Good bread, good meat...

Every once in a while, I need to wander off on a tangent. Tonight, while driving back from the initial meeting for volunteers at the NHL All-Star Game, I drove by Fat Matt's Rib Shack (and let's not forget the Chicken Shack next door). So... I got to thinking about some of the great places I have been lucky enough to eat at here in Atlanta. I know it isn't about real estate, but we live here... and we have to eat... and if we are going to eat, we should eat well.

I guess I should start with Fat Matt's. This is a legendary stop in Atlanta. Aside from ribs that are known throughout the South, there is live blues seven nights a week. The last time I stopped in, there was a tour bus parked outside. As a blues neophyte, I couldn't tell you who the musician was, but one of my guests was just about beside himself that a legend would bring his bus up from New Orleans for a one night engagement in a rib joint. Don't let the look fool you... this place rocks... er blues... whatever.

The chicken next door is also quite amazing. That would be Fat Matt's Chicken Shack. No live blues (that I know of), but BBQ chicken for lunch is certainly a treat.

The next one on the list is actually gone now. For decades there was a place in Atlanta called Deacon Burton's Soul Food Grill. It was the very definition of Southern Cuisine. Deacon Burton passed away a few years ago, and there was a lot of drama involving the restaurant. Born of the drama is a place called Son's Place. I have not been there, but I hear it is across the street and has faithfully captured the experience. The reviews are good as well.

As long as we are on Southern foods, let's hit another BBQ place. This one is right around the corner from me. Spiced Right Bar-B-Q in Lilburn, GA. It is good sweet BBQ. Again, it isn't fancy, but that doesn't mean it isn't good. They have half a dozen different sauces, and they are all good. On my last visit, I enjoyed the brisket... and some pulled pork... and some chicken. Ok, I had some rolls, too.

Finally, not too far away is a DeKalb County tradition... but it's pretty close to Gwinnett County as well. Matthew's Cafeteria in Tucker is a favorite destination for locals at lunchtime. Like Son's Place, they are a "meat and three" place (for those that aren't familiar, that would be meat and three vegetables or sides). Swinging by around lunch, and the lot is plugged with police cars, while there is a steady stream of traffic from Cofer Bros. Lumber across the street.

If you are an Atlanta local, especially around Gwinnett County, I hope that you have a few new ideas for lunch or dinner in the next couple of weeks. If you don't live in Atlanta, drop in for a visit. Buy a house. I'll even take you to lunch...

Thanksgiving and parades...

I've been watching some of the NBC and CBS coverage of the Macy's Thanksgiving Day Parade. My wife is a (semi)reformed band geek, so she wanted to see the parade. Also, since WCC (World's Cutest Child) likes parades, we had a triple reason to tune in (1 for the wife, and 2 for the kid).

So, we tuned in, looking forward to seeing some floats and some bands. But, what do we get? Broadway show tunes and promos for upcoming NBC shows... Maybe CBS will have some of the actual parade... Nope. Instead, the cast of CBS's Daytime programming just "drop by" for a chat... between musicians promoting their new albums.

So, for both of the broadcasts of the parade, all they did was self-promote and show commercial acts. Stephenson High School from Stone Mountain got about 10 seconds on CBS. I think they got almost 20 seconds on NBC... just enough to say who they were... and hear a VERY short clip of music.

I think that both of these networks have forgotten what the parade is about. While one could certainly argue that it isn't a non-commercial event... sponsored and even owned by Macy's... it isn't PURELY a commercial event. It is a Holiday Event. Don't the kids that raised thousands of dollars to travel to the parade to perform, because they thought it would be an honor, deserve more than a passing mention on the way to professional performers that are their to promote their latest product?

One thing that was mentioned on CBS in their short mention of the Stephenson High School Marching Band is that the graduating Seniors have garnered $10,000,000 in musical scholarships for college. If they read the teleprompter right... all I can say is WOW! Congrats to the Stephenson High School Marching Band for getting to the Macy's Thanksgiving Day Parade AND The Rose Parade.

Get 10% off at Lowe's!

If so, I have a deal for you.

Sign up for my email list, and I'll send you a 10% discount coupon for Lowe's.

It's that easy. Seriously. Ok, it does mean that you have to give me your address, and your real email address, but here is what I can promise in return...

• I will NOT sell your information.
  
• I will NOT give away your information (except to Lowe's for the discount coupon).
• I will NOT trade your information.
  

This is what I plan to do once you give me your information:

• I will send the discount coupon.
• I will send occasional emails (I promise that I won't send anything more than a couple times a month... normally just once a month)
• I will give you updates on big things happening on my website.
• I will send you an occasional postcard or other piece of mail (again, once per month maximum).

Here is why I want to do this:

• I want your business.
• I want to keep my name in front of you, so that when you buy and/or sell a home in this area, you will think of me to assist you.
• I want you to think of me for a referral if you know someone buying and/or selling a property in another area.
• I want you to think of me if you know of someone else that is buying or selling a property here.

Here is what I ask:

• Please be thinking of buying or selling a property in Gwinnett or the surrounding area in the next six months or so.
• Consider me to be the real estate agent to help you with the transaction(s). This doesn't mean you are required to, it just means that you will give me a shot.
• Please don't be represented by another agent.

And, if you think that is all I want to offer, please think again...

• Client Gateway (for Buyers and Sellers)
• New Methods
• Performance history
• Real Pricing (Absorption Rate Pricing Analysis - for Buyer and Sellers)
  
• Appropriate Promotion (not just MLS and pray - for Sellers)
  
• Access to the right Presentation (We'll get you staged and ready to sell - for Sellers)

I look forward to hearing from you. I'd love to give away a bunch of these certificates.

Open Property Search for Gwinnett County, GA and surrounding

I've gone and done it now... I opened up the search capability on my website. Search the MLS without having to register or give up your private information.

As long as there have been real estate agents, we have been gatekeepers of information. In the early days, agents and brokers held their own listings. They wouldn't even share them with other agents and brokers. Then, somebody figured out that other agents had listings, too... and they might be willing to all cooperate and share... and EVERYBODY would benefit. And so the Multiple Listing Service was born. It was real estate brokers in a specific area cooperating with each other and making all of their listings available to each other.

It was... "The Book." I can remember back in the 1980s (and the book goes back WAY before that) going to the agent's office to see "The Book." It was guarded, and seldom allowed out of the office. It was updated every week or three... depending on the market. But, agents guarded it like a treasure. The information was power...

And then came the listing computer. I remember this as well (no, I wasn't in the business. I was a buyer). One actually had to go to the office of the agent to look at "The Terminal." It was on an intranet, and tied into the MLS. Agents could only see it at the office, and there were still books, but the listings were updated daily, and somewhat searchable on "The Terminal." But, if a buyer wanted to have access to new listings, the agent had to pour over the machine each day or every few days to see what was updated.

Then came "The Website." Soon, the listings were available via IDX (this is a data exchange where the listings are sent to all of the brokers that want them). Because the internet was still not widely adopted, and the information was prized, the only way to access "The Website" was through a broker's site... with a password... that one got by giving up their information.

Now, the information is out there. We all have it. I have it on one of my websites as an IDX feed.

When I surf, I hate putting in my private information. I want to be anonymous until I desire to give up my information. I assume that most web surfers are like me. So, I decided that I needed to give the same anonymity to my surfers that I want when I am out on the web. The Golden Rule and all that.

There was a little reluctance from some of those that were entrenched with the "control of information", but they have caved... Search away.

If you wish to give me your information, I'll be happy to put you on my email list. Or, you can get my RSS feed from my blog, confident that I am still in the dark as to your identity. If you want to look through my site and search the listings and then use another agent for the transaction, that's ok. I hope that you decide that I should represent you.

Enjoy.

Oh yeah... You can do the search through ANY of my websites. LaneGetsResults, LaneBailey, GarageHomesUSA or directly.

Can we ease the water shortage?

It looks like there is an idea to do just that.

If the US Fish and Wildlife Service signs off, the water coming off Lake Lanier could be dramatically cut. Right now, we have about 79 days left. If this plan goes through, there would be a reduction in the Apalachicola River of about 10%, but the outflow from Lanier could be cut more than that... maybe even more than a year.

So, we'll see what this does for the drought situation. Of course part of the problem is that the USFWS hasn't decided when they'll decide... Of course, it isn't like there is some sort of clock dripping... I mean ticking in the background.

Here is a great blog with sources and further info regarding our wonderful water situation here. I'll also keep posting as I get new info.

Client Gateway for Buyers... a cool bonus.

One of the great features I offer to buyers is the Client Gateway. If you aren't familiar, it is a custom private webpage that lists all of the properties that meet the criteria we decide on. As new listings are entered into the MLS, they show up in the Client Gateway the next morning.

The example shown is a Gateway that I have set up to keep an eye on new listings of homes with 4 or more car garages in Gwinnett County, GA.

A great feature of the Client Gateway is the ability to organize the properties. While reviewing the properties in the Gateway, one can select "Like", "Possibility" or "Dislike". Properties that are shuffled to "Dislike" drop from the front of the site. Those labeled otherwise will have a bar showing that status. They can be arranged by price, age, number of bedrooms, subdivision or city name.

While surfing in the properties, aside from being able to class them, one may also map them, email them to a friend or family member, make notes or send a message to me about the property.

We've long had the ability to send clients listings as they came on the MLS, but this is a MUCH better way than the old email system. Under the old email system, each day there would be a new email. If one liked one of the listings, then they couldn't delete the mail, or they needed to print out the listing for filing. Now, they are much easier to organize and retrieve.

The Client Gateway is just another great service I offer my buyers. If you are interested in having a Client Gateway to track properties you may be interested in buying, let me know. I'm happy to set one up for you while we work together. I look forward to hearing from you. Drop in to my website and send me a message.

Abandon all hope, Ye who enter Atlanta's roads on Halloween...

Tomorrow is Halloween. Don't drive. Seriously, the scariest thing in Atlanta tomorrow will be the traffic.

It won't be bad in the morning, but coming home will NOT be fun. After about 2:00, until around 9:00, the highways and side streets will be crazy. It won't just be the little pirates and ghosts running around collecting candy, either. It is the same every year.

There are the adult parties, the kid parties, the trick or treating and then that special something else... people go nuts.

Mark my words. Take off early (I'm thinking just before lunch) and go home. Dress your little goblin (take that whatever way you want), and then kick back and throw some candy around. Don't even try to go out for a pizza if you don't have to.

Be safe out there...

On droughts and mussels

Ok, we have hit the point where one has to live under a rock to not have heard about the drought in the Southeast. It is a real problem. But there are a few things that don't seem to be getting the play that they should.

• The Army Corps of Engineers is releasing water from Lake Lanier in order to "preserve" a pair of specific species of mussel that lives in the Apalachiacola River delta in Florida.
  
• Alabama doesn't even have a mechanism in place for statewide water restrictions... much less an implementation of water restrictions. GA has been under restrictions for most of the last several years.
• The Army CoE "accidentally" released an extra 22 billion gallons of water due to a faulty gauge this past spring. That is enough to provide the Atlanta metro with water for a month and a half.
  
• If there wasn't a dam on the Chattahoochee River, there would be about half as much water flowing south.
  
• The largest water consumers in the area are a Pepsi Gatorade plant and a Coca-Cola syrup plant.
  

What it seems to be coming down to is that a species of mussel is more important to the Army CoE than the people they are supposed to be serving. Lake Lanier was formed by the Corps to serve the water needs of PEOPLE in the region. But, now those needs are secondary to a mussel that would be facing survival issues if the dam weren't in place. Furthermore, if Atlanta and north GA have to live under water restrictions, areas downstream that rely on the same source should also be under the same restrictions.

Calling one developer... you don't know who you are yet.

I must admit that I was a bit amazed at the reaction to my last post. On Active Rain, it received a Feature within an hour of being posted. It was also one of my most viewed and commented blog entires. I was shocked that the comments weren't closer to the "Are you nuts?" type.

So, just to get one step closer to reality, here is a compromise first step. Let's team up to build houses for a variety of car people. We're out there. There are at least as many of us as there are horse people, maybe even golf people. Ok, maybe there are more people that hit the links on a Saturday than there are building street rods, but you get my point. There are a LOT of folks out here in the world that love cars. Not only do they love cars, but they have more than two or three. Not only do they have more than two or three, but they like to work on them. For many car people, working on the car might involve a lot more than changing the oil in the driveway.

"What can we do with that little nugget, Lane?"

Let me derail you for a moment. Take a look at a couple of posts I tossed out previously.

• First, there is a post about specializing.
  
• Next up, I posted about unique selling propositions.
  
• Lastly, let me once again point out the NAR Buyer's Study saying that over-sized garages place behind only central air-conditioning on buyer's wish lists (sorry, I don't have an NAR link, but here is the post I made about it).

So, buyers want bigger garages, specialists thrive when generalists fail, and in order to sell in a weak climate a unique selling proposition is one of the key weapons. Builders are choking on inventory in many areas, but other spots are selling like hotcakes. Even in a relatively local area, one development can't keep up, and the next can't keep its head above water.

Of course, pricing is one of the things that can make a difference... but so is value. Building what others don't is one way of creating value. If it is building something desirable, it will separate the leader from the pack.

Instead of building houses and needing to give away TVs and 5%+ commissions, why not build something that will draw buyers. There are some unique (and relatively inexpensive) marketing opportunities. Also, the word of mouth could be amazing. Many people in the car culture community are involved in clubs, and word of a development that was geared towards them would spread like wildfire.

You just need the right type of agent to handle the process and get the ball rolling. Let's team up. Contact me for more info.

Let's build a subdivision that will have the buyers lining up... in their coolest cars.

Can I call a moving company for content?

I have taken a step. In a few weeks, I'll be making a big change in my real estate career. I'm not ready to announce it yet, but one of the parts is an all new website. Because of the HUGE amount of content I have created do to blogging... and blogging here, I have a LOT of content to put into a site. So, I decided to jump into the world of CMS. I finally was able to set up a test with Joomla, and I think I am really going to like this.

While I know that I probably should hire someone to handle my website, I'm not going to... :P

I will be hiring a designer to build a custom template, and possibly also to design a new logo and some other portions for the new business plan, I will remain the one responsible for content and implementation. Because I know that I will be updating and adding content frequently (if I migrate my blog to this platform, it will be updated almost daily), I know that I have to learn how to handle some of these responsibilities.

In the mean time, I just realized that I will be migrating a SERIOUS load of content. I have 125 blog posts here. Many of those posts are suitable as articles and content on my new site. That is a LOT of stuff to get set up and categorized on the new site.

Don't worry, updates and progress reports will appear here first.

Are you a first time home buyer willing to be on TV?

Every once in a while, we fall into an opportunity. Here is one if you qualify, and are selected.

There is a new program that is looking to film first time home-buyers as they visit homes, make a selection, and then offer for a house. Everyone gets a shot at their fifteen minutes of fame. Filming will be in Atlanta beginning next month and continuing in October.

Obviously, I can't guarantee that any particular person will be selected. But, if you are interested, and not currently working with a real estate agent, email me for details. The production company won't pay for your house, but they say that they will provide a "nice closing gift" for those selected.

I think it would be a lot of fun.

Real Estate Investing 202 - Buy and hold Strategies

Real Estate Investing 202

Digging a little deeper in Buy and Hold strategies

In Real Estate Investing 101, Part II, we covered buying and holding property for long term appreciation and wealth building. This is by no means a get rich quick scheme, but is one of the most proven ways to build wealth over time.

Finding an appropriate property

Just like with flipping, property is a required ingredient. In fact, the same sources will work for buy and hold strategies as for flipping. The primary difference is that buy and hold strategies are generally a little less stringent on cost control, as well as condition. One can be in the property for a little more money because there isn’t a short term margin to mind. REOs (bank owned property), pre-foreclosure, short sales, older homes needing updating and strong but ugly properties are still the best options.

Rental homes are more price sensitive for marketing. While a flip may be done at any price level, rentals are a bit more picky. While it certainly requires knowing the market, generally in the Atlanta area, the best options are in the $125k to $250k area. There are opportunities below that, as well as above, but the meat of the Single Family Residential (SFR) market will be around this range.

Under $125k- Pro- Just as with a flip, these properties are easier to carry when they aren’t producing. Con- Even with a generous appreciation, the actual cash value will not go up as much as with more expensive properties.

$125k to $250k- Pro- This is the most active area of the market. There are more renters available, so it may be easier to keep the property occupied. Con- This is the most active area of the market. There are more properties to compete against for the renters.

$350k to $500k- Pro- These are executive rentals, and usually the renters will be more mindful of the property. There are property owners that concentrate on this market because it is quite profitable and low hassle. Con- There are higher costs to carry the property when it isn’t rented, and it may require more expenditure between renters to update the property. The renters will be pickier about amenities, fixtures and finishes.

Over $1m- Pro- The rental rate to cost is usually higher because of the rarity for SFRs. Most of these properties will be commercial, which usually have longer leases and often don’t require the landlord to make the improvements of maintain the property. Con- For the SFR market, this is a rare rental. There certainly are some out there doing well, but they will be shorter term (usually) and require more and more expensive marketing to fill. For commercial properties here in Atlanta, one needs to be very careful because there is a LOT of available commercial space.

Putting together the numbers

As with the flipping article, I have an Excel spreadsheet to examine the deal more closely. It isn’t fancy, but it does help keep all of the important points front and center so that the details don’t get in the way of the big picture.

When filling out the spreadsheet, the light gray areas are for users to input information. The light green areas have calculated values. Remember, the more accurate the input information, the more accurate your profit analysis will be.

As with flipping, it is very important to know what the upfront costs will be, both for acquisition, but also for any required renovation. However, unlike flipping, if the investor wants to reduce costs, and has the needed skills, doing more work themselves, instead of hiring contractors can be more manageable. Most investors aren’t going to have a bunch of projects running at once. If one DOES plan to have a lot of project going at one time, or if one is not appropriately skilled, hiring contractors is a better plan.

On the linked worksheet, we can see that the fictional investor purchased a property for $200k. It needed a further $25k in renovations. After renovation, the unit has an expected rental of $2250/mo. and requires about $1800/mo. to carry. I factored vacant periods in, as well as needed maintenance through the use of set-asides and reserve funds. These are included in the monthly carrying costs. I specifically expect a 90% occupancy rate. That may be a bit high, but I also tried to balance that by under shooting the expected annual increase in value.

As we delve into the numbers, what we find is that the cash flow accounts for a total of over $550k over the thirty year period. Further, the property increases in value by over $300k. This means that if the property is held the full thirty year term, the mortgage would be paid, and the investor would have collected almost $1.1m over the thirty year term, after selling the property. Even after discounting the original total investment, there is still a profit of $800k.

But, the real magic is in the leveraging. In this example, the investor fronted less than $80,000 and ended up with over $1,000,000. If one actually spends a little more for a property that doesn’t need as much renovation at the beginning, one may have a better total return.

Putting together a good team

Any good investor needs partners. These are the people one needs to have available:

Real Estate Agent- A good agent will know what is on the market. The agent should be able to help minimize the initial costs, while making sure that the property is suitable for renting, and will be readily marketable for that purpose.

Rental Agent- Knowing what a given property can rent for is valuable information. Also having someone ready to market the property as soon as practical is valuable to cut down non-productive time.

Inspector- Spending a few hundred dollars for a good inspection is money well spent. Missing a failing HVAC system or a roof issue could cost thousands. Knowing that a particular siding or electrical has shown itself to be unreliable can also be very valuable. If one can find an inspector that will give good cost estimates of repairs and upgrades that need to be performed, one may be able to cut down on the number of contractors that need to be consulted prior to buying a property. The inspector can also provide invaluable insight into the long-term viability of the expensive systems in the property.

Mortgage Loan Broker- Unless one is going to owner/occupy the properties for a number of years at the beginning of ownership, one needs to work with a mortgage broker that understands investment loans. Structuring the loan appropriately for the investor can decrease the monthly costs, and increase the cash flow of the property.

Rental Marketing Strategies

The whole point of this exercise is to get the property rented and keep it that way. There are a few things to keep in mind to maximize the long term return, and minimize risk.

Hire a good rental agent. They are part of the team. A good agent will help get the right exposure for the property, as well as make recommendations that will make the house more marketable. These are specialists. Depending on the individual agency they are with, there may be a one-time fee or they may be a monthly percentage.

Stage the property. A vacant house makes it harder for renters to mentally move in, just like buyers. A few rooms that are well staged will really increase the value in the minds of renters, so it is generally well worth the cost. This is especially true for higher end homes, but may be the thing that tips the balance for ANY property. With rentals, this may be a real standout, as few rental properties are staged.

Set rent appropriately. To get, or more likely keep, a good renter, be flexible. A good renter can cost less money between rentals. If it is a longer term renter, there will be fewer vacant periods.

Be flexible on lease/purchase possibilities. I have heard that about 1 in 8 lease purchase sales actually close. If offering a lease purchase is what it takes to get a good renter, or to keep a good renter, remain open to the possibility. It may be well worth the risk that the property may sell. Also, if the buyer/renter would like some of the rent credited to down payment, most lenders require that only an amount above market rent be applicable to down payment. Usually this money is forfeited as earnest money if the sale doesn’t close.

Research. Plan. Prepare. Remember the old adage that it takes money to make money. This holds true in buying real estate to hold as well. Targeting the money is less important than in flipping, but spending it appropriately is still important. Also, understand your own market and your own limitations.

Answers to questions I can't answer

I've been asked a question about a particular area that I just couldn't answer. Ok, I could answer, but at the peril of losing my license. You know the questions.

Here is another tool in the arsenal I give to clients to find out before moving what the pitfalls and pluses are regarding specific areas.

City-Data.com

I've found that it is better than a lot of other forums. Of course there are people on there that are alarmists or apologists, just like any other member driven media, but if your clients are able to look past the extremists, they should be able to see some good information.

As a real estate agent, there are things that I can't do. One of the stickiest is called steering. Basically, this means that a client is only shown property in a certain area, or not shown property in a certain area because I think it would be more comfortable for the client. The reason that it can be sticky is, as a real estate agent, we are often asked by our buyers to only "show houses in _(insert racial/religious/cultural/ethnic/other group identity here)_ type of area" or "don't show me houses in ..." blah, blah, blah. You get the idea. If I comply with that request, based on the language of the request, I can lose my license. Can you find an agent that will do as you've asked, based on that or a similar conversation? Absolutely. But, it won't be me.

If a client asks me to show them homes in a particular subdivision or neighborhood, I CAN do that. But, the toughest question is "Can you find me a home in a family friendly subdivision?" It's tough because it is a technical violation of the ethics rules of the Georgia Real Estate Commission for me to used familial status as a determining factor in selecting homes to show. However, the way I would handle it is to ask questions... legal questions. The first one is"

What do you consider family friendly?

Based on that, we can find the right house. We can talk about schools, recreational opportunities, traffic flow, and other factors.

Luckily, there is no danger in telling me you want car friendly neighborhood. Neither car people, nor non-car people are protected groups... yet.

Local Real Estate Forum for Buyers, Sellers, Investors, FSBOs and others

You know, every once in a while, I have a "duh! Hello!" moment. Today was one of those days.

Back at the beginning of the year, one of my mortgage brokers and I built a forum on my website. Our goal was to provide an arena for buyers, sellers and investors to pose questions to others and to real estate professionals. We also wanted unrepresented sellers (FSBOs) to have a resource that they could use to get information about the selling process.

It took a lot of time, and when we jumped out of the gate, we figured out that getting traffic was going to be tough... and it has been. We've had some traffic, but not the level it needs. So, if you have questions, or comments, or want to share your experiences, feel free to drop in. Here is a link to the forum.

I've also decided to open the forum up to Gwinnett area neighborhoods (I'm actually open to other areas of the Atlanta metro, too). If your subdivision, or neighborhood would like to have a private and/or public forum area, let me know. I can set it up, and allow password only access to your area. Unapproved parties will not even see that the area is on the forum. It can be used to post news, minutes from HOA meetings, postings about neighborhood garage sales, etc. Of course, there is no fee, and I obviously can't make you use me as your real estate agent.

Take a look. If you have any questions, I'd love to hear them.

I called this one a month ago...

I just got today's REALTOR Magazine Online Daily Update. This was one of the stories that was featured. It is about how foreclosures are up. They make up 10% of the listings in CA, as opposed to 1.7% last year. But, at the same time, distressed properties aren't listed at much of a discount compared to other properties.

A month ago, I posted this update for part of my area. If you struggle through to the end, you'll see this passage:

Foreclosures will start to get more attractive if the lenders start to get realistic about the prices. I see many of these homes priced well above comparable homes plus needed renovation (even with free labor). Until the prices on these properties drop down low enough to allow rehabilitation, these properties won’t sell in any significant number. There are some that are selling, but not to experienced investors or “flippers”. A good example is a home selling at $175k in a subdivision that should net $185k - $200k. The property needed around $20k in renovations to bring it up to area standards, not including most labor. A possible $5k profit is not sufficient for an investor to consider the property. That limits its market to investor/occupants. As the number of foreclosed properties increases, these limited buyers will dry up.

Did I call this one?

When the REOs start dropping, they may start moving. Right now, the banks still think they can get the money out of them that they are into them for, despite the fact that they are over-priced and under-quality. I think when we see a bunch of the REOs start to get attractive, we'll see more balanced listings/solds ratios.

Cool Toys and Ideas for the Garage

Since I am an admitted garage guy, I obviously like the toys that go into a cool garage.

OK, the ultimate garage toy is a really cool ride. Street rods, sports cars, racers, Jeeps, 4x4s, even boats and other things are the ultimate garage accessories. But, what goes into make a cool garage aside from the rides?

If you are a builder, the lots of electrical outlets are the first order of business. Fabricators will often have several things going at the same time, and have various tools in various work stations around the garage. This would also include 220V outlets for welders and air compressors and plasma cutters. The next thing is closed storage. While shelves are a must, having closed shelving is MUCH better. Not only does everything look neater (because you can't see it) but it stays cleaner. All of the dust from grinding and working stay out of the shelving. Finally, EVERYTHING needs to be off the floor, or on rollers. This makes clean-up a much faster and more efficient process. Break out the air hose and blow it out.

For those that do heavy duty building, floor coatings like epoxy aren't that good. Welder slag and plasma slag will burn the coating and take it back to ugly. Tiles are not good for the same reasons, especially the plastic snap in tiles.

Light work/display/detailing garages go better with industrial coatings like epoxy. The snap tiles, like Racedeck are also great in these garages. It is still good to keep everything off of the floor for clean-up. The only real drawback of plastic tiles is that they don't do well with heavy loads like big tool boxes and jackstands. One cool thing I have seen done for jackstands is to weld a flat piece of metal to the bottom, and then coat it with Rhinolining. This cushions it for plastic tiles, and will keep the stands from scratching epoxies.

For a true display bay, go wild. Theme it. I ran across a house with a faux marble floor in the garage. Since the house looked like an Italian Villa, it fit perfectly. The Alfa-Romeos and Ferraris were quite at home with this setting. Similarly, I ran across a detached garage that looked like a 1950s service station. It had glass roll-up doors and fit the street rods perfectly. Lots of neon and chrome were there as well.

Tool storage is another area that we always need to go after. I have LOTS of tools. Aside from the big things (welder, band saw, plasma cutter, drill press, etc.) there are loads of sockets and hand tools, as well as small power tools. Keeping them organized and handy is always a challenge. These are great little racks for sockets other stuff and they can allow a lot of stuff to be in a small area, but still fully organized. Of course, there are lots of great boxes and other tool storage things that are good to have around. Aside from traditional boxes, going to full on tool cabinetry is a great way to make the garage look worthy of a high dollar race team. If given an unlimited budget, these are a great choice. Coming back down to earth, using several rolling boxes is a great alternative. This also makes it easier to move them around when needs change.

Whatever you do, make it work for you. You'll find that your garage can look better, hold more stuff, and increase the value of your home.

DeKalb County Limited Building Moratorium

I just received this from Jenna Graber, the DeKalb Association of REALTORS PR person. It was forwarded from the Greater Atlanta Home Builders Association. Quoted as follows:

On Tuesday, July 24, the DeKalb County Board of Commissioners adopted a 30-day moratorium on the issuance of certificates of appropriateness, land disturbance and building permits respectively for non-conforming multiple lots of record held in common ownership. The moratorium only impacts these properties and does not prevent a landowner from rezoning land. The county will seek to amend this process so newly created lots are not smaller than those currently allowed in the existing zoning ordinance. This measure was taken to address inf ill development in older communities where larger non-conforming lots were being subdivided to create multiple homes. According to Commissioner Jeff Radar, the County does not plan on extending the moratorium beyond 30-days. For a copy of the ordinance, please contact Leroy Sutton at 678-775-1473 or via email at lsutton@atlantahomebuilders.com or Chris Burke at cburke@atlantahomebuilders.com.

Chris Burke,
VP, Government Affairs

For those of you that weren't aware, there has been a lot of chatter and activity in DeKalb County about "infill." Infill is the increasing the number of homes in an area, either by building on previously unused areas in established subdivisions, or by breaking up a larger lot into smaller lots and increasing density. Of course, there are two sides to the coin. Those in favor of infill (especially builders and some residents with larger lots) cite that there is a shortage of housing closer in to town. They also point out the increased value of surrounding properties as newer (and often, bigger) homes come into the area. On the other side of the issue, many homeowners argue that services and infrastructure are already stretched in many areas. Increased load on water, sewer and roads devalue their property.

I can understand and appreciate both sides of the issue, and think it DOES merit closer inspection on an area by area basis. Some of the corridors that have had increased infill are well able to handle at least the traffic loads (I'm not going into the sewer to see how that is coming along). Other areas can't deal with the traffic they have, and increasing it would be VERY damaging. Further, some can't support more or bigger roads.

I'm telling you... The GARAGE is the "new Media Room"

Take a look...

The Chicago Tribune posted a story today about garages. Here are a couple of excerpts:

Home builders, remodelers and specialized garage-organization companies see that problem as an opportunity to sell you a solution. They have plenty, including more square footage and garage-themed cabinetry. You can even find a fridge specially built for the garage, so you can always have a cold drink at hand when you're working on your wheels.

Around some homes these days, the amount of space devoted to the garage is big, indeed. Three-car garages were included in 20 percent of new homes built in 2005, according to the National Association of Home Builders. Another 64 percent of new homes had two-car garages.

and

The garage on display in a Stanley Martin model home at Coles Run Manor in Manassas, Va., is packed with nearly as many fancy upgrades as the kitchen. Their "tricked out garage" option includes raised-diamond pattern rubber-like floor protectors; a work bench; storage cabinets; tool racks; slatted wall coverings that accommodate a variety of hooks and baskets for storage; ceiling-mounted bicycle hoists; and even a 20-inch, wall-mounted flat-screen TV. Buyers can choose elements a la carte or sign up for the full slate of options for $19,500.

finally

And who knew there even was such a thing as a refrigerator specially designed for the garage? Gladiator makes the Chillerator Garage Refrigerator, which is Energy Star rated for efficiency and is designed to handle the wide variations in temperature and humidity usually found in a garage.

The Freezerator, specially designed for garage use, allows you to turn the temperature in the freezer compartment down to ordinary refrigerator temperatures, to better accommodate your stockpile of beverages. Both come in an oh-so-manly diamond-plate metal finish.

See. I'm not crazy. I'm just ahead of the curve. There are a lot of us out there that appreciate a nice garage. What goes into a great space in the garage is often something that escapes the average real estate agent. Power consumption baffles them (what are those funny looking plugs for?). While a work triangle in the kitchen is pretty normal knowledge, the same type of work patterns in the garage only appear to people that, ta da... work in the garage.

Just like equestrian properties, or golf properties, or waterfront properties are most often best represented by those that understand them, so are garage properties.

Enjoy, and get out there and spin a wrench. It's GREAT therapy to work for a couple of hours and see something accomplished when it's over.

Do you have a Unique Selling Proposition?

I touched on this in another thread, but I think a lot of people thought it was actually about cars, so I am going to go into a little more depth, and be a little less cryptic. But, the main point of the thread was...

They are saying that they specialize in EVERYTHING. If one specializes in everything, they really mean that they specialize in nothing. I mean, really. How can you specialize in everything?

Now, let's tie this back to real estate.

Have you ever seen an ad that said "I specialize in Buyers and Sellers"? I guess that means that they will deal with anyone but lookers... But, isn't that what everyone else does? Are you truly a specialist if you think you do EVERYTHING? The short answer is NO. the long answer is No, you are a generalist.

Why not just say that you generalize in everything?

So, for agents, in order to separate you from the crowd, you have to separate yourself from the crowd. Was that repetitive? Take a look at the little house books (Hobbs/Herder calls them little house/little head books). Look at all of the agent pages. Almost everyone is using the same template. Almost everyone says the same thing. To look at one of those books, you would think that EVERY AGENT IN THE MARKET is #1 for integrity, service, and production. For the vast majority of agents, they put out nothing that makes them any different than any other agent. And, 20% of the agents out there do 80% of the deals. So, if what you offer is no different than what the next person offers, you are a commodity. There is only one way commodities can compete, and that is by being cheap. If you think all gasolines are the same, will you buy the more expensive one, or will you go across the street where it is ten cents cheaper? If you think your car runs better on Brand B, will you still buy it when it costs a little more? If the Kraft Mac & Cheese tastes the same as the Kroger store brand, will you pay 50% more for it? But, if you family says that the Kraft is better, you'll put that in the cart.

But, we tell prospects the same thing that all of our competitors say, and then we wonder why they put the cheaper agent, or the one that happens to be standing next to the Mac & Cheese, in the cart and list their home or buy their home with them.

But, we tell prospects the same thing that all of our competitors say, and then we wonder why they put the cheaper agent, or the one that happens to be standing next to the Mac & Cheese, in the cart and list their home or buy their home with them. Yes, I said it again on purpose.

Now, the next phase of this little game is this.

Why should someone buy the house that you just listed? If it is just like the 6 other houses just listed in the subdivision, the only way to compete is with price. If you do GREAT marketing to drive buyers to finding it, as soon as they visit, they will see that there are 6 other houses that look just the same. I guess you might be able to creatively route them through the neighborhood so that they don't see anything that is cheaper.

Instead, maybe it would be better to make the house different from the others. Proper staging may make it prettier. (yes, there were three different Atlanta stagers linked in the last sentence...) Having a kitchen that is just a little more modern and stylish or usable may set it apart. Or (my favorite) having a garage that is well laid out for a car person, with epoxied floor, and great cabinetry will also separate this house from the others in the subdivision.

BTW, if you are a builder in the Atlanta area, and want to set your small upscale community apart, contact me. I have a GREAT idea for you.

As always, I'd love to see your comments. Thank you so much.

Real Estate Investing 201

Digging a little deeper into Flipping

In Real Estate Investing 101, Part I, we covered buying a house to resell for a short term profit. In this lesson, we’re going to delve a little deeper into flipping, run a scenario, and examine ways to maximize profit, while minimizing risk and making it happen fast.

Finding an appropriate property

Obviously the first ingredient in a profitable flip is the property. Despite what one may see on TV, it takes a little while to find good candidates. The various types of properties that may make good flip candidates are foreclosures or REO (bank owned properties), fixer-uppers, older homes that need updating, and ugly properties that are otherwise in good shape. Cost is obviously important, but condition is also very important. Remember, not only will there be an expense for the repair, but there is also a cost to carry the property while the repairs are being done. For example, if Property A needs $20k in rehab, can be completed in 8 weeks, and will cost $2k/mo. to carry, it may be more attractive at $176k than Property B, which needs $50k in rehab, will require 16 weeks at $1500/mo. and is priced at $150k. This assumes that they would both be able to fetch the same price at the end of their renovation.

Homes may be in almost any price range. Condos may be purchased for as little as $40k, but sometimes there are opportunities with homes prices at $1M or more. In fact, the pricier homes have some advantages in some markets. Let’s cover a few price levels:

Under $100k – Pro- Cheap, easier to carry if it doesn’t sell as fast, possibly a larger market to sell into after completion. Con- Lots of competition bidding up the prices, requires tight control of expenses to be profitable, lots of market competition.

$200k to $400k – Pro- Fewer competitors bidding up prices, often a little larger pool of properties to pick from, usually higher margins. Con- Requires more capital, appropriate level of fixtures and finishes more important.

Over $700k – Pro- Often more generous margins, little competition, fewer buyers that will do work themselves, more fun to make (home theaters, high-end kitchens, etc.). Con- Bring your checkbook, higher level of capital needed, wrong finishes and fixtures will kill chances of a sale, tastes may be fickle.

Over course, you may have noticed that I left generous gaps. These are guidelines, and in different markets, the actual prices will need to be adjusted.

Putting together the numbers

I have an Excel spreadsheet that I will use to examine the transaction. It is available here. While it isn’t fancy, it does cover the information that we need in order to calculate the cost of the flip, and figure out what needs to happen in order to make a profit. There is nothing worse than getting into the flip, and finding out that you forgot something important, and you aren’t going to make money. Unlike a TV show, it is not very often that you can just raise your price in order to get your money back out of the deal.

When filling out the spreadsheet, the light gray areas are for users to input information. The light green areas have calculated values. Remember, the more accurate the input information, the more accurate your profit analysis will be.

The toughest and most important part is getting the right cost estimates for the renovations. The natural inclination is for these to be under-estimated. Many first time flippers plan on doing all or most of the work themselves. This isn’t a great long-term strategy, but there are advantages. The primary advantage is that the flipper increases the profit margin. However, the big danger is that flippers often under-value their own labor. Using painting as an example, painting the interior of a large home may require 20 gallons of paint. A professional painter may bid this job at $4000. The cost of paint would be approximately $600. A job like this might take 60 person/hours. Entering $600 for the cost of repainting the house does not place any value on the time involved in labor. So, even if the person flipping the property is planning on doing the work, they need to break out the labor for these tasks. More than one person flipping a property has spent hundreds of hours only to find that they $/hr were terribly low.

Putting together a team

A good flipper needs a good team. This is even more important if one plans to have more than one or two properties active at any given time. But, these are the people one needs to have available:

Real Estate Agent- A good agent will know what is on the market, and should be able to quickly determine what a good ARV (After Repair Value) for a given property will be. This agent will also know how to price the property to maximize return. That doesn’t always mean maximum price, those closing costs can add up, and if one’s capital is tied up, one can’t move to the next project.

Inspector- Spending a few hundred dollars for a good inspection is money well spent. Missing a failing HVAC system or a roof issue could cost thousands. Knowing that a particular siding or electrical has shown itself to be unreliable can also be very valuable. If one can find an inspector that will give good cost estimates of repairs and upgrades that need to be performed, one may be able to cut down on the number of contractors that need to be consulted prior to buying a property.

Contractors- These contacts can make or break a flip. If the work is good, fast, and appropriately priced it is well worth paying to have it done. Saving a few hundred dollars and spending a few thousand in carrying costs while you wait for a contractor that is behind schedule is not a good trade. Saving a few thousand, and then having to spend money to fix what wasn’t done well is also not a good trade… especially when you have to carry the property that much longer to get everything done.

Project Coordinator- If more than a couple of projects are running, having a person to help keep everything on track is vital. Even the best contractors will have people that need someone to make sure they are there on time, and doing the right work. Even the best flipper needs a second opinion, and someone to run errands or get the right materials.

Mortgage or Commercial Loan Broker- Carrying costs are another make or break expense. Having the capital to complete the project is a requirement. Being able to continually finance projects is also required. Most mortgage lenders (not brokers) don’t want to loan money to flippers without front loading. They make money by either carrying the loan, or charging up front fees. Since the goal is to NOT carry the property, they need to front load the fees. A good loan source can DRAMATICALLY lower your costs.

Selling strategies

In order to lower carrying costs, as well recapture capital for the next project, selling the property quickly is important. However, giving it away reduces the profit margin. There are a few things that can be done to help accomplish these conflicting goals.

Hire a good agent. They are part of the team. A good agent will help get the right exposure for the property, as well as make recommendations that will make the house more marketable. They will also have access to people that are in their team that will make the sale go more smoothly.

Stage the property. A vacant house makes it harder for buyers to mentally move in. A few rooms that are well staged will really increase the value in the minds of buyers, so it is generally well worth the cost. This is especially true for higher end homes, but may be the thing that tips the balance for ANY property.

Price it appropriately. Many experienced flippers will price a property 3%-5% below market in order to make it sell faster. This reduces “opportunity costs” and also lowers risk. Opportunity costs are the deals that one can’t pursue because their capital is tied up elsewhere. There is no risk after the property is sold.

Research. Plan. Prepare. Remember the old adage that it takes money to make money. This holds true in flipping real estate as well. But, it is vital that the money be appropriately targeted, well managed, and strictly controlled. This doesn’t mean that it shouldn’t be spent, but that it should be spent on the right things, and taking shortcuts may not be the best idea.