Batten Down the Hatches…

May 25, 2012 by Michael Borger

Storms’ a Blowin’!

Or are they? The news the other day is that this will be a calmer hurricane season for Hawaii in 2012 than average. While that may not be much fun for the daredevils and storm chasers out there, I think most people will welcome riding out the remainder of the year with fewer causes for concern. Of course, predicting hurricanes — like any natural disasters — is subject to margins of error, but Hawaii is no stranger to tsunamis, earthquakes and the like.

That being said, let’s hope the nice folks at the Central Pacific Hurricane Center didn’t get their storm charts crossed (ok, ok, I know they really use GIS, remote sensing and other high-tech tools). But whenever I see news like this, it makes me think of the precarious nature of Hawaii’s ‘settled presence’ on our islands — namely, where we’ve decided to build homes and infrastructure. The ‘human layer’ on top of the existing physical island.

Hawaii Flood Hazard Assessment Tool - Kailua and Lanikai Flood Zones

Last weekend, my girlfriend and I took a drive up the windward side to Kaaawa Beach Park. We were looking at all the places where the water comes right up to Kam Highway, at all the homes that are sitting right on the edge. And whether you believe in global warming or not, there’s too much evidence of global sea level rise to not be concerned if one of those homes is yours! (someday we’ll have to make a hard decision on just what we’re going to do when Kam Highway gets flooded over just one too many times for our comfort)

Of course, this example is just from Oahu because that’s where I live. But I’ve been to Kauai, Big Island, Molokai and Maui enough to know that the same situation exists throughout the state. We now have shoreline setbacks to help prevent future construction in these dangerous areas (some islands adhering to stricter setbacks than others), but the annual hurricane season prediction is a good time to reflect, from a Hawaii housing perspective, on some basic ideas for living safer in the coastal zone:

1. Learn about the shoreline setbacks that exist in your island/county. Is it 40ft? Or 50ft plus an erosion multiplier?

2. Check up on your hazard and flood insurance — don’t skimp if you don’t have to

3. If you’re building any additions to your home, pay special attention to new building ideas that allow high winds to pass by with minimal damage

4. Don’t build any erosion control structures without TONS of due diligence. This means seawalls, revetments, groynes, piers and more. It’s the State policy to discourage such efforts of shoreline hardening (armoring).

5. If you’re in the market for a new home, think very hard about whether you want beachfront or not. Understand how the beach ‘behaves’ by the home you’re considering. Is it accreting or eroding? Is it subject to massive sand depletion and replenishment throughout the year? Know your beach before buying your home. In the long run, you may be safer and more at ease looking at the ocean from a bit further back.

Leave your comments below!

How to Estimate Rehab Costs

April 4, 2012 by Michael Borger

How to Estimate Rehab Costs

Learning how to ‘run your numbers’ is a key component of flipping houses. The most important numbers are:

1) Acquisition cost
2) Financing cost
3) Resale Price
4) Rehab Cost

Today we’re going to talk about #4 — estimating your rehab costs. Get this number wrong and not only could you sabotage your expected profit but you could actually end up losing money. Get it right and BAM — you’re in the green!

When you’re visiting a house for the first time, it’s helpful to have a sheet with you that details out the cost for each rehab item. Then you just check each item and tally up your costs. Full kitchen renovation? Check. One full bathroom and one half bath? Check, check. New roof? Check. Tally up — $34,000.

If you really nail this system down, you can be in and out of a typical house in 30 minutes or less with a solid idea of how much your rehab is going to cost. Maybe you won’t get it down to the exact dollar, but you’ll be pretty darn close. Knowing this, you can then figure out your other numbers and come up with your MAO (that’s Maximum Allowable Offer for you folks who like the lingo).

Think about how much time this can save you. Maybe you can visit 1 or 2 more houses each and every day! Think that will increase your efficiency and, therefore, your bottom line? You better believe it.

But we need to backtrack a minute. How do you know that bathroom remodel will cost $5,250? There are a couple ways to really tighten up that number so you’re prepared when you get a call on that Ewa Beach fixer upper and need to go visit the house for the first time.

Have a Handyman or General Contractor Give You an Estimate

“Wait a second, Mike” you say. “I thought the plan is to be able to properly estimate the cost when I first visit the property, not when I have a handyman or GC walk the house during my inspection period.”

You’re correct, but when you’re starting out you might need to get a few estimates to make sure your numbers are right. Do this a few times and you’ll quickly get an idea of what your kitchen tile floor will cost and how much that fourth bedroom extension on your Kaimuki single family house will add to your rehab budget. Eventually you won’t need them with you on the first visit but only when you want to be sure you didn’t miss anything.

Go For a Long Walk

Another way is to spend an afternoon or two at Home Depot or Lowe’s with a tablet of paper and pen in hand. Price out your materials at different grades. Corian vs granite countertops; hardwood vs tile vs carpet floors and different grade appliances. Don’t be afraid to chat up the employees — they should know how much the labor should cost to install the materials you’re scoping out.

Take these material costs and put them in your rehab sheet that you take with you on your site visits. Don’t reinvent the wheel every time — stay efficient.

You Don’t Need to Be Perfect….

Again, the idea is not to get the perfect repair estimate inside of a half hour. The idea is to be able to act on a moment’s notice on that Mililani hot deal and know within a couple thousand dollars and 30 minutes onsite whether that rehab is going to cost you $20,000 or $40,000 to fix up.

Here’s the REAL POWER in this skill. If you can figure out your repair estimate while visiting with the seller for the first time, then you can go to contract right then and there! Don’t give them the opportunity to call up a competitor while you mull it over and reschedule another meeting a few days later in the week. That window of opportunity is GONE, my friend!

Knowing how to estimate rehab costs is a key skill for any real estate investor interested in flipping houses. Practice it until you’ve systemized the process and you’ll save both time and money on your deals.

The Worst Contractor Ever?

September 3, 2011 by Michael Borger

The Worst Contractor Ever?

I just got back from a training with my friends from FortuneBuilders in San Diego (great city!). While the focus of this long weekend was mostly the state of
foreclosures, short sales and REO properties in our respective markets, we of course talked about all things regarding real estate investment and homeowner service / problem solving. On Sunday, JD and Paul Esajian (of “Flip This House” on A&E) showed us this hilarious video they produced.

If you’ve ever had trouble with a general contractor or handyman (that never happens, right?), you’ll feel a special attachment to this short film. Of course, JD & Paul are absolute experts when it comes to rehabbing and renovating houses, so there are a few lessons to be learned here. If you’re hiring someone for your rehab, do your homework on them, get referrals, make sure all expected work is crystal clear and in writing and that channels of communication stay open. If you’re a contractor or handyman, then here’s how not to get your next job!

With that said, I present to you “Subpar Construction & Customer Underappreciation 101” – enjoy!

Funny, huh? What are some of YOUR worst rehab nightmares? Share below!

How to Fix a Leaking Roof

December 29, 2010 by Michael Borger

Leaky Roof? Wearing Your Raincoat Inside?

Is your roof leaking? Do the recent rains here in Hawaii have you wearing your raincoat inside? If so, you want to fix this problem immediately since water can cause significant damage to your home’s construction, whether it’s your home or an investment property. It’s not always a quick fix, but you need to get it handled NOW. If you’re not going to call a professional (and be honest, maybe you should), then here are some quick tips on how to fix that leaky roof:

1. Get yourself a good ladder and a few ounces of courage, because you’re getting up on that leaking roof! Ok, do I need to say that you should not do this while it’s actually raining?? Once you’re up top, enjoy the views of Waikiki, Pearl Harbor or Diamond Head or wherever you find yourself because you really shouldn’t be up there too often. Now back to work!

2. Look for imperfections in the shingles. Any broken pieces or tears? Anything rotting? Now examine your vents and skylights or anything else you have up there – satellite dishes, antennas, etc. Are the cement seals broken? I saw a few chimneys in Wahiawa recently – check those seals, too. What about your solar panels? Did they cause any problems when installed? Check for mold as well so you know whether you have another problem on hand.

3. Need help locating the site of the leak? Try this: take a few flowers up there with you, break off the petals and tear those into small pieces. Now, place them on the wet roof and see where the water takes them. That’s your leak! If it doesn’t work, then at least it will smell nice as you’re walking around.

Water Stain on Your Ceiling?

4. Now get down from the roof. Really, what were you doing up there? Don’t you know it’s dangerous? You could get a bad sunburn, too. You should be in the attic instead because that’s where you’re going to locate the source of the water’s entry into your house. Hopefully it’s only coming in from one place. Just follow the wet tracks or water stains to the source.

5. Now that you’ve located the leak, let’s fix it. If the problem is a vent or a shingle, you’ll want to replace the part and give it a healthy dose of roofing cement to plug those leaks. A trowel is your tool of choice for this job.

6. If your problem is due to rusted metal, then you can use a quality metal paint to prevent further corrosion from water or extreme heat. However, this is patchwork – severely rusted metal should ideally be replaced. Your roof is not the place to save a few bucks.

7. Empty that bucket inside your front door, ditch the raincoat during family dinner and revel in a job well done. You’ve fixed your leaking roof, your Hawaii house is a home yet again and you are the envy of all the neighbors.

8. If you can’t do Step #7, then call a professional Hawaii roofer! ☺