Yesterday afternoon, Nick Aalerud of AA Real Estate Partners and Jim Jones of Entrust held a webinar on using Self-Directed IRA’s to invest in real estate.  They were 40,000 attendees signed up for the interactive webinar.

Watch the entire recording play-back:

And don’t miss Jim tomorrow evening at the Eastern Mass REIA Meeing in Rockland, MA.  As the featured speaker, he will talk in about the many investment strategies available when you use a Self-Directed IRA.   Click here for event details. 

It’s now 2 weeks into the project and most of the demolition is complete. The new master bath suite is framed out and things are moving along!

Join Nick and the gang from Southern Maine REIA as they take you through the house…

Watch Part 1 of the Bedford Property to see what 126 Meetinghouse looked like before.

This past Saturday, we held AARE Mentor’s first Rehab Road Trip, and I am happy to report that it was a success!

Unlike the Wholesaling for Profit workshops, where we were able to accommodate 25 people, this Road Trip was limited to only 10 students.

Highlights from the Road Trip

The day started off with a 2-hour classroom-style presentation, preparing the students and making sure we were all on the same page.

At Property #1, the students learned how to get a preliminary rehab estimate in less than 15 minutes.  It’s easier said than done.  Many were tempted to go right into a detailed estimate, which usually leads to “analysis paralysis.”  With some practice, they got the hang of it.  Flory M. from Acton, MA puts it best:

“I am ready to cut my time spent on initial budgets by 75% and arrive at the same number or better!”

Next, they performed a detailed Scope of Work.  Everyone can use more practice refining their SOW, new and experienced investors alike.  The goal at Property #2 was to eliminate contractor confusion, because it’s all comes down to communication, right?  Throughout the day, students were given tips on managing contractors during every step of the rehab process.

The last property was one for the books.  If you follow the AA Real Estate Facebook Fan Page, you already got a sneak peak of one of the absolute worst properties we have seen in a long time, supported only by this air jack on a crazy toxic waste barrel…

Rehab Road Trip is Great for New and Experienced Investors…

“Nick presents solid information on costing rehab repairs with an experience base.  All this makes either a great starting point for those getting into rehabbing or a reference to tweak and organize strategies of those that have done it for a while.”

David L. of Manchester, NH

“The hands-on structured coaching was excellent.  We were provided with practical straight forward methodologies.  It was presented in a way which was applicable and valuable to the new or experienced rehabber.  Overall, this seminar was an excellent investment.”

Bob H. of Westford, MA

Reserve your spot on the next Rehab Road Trip is September 9th, 2012.  Sign up for our newsletter and become a Fan on Facebook to receive notifications.

Within the past couple years, the Rehab Chronicles video series has featured properties all over Greater Boston, but never before have we pioneered into the northern territory commonly known as “New Hampshire.”

This house is crazy awesome… 4,225 sqft, 4 Bed/3.5 Bath, 3 Car Garage.   Not only is it huge, it’s also quite the party house–complete with an outdoor bar and a Hot Tub Time Machine.

Even though most of the work is cosmetic, there are still some interesting issues.  So, over the next several weeks, watch the transformation of Meetinghouse Rd from 1992 to 2012.  (I told you there was a Hot Tub Time Machine!)

Enjoy!

All-Day Intensive Workshop

 8.5 HOURS of Pure Rehab Analysis…Prepare to get your hands dirty!

Ever wish you could just walk into a property and know exactly the work needed?

And more importantly, know instantly how much the rehab will cost?

Whether you are a Rehabber, Wholesaler, or Property Owner, an accurate repair estimate can make or break a deal.

Investors who know their rehab numbers can make offers right on the spot.  And in this fast-paced world of real estate, those are the investors who get the best deals.  (Ever wonder how on earth a property goes under agreement the day it’s listed?)

Don’t let any more deals fall through the cracks because you are unsure about the rehab estimate!  

 Join Nick Saturday, April 21st for his

Intensive Rehab Analysis Workshop

Workshop  Details:

Phase 1: Classroom-Style Workshop, Review of Provided Binder

• Training on our Rehab Estimate & Pricing Tools
• All our Contractor Agreements & Contracts
• Digital Versions of EVERYTHING

Phase 2: Thorough Rehab Analysis of 3 Properties

• Hands-on training in a group setting, ask anything!
• Each analysis more intense than the last!

Due to the Hands-On Nature of this Workshop, Space is Limited to 10 People…

 Click Here to Reserve Your Spot!

Wow.  Deal #107 sure is one for the history books here at the AA Real Estate Group.

You’d think I would have seen it all by now–or at LEAST that my exquisitively trained eye (through my AAwesome shades) would be able to come within a $10,000 margin of our rehab budget.  Well, $35,000 in change orders later, it’s a brutal reminder that I haven’t seen everything, nor will I ever.

After the dust settles on each project, we always ask ourselves the Big Question, “What did we learn on this one?”  For this Littleton project, the major change in the rehab cost was due to an unforeseen issue underneath the floor.  Let’s break it down, shall we?

If you look closely at the rug against the closet, you can see the floor popping up.

Believe it or not, a homeowner still lived in the property.  So, unlike a foreclosure or abandoned property, we couldn’t even spend time or money doing some light demo to properly diagnose what the buckling meant.  I thought this problem was similar to one I saw before on our Harvard St house in Natick, MA (Deal #89).

It should be noted that neither an inspector nor our GC could get access to underneath the floors, as they perform a “visual” inspection only.  Also, under the house was a slanted piece of ledge, which is why there was no basement.  There was only a small crawl space under one corner of the house – But no access to the side of the house pictured above.

Based on this visual inspection, the buckling typically meant one of a few things:

1.  Best Case Scenario

Since we could only see the hardwood buckling, some moisture just could have gotten underneath it.  We only had to strip and replace the hardwood in the room ($850 installed).

2.  Second Scenario

The house had settled, and we simply needed to tear up the floor & subfloor, resupport it, and re-floor it (approx $3,000).

3.  Worst Case Scenario

The sill was rotten from pests or moisture, causing the floor joists to lie slanted a bit.  Strip & replace the sill over 15 linear feet, secure & relevel joists, and refinish:  $6,000.

Being conservative, we budgeted for the worst case scenario.  $6,000 was added into the budget to address the buckling problem.

Then, the floors came up…

Not only was there settling… but moisture came through a bad seal underneath the non-accessible crawlspace.  That moisture had rotten not one joist… but every… single… joist, in the ENTIRE HOUSE.  In the picture below, you’ll see “moisture” was actually what appeared to be a duck pool sitting under the house.

This is the same corner of the house as the one pictured above. Notice the bits of rotten joists floating in the pool of water.

For those who aren’t familiar, joists are structural.  The only way to properly replace joists is to demo every wall, ceiling, and floor until new joists and supports can be installed underneath –  of course AFTER waterproofing everything.

That wasn’t all.  We found out the property-owner’s brother’s friend, “Uncle Jake,” (who must have been a janitor at a local school) decided he knew how to do plumbing.  Of course, he knew nothing and did everything improperly, including installation of a waste line that DIDN’T QUITE make it to drain into the septic tank.  I’m sure this is also the Jerry-Rigging Genius who brought us the downspout as a plumbing solution.

Between the rotten joists and the terrible plumbing, it all added up to around $35,000 - above and beyond the original $6,000 budget.

So what was the total damage?

From start to finish, our original $80,000 budget became $123,034 in construction costs – and technically, still climbing with our final inspection report.   When you are hit pretty hard, it is tough to keep your mind clear and stay set on the end goal.  Your brain may then tell you to scrimp on everything else, or to list the price higher than you originally planned, but that all leads to bad financial decisions.

Learning & Moving Forward

The truth is – I truly and honestly can’t think of a way to have eliminated the inherent risk that was present.  The same goes for any rehab, for that matter.  Having done now 110 deals, my job is to eliminate variables as they come up.  The more variables I eliminate, the safer the deal is – even with huge construction figures.  Had Littleton been a foreclosure or abandoned home, I may have asked permission, and put some money at risk to do a light demo to figure what we were looking at.

So, if there was no way to have foreseen $35,000 in change orders, what can I learn from this experience?

Firstly, I learned how to take hard hits in stride, without losing sight of what needed to be accomplished.  We needed to find a reasonable solution and finish the project correctly, all while still making it a beautiful home for our new buyers.

This experience also reinforced my conviction to always use conservative numbers in my analysis.  I always include a Fudge Factor in each rehab estimate, because you will never fully know what’s behind a wall until you open it.  Had I not been so conservative going into the project, I would have ended up in deep trouble.

I can’t be angry at myself for coming across one bad deal in 100.  At the end, I’d say 1% is a pretty good ratio.

And who knows?  Our current track record of how many deals we’ve lost money on… which, by the way, is ZERO… may stay at zero, as we bought this one correctly.  But Tsk tsk, we don’t talk numbers until it’s signed, sealed, and sold.  It’s bad luck, you know!

Thanks for following the videos of The Littleton Rehab Chronicles.  Hopefully you learned a thing or two, especially on what to look for, and in this case, what we could not have POSSIBLY looked for – but how we dealt with it and moved on.  A logical head and steady hand are what it takes to get through some of the challenges like this one, and we appreciate you following it.

Check out our new Chronicles coming out, as we head up to the Arctic in Bedford NH!

Littleton Rehab - BEFORE

Littleton Rehab - AFTER

IT’S FINALLY OVER!

We can’t believe it either… After about $35,000 in change orders, this one ended up essentially being a brand new house.  (Which I’m sure helped us get it under contract for the full asking price…)

Take one last look at the nightmare that was the Littleton Rehab Chronicles.

Stay tuned for the next Rehab Chronicles, where Nick heads up to the Arctic Circle (a.k.a. Bedford, NH).  It’s a 4,225 sqft– a party house complete with an outdoor bar.  I promise those videos will go much more quickly than the Littleton rehab…

In this episode, take a walk through with Nick and a couple of our AA Premier Properties agents, Ken and Naomi.  Since you last saw the house, the floors are water-proofed, and the subfloors and studs are installed.  Also, construction was at a stand-still due to the town requesting new floorplans.

Check out the video below:

This was such a popular article last year, we decided to repost it this year. Hopefully you had a great Holiday! Having just returned to the office from a very well rested vacation to St. Lucia, I am taking the week between Christmas and New Years to get caught up, set goals and prepare for a productive 2012!

Anyway, this time of year is very special for me, and I wanted to try and help make it very meaningful for you as well.  This is usually a time we reflect on the past year, what we did, didn’t do, achieved, slightly missed, things we did that we did NOT plan on, and overall – sigh & smile at another blessed year gone by.

Have you heard this statistic? Only 8% of New Year Resolutions actually succeed. I heard this once a few years back, and didn’t find it too difficult to believe.  Think of how many people you hear talking about their Resolution in February.

Weight loss, quitting smoking, drinking less / not at all, bringing in $100K more the year ahead (if you work in a place where you control your own destiny) are all GREAT ideas.  To explain why many Resolutions fall through, allow me to inject a little philosophy… if EVERYONE in the world actually succeeded in achieving their New Year’s Resolution goals, one could assume there’d be an awful lot more focused, happier, successful people out there.  However, wouldn’t that just bring down one aspect of why we make Resolutions? Challenging ourselves?

Balancing the Level of Difficulty

I’ve found people will only work towards winning a game– whether that is a board game, a fitness regimen, achieving an income level—when they think they are capable of winning.  If the challenge exceeds their capabilities, they feel defeated and stop playing. On the other hand, if people make their goals too easy to win, they get bored with the lack of challenge and walk away.

Between hopelessness and boredom is the sweet spot of an invigorating challenge.  How do we make a playable middle ground?

I’m glad you asked, Goldilocks.

First off, New Year’s Resolutions don’t work, because big changes in someone’s life are more than just a decision collectively made on New Year’s Day.  Usually, they’ve been WANTING to make the decision for a while.  They even began making a plan for how they will put that change into ACTION, and then work to MAINTAIN it throughout the year.  It could take days, weeks or even MONTHS before someone is ready to make a change they know they want to make.  Chances are the day they reach that level of mental preparedness is not January 1^st.  This arbitrary date does not consider any of the factors for successfully reaching a goal.  THAT is why I’m completely against making “New Year’s Resolutions.”  You’ll either drop into being the 92% that fail, or the 8% that succeeded.

A Better Alternative

I like to think there’s a better way by taking a more analytical approach.  Become not the 8% that keep their Resolutions, but the 3% that understand how the DESIRE, FOCUS, and CONSISTENCY can lead them to becoming a better family member, professional, and overall person…. and stay that way for not just one year.

I’ll be taking some time off soon, usually about two or three straight days, to reflect, regroup, renew & refresh my goals for 2010, and plan out my 2011.  The following is what I will be thinking & doing in MY two days:

1.  REVIEW:

Take out the box that contains the PIECE OF PAPER that had your WRITTEN 2011 goals, plans & resolutions on it.  Don’t have one?  Now you know what you will be doing for 2012.

Questions to ask yourself:

• What goals did I meet or exceed this year?  What challenges did I face as I worked to meet these goals?
• What goals did I come close, but didn’t reach this year?  Was there anything I could have done to push myself to meet this goal?
• What goals did I not even come close to obtaining?  What was so difficult (or boring) about reaching this goal?   (Was this goal even as important to me, as I thought it was?)

2. ANALYZE:

Write down the most IMPORTANT LESSONS you learned over the past year, no less than 3, and no more than 10.  These can be business-oriented, personal lessons, or general life lessons.  They can also be observations about yourself you want to point out.  Put a few lines in between each point.

Example:  “I learned that my personality type makes it very difficult to FOCUS on one specific task at a time.  I tend to take on more than I can chew at a time, and get overwhelmed.”

3.  INTERPRET:

On a NEW piece of paper, write the title “2012″ in big letters at the top, and using the lessons & observations you just learned about yourself, WRITE DOWN 5 things you can do in 2011 to IMPROVE your life, keeping in mind the “big 3″ (Personal, Business, Spiritual).  Do NOT call these “Resolutions”, these are just statements – you will need to legitimize them in the next step.

Examples:

• “I will keep track of my dollar per hour ratio on my tasks, to help analyze and improve my time I spend in my business.”
• “I will spend more time with my family.”  Or, “I will begin doing charity work.”

Important: You will need to convert those above statements into MEASURABLE and QUANTIFIABLE goals in the next step.  Do your best to stay away from vague, ambiguous CONCEPTS that cannot be quantified.

4.  COMMIT:

On this same piece of paper, write down one or more INDICATIONS of COMMITMENT underneath each one of these statements you wrote above, and assign a REALISTIC GOAL for each.

Example: “I will set aside the hours between 6 & 8PM each day of the week for my family time, with the only exception being 5 networking events per month.”

Here’s where it’s important to break it down into small time chunks – it will make it much less overwhelming.

Important: Don’t use YEAR goals – if you have a YEAR goal in your head, divide it by 52, and now you have a WEEKLY goal.  I find WEEKLY goals much easier to work with.

Example: “I will spend 1 month this year focusing entirely on systemizing & organizing by business (this is to assist my dollar per hour ratio).” –> Becomes “I will spend 2 days per month (every second & fourth Friday) reviewing my systems, organizing, and re-prioritizing, in order to be more effective immediately.”

Now, you have your TIME commitments.  You will use this and incorporate it into your weekly calendars & planning sessions, EVERY week, for the rest of the year.  If you use an electronic calendar, put the reminders in NOW, so you have someone prodding you & holding you accountable to meeting these time commitments (I use Google Calendar).  I believe these specific time commitments are even MORE IMPORTANT than your income goals – this is where the CONSISTENCY plays in.  Remember, with DESIRE, FOCUS, & CONSISTENCY, comes SUCCESS.   By following these time commitments, no matter what your income goals, you WILL find success this year.

5.  SET the BAR:

WRITE DOWN your MONETARY & other MEASURABLE GOALS for 2012.  This can include dollars & cents, dollars per hour, charity donations, etc.  The important part here is to BREAK IT DOWN, as you’ll see in the next step, every one of these goals must also come with WEEKLY ACTION STEPS you must take to work towards achieving the goal.  You’ll see more clearly in the next step.

Examples:

• “I will bring in $200,000 in income this year, through ________________. ” (Ebay Sales?  Real Estate Agent Transactions?  Financial Product Sales?  Edible Arrangements Sales? …hehe… definitely not Edible Arrangements…)
• “I will work on my effectiveness this year, so that when I divide all my hours I’ve worked into my total income, I will be worth at least $150 per hour worked.”
• Remember to break it down again: “I will donate $10,000 of my income this year to charity.”
• –> Becomes, “I will donate $200 / week into an escrow account, which will be used on Jan 15, 2013 to donate to one or more charities of my choosing.”

6. TAKE ACTION & ACHIEVE:

WRITE DOWN your WEEKLY ACTION PLAN to meet these goals.

Example:  If you say, “I will make $200,000 this year in income,” you need to have a breakdown of the vehicle that will make this happen, and what needs to be done on a WEEKLY basis to make this happen.  Work backwards!

Wholesaling Example:

If you know you make a minimum of $5,000 per transaction, and you can average $15K.  You also know, in your business (this is an example only), you receive an average 7% marketing response rate, with 3 leads / site visits converting into 1 offer, and 5 offers converting into 1 deal.  So… questions to ask:

• How many deals do I need to do, over the year? ($200K / $15K = 13.33 = 14 deals in 2012.)
• How many offers do I need to make, to get this many deals? 14 deals * 5 offers each = 70 offers … OR, 6 per month.
• How many site visits do I need to make? 70 offers * 3 site visits each =  210 per year… OR, 18 per month.
• How many marketing pieces do I have to send out, to get to these deals? 210 leads / 7% Response Rate = 3,000 direct mail pieces
• How many marketing pieces do I need to prepare & send out per week, to meet this goal? 3,000 / 52 = 58 letters per week.
• ACTION PLAN ITEM: I will send out 58 letters per week, consistently.
• ACTION PLAN ITEM:  I will need to spend minimum 5 hours per week building this lead database, so I have addresses to send to.

Next step: Once you have all these written out, guess what?  You import them into your calendar.  So you get countless e-mails and smart phone pop-ups until you do the stuff you said you were going to do.

Is this difficult?

Sure – it takes a lot more time than simply making a “Resolution” and hoping you stick to it.  Is it doable? ABSOLUTELY.  And if you are in a different profession, you can break down your own targets.  (Number of client visits, Number of networking events attended, etc.)

The more years you have under your belt, the easier it becomes.  You startto learn more effective ways to run your business (what methods of marketing bring in more leads, how much each lead cost, etc).

For those who want a much more simplified version, and who maybe aren’t at this point yet, I’ve found the template Tim Ferris uses in 4-Hour Workweek is a GREAT place to start.  It shows you the basics on setting goals & making action plans.  Take a look at it here. It’s a great tool to begin with, but I’ve modified it a bit.

In any event, I violated a HUGE rule in marketing: keep these things short.  On such an important topic however, I wanted to really drive home the fact that this PLANNING aspect, is the part that separates YOU and ME, from the 92% of people out there who fail at changing their lives.  If the DESIRE is there, then there’s no reason you can’t FOCUS down on what’s important to you, set the action plans in place, and remain CONSISTENT throughout the year.

And who knows?  In January of 2013, you may take out that sheet of paper you put in that box (after you’ve imported all the stuff into your calendar), and realize, WOW.  I accomplished a tremendous amount, and didn’t even break a sweat.

And now you know Step 7.  REPEAT.  CONSISTENCY.  Have I mentioned that yet?

To all – I wish you a Happy & Healthy 2012.  NEVER stay in a comfort zone, ALWAYS push yourself to new limits, continue to learn how to become a time management expert, love the ones you’re close to, treat your body right, and if you want something, PLAN IT, and GET IT DONE.  There’s no excuse.

Your Mentor & Colleague,

Nick