2. Knowledge Foundation
Books:
“Flip: How to Find, Fix and Sell Houses for Profit” by Rick
Villani
“Find It, Fix It, Flip It!: Make Millions in Real Estate-One
House at a Time” by Michael Corbett
TV Shows:
Flipping Boston
Property Brothers
Flip or Flop
3. Agenda
1. Part 1: How to Find the Right House
2. Part 2: How to Fix the Property
3. Part 3: How to Flip the Property for Profit
4. Part 4: New Local Flipping Fund
5. Where to Look: Neighborhoods
“Buy the worst house on the best block”
Target neighborhoods and become experts in them
Should be close to you for travel purposes
Definition of good neighborhood: Good schools, well-maintained front lawns,
garbage under control, low crime rate, 15-20% of homes recently fixed up, R-1
Zoning (single family, no apartment buildings), lots or real estate activity, more than
75% of sales to owner occupants, accessibility to stores and services, strong
homeowners association
Also try:
Fringe neighborhoods to good neighborhoods
Neighborhoods in Transition (New stores, renovation projects, etc.)
Older neighborhoods
Be wary of houses in newly developed cookie cutter communities (hard to make your
flip stand out and not enough to need big improvements)
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
6. Types of Houses
“Cosmetic
Fixer”
“Teardown
”
“Downright
Ugly
House”
Source: “Find It, Fix It, Flip It!”
• Structural problems that are beyond
repair economically (Foundations not on
slab or concrete, Major shifting, bad floor
plan requiring room addition, truss
damage to the roof, major fire damage,
illegal room additions)
• Geological Problems that you can’t
overcome (severe earthquake damage,
unstable hillside near house, slipping or
shifting due to soil erosion)
• Environmental problems to run from
(asbestos ducting, mold, faulty septic
system or long sewer line to street, high
levels of radon)
• No curb appeal, but lots of potential
• Great bones
• Little or no landscape
• Maybe a few structural problems (i.e.
sagging foundation)
• Dark interiors with drapes/blinds
• Upgrades needed in house systems
• Dated kitchens/bathrooms
• Rotting subfloors
• Leaks in roof
• Lots of small rooms
•Just needs a bit of cleanup, paint,
landscape, redo the floors, scour
the kitchens/bath with new
appliances
Fix It
Find It
Flip It
New Fund
Flipper’s
Target
7. Doing the Search
MLS (Realtor Access Only):
Identify average price per sq. foot and
the range of prices for different houses
Check expired/canceled listing report
Days on market report – target houses
that have been on market for a while
Do a keyword search on relevant
keywords: “handyman special’, “needs
work/updating/TLC”, “Repair
allowance”, “Assumable”,
“Undervalue”, “Deal”, “As is”,
“Motivated Seller”, “VLB (Vacant on
lock box)”, “Estate sale”
Set up daily alerts (need to get before
others)
Other:
Searching in classifieds (such as
craigslist.org): Look for keywords like:
“Handyman special”, “Vacant”, “Motivated
seller”, “Must sell”, “As is”, “Needs work”,
“Fixer upper”, “Estate sale”, “Needs
updating”, “Great neighborhood”,
“Charming”
Search the Internet for “For Sale By
Owner” and then your city to see other
listing sites
Hit the streets and note down any vacant
or run down properties and look up the
property owner and contact information in
Tax Rolls/property tax records and
contact directly with letter or phone call
Fix It
Find It
Flip It
New Fund
Source: “Flip: How to Find, Fix and Sell Houses for Profit”
8. How to Choose the Right House
Calculate your Profit Up Front:
Estimated Final Flipped Price: _________
- Purchase Price of Home: _________
- Purchase Closing Costs: _________
- Estimated Fixit Costs: _________
- Carrying Costs: _________
- 10% Buffer: _________
- Sale Closing Costs: _________
- Capital Gains Tax: _________
End Profit: _________
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
9. Final Flipped Price
In order to figure out the final selling price follow four steps:
1. Pull the comps
Find similar houses in MLS that were: 1) sold recently (last 3-6 months),
2) same neighborhood, 3) same size (+- 500sf), 4) same age (+- 10
years), 5) same bed/bath (+- 1 bed/bath)
2. Drive the comps
Based on visual factors rate each comparable with +1 (better than ours),
-1 (worse than ours) or 0 (same).
3. Read the market
Future changes in housing prices
4. Check with experts
Average your comps to get an approximate $ per s.f. and
average selling price
Fix It
Find It
Flip It
New Fund
Source: “Flip: How to Find, Fix and Sell Houses for Profit”
10. Other Variables
Purchase Closing Costs:
Title insurance, inspection, survey, appraisal and documentation
Usually ~1.5% of purchase price
Carrying Costs:
Property taxes, insurance, utilities and maintenance costs
Usually ~1.5% of purchase price
Sale Closing Costs:
Real estate agent commissions, closing title, survey, appraisal, etc.
Usually ~7% of selling price
Profit:
Should be 10 to 20 percent of final selling price
Plus risk associated with rehab complexity (generally base 10% profit plus 1% for
each $5/s.f in improvement costs)
Fix It
Find It
Flip It
New Fund
Source: “Flip: How to Find, Fix and Sell Houses for Profit”
11. Tax & Legal Costs
Work with an Accountant:
Pocket up to $500,000 in profit tax free if married couple hold
your property for two years or more and it has been your primary
residence
Keep up to $250,000 tax free if you are single
Less or even no capital gains on $250-$500K if you move from
your primary residence before 2 years due to special
circumstances
Own home for a year and a day, capital gains rate goes down
Using Federal 1033 tax-deferred exchange program, sell a
property and roll your profit into the next one not matter how
short a time you’ve stayed there, and pay no tax on it
One business setup (i.e. LLC) for all your flips or new business
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Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
12. Your Dream Team
Key professionals needed:
Real estate agent
Lawyer
Accountant
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Find It
Flip It
New Fund
14. What to Fix?
Divide improvements into Must, Should and Could:
Must: Absolutely required to sell
Should: Usually flooring, countertops, trim, tile, lighting and paint
Could: Amenities, openings, room conversions, additions, layout changes
When choosing what improvements to make need to identify what
improvements are available in market and pricing constraints.
Each improvement can be done at different design levels: Basic, Standard,
Designer or Custom finish level (www.flipthebook.com)
Source: “Flip: How to Find, Fix and Sell Houses for Profit”
Fix It
Find It
Flip It
New Fund
15. Cost Approximations ($/sf)
Basic Standard Designer
Make-Hab $3 $5 $7
Rehab $12 $15 $18
Remodel $20 $25 $30
Restructure $35 $40 $45
Fix It
Find It
Flip It
New Fund
Source: “Flip: How to Find, Fix and Sell Houses for Profit”
16. Basic Areas of Improvement
Outside:
Curb appeal
Landscaping
Flowers
Front Door
Exterior painting
Pathways and driveways
Garage door
Outdoor lighting
Backyard & Grounds
Other Internal:
Kitchen
Master Bath and
Bathrooms
Floors
Walls & Ceilings
Painting
Internal Systems:
Electrical
Plumbing
Heating and
Air
Roof
Windows
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
17. Potential Lifestyle Upgrades
Bad flow
Underdeveloped living space
Worst view
Very little natural light
An unwelcome entrance
Undefined property lines
No security system
No backyard boundaries
Noise
Undeveloped structures
Hidden square feet
Bad kitchen layout
No outdoor living area
Cement yard
No income potential
Borderline neighborhood
Tiny master closets
No home office
Underutilized storage spaces
No privacy
Wasted yard space
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
18. Your Dream Team
General Contractor (licensed, insured and bonded)
Subcontractors (Electrical, landscape, plumber, roofer,
painter etc.)
Handyman (can work under GC license, otherwise you will
need to file with city for home owners permit yourself and get
work signed off)
Design (sometimes get free help from home improvement
stores)
Yourself (limit to demolition, cleanup, landscaping, spot
painting, wallpaper removal, change out switch faceplates,
replace door hardware; let other professionals do the rest)
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
19. Estimates & Contracts
Tips on estimates:
Difficult initially, then gets easier
Pay contractor based an hourly fee
for walk through if required
Call subcontractors
Interview three, pick one
If they don’t show up to interview or
not responsive, find someone else
Refer to Marshall & Swift guide
(www.marshallswift.com - $11 used
on Amazon)
Make sure contractor bids
include:
1. Line item bid of costs
2. Material and labor
breakdown
3. Materials detail
4. Any exclusions
5. Statement of insurance
and bonding
6. Debris removal
7. Completion time frame
8. Contractor payment terms
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Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
20. Budgeting & Scheduling
Budgeting Tips:
Create more refined budgets as you
go.
Initial at Big – 10% actual / 90%
guess,
Offer accepted - More refined, get
contractor/subcontractor input during
escrow close
Final – Take your offer accepted
budget and add an “Actual” column
to track variances and
overages/underages.
Update budget at least twice a
week
Scheduling Tips:
Plan ahead
Order materials ahead
Confirm your delivery
dates
Keep contractors in
sequence (use
HomeFixers 50 steps to
rehabbing a house:
www.flipthebook.com)
Only use in-stock materials
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
21. Design Tips: Key Principles
Keep it simple (traditional styles to not alienate anyone)
Stay consistent (same styles all rooms and
indoor/outdoor):
Cabinetry: same style and color throughout the house
Countertops: same styles in kitchen and bath
Carpet
Window treatments: same style in all bedrooms
Hardware: Door knobs and door hinges
Lighting
Keep it neutral
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
22. Design Tips: Lighting
Lots of natural light
Avoid window treatments (cost, less light)
Use dimmers (not just on/off)
Use halogen bulbs
Replace all switch plates, light switches and
electrical outlets
Fix It
Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
23. Design Tips: Painting
Type:
Flat: Walls, Celing, Stucco, Cement
Semi Gloss: Kitchen Walls, Bath Walls, Woodwork, Cabinets, Wood siding,
wood trim
Gloss: Doors
Ceilings: Always a shade of white, makes room look bigger
Interiors: Choose one base color of neutral tone, then choose one
shade darker and one shade lighter than base color. Most walls will be
painted lightest shade. Accent walls and adjoining rooms with one of
the two darker shades (for example kitchen in medium shade and living
room in darker shade).
Exteriors: Neutral earth tone base color for large surfaces such as
walls, contrasting but complementary color for trim and accent moldings.
Rich, strong third color for very select accent items such as front door
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Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
24. Design Tips: Floor Plans
Open floor plans
Adjust non-load bearing walls
Increase kitchen size if required
Bigger master bath if possible
Walk-in closets in master bedroom
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Find It
Flip It
New Fund
Source: “Find It, Fix It, Flip It!”
26. Staging
Adding furnishings to make visitors associate with home:
Gives buyers a visual blueprint of what life will be like
Makes empty space feel warm and inviting
Creates proportion in a big room through groupings
Makes a tiny room feel larger through right furniture
Showcases positive features and downplays negatives
Tips:
Keep classic and simple
Make more expensive then everyday home furniture
Bring your won, borrow from friends, second hand stores or hire a
professional stager
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Find It
Flip It
New Fund
28. Niyat
1. Help OC Mumineen start new businesses
2. Allow Mumineen with money in banks to earn
a return on the money while taking risk and
helping other Mumineen start businesses
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Find It
Flip It
New
Fund
29. Management Team
Management Team:
Mulla S. Takhtawala:
Engineering background
Experience managing $5M+ Masjid construction project
Mulla H. Kothari:
Business background
Real estate license/experience
Administrator:
M. Khambaty:
Business/financial analysis background
Landscape architecture construction experience
Construction Advisor:
Mulla T. Campwala:
Licensed general contractor
Multiple construction project experience
Fix It
Find It
Flip It
New
Fund
31. Starting Housing Search
Leverage realtors in Jamaat to help with housing
search:
A. Hussain
S. & R. Khambaty
A. Sabir
S. & S. Sikora
Possibly set 2 week proposal period then evaluate
alternatives
Focus on off MLS listings (“Worst house on best
block”)
Target Neighborhood: Corona, Ontario, Chino,
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Find It
Flip It
New
Fund
33. Sample #1: 1103 Francis ST #G
Condominium located in Ontario, CA (1,051 sf, 2 bed &
2 bath, built in 1980) – Listed at $111,000
Eventual Selling Price: $125 per s.f ($131,000)
Other Costs:
Purchase & Sale Closing Costs: $11,000
Carrying Costs: $1,500
Fixit Costs (need to confirm): $10,000
Potential Profit @ $10K: Max Offer of $98,000
Fix It
Find It
Flip It
New
Fund
Address Square Feet Selling Price $/sf
2321 Magnolia AV #14D
2125 Magnolia
Av2078 Mountain` Av
2220 Smoke Tree Ln
2033 Magnolia Av
2321 Magnolia Av #10d
2052 Mountain
Av1602 Mountain Av #F
1604 Mountain Av #9C
1046
1060
1200
1346
1060
1146
1200
1064
1064
$95,000
$102,000
$120,000
$150,000
$158,000
$160,000
$160,000
$163,000
$163,000
$91
$96
$100
$111
$149
$140
$133
$153
$153
Average 1132 $141,222 $125
34. Sample #2: 734 Saint Paul St.
Single family residence located in Pomona, CA (1,289 sf, 3 bed & 1
bath, built in 1949) – Listed at $161,200
Eventual Selling Price: $175 per s.f ($226,000)
Other Costs:
Purchase & Sale Closing Costs: $13,700
Carrying Costs: $2,400
Fixit Costs (need to confirm): $20,000
Potential Profit @ $20K: Max Offer of $170,000
if @$160,000 offer, potential profit = $30,000
= 15% return in 6-9 months (30% annualized)
Fix It
Find It
Flip It
New
Fund
Address Square Feet Selling Price $/sf
1429 Farrell AV
1321 Alvarado
ST1002 Colmar ST
980 Colmar ST
779 Saint Paul ST
954 Karesh AV
1002 Colmar ST
1356 Brewster DR
1076 Karesh AV
1533
1223
1223
1225
1084
1254
1223
1366
1254
$246,000
$197,000
$202,000
$205,000
$216,000
$218,000
$275,000
$230,000
$239,000
$160
$161
$165
$167
$199
$174
$225
$168
$191
Average 1297 $227,300 $175
35. Terms & Conditions
Use existing LLC
50/50 Profit split between investors & management team
Referred to as norm in reference books
Expenses paid for management team but no salary
All decision making with management team
Investors are silent partners
One flip at a time, then dissolve
Minimum $20,000, no max. Profit payout based on % of
fund.
Target Min. Fund: $200,000
Monthly feedback meetings for investors on progress
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Flip It
New
Fund
36. Discussion Topics
Using realtors (terms & conditions)
Investment amounts
Investor say-so
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New
Fund