1. Four Flippin’ Boxes Arizona Academy of Real Estate 9/12/12 Arizona Academy of Real Estate 9/12/12

2. Marty Boardman Owner and Chief Financial Officer of Rising Sun Capital Group, LLC – Gilbert, AZ, licensed Realtor since 2007 Real estate investor since 2002 and principal in over 250 single-family transactions in Arizona, Texas, Illinois and Wisconsin. Accredited instructor for the Arizona Department of Real Estate and national contributor to BiggerPockets.com real estate news website. Author of Fixing and Flipping Real Estate: Strategies for the Post-Boom Era (not completed). Husband to Linda and father to Allyson and Audrey. Owner and Chief Financial Officer of Rising Sun Capital Group, LLC – Gilbert, AZ, licensed Realtor since 2007 Real estate investor since 2002 and principal in over 250 single-family transactions in Arizona, Texas, Illinois and Wisconsin. Accredited instructor for the Arizona Department of Real Estate and national contributor to BiggerPockets.com real estate news website. Author of Fixing and Flipping Real Estate: Strategies for the Post-Boom Era (not completed). Husband to Linda and father to Allyson and Audrey.

3. Marty Boardman marty@risingsuncapitalgroup.com 602-319-5391 @martyboardman linkedin.com/in/martyboardman marty@risingsuncapitalgroup.com 602-319-5391 @martyboardman linkedin.com/in/martyboardman

4. Four Flippin’ Boxes

5. Choose Your Own Adventure No two rehabbers are the same. Successful rehabbers do have: –Drive to Succeed –Integrity to Build a Solid Brand –Discipline to Make Good Decisions –Mindset to Work Hard and Work SMART No two rehabbers are the same. Successful rehabbers do have: –Drive to Succeed –Integrity to Build a Solid Brand –Discipline to Make Good Decisions –Mindset to Work Hard and Work SMART

6. What to Expect from this Class This is NOT a plan for creating real estate wealth. This is a blueprint for developing your own plan. This is NOT a plan for creating real estate wealth. This is a blueprint for developing your own plan.

7. Begin with the End in Mind 1.What do you want? 2.1-3-5 year plan 3.Cash chunking 1.What do you want? 2.1-3-5 year plan 3.Cash chunking

8. “The problem is we are consistently inconsistent.” - Larry Martel – KPHO TV5 Reporter Box #1: Acquisition

9. Acquisition Topics 1.Strategy (Niche) 2.Analyzing Deals 3.Writing Offers 4.Common Mistakes 1.Strategy (Niche) 2.Analyzing Deals 3.Writing Offers 4.Common Mistakes

10. Strategy (Niche) Target Property Target Neighborhood Target Price Point Target Rehab Target Property Target Neighborhood Target Price Point Target Rehab

11. My Niche Single-Family detached homes only Minimum 3/2/2 Tile Roof – Stucco Exterior Valley-wide $120,000 - $350,000 acquisition price Light to advanced cosmetic rehab Single-Family detached homes only Minimum 3/2/2 Tile Roof – Stucco Exterior Valley-wide $120,000 - $350,000 acquisition price Light to advanced cosmetic rehab

12. Analyzing Deals Every investor has their own “rules” for evaluating a deal Most tools are built to help determine the investor’s Maximum Purchase Price (MPP) A common rule is The 70% Rule: MPP = (ARV * 70%) – Rehab Costs Most successful investors want something more detailed to help avoid potential losses Every investor has their own “rules” for evaluating a deal Most tools are built to help determine the investor’s Maximum Purchase Price (MPP) A common rule is The 70% Rule: MPP = (ARV * 70%) – Rehab Costs Most successful investors want something more detailed to help avoid potential losses

13. THE FLIP FORMULA MPP = ARV – Fixed Costs – Profit – Rehab Costs ARV is the conservative resale value Fixed Costs are all the fixed costs you incur Profit is your desired profit on the deal Rehab Costs are the costs to renovate MPP = ARV – Fixed Costs – Profit – Rehab Costs ARV is the conservative resale value Fixed Costs are all the fixed costs you incur Profit is your desired profit on the deal Rehab Costs are the costs to renovate

14. Example: 4708 E. Thunderhill MPP = ARV – Fixed Costs – Profit – Rehab Costs What is our MPP?

15. ESTIMATING ARV MPP = ARV – Fixed Costs – Profit – Rehab Costs

16. Estimating ARV Do it like an appraiser would Three approaches to analyze property value: 1.Sales Comparable Method 2.Income Method 3.Replacement Cost Method For residential property, stick with Sales Comparison Method Do it like an appraiser would Three approaches to analyze property value: 1.Sales Comparable Method 2.Income Method 3.Replacement Cost Method For residential property, stick with Sales Comparison Method

17. What Is Sales Comparison? Value based on what similar properties in the vicinity have sold for recently. Vicinity = Preferably same subdivision or ½ mile. Recently = Preferably past 3 months. Similar = Age, Style, Size, Condition, etc Value based on what similar properties in the vicinity have sold for recently. Vicinity = Preferably same subdivision or ½ mile. Recently = Preferably past 3 months. Similar = Age, Style, Size, Condition, etc

18. Here’s What I Know: 4 bedroom homes are more valuable than 3 bedroom homes to most buyers. 3 car garages are more valuable than 2 car garages to most buyers. Homes with pools are more valuable than homes without pools to most home buyers. Single-level homes are more valuable than two-level homes to most homebuyers. 4 bedroom homes are more valuable than 3 bedroom homes to most buyers. 3 car garages are more valuable than 2 car garages to most buyers. Homes with pools are more valuable than homes without pools to most home buyers. Single-level homes are more valuable than two-level homes to most homebuyers.

19. Here’s What Else I Know: Normal Sales -$112.38 $/SF Short Sales -$76.58 $/SF REOs -$78.42 $/SF *Source – Cromford Report, 9/12/12 Normal Sales -$112.38 $/SF Short Sales -$76.58 $/SF REOs -$78.42 $/SF *Source – Cromford Report, 9/12/12

20. Here’s What I Don’t Know: How much more value will a homebuyer and/or appraiser see in a property with these desirable features? How much more value will a homebuyer and/or appraiser see in a home that’s not a short sale or REO? How much more value will a homebuyer and/or appraiser see in a property with these desirable features? How much more value will a homebuyer and/or appraiser see in a home that’s not a short sale or REO?

21. Estimating ARV – An Inexact Science Lack of supply School District Family Busy Streets Barking Dogs Lack of supply School District Family Busy Streets Barking Dogs

22. Step 1: Specs on 4708 E. Thunderhill Year Built1993 ConditionExcellent Square Footage 1,951 Beds3 Baths2.5 Parking3 Car Garage PoolYes Levels2 SubdivisionDesert Breeze

23. Step 2: Find Comps

24. Valuation Adjustments: Thunderhill13402 38 th 13223 38 th Bighorn Year Built19931988 1993 ConditionExcellent Good Square Footage 1,9512,204 2,145 Beds344 4 Baths2.5 3 Parking3 car garage 2 car garage PoolYes No Levels2222 Step 3: Compare Specs

25. Step 4: Normalize Values & Average Adjusted Values: 13402 38th 13223 38th Bighorn SALE PRICE$285,000$300,000$242,000 $/SF$129.31$136.11$112.82 SF Difference:- 253 - 194 Adjustment$252,363$265,600$220,272 Average Value (ARV): $246,078 Low Value (ARV): $220,272 ARV Range

26. Step 5: Factoring Demand How many active listings for sale in the vicinity? How many active listings like this property are for sale (i.e. normal sale, 3 car garage, pool, excellent condition)? How many like listings are pending? How long were these listings active before they became pending? How many active listings for sale in the vicinity? How many active listings like this property are for sale (i.e. normal sale, 3 car garage, pool, excellent condition)? How many like listings are pending? How long were these listings active before they became pending?

27. Step 5: Factoring Demand (cont.) NO active listings for like properties in the entire zip code of 85044 Only one PENDING listing for like property in the entire zip code of 85044, $275,000 after 19 DOM NO active listings for like properties in the entire zip code of 85044 Only one PENDING listing for like property in the entire zip code of 85044, $275,000 after 19 DOM

28. Example: 4708 E. Thunderhill MPP = $270,000 (ARV) – Fixed Costs – Profit – Rehab Costs

29. ESTIMATING FIXED COSTS MPP = $270,000 – Fixed Costs – Profit – Rehab Costs

30. Categories of Fixed Costs  Purchase Costs  Inspection Costs  Closing Costs  Lender Fees  Purchase Costs  Inspection Costs  Closing Costs  Lender Fees  Selling Costs  Commissions  Closing Costs  Home Warranty  Termite Treatment  Selling Costs  Commissions  Closing Costs  Home Warranty  Termite Treatment  Holding Costs  Mortgage Payments  Property Taxes  Utilities  Insurance  Holding Costs  Mortgage Payments  Property Taxes  Utilities  Insurance

31. Marty’s Typical Fixed Costs PURCHASE COSTS: Inspection Fee155 Closing Costs1000 Lender Fee900 Total:2055 HOLDING COSTS: Mortgage Payments5400 Property Taxes600 Utilities450 Insurance300 Total:6750 SELLING COSTS: Commission to Buyer's Agent6750 Commission to Listing Agent4050 Closing Costs3400 Home Warranty400 Termite Treatment325 Total:14925 Total Fixed Costs:23730

32. DETERMINING PROFIT MPP = $270,000 – $23,730 – Profit – Rehab Costs

33. How Much Profit? Profit Trade-Off: –Too much, unlikely you’ll get the deal at your MPP –Too little, introduces risk and lowers your income Most investors tend towards 10-20% of resale price, with a minimum Marty’s Criteria: 10% of ARV, 15K Minimum Profit Trade-Off: –Too much, unlikely you’ll get the deal at your MPP –Too little, introduces risk and lowers your income Most investors tend towards 10-20% of resale price, with a minimum Marty’s Criteria: 10% of ARV, 15K Minimum

34. ESTIMATING REHAB COSTS MPP = $270,000 – $23,730 – $27,000 – Rehab Costs

35. Rehab Costs INTERIOR TradeTaskLaborMaterialsTotal DemoBasic cleanup100 200 ElectricalLights, Fans150600750 PlumbingKitchen Sink100 200 PaintWalls only14001001500 CabinetsRefinish9003001200 CountertopsGranite40015001900 FlooringClean carpet, tile in bathrooms300 600 HVACMaintenance1500 AppliancesInstall appliances20011001300 SuppliesBlinds, door hardware20011001300 CleaningHouse cleaning2000 StagingKitchen, master bath, pictures3000 INTERIOR TOTAL:440052009600 EXTERIOR TradeTaskLaborMaterialsTotal RoofRepair back patio200 400 PaintRepaint exterior14001001500 LandscapingCleanup, plant shrubs, trim3000 GaragePaint garage floor50175225 EXTERIOR TOTAL:19504752425 TOTAL:12025

36. PUTTING IT ALL TOGETHER MPP = $270,000 – $23,730 – $27,000 – $12,025

37. MPP For 4708 E. Thunderhill MPP = $270,000 – $23,730 – $27,000 – $12,025 MPP = $207,245 = 77% of ARV

38. MPP for 4708 E. Thunderhill Sales Price:$269,900 Acquisition Price:$200,000 Fixed Costs: Commissions$10,800 Mortgage Payments$ 5,100 Utilities/Insurance$ 700 Closing Costs$ 5,000 Rehab Costs:$14,700 Total Profit:$33,600 Sales Price:$269,900 Acquisition Price:$200,000 Fixed Costs: Commissions$10,800 Mortgage Payments$ 5,100 Utilities/Insurance$ 700 Closing Costs$ 5,000 Rehab Costs:$14,700 Total Profit:$33,600

39. Acquisition Strategies 1.Short Sales (MLS) 2.Bank-owned 3.Auction 4.Unlisted pre-foreclosures 5.Other motivated sellers 1.Short Sales (MLS) 2.Bank-owned 3.Auction 4.Unlisted pre-foreclosures 5.Other motivated sellers

40. Writing Offers 5 Decisions Prior to Writing Your Offer: 1.Cash or Financing 2.Purchase Price 3.Earnest Money 4.Closing Costs 5.Contingencies Due Diligence Period Financing Contingency Appraisal Contingency 5 Decisions Prior to Writing Your Offer: 1.Cash or Financing 2.Purchase Price 3.Earnest Money 4.Closing Costs 5.Contingencies Due Diligence Period Financing Contingency Appraisal Contingency

41. Short Sale Offers That Get Approved Days on Market Doesn’t Matter The BPO (broker price opinion) is key Provide BPO agent with comps Document repairs Days on Market Doesn’t Matter The BPO (broker price opinion) is key Provide BPO agent with comps Document repairs

42. REO Offers That Get Accepted On the market less than 3 days or more than 3 months Offer at least 80% of list price $5,000 minimum EM deposit Need at least 5K in repairs Low due diligence (3-7 days) Have an agent on your side (either Buyer’s Agent or Listing Agent) On the market less than 3 days or more than 3 months Offer at least 80% of list price $5,000 minimum EM deposit Need at least 5K in repairs Low due diligence (3-7 days) Have an agent on your side (either Buyer’s Agent or Listing Agent)

43. Buying at the Auction The MPP formula still applies Use a bidding service Check title Drive Report Don’t get emotional The MPP formula still applies Use a bidding service Check title Drive Report Don’t get emotional

44. Unlisted Pre-Foreclosures Direct Mail Door knocking Website Voicemail Direct Mail Door knocking Website Voicemail

45. Common Mistakes Clouds on Title (Auctions) –Assessments –Federal Tax Liens –Deed Transfers HOA Issues Getting Financing in Order Clouds on Title (Auctions) –Assessments –Federal Tax Liens –Deed Transfers HOA Issues Getting Financing in Order

46. Box #2: Rehab

47. Rehab 1.First Steps 2.Team Building 3.What to Fix 4.Estimating Costs 5.Cost Control 6.Common Mistakes 1.First Steps 2.Team Building 3.What to Fix 4.Estimating Costs 5.Cost Control 6.Common Mistakes

48. First Things First 1.Secure the property. 2.Get insurance. 3.Turn on utilities. 4.Meet with trades. 5.Determine repairs. 1.Secure the property. 2.Get insurance. 3.Turn on utilities. 4.Meet with trades. 5.Determine repairs.

49. Team Building OPTION #1OPTION #2 GCElectrician Plumber HVAC Carpenter Painter Flooring Cabinets Landscaper Glass/Window Handyman

50. What To Fix Cosmetic Repairs:  Paint  Carpet  Appliances  Lights/Fans  Sinks/Faucets  Door Hardware  Outlets/Switches Advanced Cosmetic:  Cabinets  Countertops  Doors  Windows  Roof  Gutters/Trim  Major Trim/Design Mechanicals:  HVAC  Re-Piping  Re-Wiring Advanced:  Foundation  Mold  Structural / Moving Walls

51. Make It Pop Air fresheners Appliances No caps Lots of Lighting (no caps) Staging Air fresheners Appliances No caps Lots of Lighting (no caps) Staging

52. Under Improving Cheap fixtures (sassy brass) Worn carpet Vinyl Dead grass Cheap fixtures (sassy brass) Worn carpet Vinyl Dead grass

53. Over Improving Flooring – Tile Appliances Landscaping Granite Countertops Door Hardware Flooring – Tile Appliances Landscaping Granite Countertops Door Hardware

54. Controlling Costs 1.Paint 2.Carpet 3.Supplies Light Fixtures Ceiling Fans Blinds Door Hardware Appliances 1.Paint 2.Carpet 3.Supplies Light Fixtures Ceiling Fans Blinds Door Hardware Appliances

55. Contractor Negotiating Tips How Much? How Long? How Much? How Long?

56. Common Mistakes 1.Taking too much time 2.Paying too much 3.Sub-standard finished project 4.Attention to detail 5.Over Improving 6.Under Improving

57. Box #3: Sales “Coffee is for closers” – Alec Baldwin, Glenarry Glen Ross, 1992

58. Sales 1.Marketing the home 2.Contract Analysis 3.Talking with Lenders 4.Influencing appraisals 5.Low appraisals 6.Settlement Statements (HUD) 7.Common Mistakes 1.Marketing the home 2.Contract Analysis 3.Talking with Lenders 4.Influencing appraisals 5.Low appraisals 6.Settlement Statements (HUD) 7.Common Mistakes

59. Marketing the Home 1.Find an agent with investor experience. 2.Not an REO or Short Sale 3.Quick Response 4.Staging 5.Agent Bonus 6.Furniture 1.Find an agent with investor experience. 2.Not an REO or Short Sale 3.Quick Response 4.Staging 5.Agent Bonus 6.Furniture

60. Contract Analysis Purchase Price Closing Date Down Payment Closing Costs Type of Financing Title Company Home Warranty HOA Purchase Price Closing Date Down Payment Closing Costs Type of Financing Title Company Home Warranty HOA

61. Talking With Lenders 1.Do you know this is a flip? 2.Bank? 3.Loan type? 4.Have you done many of these before? 5.Buyer well qualified? 1.Do you know this is a flip? 2.Bank? 3.Loan type? 4.Have you done many of these before? 5.Buyer well qualified?

62. Influencing Appraisals 1.List of Improvements 2.Comparables 3.Meet appraiser at the home. 4.Leave comps at the home. 1.List of Improvements 2.Comparables 3.Meet appraiser at the home. 4.Leave comps at the home.

63. Low Appraisals Cash to cover the difference 2 nd appraisal Lowering closing costs New bank Cancel Cash to cover the difference 2 nd appraisal Lowering closing costs New bank Cancel

64. Settlement Statement (HUD) 401 – Contract Sales Price 509 – Credit Closing Costs 511 – County Taxes 703 – Commission 1102 – Closing Fee 1304 – County Taxes 1305 – Additional Exhibit 401 – Contract Sales Price 509 – Credit Closing Costs 511 – County Taxes 703 – Commission 1102 – Closing Fee 1304 – County Taxes 1305 – Additional Exhibit

65. Common Mistakes Assessments HOA Dues Federal Tax Liens Assessments HOA Dues Federal Tax Liens

66. Box #4: Raising Capital

67. Create a Track Record 1.Leverage the success of your mentor/partner. 2.Raise your own capital. 3.Build your own real estate investment business. 4.Attract other investors and/or partners 1.Leverage the success of your mentor/partner. 2.Raise your own capital. 3.Build your own real estate investment business. 4.Attract other investors and/or partners

68. Building Trust Promote the system Schedule a field trip Provide financials Be authentic Promote the system Schedule a field trip Provide financials Be authentic

69. Where is the Money? Warm Market Networking Social Networking Work – School - Church Warm Market Networking Social Networking Work – School - Church

70. Partners Joint Venture Agreement LLC with operating agreement Prom Note Joint Venture Agreement LLC with operating agreement Prom Note

71. Self Directed IRAs $3.7 Trillion in IRAs Anything allowed by law Membership interest in an LLC Prom Note Grows tax free $3.7 Trillion in IRAs Anything allowed by law Membership interest in an LLC Prom Note Grows tax free

72. Hard Money Property serves as collateral 25-30% Down 12-18% interest Monthly interest payments Personally guaranteed Property serves as collateral 25-30% Down 12-18% interest Monthly interest payments Personally guaranteed

73. Managing Expectations 1.What kind of ROI are you looking for? 2.How much do you plan to invest? 3.How long can you keep your money invested? 1.What kind of ROI are you looking for? 2.How much do you plan to invest? 3.How long can you keep your money invested?

74. Four Flippin’ Boxes

77. FlippingPhoenixHouses.com

78. Marty Boardman marty@risingsuncapitalgroup.com 602-319-5391 @martyboardman linkedin.com/in/martyboardman marty@risingsuncapitalgroup.com 602-319-5391 @martyboardman linkedin.com/in/martyboardman