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

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

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

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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

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

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 Create an idea file for design Choose a builder/ contractor Sign a contract that works for you Know your role in construction Have a clear vision! Reality Check Know your soft costs Know your hard costs Factors that influence cost Know where to spend your money Partnership Agreements

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 Bathroom renovation (75-100%) Kitchen renovation ( 75 -100%) Interior Painting (50 -100 %) Exterior Painting (50 -100 %)

TEN AVERAGE ROI POTENTIALS Roof shingle replacement (50-80%) Furnace/heating system (50-80%) Basement renovation (50-80%) Recreation room addition (50 -75%) Installing a fireplace (50 -100 %) Flooring (50-75%) Construction a garage (50-75%) Window/door replacement (50-75%) Building a deck (50-75%) Central air conditioning (25-75%)

PARTNERSHIPS AGREEMENT 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

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 LUMP SUM Fixed Dollar number Turn-Key construction process Less unforeseen conditions (in contract) contractor takes all the risk and total control COST PLUS Proposed budget / working budget Books are open Owner has option to pay trades directly Management fee % Field Supervision $

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