Say hello to our little friend! We have approval from the city to add square footage to the Aloha house and are in the construction phase as we speak.
I want to apologize for not posting more but we have 5 properties that we are buying this month
Been busier than a one legged ass kicker
and have been as busy as one-legged man in an ass kickin contest.
In addition my wife and I are in Mexico for my best friend’s wedding until next Monday.
It was a much needed break and thanks to technology there is quite a bit I can actually do while gone but it really comes down to teamwork and poor Nick is grinding it out in the office while I start my first leg of my trip at our ocean front suite with a jacuzzi on the balcony, at the all-inclusive resort called dreams Puerto Vallarta.
Upstairs “rec room” at Rolando flip
When we got Shannon aka Aloha house under contract we noticed that the city records had only 2 bedroom 2 baths and 1775 square feet even though there was clearly another room above the garage.
This and the fact that the rear of the property was obviously added onto at some point made us go to the city to do a little more research since we were not willing to buy a 2 bedroom for the price we were under contract for.
We were fortunate enough to have a co-operative (bank) seller who gave us permission in writing to go down to the city to pull permits (the County of San Diego will not let you pull building records without the owner’s permission and many lenders specifically state in their contract that you agree not to contact the city about the property.
Brad went down to the city and once he got through the usual red tape and double talk was able to find out that in fact the whole structure was permitted. And
copy of San Diego flip building record
even better news was the fact that 1775 square feet did not include the room above the garage but that the room above the garage WAS permitted as a 320sq. ft. rec room.
Since the rec room was not under the same roof it did not count towards the square footage and was considered just a rec. room.
So long story short and a bunch of time in between we found out that the only way to permit the room above the garage and turn it into a bedroom was to attach it under the same roof..
Well since the seller stated they were selling a 3 bedroom 2.5 bath when it was really a 2/2 we pulled out the old 1,2 punch hail mary. ( We told our agent up front that we were not going to buy it for the price. We were under contract for because of the reasons above and let him know that we could either back out or try to get a credit but didn’t want to jeopardize his relationship with the other agent. He said let’s go for it).
Okay here is the 1,2 punch which is risky in the sense that you will spend some money, time and potentially lose the deal. (I told the agent up front that I was not buying this deal for the price. We were under contract for so this was not a surprise to him.)
Get a professional building inspection
We get inspections on many projects before we buy them because It does a few things
Sees things that I may miss
Helps me come up with a list of items that are easy to fix but can scare buyers. I add this to my scope of work and I require my contractor to have these items fixed before his last payment. I bring the inspector out one more time before I put it on the market and make sure the work the contractor did was okay and have the inspector sign off that I completed the work.
I give the building inspection and my termite report to any buyers before I let them put in an offer, that way they can’t come back and say they want a $5,000 credit because the electrical is not grounded. By giving them the BIR they already know this before they put in the offer. Remember a buyer can negotiate the price down at multiple stages, as a seller you get one shot, once you’re property is tied up the price never goes up.
2. Get a bid on the work that needs to be done in writing from a contractor, submit any information you gathered from the city the sellers maybe didn’t know about (now they need to disclose this info to the next buyer since they now know about it) and justify a price reduction.
This is risky because it takes a lot of time to do it correctly and not just look like your a grinder which only pisses people off and will make them say no, just because they think you are full of it!
So we submitted a bid and in addition Nick wrote a great letter (since he is smarter than me) demonstrating the reduction in value a 2/2 has as opposed to a 3/2
The letter we wrote to the bank asking for a credit
(about $14 per foot over the last 1o years). Here is a quick snipit asking for a $40,000 credit.
Okay so I digress (I write like I think. All over the place so bear with me).
We submitted to the city with plans to add 2 bedrooms (by adding closets to the œrec room above the garage and to the dining room since there was plenty of room to make a living/dining room) and one bathroom to the œrec room.
Well we got approval just after Christmas. By adding 2 walls, 40 square feet of roof and $6,000 dollars / $11 per sq. ft. we were able to go from 1775 sq. ft to almost 2,300. Not bad considering the average price per square foot is over $250 in the area.
Next time, I’ll tell you about some of our new projects and some pretty cool stuff we are doing including another place that we are able to get about 500 sq. feet added just by adding a garage which will give us about $100,000 in extra value!
Stay tuned to the same bat channel and no particular time except when this one toothed man in a corn-on-the-cob eating contest dude gets around to updating this site.
12 hours and I’m off to our second leg in our adventure, Cabo for our friends 40th birthday!
Updated floor plan
For the most updated information & news on real estate & Gabhart Investments go to our Facebook & twitter pages
So we finally got through plan check from the city (huge relief since our Falcon project in Mission Hills got stuck in the bureaucratic spin cycle because of a little plant called Artemisia californicaor better known as coastal sage brush which I will now just refer to as an expensive weed. This expensive weed was found on the cities property next to ours on the hillside and because no one at the city could seem to agree on how to move forward.
The options they were giving us were not acceptable especially since we were not even touching anything within a 100 feet of this little frigging plant. The only exterior work we were doing on the back of the property (where the hillside is) is some work on the decks which are already existing.
This has definitely been an interesting project and quite the learning process. On every project you learn something and some times those lessons cost more than others.
I am not sure what I could have done different on this project. We were able to get a great deal on this buying it at $305,000 when the average price in the area is above $700,000, but that price came with strings attached.
Here are some things that we have come up against.
As some of you may or may not remember the reason this property was so cheap is the city put a lien against the property due to code violations.
The previous owner started a big remodel including
New electric & Plumbing
But like many back yard weekend warriors you could tell some of the work was questionable at best.
Hey it’s so easy to flip real estate even a cave man can do it.
To make sure we knew what we were getting into (or at least have a decent idea of what we were looking at) we met the inspector at the property (multiple times) who put the violations on Falcon.
The inspectorseemed very helpful and walked myself , contractor, architect (different times) through the property and pointed out what he wanted fixed. Some of these items were…
Electrical & Pluming – make sure it was to code and fix what wasn’t
Wanted the decks engineered to make sure they were OK
Check the roof and some beams
Replace some windows that were removed
A handful of miscellaneous items
Well even though it wasn’t April, the joke was on me. The first thing the city did when we submitted (as per the cities guidelines) our plans from the architect was to ask for additional items (it seemed like every time we submitted someone asked us to add something else. I think there was a contest at the city to see who could get us to make the most changes and different times).
What made this difficult is every time they asked for something new we had to scramble for someone to get it done as a priority. Below are some of the items that were asked of us, piece meal (It would have made more sense to me to have just given me the list from the start. But what do I know they need to stay busy to justify those big pensions right)
Submitted set of plans of our modifications the city suggested. Hired an architect to do this
They then asked us to get a surveyor to survey the property lines – week later re submitted
Wanted additional engineering – week later submit
Oh, now you want a landscape architect and a biologist to call out EVERY plant on our property and 100 feet past in all directions and onto the cities land…. Oh, sure why not that makes sense since we are doing what to the landscape? Oh, you also want us to actually draw, diagram and show the placement of each plant… Yeah no problem, just let me know if you would like me to re-pave the street for the city while I am doing this extra work. A few weeks later
Oh, you have coastal sage brush on our city property… tisk tisk…
Fast forward months of back and forth, Tug-a-war between different people in the city telling us to do different things. Different interpretations, more submittable to the city, tweaks, and finally the legal has landed we are through plan check and now just need to get this thing finished and hope we don’t run into any more major problems like we have already.
Here is a brief rundown of where we are at and what happened.
For the most updated information & news on real estate & Gabhart Investments go to our Facebook & twitter pages
So a little bit about me; hmmmm where to start? Well first let me make it known I have no, prior real estate experience. Prior to moving down to San Diego, I studied International Business at Pepperdine University and then went into wine sales. I was involved in a small family winery in the heart of the very beautiful wine country of Paso Robles, CA. I decided I had drunk enough wine and moved down to San Diego with my best friend to start my MBA studies at USD (University of San Diego). However, that path quickly changed, and I found myself of a path of real estate. I added an additional year to my MBA studies by enrolling in a Real Estate Master’s Program (MSRE) at USD. It was at the beginning of the program in which I took and interview for the only non-paid internship position offered (all other internships were paid). That was on 9/22/10
1. Why did you choose to intern with Gabhart Investments?
It was very simple for me to choose to intern with Gabhart Investments (GI) as this internship was more encompassing than the others which I interviewed. I liked that Curtis’s business model allowed for a hands on approach involving every stage of flipping a property. I knew I wanted to learn several aspects about how flipping properties, from how to acquire to how to sell. Other internships however were more focused and would have been for too narrow in what could be absorbed and learned. Finally it was the reading of Curtis’s and Nick’s blogs and bios which sold me on joining Curtis’s team. I felt I would be a good fit after getting to know both Curtis and Nick a little better.
2. How did you hear about the internship?
The internship was an opportunity presented to us through our program director for the MSRE program at USD. She simply emailed the description and contact information. I then reviewed the web site, made an appointment for an interview, and the rest is history.
3. Why would you work for free?
The fact that this internship was unpaid wasn’t really an issue for me. I figured going in that any internship would be unpaid. If I landed an internship with pay, then it would have been an added bonus. However this dilemma did present itself. GI was the only internship not offering any sort of compensation. My dilemma was to take an internship with Pacifica Company, which was paid, or interning with GII.
I chose GII because I figured the value of what I could offer, and receive, was greater with GI without compensation, than that of Pacifica Company. What could be taken away from working and learning from Curtis seemed much more practical and something which could be readily applied.
4. What are you trying to accomplish?
I am trying to accomplish several things while interning with GI. First and foremost is to learn as much as possible about how Curtis does business. By working side by side and going to the different properties and being involved at all the different stages, I will be able to determine if this is a field of real estate which I will pursue. If this is something I find I want to pursue further beyond this internship, then I will also need to land a position either here with GI or with similar firm here in San Diego.
5. What were your views and perceptions before you started? Are they different today from 30 days ago?
In as little as just 30 days my views have changed dramatically. Prior to starting with GI, my perceptions were that flipping houses was relatively easy and that raising the capital would be the only thing holding me back from being able to do this on my own. I figured it couldn’t be that hard to by a property, hire a general contractor to fix it up, and then sell it. I wish I still believed it is all just that easy.
All ready through working with Curtis, I have a new respect for being able to be successful through flipping houses.
6. What tasks have you worked on so far?
As mentioned in the previous answer, I addressed just how my perceptions have changed in the first 30 days. So far I have only worked on the beginning of the process, acquiring the properties. Primarily I have worked on comps for the most part. This is searching MLS and other websites to find similar properties and estimate what the property would sell for once rehabbed. We find the comps in order to run our proformas to determine whether a given deal would produce the necessary returns for our investors.
7. What have you learned? Is there anything in particular that stands out?
SO far I have learned how to run comps and proformas. I look forward to the coming months as more properties are acquired and learning how to rehab the properties.
What stands out so far is how to run comps when there aren’t many similar properties in a close area to the subject property. This means how to use properties that may not be identical and how to adjust the value of such. For example if I am running a 3/2, I could use a 3/3 comp and figure that extra bath adds about $15,000 to the comp, or I need to subtract that amount from this comp to be comparable to my subject property. This could be a bath, bedroom, garage, etc.
I am also starting to learn how to deal with realtors and how to get them on our team so that they can bring us deals to buy. Curtis is great at this, because he develops a sort of loyalty with each individual agent. When an agent brings us deal, say they are representing a seller of a distressed property, Curtis will have them represent us as buyers and Curtis also promises to re-list the property with the same agent when it is time to sell. This is a great incentive for realtors to bring us deals, as they make commissions on several ends of the deal. Usually at least 2-3 times during the process, which means 2 -3 times they receive commissions.
8. What is the most important thing you have learned so far and why?
BY far the most important thing I have learned so far is hat speed is critical in this business. Curtis takes a red-light/green-light approach. Basically this means trying to find out quickly why a deal won’t work. This is a crucial skill to have and to be able to determine if a deal is worth pursuing very quickly.
Perfect example is the property we picked up on Coronado. Curtis received and email from another individual who flips houses in North County and had a property in OB on Coronado. We received the info about 10:00am. We quickly got onto MLS and searched any comps to come up with a value for what we could offer for the property. It is important to look at comps on MLS because from the comps we can roughly estimate what the property would sell for once rehabbed. If we can determine that the sell price wouldn’t return the IRR for the property we can just cross it off now, before wasting time driving the property
We quickly determined that the property, based on the comps and given rehab estimates would work for us. It was now time to drive the property and comps. Once we get to a property we can get a better feel for what rehab will be needed and more importantly, how much money is needed for rehab costs. While we were at the Coronado property we talked to the neighbor who informed us that other flippers were looking at the property just a few hours before us. We quickly drove the comps, returned to the office and were running proformas and coming up with the best strategy to acquire this property. Our first negotiations began around 2:30. Not sure what time the deal was agreed upon, by the next day when I arrived Curtis already had an agreement to purchase the property.
Because how lucrative these deals can be, speed is crucial. Had we not moved so fast on Coronado, another flipper would have picked it up. On Coronado, the property was purchased for $320,000 and with-in two days we may have it sold for $400,000 (net to us) with no work needed. $80,000 for moving quickly isn’t a bad pay day for a few hours worth of work.
For the most updated information & news on real estate & Gabhart Investments go to our Facebook & twitter pages
Ahhhh finally we sold our Chula Vista 2 bedroom 1 bath house.
The cats in Chula Vista didn’t use the bathroom like this good kitty did
trying to get rid of the strongest nastiest cat urine smell I have ever encountered (see video below for the smell O’ vision cam)
the 30′ septic pit we discovered (which was supposed to be a septic tank – actual picture)
paying $13,000 in city fees to hook up the septic (pit) to the city.
An appraisal that came in $20,000 to low.
Besides those little things you couldn’t have asked for a smoother, easier, less stressful transaction.
I must have been on a bathroom break (training the cat to pose for the picture above) while I was watching those get rich quick late night Real Estate riches infomercial (those nights I wake up thinking about sink holes, low appraisals, and dealing with city governments) hosted by those two midget dudes.
Does one steer while the other brakes and accelerates?
I just don’t recall seeing my little buddies mentioning those damned septic pits that cost 15 gees to take care of.
In addition they didn’t include the super duper negotiating navigating techniques it takes to keep a deal together with these challenges.
That must come with the more expensive course sold by Tom Vu
Over the past eight weeks, the interns at Gabhart Investments, Anthony Espinoza and Seth Struiksma, have learned the nuts and bolts of renovating residential properties in San Diego and have made valuable contributions to the development and growth of the business. In addition to interning at Gabhart Investments, both Anthony and Seth contribute much of their time on the Board of Directors for the Real Estate Society of San Diego State University. The main duties for the interns are to assist with acquisition research, frequently update the website blog, and ultimately create a personal business plan to use as a guide for the future. At the inception of the internship, both interns contributed their ideas and efforts towards writing the Gabhart Real Estate Opportunity Fund business plan. They were instrumental in finalizing a plan that would eventually be sent out to investors. Once the Fund was established, Seth and Anthony assisted with design ideas and materials for the property renovations. Throughout the entire internship, the interns documented the processes, procedures, and skills they learned on a daily basis. For more information on the Real Estate Society at SDSU, go to: https://www.realestatesocietyofsdsu.com
Ok enough with the fluffy crap, Here is the no BS Curtis version…..
Those two spent there summers with a fat grumpy dude learning how what it takes to buy properties in this market WITHOUT GETTING PAID (the fat grumpy guy is me). The fact that they were willing to put in all that work without getting paid to learn the business shows me that they are serious about making it in life.
Personally I know my greatest rewards have coming from putting my balls on the line with the understanding that I may not succeed but if I do the rewards will be great. Not everything has always worked out the way I wanted but in my opinion it’s not whether you fail that counts it’s whether you don’t give up and keep going until you succeed that makes you a success (it doesn’t have to be money. Do you have any idea how hard it was to land my wife??? Now I have her though and she’s stuck.)
I have had many ventures that have made me fall flat on my face.
When I was 6 I decided to sell used books door to door. This was my first lesson in keeping the overhead low. I hired this cute 6 year old girl as my secretary and paid her a dollar a day. I think she ended up making more money than me.
Also looking back at it I wonder what the fudge was my baby sitter thinking letting me sell books door to door when I was six???? Can you say Chester the Molester? I’d be kicking some babysitter ass if they let my daughters do that.
Over the years I mowed lawns, painted and even bought 12 coin operated alcohol breathalyzers from ebay that I thought would make some serious coin by putting them in bars.
Well the only thing I got out of the breathalyzer business was a video of me opening the boxes, plugging all the machines in and watching all the pretty lights flash on them… The best part was when I talked to the video camera saying “if these don’t work out my wife is going to KILL ME!”.
Well needless to say the first bar I brought them to (a biker bar in spring valley) a drunk came up and thought it was a game and started drinking shots and blowing into the machines to see how high he could get his alcohol level. Needless to say I figures the liability would outweigh the potential money.
There were many many more adventures like that which I won’t bore you with until I found a niche I could do well in. That niche was Real Estate and I busted my hump and worked for free for a long time (and a lot of nagging from the wife) until I finally made it.
It hasn’t been an easy journey and I can’t say I never lost any money because I have. I can say that I love what I do and if I didn’t do this I would probably be working in Taco Bell still (my first legal job).
Well in summary I think they learned a lot and even if they learned that they hated the business (which I don’t think happened) it’s better to find that out before you go and make a career out of it.
I just want to thank both of them and let them know that they have a lifetime of free advice and help (it’s probably worth what they are paying me for it).
From our last meeting together Seth is actually interested in getting into the commercial brokerage business which I highly recommend and Anthony is going to Spain for a semester to drink some sangria’s and decide on what he is doing.
So in summary – A+ (even though I never got an A or a B or really many C’s)….
BTW – if you enjoy these posts at all do me a favor and click the sharing button and share. If you don’t like it and think it’s crap share it and let them know my name is Jon Jerome.
For the most updated information & news on real estate & Gabhart Investments go to our facebook & twitter pages
Do not read this blog on Real Estate Flipping if you have been drinking the guru punch about Real Estate being easy.
You have been warned because if you think the above is true then I am about to pee in the guru punch bowl.
If you want to really know what it takes to succeed in Real Estate read ahead because this blog isn’t about blowing smoke up your you know what. It’s about what it takes to survive and succeed in today’s Real Estate world. And it’s not about easy get rich scams it’s about putting your nose to the grind and sacrificing today for a better future tomorrow.
So where do I begin?? How about right now….
I am finally relaxing (if writing a blog is relaxing) having a beer (Sierra Nevada), watching The Heartbreak Kid with Ben Stiller (which is hilarious) after spending a 20+ hour work weekend getting Property 37 (Bullrush Glen – Escondido) and Property 38 (Caminito Agadir – Scipps Ranch) ready for a virtual tour.
Originally, I wanted it done Monday (so I didn’t have to spend 20 hours rushing around on Saturday and Sunday) but the photographer could only do it Sunday unless I wanted to wait until Wednesday or Thursday which I didn’t. So we did what we had to do we got it done for the pictures on Sunday which meant a long weekend. So thank you to Rick Williams, and Gabhart Investments newest team member Nick Walsh. I didn’t want to lose a week of market time so I got off my fat butt and got it done with the help of a great team.
I don’t like to put properties in the MLS without excellent pictures so I got it done. I am kind of a perfectionist in that way.. Come to think of it maybe it’s OCD?? I’ll ask my wife she’s a pediatrician and I’m a big baby.
Do what others won’t do so you get what others can’t
I think I saw this on a toilet stall in a truck stop somewhere.
The lucky insomniac I am woke up Saturday at about 2 AM thinking of all the things I had to do that day. I tried to watch a boring documentary (BTW my wife has NO problem sleeping and does not enjoy me watching the TV at 2 am AT ALL!) which I hoped would bore me to sleep. Instead I just learned a whole lot of boring things so I decided to jump out of bed about 4 to get a crack-in…
After organizing my day, sending off a bunch of emails I was at Home Depot At 6:30 picking up some mirrors, paint for an accent wall and misc. items for the projects. I then went to Tar-shay (Target) at 8am when it opened to pick up items to stage the kitchens and baths at both places and then to Ikea which is a boat load of fun in itself (I think I would rather be tied to a chair and have someone torture me by scratching a chalk board with their nails rather than go to Ikea on a Saturday)
I felt I needed to do a light staging on these projects and was glad it did (pictures coming soon). It really made the places seem a lot nicer and I want to thank my beautiful bride Lisa for helping me Sunday morning to pick up the items that I forgot. For the record this is the first time her, and I have not gotten into a fight for her going to target buying stuff and Target has a 90 day return policy, so this is really staging on a budget…. (Is it bad to take some things back?)
In a perfect world, I like to get the property in front of as many agents as possible. I do this for two reasons. 1) to sell the property 2) to sell our company. When agents see that we are a REAL company and not just a late night informercial student they take notice and start calling us on deals. Remember your Real Estate business involves marketing yourself.
A couple really great ways of getting your property sold and your name out there is to participate in the agent caravan and pitch sessions.
On the agent caravan the local realtors have a certain day for each area of San Diego where they all caravan and go see the listings that have signed up for the caravan.
Why should I care you wonder??? Well grasshopper let me tell you. I want to get as many agents through my property as possible. And I want these agents to 1) bring buyers and 2) bring me more properties to buy.
So how do we get these agents to come to our properties you may ask??? Well sure we get on the broker caravan but its more than that. We offer incentives like
* an extra 1/2 % to any agents that register on the day of the open. (motivates their greed)
* Let them know the property is NOT on the MLS yet (we also call on agents to let them know) so they have time to preview it and let there buyers know BEFORE it hits the mls (creates a sense of urgency)
* Provide food. It’s amazing how many realtors will show up for a sandwich! (motivates their cheapness)
* We give out a $100 gift certificate to whomever comes closest to guessing the actual final selling price of the property. The agents need to put the dollar amount it will sell for on the back of a business card and drop it in a fish bowl we have on site. (motivates their greed and competitiveness). The reason I offer an incentive is if I were to just the agent how much do yo think this property would sell for many of the agents will put a lower number. On the other hand if there is a shot at winning a Benjamin they will gnaw their arm to win it. Think about this, if the agent MAY possibly have a buyer don’t you think they may want to put in as low a number as possible so if they happen to put in an offer I think it’s good? Yes they do, UNLESS they have the chance of winning a $100 because realtors are very competitive and will want to guess the most accurate price possible.
The technique of getting the Realtors to guess a final sales price really helps me dial in the listing price since these agents are usually the agents who work the area we are selling the properties.
Pitch Session – This is what I do for the agent pitch session which is really just a meeting of a bunch of agents in a particular area to announce their listing and announce there buyers.
What I do is I 1) pitch our properties for sale and give them our listing agents contact info and 2) (the real reason I am there) let them know that since I am selling a property, I need to replace it and please call me for a good deals. I mention that I will act as a principal on any transactions they bring me and sell it through them also.
Remember to market your properties and market your self…
So it’s 8:30 and watching a movie and writing a blog is harder than me jumping on one foot, rubbing my belly, patting my head and saying the alphabets backwards (I can’t do any of these things by themselves none the less together) so I am going to clock out… But next time I post I will update you how the Caravan goes and the pitch session goes and post some pics and movies.
Last thing if you like this blog please share this post to as many sites as your willing.. I don’t make any money on this thing (actually I probably lose money since I am not getting paid) but I want this thing to be a top real estate blog and the only way it will happen is if people share this site with other people. So please share if you like the information.