Blessed Are The Flexible (For They Shall Not Break) Today’s Agenda: 1. The Market is Changing! How? Why? So how do I flex now? 2. Getting Started A. Decide to at least take a serious look. It’s more than just reading these slides. What’s next? B. Action- It’s easier to steer a car that is moving. C. The Money or the Project: which comes first? 1
Today’s Agenda: Continued 3. Finding the Money A. Small Banks B. Private Investor “Sugar Daddy” C. What if I find a deal before I find the money? 4. Update on 1000 home challenge (program based projects compared to free form projects) 5. Update on GreenEarthEquities Lemonade Production
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The Market is Changing So how do I flex now? 1. Inventory is down. Way down. 2. REO’s are selling at or near asking price. 3. Usually with multiple offers. 4. Indicates confidence by investors and homebuyers. 5. They have seen enough success by GEE and others to overcome what the “sky is falling” message of the mainstream media. 3
The Market is Changing So how do I flex now? 6. 20-20 Hindsight says, “I wish I had bought up 5 to 10 cheap REO’s back in March when I could have..... No use crying over spilled milk. The questions now are: A. What can be learned? B. What to do now? C. Is this still a good idea?
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Lessons 1. Limit your intake of mainstream media. It will poison you into inaction and opportunities will pass. Remember what the current crop of “gurus” were saying 2 years ago. They were all wrong. Why trust your financial future to them now? Let’s re-evaluate the foundation principles of GreenEarthEquities Here are some slides from the first presentation. Do they still apply? 5
The Time Is Now There has never been a better time to invest in Real Estate. We have the inventory, the experience, the financing to buy, the financing to sell, the contractors, and the pent up demand of buyers. The only thing that could prevent our success would be our failure to act. The main thing that would cause that would be listening to mainstream media and negative friends. DONT DO IT! G r e e n E a r t h E q u i t i e s . C o m
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The Perfect Storm of Opportunity • Massive amount of inventory (cheap-REO) • Lowest Interest Rates in Years • Rents are Staying High • Craftsmen and Contractors are hungry • First Time Buyers Incentives. • Banks MUST sell. G r e e n E a r t h E q u i t i e s . C o m
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Why Be An Energy Wise House Flipper? • Make some money • Build and Preserve a Lifestyle • Save the Planet • Bless your Community • Feel good at the end of the day • All of the above G r e e n E a r t h E q u i t i e s . C o m
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Benefits of Energy Wise House Flipping • Works even if economy doesn’t recover! • Works even better if it does recover. • No Landlord headaches • Cash a check every 120 days • Do a good thing for the neighborhood and the planet.
G r e e n E a r t h E q u i t i e s . C o m
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Reasons that this works Now, in these times • Many foreclosures are available at 25-35% of 2006 prices
• 40 to 50% of todays fixed up ARV prices • Enough room to make a profit • We are adding Value. In America Value Added is rewarded with profit
•
No one else is doing it (this way) so our unique and desirable product has little competition G r e e n E a r t h E q u i t i e s . C o m
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This Unique Time Wont Last • Most of the ARM’s have already re-set • Another “wave” or two are still coming • Obama may force banks to modify loans • A creative person will always figure a way • But the factors are so perfect for this
opportunity, it makes NOW the time to act.
G r e e n E a r t h E q u i t i e s . C o m
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The System Is A Cookie Cutter • If we perfect and stick with the System • We will Stamp Out the Dough! • Stay away from Architectural Wonders • Stay away from Historical Homes • Stay in the Blue to stay in the Green • Control Your costs. Avoid hourly labor! G r e e n E a r t h E q u i t i e s . C o m
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The 5 Olympic Rings of Energy Wise Renovation • Buy It Right • Design It Right • Build It Right • Market It Right • Sell It Right • Pass thru all these rings and receive the Gold! G r e e n E a r t h E q u i t i e s . C o m
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Who do you want to be in this business? • • •
The Carpet and Paint & Make it a Rental guy,
• •
Who would you prefer to be?
OR The Energy Wise Renovator delivering The American Dream to a First Time Homeowner Who would you prefer buys that house on your street? G r e e n E a r t h E q u i t i e s . C o m
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Who do you want to be in this business? #2 • • • • • •
Homeownership improves the neighborhood And decreases our reliance on Saudi oil. Rentals speed a neighborhood’s decline Have you ever washed a rental car? Renting is our Exit Strategy of Last Resort (After Re-finance, of course)
G r e e n E a r t h E q u i t i e s . C o m
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Picking an Area And Specializing
• You will know the area best. • Save fuel, save time, save $ (very green) • You will start to build your own comps • After #1, All properties will appraise • You are improving the community • The neighbors will love you. G r e e n E a r t h E q u i t i e s . C o m
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Our 2 Clusters Are all within a 200 Yard radius.
GreenEarthEquities.Com
Projects Done & In the Pipeline
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Except #7. We’re starting a new Cluster
This helps on the comps and appraisals
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Tarpey North Cluster
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With this concentration we can actually raise the values in a neighborhood. Your Open House Brochure should do so much more than just feature that house. Why dont Realtors do this???
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Get the Customer Looking Ahead
Text
Get the Realtors Looking Ahead
6 Tarpey South Cluster
3
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How to Choose Your Neighborhood • Keep it Blue to Stay in the Green • Buy at 33 - 60% of the Median Home Price • Sell at 80 - 130% of Median Home Price • basis = Fresno Median $145,000 (Mar, 09) • First Time Buyers in this range are plentiful • Facilitate the American Dream G r e e n E a r t h E q u i t i e s . C o m
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Paychecks or Profits • For some, It’s time for a Paradigm Shift • Work for Paycheck, Stay Limited • Work for Profits, Remove all Limits • Paychecks used to have safety nets • Work for profits = No guarantees. G r e e n E a r t h E q u i t i e s . C o m
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Formula for Purchase Price • ARV = After Repair Value • MAO = Maximum Allowable Offer • MAO = ARV * .65 (or .70) - Repairs - Soft Costs
• Note: This is Maximum.
Offer less to
leave room to dance.
G r e e n E a r t h E q u i t i e s . C o m
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Ways to Offer • MAO formula - 10 or 20% • Asking price - 40% (for volume offers) • Look at property after dance begins (due diligence)
• Remember this is just the first step. • As much as 100% of the profit comes in the dance of negotiation
G r e e n E a r t h E q u i t i e s . C o m
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Exit Strategies,
Decide before you offer
• Retail Flip after Renovation.
Is FHA the
new Sub Prime?
• Wholesale Flip (Assignment) • BRRR Buy, Rehab, Rent, Refinance • Buy and Hold (rent) • RTO Rent to Own, Lease Option • Owner Finance to open a new pool of buyers.
G r e e n E a r t h E q u i t i e s . C o m
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Houses to Stay Away From, or discount Big • Busy Street • Commercial, Industrial next door • Two Bedrooms • One Bathroom • Unusable floor plan • War Zones, G r e e n E a r t h E q u i t i e s . C o m
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Houses to Stay Away From, or discount Big • Very small houses, under 900 sq ft. • Master Bedroom should be 12 x 12 • No garage, No off street is even worse • High tension power lines • Projects, Train Tracks, Freeway • Functionally Obsolete, Bad Floor Plans G r e e n E a r t h E q u i t i e s . C o m
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Float Like a Butterfly Sting Like a Bee • In and Out Quickly is the Safe Way to flip houses
• In and Out before the
market changes
radically
• 120 days from Own It to Sold It.
(COE to
COE) is a reasonable target.
• Turn the money. Do another one. 3 times a year. At least 2
G r e e n E a r t h E q u i t i e s . C o m
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Overcoming Inertia • Build The Plane In Flight • Ready, Fire, Aim! vs The Paralysis of Analysis
• The moving car is easier to steer. • Make an offer, it wont kill you. Get used to it.
• Accept an offer, you still have an out if you need it.
G r e e n E a r t h E q u i t i e s . C o m
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GEE Buying Strategy • Choose the area • Offer, offer... Dont get emotionally involved • Do your due diligence inspections • Home, Termite, & Sewer are minimum • Request the Haircut • Be prepared to walk away G r e e n E a r t h E q u i t i e s . C o m
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We are looking for Ugly Houses • The ones no one else wants • Too much work for them • They cant visualize the end result • There is less competition • More room for profit • If you have the right team G r e e n E a r t h E q u i t i e s . C o m
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How Ugly? • Board Ups & Broken windows • Burn Outs • Graffitti and other vandalism • Cant find the house for the weeds • Green Pools, Dry & Boarded over pools • Roof Leaks, & Mold G r e e n E a r t h E q u i t i e s . C o m
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So How does our strategy change with the market change? 1. Prices are up. We will pay more and sell for more. = Primarily a mental shift on what’s a good deal. 2. Still looking for ugly houses to leave the competition behind. 3. Fast turnaround is still important. 4. Flexibility on financing upon sale will become more important. 5. Beyond that, it’s the same. Principles dont change. 30
So How does our strategy change with the market change? 6. Developing a strategy near VA Hospital for 2 bedroom homes and 1 bath homes. (previously excluded) 7. Smaller homes with smaller budgets. Evaluating the Wow!, Done! And Energy Packages. What would you cut to stay in a budget? These smaller homes may be just what a disabled Vet needs. (Near the VA and Handicap accessible) Maybe a niche? 31
So How does our strategy change with the market change? My #1 strategy is still buy, renovate and sell rapidly. This will work even better as the market heads back up. We will gain some of the appreciation on the way. I am also beginning to consider holding certain choice properties for the ride up. I am also looking to sell with owner financing thru Lease Options, Carry backs, Wraparounds, etc. 32
So, How to get started: Decide and Act. (decisively) 1. Be sold on the concepts. 2. Believe in yourself. It’s America. You can do this. Set the plan of Action A. Find a Realtor B. Choose an Area C. Start Looking at houses. D. Require CMA’s from realtors (Comparative Market Analysis) E. Start looking for $Money F. Make Offers. G. All of the above, All this week. There is power and momentum in Massive Action. 33
34 G r e e n E a r t h E q u i t i e s . C o m
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34 G r e e n E a r t h E q u i t i e s . C o m
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34 G r e e n E a r t h E q u i t i e s . C o m
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Which comes first? And what if they accept my offer? 1. Initially, you will be talking about hypothetical deals with potential investors. 2. If you get an offer accepted and into escrow, you will be taken much more seriously. 3. If you still cant find the money, you have 17 days to back out. It doesn’t matter which shows up first, the money or the project. Either will hasten the other. 35
Solving the Money Issue if you have none. And no Credit. 1. Find an investor AKA SugarDaddy Many people are unhappy with their current investments. Do you know anyone who is happy? 2. Two ways to invest A. Guaranteed Interest Rate (10%) B. Share of the profit. (50-50 etc) They will invest with you based on your collateral and your confidence. Hard Money is also Available. 36
3 Lemons for this week t s (all typical) a l f o 1. A project that was sold may be falling apart due to buyer’s credit score and changing requirements.
w e s i n v o m Re e l s k e e w
2. We guessed that an illegal addition could be corrected, and we guessed wrong.... 3. An Inspector was unfamiliar with Mini Split technology so he shut down our job! (until we could educate him) 37