DAN AND NIKKI HALL

REAL ESTATE INVESTMENT FORUM 2011

HOW TO FLIP A HOUSE AND MAKE MONEY

• never as easy as it looks; nothing glamorous about it

WHAT YOU SEE ON TV IS NOT REAL!

REAL RISKS!• People don’t line up to sell you their

houses at 50% below market value• Requires considerable time (double

it) and money• The economy is capitulating and who

knows the effect that will have on the housing market

• You never hit your budget estimates

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THERE GOES THE BUDGET ESTIMATE!

GOT THE STOMACH?

• Secure financing BEFORE you look at houses

• Banks typically don’t finance construction costs

• Choose a specific neighbourhood and stick to it

• Line up your trades

THE BUY

• High margin - low risk?? Dream on....

• Margins typically greater in new builds than renos

• Don’t pay for someone else’s renovation. The worse the better!!

THE BUY……

•Competition is fierce •Competing with end-users who don’t have to factor profit, RE fees in their offer price•Review comparables, but don’t be fixated by them

INSERT PICTURE OF FISHLEIGH *

WALK AWAY RENEE...

• Unlike most of the rest of the world, Vancouver and Toronto remain hot Real Estate markets

• Don’t get caught up in it - stick to your price

THE BUILD

• Create something that adds value to the property and use it each time if you can….

BOXES AND SUCH

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VALUE PROPOSITION?

•You have to add value to differentiate yourself from the thousands of others doing this•Design, but don’t over design

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FLIPPING TODAY?

• Skyrocketing purchase prices

• Higher construction costs• Capital gains / HST / Tarion

/ Homeowner Protection Office (HPO)

NOW LET’S GET BUILDING!!

CONSTRUCTING YOUR INVESTMENT 101

1. Have a clear vision!2. Reality Check3. Know your soft costs4. Know your hard

costs5. Factors that

influence cost6. Know where to

spend your money 7. Partnership Agreements

8. Create an idea file for design

9. Choose a builder/ contractor

10. Sign a contract that works for you11. Know your role in

construction

HAVE A CLEAR VISION

Be clear about what you want to accomplish

PRE/DURING/POST CONSTRUCTION

NOT-SO-REALITY TV

• Beware - what you see on TV is NOT always real.

• Estimates are fluffed to fit the storyline.• Building is stressful – your house will be a mess,

it will always cost more than it does on TV. This isn’t television; this is reality, and it’s YOUR reality.

KNOW YOUR SOFT COSTS OF CONSTRUCTION

• Architectural and engineering• Permitting and planning • Design • Insurance and legal• Carrying costs (heat, hydro, mtg)• Potential furniture display/staging • Real Estate commission• Purchase price (down payment, mtg)• Land transfer• Property taxes• Management fees

5 MAJOR STAGES OF CONSTRUCTION HARD COSTS

FACTORS THAT CAN INFLUENCE COST

• Level of design – how difficult is it to build• Level of finishes• Revisions to the original plan• Unforeseen site conditions • Duration of construction: Time = Money

KNOW WHERE TO SPEND YOUR MONEY

TOP 4 ROI POTENTALS 1. Bathroom renovation (75-100%)2. Kitchen renovation ( 75 -100%)3. Interior Painting (50 -100 %)4. Exterior Painting (50 -100 %)

TEN AVERAGE ROI POTENTIALS

1. Roof shingle replacement (50-80%)2. Furnace/heating system (50-80%) 3. Basement renovation (50-80%) 4. Recreation room addition (50 -75%)5. Installing a fireplace (50 -100 %)6. Flooring (50-75%)7. Construction a garage (50-75%)8. Window/door replacement (50-75%)9. Building a deck (50-75%)10.Central air conditioning (25-75%)

• Make sure that all of your partnership agreements are in place prior to purchase or immediately thereafter

• Review title searches for all proposed purchases

• Eliminate all personal liability as best possible

• Always refer to legal counsel

PARTNERSHIPS AGREEMENT

CREATE AN IDEA FILE FOR YOUR DREAM HOUSE

• Clip ideas from magazines• Search international design blogs• Visit model homes & showrooms• Visit Home and Design Shows• Drive through neighbourhoods and take pictures• Watch design shows and take notes• Relax with a glass of wine, some

grid paper, a ruler and get creative with floor plans

CHOOSING A CONTRACTOR• Get multiple bids or quotes - 3 or more bids will give you a rough idea of the

going rate for your project• Remember that in the long run, cheaper

isn't always better• Get references and actually call on them

CHOOSING A CONTRACTOR

• Are they businesslike and professional? • Will the contractor be on the site him/herself ?• Are they licensed and insured?• Will they provide a written warranty?• What is their level of experience ?• Get a commitment on timeframe for the duration of construction.• What type of contract are they operating with?• CCDC Canadian Construction Document Committee (built by the Canadian building law)

TYPES OF CONTRACTS USED IN CONSTRUCTION

COST PLUS

• Proposed budget / working budget

• Books are open

• Owner has option to pay trades directly

• Management fee %

• Field Supervision $

LUMP SUM

• Fixed Dollar number

• Turn-Key construction process

• Less unforeseen conditions (in contract) contractor takes all the risk and total control

YOUR ROLE IN CONSTRUCTION

• Develop a trusting, working relationship with your contractor• Be available during the day to make decisions – this is important not to slow down the process!• Take the time to work through issues with your contractor – there are no problems, only solutions!

YOUR ROLE IN CONSTRUCTION

• Walk the construction site regularly and ask as many questions as you can.

• Be prepared for a lifestyle change throughout the duration of construction.

• Make sure to pay your contractor on time – ( We are not banks)

• Know your finishes and longlead items

KNOW YOUR FINISHES AND LONGLEAD ITEMS

TO DOWNLOAD A PDF COPY OF THIS PRESENTATION

Visit www.halldevelopments.com

Feel free to email us if you have any questions

dan@halldevelopments.com

nicolehall@rogers.com