The London GroupÂ are reputable economic advisors to the San Diego real estate community. Here are someÂ hot points from their latest reports and interviews…along with what we’re doing about it.
–Invest in assets with promise, or those that are stable. Employ a conservative approach and don’t go for the home run just yet. (we are specializing inÂ many small residential projects with a quick turnaround while keeping our eye on the multifamily market for bigger opportunities)
–Purchase in good metropolitan markets – those with diversified economies with limited potential for new supply, growing populations and good quality of life. (sounds like San Diego so we’re staying here!)
–Forclosures have not surged yet in San Diego due to more short sales occurring before property becomes bank owned. They estimate San Diego foreclosures in 2010 to be 10,000, down from peak of 20,000 in 2008. (we are starting to see and pursue more short sale opportunities versus REO)
–27% of all San Diego listings are distressed sales (this is still a large percentage but the key is building relationships with agents and banksÂ to get the best deals before the competition)
–San Diego has added 10,500 jobs so far in 2011, representing a 2% growth rate. (home valuesÂ are still bouncing around at the bottom because we are not creating enough jobs to give buyers the confidence to come off the sidelines – as a result we are focusing on quality and pricing aggressively for a quick sale)
SDAR is hosting it so there is no cost (sdar charged $45 for this class when I taught in their offices last year) but I will be up-selling ginzu knives and snuggies
What do you get the dad who has everything for Christmas? A superman Snuggie
at the end of the presentation. Nothing like having snuggies for the whole family as long as yours is of Superman!
Just kidding. Any of you who have been to these courses know I don’t sell anything except……. the fact I am a buyer and that providing you with tools I have learned and used you’ll consider calling Gabhart Investments when you have a great property for sale.
Ok here is theÂ sch-peel
In this class you will learn if the highly lucrative, highly competitive business of commercial real estate brokerage is right for you. This business niche is not for everyone, so attend this class and find out if you are up to the challenge.
Commercial Real Estate Course topics
What is commercial real estate?
How long will it be before I make money?
What are the risks?
Do I need experience in commercial real estate?
How to leverage your existing client base to turbo charge your success
Choosing the right company to work for
Additional resources to get more information on commercial real estate
Here is what we are not covering
How to analyze a property (I will talk about what you may want to know/learn and where to get that information)
This is a good intro if you are thinking about making a time or money investment into the commercial side of things.
It’s not for everyone so don’t expect a bunch of ra ra sis boom ba that anyone can get rich doing it. I will give you a no nonsense run down of the business as I have experienced it.
I will say that if there is a way to get into Real Estate with little or no money (not little or no time) then commercial real estate may be a great avenue. This is what allowed me to transition from doing Real Estate as a hobby to a career that has been very rewarding (and challenging – NO GET RICH QUICK GRASS HOPPAH)
I will say
Real Estate gives me flexible hours (not short hours but time availability to do things like see my kids plays at school during the day etc.)
And work from my H2Office while not in my physical office. Check out this awesome set up.
Real Estate gives you the flexibility to work from anywhere! My second home office...
Due to the success of our first Fix & Flip workshop at ourÂ Shannon Project (AKA Aloha House)Â we are thrilled to announce our 2ndÂ workshop.
The Shannon workshop was very fun and exciting. The project was just at the beginning phases of construction. We had our participants break off into groups and come up with a scope of work and share different construction ideas to maximize the value of the project.
After the great feedback we had (and standing room only with 2 days notice) we decided to do it again at another of our flips andÂ will be doing something very similar for our Santee Flip workshop.
After going over go over how and why we purchased the property as well as which comps were used and how we have estimated our predicted sales price.
However, we have already gutted the entire project and what is left is a run-down, beautiful, desperately in need of rehab, gorgeous blank slate for you (our guests) to creatively come up with a scope of work and different construction ideas to maximize the value of the project.
Curtis will be touching on the five â€œFâ€™sâ€ of successful flipping with the emphasis on the fixing for resale.
They say itâ€™s all in the buy which is trueâ€¦
But if you donâ€™t know how to estimate, manage, or decide on what should and should not be done youâ€™ll always be unsure of whether itâ€™s really a profitable venture.
When working on these house flips many times the profit is really in the design and finishes but the art is doing it on a budget so you receive an appropriate return vs. the cost of work being done in a timely manner.
The renovation phase
encompasses the planning and directing of all project functions from conception to completion. Our goal is to have a fully refurbished property in four to eight weeks from the time of acquisition.
Itâ€™s important to have processes in place for planning, purchasing, and contracting. Whether you are an agent or investor or even property manager these are key skills you MUST have.
Come join us for this informal/impromptu event where we will be using our project as a case study.
This will be a great place to network and meet fellow investors who buy property and invest in others, contractors, architects, and agents. They say itâ€™s not what you know but who you know and we hope you make some great contacts you can do business with.
Briefly touchÂ on the deal points and why we decided to purchase this property and how we found it.
We will present the property; walk through the property with all in attendance.
Then teams will be formed and work together to come up with a scope of work and to try to develop the best solutions to add value to the property.
Finally we will present our plans and show how to create maximum value, with the greatest return on investment. Â After all, that is the goal of flipping houses right?
Finally we will re-group and discuss each idea and then present what construction ideas and plans we have come up with and compare them to ours, including
This workshop will be held Saturday the 5th from 9:00am to 11:000am on site of our most recent purchase in Santee. Register by filling out the form at the bottom of this page or clicking here. We will then contact you with the exact location.
I am very excited about this post as this is my first deal with Curtis and Gabhart Investments. As I mentioned in an earlier blog, I am very new to real estate and am interning with Curtis to learn the ropes of flipping houses and how to succeed in this market. This deal was not only exciting, but also unique in that the property was flipped so quickly and with no work or construction. It was valuable learning experience as I learned it is possible to flip a house, make a profit, and no work in less than 30 days. Below is the step by step process of the deal.
stay tuned for our most recent acquisition at 6600 Shannon, 92115. Well be adding square footage and re-configuring the floor plan to turn it into a 4 bedroom 3 bath from a 2 bedroom 2 bath
– Brad Talbert
Back to our message folks…
So the property we picked for $320,000 on the 26th of October in Ocean Beach, we just sold it for $400,000 on the 18th of November.
Here’s how it all began!
Once upon a time at a faraway place in Point Loma Hieghts…
WHAT & WHERE – 706 Sq Ft, 2 Bed/1 Bath in 3952 Coronado Ave, San Diego, CA 92107
DEAL POINTS OF PURCHASE
Executed contract date – October 11, 2010
Escrow length 15 days (Oct 11 to Oct 26 – We closed early)
Deposit – $10,000
Down payment – $90,000
Loan Terms $230,000 seller carry back @ 6% interest only, 1 year term. $1500 in loan fees
Purchase Date October 26th
Purchase Entity- Gabhart Real Estate Opportunity Fund, LLC Series 2
DEAL POINTS OF SALE
$400,000 Net to Fund
Executed contract date – October 29, 2010
Escrow length – 20 days (Oct 29 to Nov 18)
DEPOSIT – $80,000 NON REFUNDABLE UPON ACCEPTANCE (WE gave him all the due diligence & disclosure up front)
Loan- none, all cash transaction
Close of Escrow (sale date) – November 18, 2010
None. We only went inside the property twice.
HOLDING TIME: 23 DAYS
RETURN ON EQUITY (approx) 77%
ANNUALIZED CASH ON CASH RETURN (approx) *A BOATLOAD
(CG-*Remember it is unlikely/ impossible that your money works 365 days a year doing investments. It would mean the day you closed escrow you bought another property.)
HOW WAS IT FOUND
Through our website. Seller contacted us after seeing our posts at sdcia.com
Way back when on the 8th of October Curtis received from his website that a person wanted to sell a property in Ocean Beach.
After calling and qualifying the seller as to why he was selling (he just purchased and didn’t want to drive an hour each way to fix it up and decided to wholesale it instead) and some other important questions so we didn’t waste our time chasing our tail .
Basic property info
Bed/bath, square footage & any recent improvements
Why are they selling & for how much
When do they need to close
And who else are they talking to (this he lps with negotiations)
This is important so we don’t waste time and have a good understanding of the seller and the property.
Ring a ding ding and a ching ching we got an email from our website that someone had a property for sale.
Action time! When getting deals ACT QUICK ! AFTER you qualify
How did the deal transition from purchase to sale (Step-by-Step)
1. The first thing we did is logged on MLS and other sites to compare the property and compile a few comparable which to evaluate and compare to the Coronado property.
a. ALWAYS do this before you get in your car and drive a property, your goal is to eliminate as many wastes of time unqualified properties as possible.
waste of time – the devotion of time to a useless activity; “the waste of time could prove fatal”
waste, wastefulness, dissipation – useless or profitless activity; using or expending or consuming thoughtlessly or carelessly; “if the effort brings no compensating gain it is a waste”; “mindless dissipation of natural resources”
2. Upon arriving at the property and beginning our inspection, we were pleased to see the property was in fair condition. (our definition of condition is probably different than most. In this case it was standing and we didn’t have a previous kitty farm, we didn’t have to jack up the house, etc.)
a. We noticed instantly the house needed a new roof, but other than, that the outside would be an easy fix. (on our first inspection we use a form from winforms that is used when doing a move in/out inspection for tenants. The form has each area broken down and items for each area. For example each room has a spot for baseboards, doors, hardware, lights, etc. We fill in the form with our notes on what needs to be done and when we get back to the office we input the information into our initial estimate spreadsheet to see how much construction is going to be)
b.Basic paint and landscaping would be the extent of work needed on the exterior. Create nice curb appeal by bringing attention to the front porch and door, adding some river rock as a wainscoting up front and just bringing back the character of this style of house.
c.The floors needed to be refinished (almost any condition hardwood floors can be made to look like new Curtis says), and a complete new kitchen with appliances and a couple other minimal touch-ups throughout the house was all the inside needed. We were thinking of redesigning the kitchen, filling in a door that had no real purpose except to take up precious wall square footage int he kitchen.
d.The backyard was big and spacious, and needed only a basic cleaning up.
e.A new front lock would also be replaced, as the current one was a bit cumbersome.
3.Upon leaving the property, we met a neighbor who informed us that other investors had been inspecting the property just an hour before. The race was on and we were off to drive the comps.
a. The majority of the day was taken by driving & walking the property and driving the comps. One of the comps we drove was a recently rehabbed property which we had put in an offer, but did not get the deal. The two were very similar, yet we felt more comfortable with our new subject property.
b.While both properties have 2 bed / 1 bath, the new one had less square footage. Our subject property we were buying did have a much much larger lot and was on a better street. Additionally our subject property had the add-on room, which was not on the tax records. This wouldn’t be beneficial for the appraisal but would act as incentive to a buyer.
c. We try to drive, video tape, and take notes on each comparable property. Curtis mentions that you always want to try to look at it from the eyes of a buyer understanding that the buyer wants the best value for their money. Ask yourself some of these questions on each property you look at.
Street – equal/better/worse
Neighbors – equal/better/worse (sometimes it is worth it to pay to paint a neighbors house or clean up their yard. Curtis has done this on other projects)
House – equal/better/worse – We look at properties that are in similar condition and don’t compare ours to fixers since when we go to sell it typically it will be fixed up. We also see if there are things that can’t be fixed like street noise, yard size etc.
In the video recorder we verbally give our assessment of the property so we can review it later. In addition this can come in handy dealing with appraisers later since many times they don’t look at the interior of the comps and you may need to justify your price to the appraiser with this being your back up.
4.Once back in the office, we run a proforma and play with the numbers to see if this venture is profitable. We start by running a quick back of the napkin proforma using the age old 70% ARV (after rehabbed value) minus costs for improvements. We quickly realized that this is a good deal, so we work to lock up the property.
(we also do this real quick before we get in the car to try to eliminate wastes of time. Once we have looked at the property we give it a more thorough analysis before we put in our offer. It is important if you get your offer accepted you close so your pre-purchase due diligence is key)
a. The project is so versatile, as it lent itself to many exit strategies.
i. One possibility is to put it back on the market without doing anything or wholesaling it. The factors here are how much we would make and how quickly.
ii. Secondly, would be to add minor paint and a roof and let the next owner really do the rest of the work.
iii.Thirdly, we could fully rehab everything, including a full kitchen package, refinished floors, new windows, landscaping etc. The final option is to try and build and add anywhere from 500 to 1500 sq. ft.
5. Once we ran our proformas and realized we had a deal, Curtis called the seller. We verbally offered $310,000 and he asked if he could call us back at the end of the day, as he wanted to see if anyone else would offer $320,000.
Curtis decided it wasn’t worth the risk of losing it and gave the seller 2 options. (by talking to the neighbor Curtis happened to get out of him the name of the buyer looking at it earlier and knew him. Because of this we knew we had to act quick and didn’t want to risk losing $60,000 – $100,000 on a bet when it worked at $320,000)
1. $310,000; all cash quick close
2. $320,000; assume the financing the seller had for $320,000 at 6% interest for only 1 year. This reduced our hard money costs and ended up netting us more than offering $310,000 and also allowed the seller to get his price.
6.Curtis immediately wrote up the offer and sent it over and got a response that night. With the $320,000 and 6%, it was really a wining situation for everyone. We put in the offer at $320,000 and had it accepted within 24 hours. The terms were a price of $320,000 and the seller carry back 6% interest and only $1500 in fees for 1 year term. We had a 15 day COE (Close of Escrow) in which we closed in 12. As it was, by having the seller carry back the financing, we were able to save money which in turn positioned us better than the $310,000 all cash quick close option.
Coronado was now a GII Property
Once we locked up the property, we began calling a few agents in the area to firm up what was happening in the market. We attempted to find out:
Are their listings getting offers and for how much?
Are they receiving close to asking price and if not, what do they think their property is really worth?
Information on the sales prices and condition of the property, financing, concessions if it was a sold etc.
We decided to let two of the local agents know that if we received $400,000 net commissions, we would sell and walk away. If not, we would let them know in 30 days when we were done rehabbing before we put it on the market , so they would have a chance to bid on it.
We came to this conclusion as we figured that a full rehab would net us about $80k or $110k and would take about three months. If we sold for $400,000, this would net $80,000 in a week, which greatly increases the returns on the property. (See post about velocity of money)
Ultimately, this was a fantastic property to find, and we are lucky we could flip it so quickly. It took less than 30 days from when we received the tip, to closing the property to the new buyer.
The transaction went smooth with few headaches. The best part of the deal is we now have a trusted professional acquaintance in North County who we will hopefully be able to exchange deals with in the future, and a buyer who is an agent will also send us deals in the future (your reputation is important and San Diego is a small town, so treat people right. Do what you say, and in the long run it pays off)
This was sent to Curtis after we had bought it from the Seller.
Thanks for purchasing the home on Coronado Avenue from me. You promised a quick and easy close and you delivered on that promise. We actually closed 3 days early on a 15 day escrow! You are to be commended on your honesty and integrity in this business dealing. If everyone involved in real estate transactions performed as you have, it would make all of our lives much easier. You may use me as a reference for anyone who wants more knowledge of this transaction. Thanks again, Larry C*
By the way stay tuned for our most recent purchase at 6600 Shannon, 92115. This will be an interesting one since we are adding square footage to the property and re-configuring the floor plan.
For the most updated information & news on real estate & Gabhart Investments go to our Facebook & twitter pages
Below is an outline of the event I will be putting on tomorrow at the Double Tree in San Diego at hotel circle. Through cliff notes, youtube, wikipedia and staying the night at a holiday inn express really helped me out
For those of you who can’t make it or are unsure what it is about I am pasting the outline here. The lines are fill ins we will discuss and I plan on it being pretty interactive. May even throw in a cold call to a property owner to see if they will sale. Hope they don’t yell at me!
For Immediate Release: GABHART INVESTMENTS INC. CEO TO TEACH APARTMENT INVESTING WORKSHOP
SAN DIEGO, CA (Dec 4, 2010) — Gabhart Investments Inc. CEO Curtis Gabhart will teach a four-hour interactive workshop named Commercial Real Estate 101 “ How to Buy & Sell Apartments on Saturday Dec. 4, 2010 from 10 a.m. to 2 p.m. at the Double Tree Club Hotel in San Diego. The workshop is designed to offer educational insight on how to break into the apartment market, in addition to presenting attendees with the opportunity to gain professional contacts, advanced industry information and the necessary tools to succeed in today’s market. Pre-registration fees are $49 or $99 at the door.
The workshop will focus on key fundamentals, including:
Learn the Right Time to Start Buying Apartments
Where to Find Deals Before They Hit the Market
How to Analyze Potential Deals Like An Expert
Proven Ways to Develop A Winning Presentation to Earn the Confidence of Investor Partners
Top Gimmicks & Traps To Stay Away From
I am very excited to host this workshop with REI Wise. This workshop, accompanied with future workshops, will provide the insights on how to look and think about investing in apartments. In today’s dynamic and uncertain economic times, for investors to try and figure out what time to buy, sell, or hold is the big question right now. The time to look at apartments is now, as this market is seeing on of the strongest recoveries across real estate assets. The investment strategies and inside information acquired from these workshops will provide you, as an investor, the tools needed to succeed in today’s uncertain real estate market.
Curtis Gabhart has spoken at several engagements ranging from transitioning from residential to commercial, apartment brokerage, condo conversion, raising capital, etc. Gabhart is a respected commercial real estate investor who specializes in apartment acquisitions and dispositions, ownership and operations. His expertise lies in the repositioning apartment buildings for maximum performance and value at resale. In the past, Gabhart was an owner and principal of ACI Apartments Inc., where he was involved in over $250 million transacted & has personally transacted over $40 million in his own deals.Â ACI Apartments has repeatedly been recognized as the most successful income property brokerage firm in San Diego. Gabhart currently serves as a board member on the University of San Diego’s Burnham Moore’s Center for Real Estate Commercial Real Estate advisory board and also served as the past President of the San Diego Commercial Realtors Association, was on the 2009 Board of Directors of the CCIM San Diego Chapter.