Flip Seminar

I attended the Flip Seminar today.  The main speaker was Gene Rivers who is a KW agent / team leader / operating principal from Florida. Gene is the only presenter of this seminar and has had extensive experience flipping properties in his market.  He has met the authors of the book  and speaks highly of them.  The authors have participated in over 1000 flips in their market in Texas.  With all of this experience, they have systemitized the finding / analyzing / buying / fixing / selling process.  Gene indicated that one of the most amazing things about meeting the authors was that he realized how un-systemized his own process of flipping had been.  I agree with that sentiment – I have done several flips and this material brings the process into a easily reproducable whole.

The seminar started with a reference to a new law in WA state that requires any flipper to have a contractor’s license.  The discussion of this issue was tabled until after lunch and there is so much I want to say about it that I will move that subject into its own post.

We then started covering the material in the book.  The presentation is tightly connected to the book – indeed, each slide referenced the page number in the book that dealt with the information on the slide.  You can download many of the figures and lists that were presented from the Flip book website.  As I recommend reading the book, my notes will focus more on the pieces added from Gene’s explanations.

Flipping is essential to a community’s health.  There is a spectrum of homeowners – the level of maintenance goes from immaculate to none.  As time goes by, the deferred maintenance on the homes with no maintenance drags down the values of a neighborhood.  The depression of values can be bad enough that it drives out those that maintain their homes – these neighborhoods eventually become combat zones.  Flipping – buying for the purpose of fixing and seling – is the only process that rejuvenates these neighborhoods.  It increases property values, tax revenues, and keeps a community attractive to incoming homeowners.

Real estate agents have an advantage in flipping – they can more easily recover some of the costs of buying and selling because of their commissions.  Additionally, the commissions can be used as part of the downpayment.  A seller contribution to the downpayment is not acceptable to a bank financing the rest of the transaction.

The 80/20 rule tells us that 80% of the real esate business will be handled by 20% of the agents.  The rest of the agents should consider flipping as a way to supplement or earn a living.  It should be apparent that any agent that is doing the work to find people who want to buy or sell is going to also run into properties that are good flipping candidates.  Every one of these agents should invest when tney can and also cultivate a list of investors who can pick up these opportunities when the agent can’t (due to limited financing or time to manage the job).

We covered the book’s description of how to determine the profile of candidate properties – what kind of neighborhood and kind of house.  Schools are the biggest driver of desirability of a neighborhood, so pay attention to them when looking for a candidate.  The range of prices per square foot in a target neighborhood needs to be at least 30% to allow enough room to buy low, fix and still make a profit.

The FHA cap is the benchmark of affordability in any community.  Therefore, it would be a good price target for your After-Repair price of homes.  This allows the greatest number of buyers to be able to buy your flipped house (40% of the market is made up of first time home buyers).

A target neighborhood should have a turnover of more than 10% per year.  Additionally, the ratio of listed to sold houses in the neighborhood should be less than 20% – this results in a neighborhood inventory of less than 3 months.  For example, a candidate neighborhood of 500 homes would have more than 50 sales per year and currently have 10 listings or less.  Also, there should be some ‘pending’ sales – this shows that houses in the neighborhood are currently attractive to buyers.

The material covers ‘must do’, ‘should do’ and ‘can do’ types of work.  ‘Must do’ is those systems that make the house habitable and safe.  ‘Should do’ is work that brings the house upto market value.  ‘Can do’ is work that takes the house above market value – this is work that decreases profit because it does not result in more value than cost.  These types of work are discussed expansively in the book and lists that can be downloaded.

I highly recommend attending this seminar if it comes to a city near you!  Gene does a great job teaching it and the material definately will help you with your flips!