is the perfect time for sellers to wait and get more money; there just aren’t another 3 houses for them to choose from!

There have been a few articles in the Toronto Star recently, talking about multiple offers – here’s a snippet from those pieces:

• For sellers, bidding wars or multiple offers from buyers are a dream come true. Numerous bidding wars took place in the United States and in many parts of Canada before the economic meltdown of 2008, but for the most part, such widespread buying frenzies are no longer taking place. Yet even in today’s balanced market, bidding wars continue on specific properties in certain areas. Although we are seeing many examples of multiple offers, it does not necessarily mean buyers
  Routing Number VIRGINIA COMMERCE BANK

  are overpaying for properties.
  Read the entire article here
  

• Sellers or real estate agents lying through their teeth; opening up offers after the allowed time period. Those are just a couple of the allegations I have received via email following my recent articles on bidding wars.

  We are now seeing an increase in people entering the market at the same time as the number of homes for sale are going down. As a result, buyers need to be even more aware of some of the practical problems they will face when they choose to participate in a multiple-offer situation.

  Here are some situations that I’ve been told about:
  Read the entire article here

Please, don’t think I am against the real estate industry; I’m not, and wouldn’t be such an active participant in it if I did not believe in the great value that Realtors bring to the public. However, there certainly is room for cleaning up some areas of the industry, and I believe this is one of them.

What do you think?

Are you enjoying this wonderful Summer time of the year? Certainly, the folks who are taking advantage of the strength of the housing market to sell their home are enjoying it! Just look at this first chart, the Weeks of Supply & the Absorption Rate. Weeks of Supply means how many weeks it would take for all the houses to sell if the current rate of sales continued and no new listings came on the market. Absorption Rate is the percentage of available listings that sold in the time period. So, from a seller’s perspective, the lower the Weeks of Supply number is (currently it is 3 weeks) and the higher the Absorption Rate is in the Milton Ontario real estate market (which is currently 34.9%), the better it is for selling a home. Click the image to view it full-size.

A pretty powerful way to view what is happening in the local real estate market. If you’d like a longer-term view of what has been happening, see this recent post. And here’s a view of what has happened on a quarterly basis in the area covered by the Oakville-Milton Real Estate Board: Click the image to view full-size.

Now let’s look at the breakdown of the milton ontario real estate market numbers for the week ending July 31st, 2009.

First, the weekly summary of listings, solds and expired listings, by price range. This chart reveals a number of things to the casual observer, such as the most active price range for the week being the $300,000 to $325,000 range. In this range, virtually all of the available properties sold, with just one remaining on the market. Is your home in this range? Let’s get it on the market now and get you a fantastic price!

This chart also shows an average days to sell of 19, however, removing the couple of anomalies, that number becomes 6 days, from the time the listing was signed, through when the house gets onto the MLS and when all conditions are removed. SIX DAYS! That is extremely fast, perhaps too fast? Look for a follow-up post on this thought in the next couple of days. Removing those same anomalies also causes the average list-to-sell ratio to rise to 99.9%! Are houses perhaps being listed at too low of a price? Just a thought.

The next chart shows the Annual Summary of Total Market Activity for the Milton Ontario real estate market. Compare the averages down each column for an historical perspective.

Seeing the number of sales in milton ontario for the week jump by 60% over the previous week could lead one to conclude that people are listening to the warnings of interest rates going up. It could lead to that conclusion, I’m not saying that is the cause.

The final chart is included so you have a graphical representation of the ongoing activity - it’s easier to see the trend in a line-graph than to just see the numbers. Click the image to view full-size.

There is a lot more information and background conclusions that can be drawn from this data – if you are thinking of selling your milton ontario home, you need the complete picture of the real estate market. Call me, Chris Newell, at 905-208-7002 and we can set a time to discuss it.

One of the truest indicators of the health of a real estate market is the absorption rate. Simply put, the absorption rate is the numerical representation of the percentage of inventory that is being absorbed and the number of time-periods of supply there is presently on the market.

The information used to calculate the absorption rate is the number of available properties at the end of a time-period and the number of properties sold during that time-period.

As I track the market data only on a weekly basis, I am only, at this time, able to present the data in a weekly format. If I am able to gather the data, I will present a historical look at things in the future.

According to typical historical expectations, when calculating absorption rates on a monthly basis, a supply of 5 months or less is a Seller’s Market; a supply of between 5 and 7 months is a Balanced Market, and a supply of 7-plus months is a Buyer’s Market. In the Milton area over the last 10 months, we have, according to these measures, been in and out of a Balanced Market.

Here’s the chart:

Click the thumbnail above

Remember, the data above is presented with numbers pulled on a weekly basis. That means that, if no more homes came on the market, we would have no homes left for sale after 5 weeks. That won’t happen, but it sure is a good time to get your house on the market right now.

Call me @ 905-208-7002 to discuss how we can position your house in the marketplace.

I came across this article today, and it made me think abo u

t the real estate market locally – more specifically, how the market is in kind of a shambles because people have been buying into the messages from the mainstream media (msm) for far too long.

You see, the msm has spent the last 12 months talking about how everything is so bad, and how much worse things are going to get, and everybody listened. It reminds me of the politician who reports when gas prices are going to go up – they go up. What if he reported that gas prices are going to go down? Might they go down?

Anyway, my position on the real estate market has been, and still is, that people have to live somewhere, so why not buy a house? Prices have gone down, rates are crazy-low, and rents have gone up. Talk about three things to stop people from renting! Yet they have continued to hold off on buying a home.

The reasons given are varied:

1. Worry about job security. Well, as mentioned, if you have to live somewhere, and it is cheaper to own than to rent, why would you rent?
2. Prices are going to go down even more. Are they? They haven’t, and they’re not going to. Why? Because we are not the United States, our systems work very differently, and Canadian banks don’t want to own real estate.
3. If it is such a great time to buy, more people would be buying. Actually, the fact of the matter is that if there were more well-priced, well-maintained houses on the market, more people would be buying. There’s almost a herd-mentality amongst homebuyers – when everyone’s buying, it must be a good time to buy. Hmmm. The laws of supply and demand say the opposite, don’t they?
4. I’ve got 9 months left on my lease. Yes, and? What I mean by this is that there are all kinds of creative ways to buy now even if you are in a 1-year lease for another 364 days. Call me for details – there are lots of ways to take advantage of the rates and prices before they go up (which they will once everyone else starts buying).
5. I don’t have enough of a downpayment saved. Well, what is ‘enough’? You can still get 100% financing; you can still get cash-back. I’m telling you, times are perfect to buy!

So, are you going to just sit back and wait? Wait for changes that won’t come? Wait until the home of your dreams is priced out of what you can afford because prices and/or rates have gone up?

Search on Twitter for GTA real estate agents – they are all saying the same thing: multiple offers. The sellers won’t sit back and wait for you – get into the market while it is to your BEST advantage.

Here’s the article that spurred my thinking:

The Bank of Canada is declaring the recession essentially over in Canada and projecting the economy will bounce back at least twice as strongly as in the United States.

The bank said today it estimates the Canadian economy will advance by 1.3% during the current July-September period, and 3% in the fourth quarter, both at annualized rates.

The bank’s quarterly monetary policy report contains many cautions about how the world and Canada is coming out of the deepest and most painful downturn since the Second World War.

The bank remains concerned that the fragile financial systems in the United States and Europe may contain more unpleasant surprises that will sideswipe the global economy once more, and it believes the strengthening loonie is not helpful given the Canada’s dependence on exports.

As well, it warns the recovery is at best nascent and dependent on massive government stimulus and historic low interest rates to support domestic activity and consumer spending.

But overall, the new outlook represents a clearly more optimistic view of the Canadian economy than governor Mark Carney presented in April, when he saw the contraction that began last October lasting at least until the fourth quarter of 2009, and the dip in the first month of this year breaking all records.

The Bank of Canada first indicated it was about to brighten its outlook on the economy on Tuesday in a statement accompanying the decision to keep short-term interest rates unchanged.

At that time, it said the economy would shrink by 2.3% this year—implying growth had already begun—and expand by 3% in 2010.

On Thursday it said that economic growth “is now projected to turn positive in the third quarter.”

Carney told reporters the recovery it will be a “gradual” process.

“Global economic activity appears to be nearing its trough, and there are increasing signs that activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system,” he said.

“However, this recovery is nascent, and to sustain global growth effective and resolute policy implementation remains critical.”

That effectively means that the downturn that cost Canadians close to 400,000 jobs since October has ended, although the recovery will be modest by historic standards.

The bigger bounce the bank is projecting starting this quarter does not change its overall view that it will take until mid-2011 for Canada’s economy to return to full capacity.