You have a house under contract, you finally did it…
All that hard work, appointment setting, hustle, persistence, follow up, and willingness to help someone solve a problem has paid off.
As the earnest money is deposited into escrow, a rush of adrenaline explodes through your veins… and you think to yourself… GAME ON.
It’s time to have contractors run through your property with a fine tooth comb, and get you bids on how much this flip will actually cost you.
If you follow BTG’s Flipping Your Thoughts On Flipping program,
You did your own estimate of repairs already….
And now it’s time to put together a few documents called: The Scope Of Work, and The Executive Summary.
The Scope of Work is for another blog – basically it’s you using your estimate of repairs to write down what the work is that you want completed on the house.
But today we are focused on..
The Executive Summary.
The Executive Summary is what separates you from the competition. It makes you a true professional.
This sheet of paper (along with the Scope Of Work ) can save you Thousands of dollars on your project.
Well first you need to understand what an Executive Summary is.
What exactly is an Executive Summary ?
Well my friend, this sheet of paper explains your vision for the flip.
You are going to explain, VERY CLEARLY, what this project will require to be repaired, what the finished home will look like, your exit strategy, and you’ll lay out the proper guidelines so your contractors will know exactly what you want this property to look like when its finished.
You need to be able to hand this document to someone, and they will be able to understand your vision for the project efficiently and clearly.
In the Executive Summary you’ll include things such as:
- What will this property look like in comparison to other similar properties in the area (aka comps)
- What kind of finishes, and layout does the neighborhood command
- Why is the home currently undervalued
- Are you going to use Quartz countertops, Marble, Granite, etc…
- Is this house multi-generational living (mother in-law quarters etc)
- Is there an HOA (home owner association) and if so how will you deal with them
- IS the neighborhood in an upswing or down (lots of renters, owners who take pride in houses etc..)
- What is the location like- traffic, noise, neighbors, street presence etc..
- Who is your end-buyer: old couple, young couple, young family, young professional, green living, first time home buyer, etc..
- What is your Exit Strategy: multiple exits? -rental property, flip, lot split or subdivision, finish and refinance, sale prior to completion.. etc..
- Time lines for: repairs, marketing, escrow (re-sale)
- and more…
All of these items will need to be addressed in your Executive summary.
It’s a complete overview of the project, and you’ll also need to look at a worst case scenarios.
I repeat-HUGE TIP: Prepare for the worst.
Look at a worst case scenario and how you will deal with it, if it happens. This will help you make as much money as you can on the deal, and if things go south, give you the opportunity to lose as little as possible.
- Permit issues
- City construction
- Major Repairs
- Neighbors causing issues
- If the market turns, how can you get out of the project with no loss (or gain)
- and more…
If you don’t plan for the worst, when it happens on a deal (and it will) you will end up losing a boatload more of cash (picture that in your head) than you would have if you planned for a worst case scenario .
This is what successful Investors do on all investments.
They have a game plan for “if things go south”. That’s how you protect yourself.
Now that you understand what an Executive Summary is, you can understand how it will save thousands on your project–
First: Like we teach all out students- You are going to have multiple contractors show up at your property on the same day, 15-30 minutes apart. They are going to see other contractors and realize that you are a professional businessman (or woman) who knows what they are doing, and you are looking for the best prices you can get.
When the contractors show up, you are going to introduce yourself, and hand them your Scope of Work and the Executive Summary.
BTW-You are going to dress to impress but not too formal (jeans, nice shoes, nice shirt, well groomed) so the contractors know you are a successful professional.
This will immediately, either consciously or unconsciously, let the contractor know that you don’t mess around, you won’t deal with inflated prices, you take your profession very seriously, and you are in this to make money.
With this magic combination: dress to impress, executive summary, scope of work, and contractors showing up at the same time, you will instantly get prices that are thousands of dollars cheaper than you would have if you only had 1 contractor show up.
Then you can negotiate prices down even further from there.
For a more in depth video on how to work with contractors watch THIS VIDEO.
Why else do I need an Executive Summary?
Secondly: Because as an active Real Estate Investor, you are going to be partnering with and leveraging other investors.
Since the Executive Summary explains exactly what this project involves, what it can be, and how it will work, it will help bring in money, sell the project (if needed), bring in partners if you decide that is what you want to do, and more…
This will save you a ton of time down the road, especially if things go south and every extra day the project takes to finish…costs you more $$ out of your pocket.
Thirdly: When you get your thoughts out on paper, and figure out your vision for the project, it will help you create your master plan.
And like in any business, when you have a structure (masterplan) in place to follow, you’ll make alot more money, make quicker decisions, and be able to track progress.
At some point, you will have multiple projects going on at the same time, and being able to reference your Executive Summary will be key.
Especially when you have contractor issues that pop up (and they will!).
So to stand out from the crowd, and save thousands of dollars on each flip by taking the time to create an Executive Summary.
For an example of a real Executive summary used on deal
And to for a video explaining more on Executive Summary at a real property
Chris M Cordova
CFO Better Tomorrow Group
Chris is an active investor, Realtor, Broker, marketer, serial entrepreneur, and co founder of Better Tomorrow Group. Follow Better Tomorrow Group on Instagram @bettertomorrowgroup on Twitter/Periscope @TheBTgroup and Facebook at Better Tomorrow Group. If you would like a FREE copy of Flipping Your Thoughts On Flipping Follow this LINK.