Hat tip to daytrip for sending in this link:
Hat tip to daytrip for sending in this link:
This film is a public service to help participants learn the basics – because you will come across these HERO loans when buying and selling. Renovate America has been approved by 350 municipalities in California, and have every intention of expanding throughout the country – they have 600 employees!
They have the potential of becoming the Zillow of the home improvement sector – they think big. They have already implemented several customer-care benefits like monitoring the contractors – who don’t get paid until the consumer signs off – and providing contractor-dispute resolution whether the company is involved or not.
Loans are based on the homeowner having at least 10% equity based on a recent appraisal, or values from four AVMs (no income-qualifying required). The loans are sold on Wall Street as HERO bonds.
Here is an introduction:
The building of the next bubble won’t look the same as the last one, but a common thread will be lenders who are hands-off. Hat tip to daytrip for sending in this story about crowdfunding for flippers:
Although data providers don’t track the number or dollar-volume of loans going to house flippers as opposed to developers of larger projects, more than a dozen real-estate-focused platforms offer loans to them. And a handful of Southern California start-ups specialize in the market.
Patch of Land in West Los Angeles made about $61 million in loans last year, mostly to house flippers, and PeerStreet in Manhattan Beach made $40 million, almost entirely to them.
“There’s a crowdfunder popping up once a month now, and the low-hanging fruit is the fix and flips,” said Jonathan Lee, a principal at George Smith Partners, a Century City real-estate-financing firm.
Like hard-money lenders, crowdfunding platforms guard against risk by securing the loans to the property and lending for less than its full value.
If a borrower goes bust, the lender takes title to the property, which, in theory, can be sold for more than the loan principal. PeerStreet, for instance, typically will lend only about 75% of a home’s value.
“They don’t look at income or tax returns. They’re looking at the property and the project. Is there profit to be made?” said Christian Fuentes, a Pomona real estate agent and house flipper.
Patch of Land can issue a check in just a couple of weeks, assuming that a loan meets its underwriting standards. The loan is then offered up to the 17,000 investors signed up on its site.
Golden Bee in November bought a two-bedroom house on Greenfield Avenue in West L.A., not far from the Westside Pavilion. The company paid about $1.2 million, with $1 million coming from Patch of Land at an annual interest rate of 12%.
Berneman is planning a $750,000 renovation that will add more than 1,500 square feet of space, along with new plumbing and wiring. He estimates that the house, built in the 1930s, hasn’t been renovated in 50 years.
“We’ll be knocking some of it down to the studs,” he said.
Berneman hopes to sell the house for as much as $2.5 million once it’s back on the market this fall. Golden Bee would stand to make $575,000, not including the cost of financing.
It doesn’t take much to turn your kitchen backsplash into a stunning decorative feature, without having to spend millions. Here are some ideas:
Here is my tour of the local tile store:
During the radio show I mentioned that in my latest survey of NSDCC sales, 42% of the home sellers had owned their home for 12 years or more.
These long-time owners grapple with improvements to sell – where do you start, and where do you stop?
I suggested beefing up the curb appeal, and new carpet and paint.
Improving the curb appeal is understandable; 1) the first impression is critical, and 2) landscaping and power-washing are quick, easy, and cheap.
But carpet and paint? Why bother?
A common response is that sellers would rather have the buyers select their own favorites – especially with flooring, because there are so many choices.
Here’s why sellers should consider spending the money:
If you don’t install new carpet and paint, the house will be labeled a ‘fixer’ in the minds of most buyers. You will lose the buyers who can’t, or won’t, afford the necessary improvements (real and imagined), and those still standing will expect a discount off the sales price.
Because buyers aren’t that familiar with the cost of improvements, their idea of a discount will be larger than yours!
(Here is a link to the whole radio show)
With a little new paint and flooring plus a couple of lights, our buyers were able to bring an original 1970’s tract house into this century:
The Pacific Beach hillside remodel is complete. Here are a few photos of the journey, and a recent video tour:
Mr. Buyer delivered what might be the best quote of the year: “I finally buy my wife a million-dollar house, and the first thing she does is tear it down!”
I was going through some old photos last night!
Back in the day, Mike Anthony and I bought a duplex in the College Area. The lady in the back house had been there for 20+ years, and was a serious smoker. We don’t think she ever opened a window – the nicotine on the walls was thick enough that we could scrape it off with a knife.
After we scrubbed it down, my brother Dave and his friend came over to paint with a rented spray rig – and it took three coats to cover it.
He and I had a dispute over him spilling some paint on the hardwood floors, and ended up in a fist fight in the backyard!
The last photo is of my all-time favorite, the triple-black 1979 Cadillac Seville.
Is there an easy answer to how much sellers should spend on repairs, to sell?
You see me on various jobs talking about projects undertaken by sellers – and the scope of the project are almost always related to the house’s age. You want to bring houses up to speed, but items that are dated and hard to change (eight-foot ceilings, split-level, bad yard, etc.) make it a real challenge.
Where do you start, and where do you stop?
Work it backwards. Those who live in a super-custom area (RSF, Del Mar, La Jolla, etc. where values can vary widely from lot to lot), have a wider range.
But those who live in tract neighborhoods can expect home values to range roughly 10% between the fixers and the cream-puffs. The newer the tract, the easier it is to predict where you are in the range, because the improvements are more likely to be similar.
If your house is mostly original, buyers will expect to pay a minimum of 10% less than the comps that have been fully remodeled or have other positives (view, big yard, one-story).
If you can find a way to spend less than 10% to get your house from fixer to full retail, then do it. Your renovated look could spur a bidding war, and/or provide additional benefits later like easier repair-list, easier appraisal, and less chance of fallout.
If the cost of needed improvements exceed 10% of your current value, then just sell it as a fixer, and have your price do the work – list for 10% under the renovated comps.
There are other variables – a bad agent can cost you 2% to 3%, and a great one can add 2% to 3%. Quality contractors at reasonable prices make a substantial difference, and timing is everything!
Get Good Help!