In this episode, Heather and Misty discuss flipping homes as a new investor, Misty’s Certified Pre Owned Home program, and visit with Adam McCarty from Rightway Home Inspections.
Introducer:
It’s time for the Central Iowa Real Estate Scoreboard right here on 1460 KXnO and now on 106.3 FM here is Misty SOLDwisch and Heather Burnside.
Heather Burnside:
Good morning, and welcome to the Central Iowa Real Estate Scoreboard. And I’m your host, Heather Burnside, along with queen of Central Iowa real estate, Misty SOLDwisch. Good morning, Misty.
Misty SOLDwisch:
Hey Heather.
Heather Burnside:
We’re going to be talking about one of my obsessions and I told you this early on, when we first got together, that I’m obsessed with home flipping shows, even though I’ve never attempted it, never bought a house and tried to do this myself, but I love these shows.
Misty SOLDwisch:
Well, they’re popular with everyone. I mean, it’s a cool thing to see something that looks really bad, turned into this amazing show piece, and then they make millions of dollars doing it.
Heather Burnside:
Right or at least tens, if not hundreds of thousands. Yeah. So I’m obsessed. And we’ve got Adam McCarty here from RightWay Home Inspections here as well, because one of the things that happens obviously when you flip a home is, as Misty put it, some of the most amazing transformations and why these shows are so popular is these homes are oftentimes left in disgusting conditions.
Adam McCarty:
Yes, they are. I’ve seen some of them.
Heather Burnside:
You’ve seen the before quite a bit, haven’t you?
Adam McCarty:
I have seen the before quite a bit.
Heather Burnside:
And normally a lot of the plots of these shows involves the inspector because they come in, sometimes they’re forced to buy it sight unseen at an auction, they’re not allowed in. There’s some risk involved with that. And then they bring the inspector in and there’s a major problem with the foundation or-
Misty SOLDwisch:
He doesn’t ever bring the good news.
Heather Burnside:
Yeah. And there’s always that plot twist, isn’t there? We budgeted this and now we’ve found that and now it’s going to cost us this amount of money. You’re always the bad guy on these shows.
Adam McCarty:
A lot of times, yeah.
Heather Burnside:
All right. So just some of the shows that I can think of off the top of my head when it comes to flipping, one of mine is Flip or Flop. And now that Tarek and Christina are divorced, but still doing that show, now they both have their own spinoffs where Christina will come in and redo a room or two. But now Tarek is helping other people flip homes, his rookie flippers, through the process. There’s the Texas Flip N Move, Flip this House. Vanilla Ice, the rapper, was flipping homes for a while.
Misty SOLDwisch:
He was flipping homes even? Got to make a living somehow.
Heather Burnside:
One of those guys from the Kardashians shows has a flip… Scott Disick?
Misty SOLDwisch:
Right, yes.
Heather Burnside:
Yeah. Flip this Disick, I don’t know what he calls his show, but talk a little bit about these shows and how much of it is, what you could expect if you… I’m getting the idea that there’s a lot that they’re not showing.
Misty SOLDwisch:
Well, it’s entertainment, it’s not a tutorial. But it does give some inspiration, and it gives people ideas on even on their own homes, things that they can do. And they do a great job of being creative and using amazing finishes and so I understand what the appeal is, for sure. Sometimes it misguides us a little.
Heather Burnside:
Right. So if you’re looking to buy a home to flip it, what are some things that people should be looking for?
Misty SOLDwisch:
So we have people all the time that call us, especially because I’ve worked with bank owned properties, representing banks, selling homes for many, many years. So those are always investor flipper magnets. And in fact, Adam McCarty, who’s here with us, purchased a foreclosure I had for sale several years ago, a really beautiful one, and that was a unique situation.
Adam McCarty:
Definitely.
Misty SOLDwisch:
So they call and they’re like, “Man, I want to get into flipping homes. And there’s just a real difference in approach if you are a hobbyist versus a professional, just like in anything, but it’s important to focus on if you have never done this before, don’t take on a mammoth project that requires you to rebuild the home completely. Take on something that’s smart, that is a solid, popular type of home. A three bedroom ranch needs some cosmetic updates. You might not have as much difference in the purchase price versus your eventual value, but you can at least dip your toe in, figure out like how these projects are going to work, who are the subcontractors you’re going to trust, and you’re going to have a safe investment that it’s going to be easy to resell it even if the timeline doesn’t work out for you.
Heather Burnside:
And I’m assuming that finding that safe first project, the inspection is going to be a big part of that too, because the last thing you would want to do is buy a home thinking it’s going to just be cosmetic upgrades and then you find something major wrong with it.
Adam McCarty:
Yeah. Yeah, you don’t want to go in and have to do foundation repair or find out that the panel is one of the ones that has high known fire risks and stuff like that.
Misty SOLDwisch:
Yes. What is that?
Adam McCarty:
There’s two. Federal Pacific Stab-Lok brand and then there’s another one called Zinsco and it was manufactured by a couple of different companies, but it’s the same panel design.
Misty SOLDwisch:
Right. If you know that upfront, then that’s fine. You’re planning for it in your budget. But sometimes people will skimp. They’re like, “Okay, I’m going to forgo an inspection period because I’ve got to get this house and it’s multiple offers. So I’m just going to make the strongest offer I can.” And then they go and put tons of money into renovations. It looks beautiful, but those underlying problems are still there. And when they go to sell it, you bet that buyer’s going to have a home inspector come through. And then they find out and then they’re like, “Uh-oh, there goes all my profit.”
Heather Burnside:
Right. And when you’re buying a home with the intent of flipping it to sell, I’m sure that there’s… You might have cash yourself, you may have investors that have come up with cash, but there’s got to be a difference between a cash flip and a financed flip, especially when you’re talking about how long you’re going to take to flip the home before putting it back on the market.
Misty SOLDwisch:
Well, a key part of how successful your investment is, is what your carrying costs are during that time. And sometimes when someone is just getting into flipping houses, they might take out an equity loan on their own personal home to finance it. That’s really putting your own home at risk if you aren’t able to do it successfully. Or they just use their nest egg cash somewhere, that can make a difference in return but that money could be making money for you elsewhere as well. So I’ve seen when someone is a seasoned investor that makes their living flipping, they tend to have a great relationship with a local bank, so they can leverage that. There are different things that banks look at, if you are trying to get a regular home loan, a mortgage, on the secondary market, as an investment versus doing an in house loan with a local bank. But they need to know that you know what you’re doing before they’re willing to put themselves out there for that.
Heather Burnside:
Right. Okay. So we’ve walked through what you need to look for and be aware of as you pick a home, the home itself, but I’m sure that the neighborhood that this home is in is going to make a difference too on your return on investment.
Misty SOLDwisch:
Well, I think it’s something that you have to take into consideration, but I’ve actually seen, I think it’s one of the advantages of our market in Central Iowa, Des Moines has a lot of areas that are upwardly trending in value, thanks to a strong market. People go to, maybe homes hadn’t been as expensive in this neighborhood and there’s some opportunity to get a good deal. But if you get the property fixed up and looking great, really there’s some flexibility on people will buy in any area. You just need to be mindful of what the upper end of the market is and not over improve it for the neighborhood it’s in.
Heather Burnside:
That makes sense. And I find this interesting. You had pointed out that a lot of the return on your investment comes from that final 10% of what somebody might think are just little details, but I know as somebody that’s sold and bought a home, you always notice the little things.
Misty SOLDwisch:
It’s the fine touches at the end that make the difference. I’ve worked with many want to be investors over the years that are like, “You know what, this project’s taken about 30 days longer than I thought. I need to get it on the market now. We’ll just put the carpet in while we’re working on it. And I’ll get the countertops in next week, but get it on now because I need to get this place sold.” Or, “I’m going to leave all these old weathered outlets and plugs in, and I don’t want to spend the 50 cents per outlet to make it look better.” Those final touches, that’s what makes it. And the best investors that I’ve worked with, they follow the same process that they look to how new construction works for inspiration. Not personalizing it.
Misty SOLDwisch:
Sometimes those want to be investors will go into a home and go, “I’ve always wanted to do this. I’ve always wanted to make our rock wall. So I’m going to do it in this home because I can’t do it at my own home.” Don’t be creative on your speculative investment. Do what you know the market wants. So pick the right colors and finishes, those light fixtures. That is so key, doing something nice, not buying the cheapest thing that you can find at the hardware store. The most successful investors I work with, they get the home fully staged. We work with my home stager to get it completely outfitted, just like you would on a new construction home. And then also if you’re going to go through all this trouble, don’t stick a for sale by owner sign in the yard, use a professional agent because having the most market exposure is what maximizes your investment.
Heather Burnside:
Going back to staging a little bit. That’s another part of those shows that I love.
Misty SOLDwisch:
It is.
Heather Burnside:
Because it can make all the difference. And it’s not just your flip, where you’re bringing in all new furniture too, just staging your home. Your home, your furniture, your belongings makes a huge difference when you’re trying to move a home.
Misty SOLDwisch:
Well, yeah. I mean, how you live in a home day to day, what works for your family, isn’t necessarily what people want to see when they’re looking for how they’re going to live in the home. And so a home stager can really… We love providing this as a service to our clients because having someone walk through that doesn’t have that emotional attachment and knows specifically how is this home going to photograph best, showing you how to arrange your furniture in a way that makes sense, how to depersonalize, it makes a huge difference in how people perceive the home.
Heather Burnside:
And of course, we’d talked earlier about what it takes, whether it’s selling your own home, whether it’s doing a flip, home inspection, and getting out ahead of any potential of problems is key. So when we come back, we’re going to be talking against some more with Adam McCarty from RightWay Home Inspections. There’s so many things that we could talk about, including Misty’s certified pre-owned home program that Adam helps out with too. So we will talk about that when we come back, it is the Central Iowa Real Estate Scoreboard on 1460 KXnO and one 106.3 FM.
Speaker 5:
As a real estate investor, I look for sharp agents who really know their market. Agents who do so much business that they can find me the right investor property and sell it for the most money without drama. When I need real estate advice in Des Moines in Central Iowa, I call Misty SOLDwisch. Her innovative marketing attracts hundreds of buyers every month, which creates more demand for your home, selling it faster and for more money. She guarantees to sell it on your timeline, or she’ll buy it. Call the agent I trust, Misty SOLDwisch, and avoid the drama.
Heather Burnside:
Welcome back to the Central Iowa Real Estate Scoreboard. We’re getting Misty with it. What are the advantages of home ownership?
Misty SOLDwisch:
So I’ve got some stats for you. People think of financial benefits of owning a home, but there’s actually a lot of nonfinancial benefits as well. 93% of people surveyed said owning a home made them happier. I mean, that’s great, right? 88% agreed that buying a home was the best decision they ever made. That’s that’s pretty good, that’s a good endorsement. 79% believed that owning a home has changed them for the better. And that is what we are so fortunate with here in Central Iowa, just having such great opportunity for affordable home ownership. There’s a lot of other stats that are interesting too. 35% of Americans, when they’re looking at their top four choices for investments, owning real estate, owning their home, 35% of them say that’s their top choice. And it’s the largest investment that most of our clients have.
Heather Burnside:
Yep. I believe it. We have a guest in here because we’ve been talking about making an investment in flipping homes as well. Not just the one that you live in, but perhaps using real estate-
Misty SOLDwisch:
A side hustle.
Heather Burnside:
Yes, real estate and flipping as a way to make some extra money. Adam McCarty here from RightWay Home Inspections. And before we get to the certified preowned home program that Misty offers, maybe I can get both of your input on if you’re trying to become a flipper, you can try to watch these TV shows and just emulate the 10% of the work that you’re seeing for entertainment, or you can think I’m going to go sign up for a seminar or I want to learn how to do this from someone.
Misty SOLDwisch:
Oh man. I know. I always know when I have a conversation with someone and they start talking, they have all these ideas about how they can get into places really cheap and have this pool of investors that have never met them before that are going to bring all this money. I’m like, “You’ve been to one of those seminars, haven’t you?”
Heather Burnside:
What are the things that we should be on the lookout for? Because Adam started chuckling too. I’m assuming that this is not anything new to either one of you, as far as scams, or you want to talk about being hustled. Somebody is trying to get into the flipping business and they end up taking the wrong advice and I’m sure that it can be disastrous.
Misty SOLDwisch:
My goodness. And I mean, I think it’s, you need to really think about if a lot of times these scam workshops are with the intent of getting you to invest in them, and run the other way if that’s what they start talking about. But yeah, there’s been-
Heather Burnside:
You mean you go to these seminars and then they start asking you for money to invest in their projects?
Misty SOLDwisch:
Exactly. Because they’re like, “Oh, we’ve had all this success and we’ve made this amazing return on investment. And so we’re going to help mitigate the risk by you working with us because we know what we’re doing.” And there have been a lot of really bad situations because of that and just misguided information too. So there are good resources out there, but just make sure you really research reviews, specific information that people that have gone through it have experienced, because if you’re going to research this, do it right. It’s not a get rich quick scheme. And a lot of times, if that’s the way it’s presented, there’s another angle that they have.
Heather Burnside:
Well, that’s good to know. All right. So now we’re going to move on to talking about your Certified Pre-Owned Home Program, because I’m assuming that this is going to be something that you work with Adam on to put everyone at ease during the home buying and selling process. So talk a little bit about that service that you offer.
Misty SOLDwisch:
So we’ve been doing the Certified Pre-Owned Home Program for several years now and it is a great marketing feature for our sellers to use, but really there’s more intent behind it than just marketing and appeal to buyer. We find that sellers, when they are going through the process, the most stressful part of the transaction is the home inspection because someone else is critiquing every aspect of their home. And so it really is something that creates a lot of stress. So the way we explain it to our sellers is we want to put you in the driver’s seat in this part of the process, instead of after you’ve negotiated down to the penny, how this is all going to work, and then you have that second negotiation 10 days later that hits you up the side of the face and shocks you.
Heather Burnside:
Right, based on the results of your home inspection.
Misty SOLDwisch:
Yes, exactly. And then all these things that really scare a buyer that might not even really be that big of a deal in the scheme of things. We want to put you in the driver’s seat so that you have had the home fully vetted, you get to choose, here’s the things I’m going to do, these are the things I’m taking care of. I know what the cost of these things are up front so that when I’m negotiating my sale price, I have that in mind, instead of having thousands and thousands of dollars in surprises after you’ve already thought your home was sold. So that’s where Adam is a key partner here because he comes in and does a home inspection. Miller Termite, who came in last week, Miller pest does a wood destroying pest inspection. We have [inaudible 00:18:51] radon do a radon test, but Adam leads the charge there.
Misty SOLDwisch:
But Adam, when we have someone come into the home, they get kind of nervous about, okay, I’m inviting this inspector into my home. They don’t know what just an all around nice guy you are until they meet you so they’re really fearful because it’s like, who’s judging my home? But what kind of things do people need to do to prepare before you come in to make that home inspection experience positive for you as a seller?
Adam McCarty:
The biggest thing is, is if you know that there’s issues already, just get them fixed before I come in. And then for preparing the house, realistically, I just need clear access to your furnace, your electrical panel, your attic access. So if you have a ton of stuff in your closet underneath your attic access, empty it out so that when I get there, it’s easy to get up there and none of your clothes get dirty from insulation or anything like that, which obviously we try to mitigate anyway, but it still happens.
Misty SOLDwisch:
But people get their closets packed full, and then that’s where that addict scuttle is. You have to sit there and watch them like, oh I’m pulling everything, oh here’s my kids’ Christmas presents.
Adam McCarty:
Exactly. Exactly. Yeah. I mean, but other than that, it’s really not hard for the sellers. I mean, it’s very hands off. They don’t have to be there if they don’t want to be, but it’s great if they’re there, because then I can walk them through exactly what I’m seeing and just explain, okay here’s what I’m seeing. This is what typically buyers are going to be concerned about. These are the ones that you want to address. All these other stuff is a lot of small cosmetics or small, minor maintenance items that realistically is just part of buying a house.
Heather Burnside:
And I know that we’ve, I’m sorry, but we’d covered this on other shows, but there’s also something you need to look for in an inspector too and that’s being certified to do the job because I didn’t know this until I started talking to Misty that literally anyone in Iowa can call themselves a home inspector, but you want one that’s certified.
Adam McCarty:
Yes, definitely. And you want to check their knowledge. Myself, I’m a licensed electrician. That’s what I did before getting into home inspections. There’s a lot of really good inspectors out there in the state that are previous HVAC or plumbers or previous construction backgrounds is a big plus.
Heather Burnside:
And you also have some technology at your disposal that I found fascinating when we talked to you in an earlier show as well, like this, I don’t know, the heat sensor?
Adam McCarty:
Yeah, the thermal camera.
Heather Burnside:
That’s it.
Adam McCarty:
Yep. Yep. The thermal camera that can see the differences in heat in the home. It’s a great tool that helps me find a lot of stuff that if you don’t have it, you just can’t see it.
Heather Burnside:
Is it a good investment? Say that you discover during inspection that you’re not up to code or up to date on insulation. Do you want to put that insulation in the attic before you sell? Do you want to get things updated like that?
Misty SOLDwisch:
We look at the report that Adam puts together and the other parties that are part of that inspection process. We look at here’s all the information, here’s our pricing strategy, what type of home it is. And it really depends on what the strategy is. I think the more things you can do to eliminate the issue, the better it is when you’re marketing your home. And again, I can’t stress enough how much easier it makes the process for the seller when they already know all these things upfront and can choose how they’re going to address them, instead of it being totally in the hands of the buyer and their negotiation. It’s just so much easier. People end up with more money in their pockets by making that small investment upfront.
Adam McCarty:
Yeah. I know for me, I would always do a pre-inspection, just seeing how the transaction goes from my side. I know when I go in there with a buyer and do the inspection that they’re going to be asking the seller, and this is after the sellers probably already conceded on price before the inspection. So now you’re negotiating twice. It makes sense to get it all out of the way upfront.
Misty SOLDwisch:
Well, and I’ll tell you also, in a hot real estate market, buyers might bid more than they ultimately want to spend on the home knowing, oh I’ve got my inspection period, I’m going to renegotiate during that. I’m going to really knock it down to where I really wanted to buy it. That happens all the time.
Adam McCarty:
That makes sense.
Misty SOLDwisch:
And so this takes all that stuff off the table.
Heather Burnside:
What are some of the biggest surprises that you’ve seen in an inspection, especially when you’re probably walking in there thinking this is a fairly new home. There’s not going to be much that I’m going to-
Misty SOLDwisch:
Everything looks pretty.
Heather Burnside:
Yeah.
Adam McCarty:
When you’re talking about from a seller’s perspective, the biggest things that I find that they may be don’t have any idea is, we talked about it in the last show, some of the panels that are hazards. It’s not-
Misty SOLDwisch:
Electrical panels.
Adam McCarty:
The electrical panels that are hazards that… You’ve lived in the house 20 years and it’s never been an issue and it hasn’t, but there’s the potential that it could be. And that’s-
Heather Burnside:
That stuff gets old or there’s updated technology that could be used that will make it more attractive to sellers and safer, I’m assuming too.
Adam McCarty:
Exactly. Those are usually the biggest surprises for the sellers. So yeah, most of it is… It’s not the little stuff, it’s always the big items that end up being surprises.
Heather Burnside:
How many times have you gone in and thought, okay, well everything seems to be working here, this HVAC system isn’t… I can tell that there’s trouble on the horizon. Or is it just… I knew that my HVAC system was getting really old, but I’m like, it’s going to have to die before I replace it. But then it finally did.
Adam McCarty:
And that’s how a lot of people are. When I go and inspect something, if it’s running, it’s running, but I can also tell them, okay, this was when it was manufactured based on the serial number for most items. And then I can tell them this is an average life span for this item. So then they know, okay, this might be something that goes out soon. That’s also part of Misty’s program is they provide a home warranty to the buyers.
Heather Burnside:
That is amazing, I was just going to segway to that.
Misty SOLDwisch:
I completely forgot about that. Yes. That pre-inspection paired with the home warranty. Adam says, okay, this furnace is 10 years old, the anticipated lifespan is this long. Well guess what? We are offering a home warranty. So if there’s any issues with the home, all the mechanicals or different components like that, it’s a 13 month home warranty, most of them are a year, this one has a bonus month, then it will get repaired. And if they can’t repair it, they’ll replace it. And, oh my gosh, last year we get reports from the home warranty company we work with. Last year, there were around $70,000 in claims that they made on just the home warranties that our home buyers and sellers had.
Heather Burnside:
Wow. And that’s also included with your package, right?
Misty SOLDwisch:
With the Certified Pre-Owned Home Program.
Heather Burnside:
That’s a great deal.
Misty SOLDwisch:
Yeah.
Heather Burnside:
Is that a lot claims?
Misty SOLDwisch:
It is. It is a lot of claims, but that’s $70,000 in stuff people would have had to pay for themselves, and that becomes a big pain point. I say to sellers, offer a home warranty because that helps alleviate your liability. When something goes wrong, it’s always like a week after someone moves in, and then they’re like, “Did the seller know, did they not disclose? Do I need to talk to my attorney?” That sort of thing. If it’s under warranty, then it’s taken care of, and there’s no questions.
Heather Burnside:
We also talk a lot about this show and I think it bears repeating, that you have the guarantee we’ll sell your home at a price and deadline you agree to, or you’ll buy it. But there is also a guarantee on the other side too.
Misty SOLDwisch:
Yes, the Love It or Leave It Program. If you purchase a home and you change your mind, decide that something else would be a better fit within that first year, you’re able to sell your home with no listing side costs so that you can easily move to the right home for you.
Heather Burnside:
Misty has you covered every time you turn around, I swear.
Misty SOLDwisch:
We try to.
Heather Burnside:
Right, so the guarantee to sell it at a price and deadline you agree to, or you’ll buy it. Love it. Or she’ll help you move to one that you do love and then the pre-inspection guarantee as well that gets everything, everybody in a good place when you go to sell your home or buy as well.
Misty SOLDwisch:
Absolutely. And then we have a moving truck to move your stuff, we haven’t even touched on that.
Heather Burnside:
We haven’t even touched on that. We will have to get to that at some point. Adam, thank you so much for stopping by. It is Adam at RightWay Home Inspections. 8020141, if you want to call Adam.
Misty SOLDwisch:
Thanks Adam.
Adam McCarty:
Thank you.
Heather Burnside:
In the meantime, we will see you next week on the Central Iowa Real Estate Scoreboard on 1460 KXnO and 106.3 FM.