Many residents and visitors lease properties short term and annually in Sarasota. This is due to the general status of the current housing market (for long term lessees) and the simple fact that many residents are seasonal, as either short-term snowbirds or shorter-term vacationers. A low inventory of available rental properties (supply) and a high necessity for seasonal and annual renters (demand) create a profitable opportunity for you – the buyer. The SRQ Duo, through their broker Merrick Damon Real Estate, can offer or facilitate all-inclusive management services for clients. This further mitigates the risk and labor associated with ensuring constant tenants and hassle free services. This is particularly helpful for remote owners and investors.
Property Rehabilitation (flipping)
A fair amount of housing in Sarasota was built in the mid 20th century. Often the property below is worth more than the older home built upon it. This creates classic opportunities that house-flippers and investors dream of. The SRQ Duo can facilitate the process and handle the various stages of the real estate transactions involved. Below is a basic guide for potential investors wishing to rehab homes for profit in Sarasota.
- Commit to the flip or rental property rehab. The first step in any real estate transaction is to commit. So many people want to get into house flipping or being a landlord and get really excited, but they don’t actually commit to going the distance. But don’t feel that only professional developers can invest and flip properties for profit. Developers can be slow and cumbersome. Successful investors are nimble, reactive, and hungry. You need a real estate agent to be the same. House flipping is not a hobby – it’s a business that can affect your financial future (either positively or negatively). Decide if you are 100% committed. Then, and only then, should you move on to step two.
- Become educated on flipping houses. Although education is a lifelong pursuit, it’s also necessary to do before jumping into a house flip. Educate yourself on the math too. Learning your return on investment is basic to any investment, including house flipping. Without the right math going into a flip, you’ll never get the right money coming out of it. The math determines how much you should pay, how much you should put into it, and how much you expect to get out of the investment.
- Market research. Next, you are going to want to take a look at the market and decide where the best place to invest will be. This is where The SRQ Duo can help tremendously. In some areas, $1,000,000 for a home would be absurdly cheap, where in other areas this $1,000,000 would be absurdly expensive. Every market is different, so you need to have a good handle on the market you plan to flip in. The SRQ Duo will answer the following questions: How much are average homes selling for? How fast are properties selling? What areas seem to be selling the fastest? What property types/size/layouts seem to be selling the fastest?
- Arrange your investment financing. How are you going to pay for this investment? All Cash – if you have the cash in your bank account, you can simply write the check. This is obviously the easiest solution, but for most investors, this is either not possible due to financial constraints, or since the relative “cost of money” (borrowing interest rate) is cheap, not the best choice. Conventional Financing – Some people utilize a normal bank loan to flip houses, but this can be difficult if the house is not in great shape (most banks won’t lend on unfinished homes.) Home Equity Loans/Lines – If you have a large amount of equity in your primary home, you may be able to tap into this equity in the form of a “home equity loan or line of credit.” If you are interested in more of these strategies, talk to your local bank or credit union. Hard Money Lenders– A hard money lender is a private individual or company that lends on high risk loans (like flips) and charge high fees and interest to get the money. Hard money loans are ideal on flips, because they typically have only a one-year or less maturity date. Partners/Private Money – If you know people who have money to lend, they may be interested in partnering or lending their cash at a certain interest rate. Private money can be one of the cheapest sources for funds, though raising private money can be difficult and legally-cumbersome. Combination – Finally, you can mix and match nearly all of the above methods to finance your next flip. Regardless of your source of financing, you MUST show proof of funds and/or a pre-qualification letter in order to view most of the properties in Sarasota (excluding open-houses).
- Sign The SRQ Duo to be your real estate agent. The earlier you commit to an agent the better, but at this point, you understand what makes a good deal a good deal, have the financing lined up, and you are ready to rock. However, you don’t need to do it all yourself. Why? Besides the fact that The SRQ Duo will do a lot of work on your behalf, THEY ARE FREE TO YOU THE BUYER. Yep, your seller is going to pay their commision, so why not use them? The SRQ Duo can open doors, write up offers, get you comparable sales (so you know what properties are really worth) and so much more. If you just call the agent who listed the property you want to buy – you’ll be dealing with the seller’s broker who has a legal obligation to get their client the best possible price.
- Find the perfect house for flipping. After walking through and analyzing properties with The SRQ Duo, you are eventually going to find the perfect potential rental house. Don’t worry so much about the time it takes – focus on finding the best deal possible. The SRQ Duo won’t rush you. They realize that this may be the first of many transactions for you. We want to gain your trust and develop a lasting partnership. You WON’T get this from larger brand agencies. You don’t want your anxiousness getting in the way of your financial future, so be patient and stick to the criteria you created. At this point, there is a very important lesson you need to understand: don’t let emotion take over the deal. It’s inevitable that you are going to be excited. After all, you’ve put a lot of work into this thing and you really want to see it come together. However, this is no time to toss out everything you’ve learned so far. So be calm, stick to your numbers, and get ready for the real excitement to start.
- Negotiations. After you submit your offer, it’s time to wait to see what the seller has to say. Usually, they will send an offer back to you (via The SRQ Duo) that is amended to what they want to see in the transaction. This is known as a “counter offer” and you can choose to accept or send the seller a counter offer. The seller could, however, simply accept your offer and end negotiations, though this is generally not the case. During negotiations, it’s vital that you stick to your numbers that you determined earlier. Emotion can run high during this phase, and you may be tempted to raise your price to numbers that no longer work in order to get the deal… but don’t do this! The SRQ Duo will be there in every step of the negotiations to help ensure an easy, emotion-free process. We’ve handled over $100M in deals across the globe.
- Get the house inspected. One of the first tasks to do once the property is under contract is to hire a professional inspector to come through and look at the property. Unless you are a contractor yourself, this is not a place to cut corners and try to save some money. A qualified, licensed home inspector can tell you a lot about the property you are about to buy – including the things you probably wouldn’t notice yourself, such as the condition of the wiring, plumbing, roof, and more. The SRQ Duo recommends clients physically doing the inspection with the inspector, and asking a lot of questions. The information you learn will serve you for years to come as you pursue flipping houses with more efficiency. After the inspection, you will have one of three choices: accepting the condition and moving on with the sale, rejecting the condition and walking away from the deal, or renegotiating the deal.
- Create your scope of work and selecting your contractors. Creating your scope of work means making a detailed list of everything that needs to be completed on the project in order to get it ready to sell. If you are not comfortable with doing the work yourself, be sure to bring a qualified contractor with you to bid out these tasks. You don’t want to buy the property and suddenly realize your to-do list is much more expensive than anticipated. The SRQ Duo believes the best way to find good contractors are through referrals. The SRQ Duo can provide guidance on local vendors and contractors that come recommended by various sources including the local Association of REALTORS.
- Close on the house. Finally, all your work is about to pay off – but it’s not the end of the journey yet – it’s just the beginning! Your Title and Escrow company will schedule a time for you to come in and sign paperwork or will do it remotely. The SRQ Duo will be on hand to facilitate the process and represent your best interest. Congratulations – you are now an investment property owner! Now, it’s time to get to work.
- Manage the Rehab. Your job (unless you hire a project manager) is to ensure the contractors do their assigned work to standard, within budget, and on schedule. Contractors are notorious for taking significantly longer than they originally said, and without pressure from you, they’ll take even longer.
- Manage the Financials. You’ll also need to ensure bills are being paid, including the utilities, contractors, supplies, and other expenses as they add up. Keeping a close eye on the bills will also help ensure you stay in budget. This is by far one of the most frustrating parts of investment properties if you are not prepared.
- Consider Staging. Staging is the practice of placing furniture, plants, art, and decor throughout the home to make it look more “lived-in.” Although it may seem counter-intuitive to controlling costs, The SRQ Duo believes that a staged home simply sells much faster and for more money than one that is un-staged. The SRQ Duo can recommend professional stagers. For more information on staging to sell click here.
- Selling or renting your new investment property. Finally, the property is finished and it looks FANTASTIC. It’s time to see what all the work has been for – and it’s time to list the home for sale. Although you could list it “For Sale By Owner” – most investors choose to list the home with a real estate agent and place it on the MLS for maximum exposure. The SRQ Duo can represent all stages of your listing campaign. For more information on our selling process click here. Before listing the property, The SRQ Duo will look at the comparable properties in the neighborhood that have recently sold and present a Broker’s Price Opinion (BPO). Although you looked at the comps when you started the whole process, the real estate market may have changed, so be sure to re-evaluate to make sure you are listing at a competitive price.
- Receive offers and negotiate a fair price. Chances are – you are not going to simply accept the offer presented (though, there is no rule that says you can’t.) Instead, you’ll probably want to “counter” the offer with one that is better for yourself. Most buyers and sellers in a real estate expect a little back-and-forth, so don’t be afraid to counter with a slightly higher number – most times people won’t run for the hills. The paperwork may go back and forth a few times, and in the end you’ll either have a signed deal … or the agreement will simply fail and you’ll both go your own ways. Hopefully, however, you find success and can move on. The SRQ Duo will ease the stress of negotiating.
- Close on the Sale, Pay Taxes, and Move On. Finally, take your profit and sink it into the next flip or use it as cash infusion to buy rental properties or to buy real estate. House flipping can be a lot of fun – but it IS active income, so continue to build up your passive income at the same time to build real wealth.