A $1 million bet: The anatomy of a high-end house flip-Diana Olick

Last June, Dana Rice, a real estate agent and house flipper, was deep in the throes of a massive remodeling project.

She had bought a 1938 home in an upscale neighborhood of Bethesda, Maryland, for $600,000 and intended to flip it for a hefty profit. Four months and $400,000 in construction costs later, Rice put the home on the market last weekend for $1,469,000. A million dollars of her money is at stake.

"Getting into the project is a risk because of the amount of money that you're putting in, but overall at the end of the day, the ratio is the same," Rice said as she put out candles and fliers for the first open house.

Rice added significant square footage, along with high-end finishes throughout. The so-called industrial cottage-style home is now 2,650 square feet with five bedrooms and three bathrooms. There is a small back patio, but the yard was sacrificed to make the home larger.

Rice says it is the opposite of the McMansion trend — not a tiny home for sure, but a 'not-so-big' home with top-of-the-line appliances, lighting, flooring, fixtures and systems.

"There is always a market for high-end because you're differentiating your product from, let's say, the masses," said Rice. "In this particular area, for this particular house, I'm very confident because I feel as though the product we delivered — we really sweated the details on it, and I'm already getting great response from people who are looking at fixtures, textures colors, and it's not what they see in the general renovation flip."

Not only is house flipping on the rise in today's increasingly competitive market, but average gross profits are now the highest since 2000, or since ATTOM Data Solutions, a real estate sales and analytics firm, began tracking flips.

House flippers in the second quarter of this year saw an average gross profit of $62,000, up from $57,900 in the second quarter of 2015. That gross profit represented an average 48.8 percent return on the original purchase price, up from a 47.5 percent a year ago.

"Home flipping is becoming more accessible for smaller operators thanks to an increasingly competitive lending environment with more loan options for real estate investors, who are also benefiting from the historically low mortgage interest rates," said Daren Blomquist, senior vice president at ATTOM Data Solutions. "That favorable lending environment for flippers has helped to fuel the recent flipping frenzy we've seen over the past five quarters."

A total of 51,434 sales of single family homes and condos were completed flips in the second quarter, up 14 percent from the previous quarter and up 3 percent from a year ago to the highest level in six years. [ATTOM defines a flip as a property sold in an arms-length sale for the second time within a 12-month period based on publicly recorded sales deed data.]

"It's so fast and it's so hot, you really have to be careful about who's doing the work, because you're going to pay that premium just to get that flip, but you need to look behind the curtain to see how they did it," Rice cautioned.

Close to 40,000 investors, both individuals and institutions, completed at least one home flip in the second quarter of this year, the highest number in nine years. Home flipping peaked about 10 years ago, during the height of the housing boom, when mortgages were easier to pick up than a quart of milk. That is not the case today.

"While an increasing number of flippers are financing their purchases, more than two-thirds are still using cash to purchase compared to about one-third using cash to purchase back in 2006," said Blomquist.

With so many new flippers in the market, the concern is in the craft. Rice actually spent more than a year remodeling her house, her fourth flip. That is longer than usual, but at her price, the house had to match the high-end market.

"The market is pretty strong for fixtures, finishes — everybody watches the TV shows. They have an expectation, and we want to meet it," said Rice.

There were also a few bumps along the way.

"In the TV shows, it's always this big dramatic thing, and then they go to commercial. That actually happens," Rice said in an interview last June. "It's either new plumbing from the main line, we had to tear off an entire section of a house and rebuild it that wasn't in the budget, but in the end, you know that you make contingency plans to make sure that you can accommodate whatever you see when you start working."

Culled from cnbc in yahoo finance

Will you ever work for life-Odunze Reginald C

 

 

 

In an article that appeared in Wall Street cheat sheet titled “5 Retirement Questions Every American Should Answer” Erika Rawe noted that  “For so many Americans, retirement planning is a complete mystery. For some people, they’d have an easier time deciding who shot first (Han Solo or Greedo?) than making decisions about their retirement savings. When CBS News asked consumers a while back how much they’d need to save for retirement, the median answer among Americans was $300,000.”

And according to Walter Updegrave in an article captioned “Three Little mistakes that can sink your retirement, which appeared in Yahoo Finance it states that “It’s almost become a cliché. Virtually every survey asking pre-retirees what they plan to do in retirement shows that the overwhelming majority plan to work.

 Indeed, a recent Merrill Lynch survey found that nearly three out of four people over 50 said their ideal retirement would include working. Which is fine? Staying connected to the work world in some way can not only offer financial benefits, it can also keep retirees more active and socially engaged”

Continuing Rawe noted that “Sure, everyone is different. We all need different amounts of money to live, survive, and thrive. But, regardless, $300,000 is way off the mark. Unless you’re planning to work until you’re 80 years old, which 30% of people in a Wells Fargo survey said they intended to do, you will run out of money before the end of your lifespan.”

But the question is will they be medically fit to work at such age; TCRS noted in an article titled “Will Millennial Dodge the Retirement Crisis? Noted that  it is important to “Calculate retirement savings needs, develop a retirement strategy, and write it down. In creating a plan, consider lifestyle, living expenses, healthcare needs, government benefits, and other factors, as well as a backup plan in case retirement comes early due to an unforeseen circumstance”

From this presentation above, it should be pointed out that living styles, living expenses and health needs are essentials for retirement but analyst are of the view that the error is that people have the  noted that  . She says this 30% group is taking a big risk, as this plan assumes there will be a job available and that they will physically be able to work at the age of 70, 75, or 80.”

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchor @dunzreg, find us on Facebook @ Reginald odunze and reginaldodunze.com, at google+ @ Reginald Odunze and at Linkedin@reginald odunze.

5 Surprising Retirement Myths That Just Got Debunked Eric McWhinnie

A crew examining retirement myths | Source: KAZUHIRO NOGI/AFP/Getty Images

Retirement myths are a dime a dozen. Reaching the promised land of financial freedom and tranquility is no easy journey given the perpetually-changing retirement landscape. In addition to the usual questions like how much money should I save, workers are becoming increasingly responsible for their own nest eggs. However, how much do we really know about retirement planning?

Defined contribution retirement plans like a 401(k), where certain amounts of money are invested by employers and employees on a regular basis, are the new primary source of retirement funds for younger generations. In fact, State Street Global Advisors (SSGA) released a new report taking a closer look at who they call “Generation DC.” This group is made up of employees aged 22-50, and are the 401(k) guinea pigs providing valuable insight about false beliefs.
“Many long held beliefs about how millennials and Gen Xers want to engage with their DC plan are off base and call for some myth-busting,” says Fredrik Axsater, senior managing director and head of Global Defined Contribution at SSGA, in a press release. “When employers combine a deeper understanding of employees’ views about retirement and focus their engagement efforts around important life stages, like starting a career or starting a family, savings programs can be far more successful.”
Let’s take a look at five surprising retirement myths that just got debunked.

1. Humans are obsolete in the retirement planning process

Retirement planning? Is there an app for that? Of course, we have apps for everything these days, from tracking your investments to showing you what you’ll look like when you’re old and gray. But, that doesn’t mean millennials would necessarily prefer to interact with apps rather than humans when it comes to managing their financial futures. SSGA finds 59% of workers aged 22-25 “want an in-person meeting once a year and technology isn’t really going to help.” Surprisingly, only 38% of Gen Xers aged 45-50 say the same thing. Employers should keep this in mind when offering retirement guidance to their employees.
 

2. Millennials are too young to care about their golden years

young man with mobile phone in the street | iStock.com/nensuria

Though millennials are often stereotyped as carefree kids living in their parents’ basement while spending any money they have on iPhones and lattes, research reveals they are aware of the importance of saving and financial planning. Eighty-eight percent of millennials in the survey agree it’s important to start saving for retirement early, two percentage points better than their more experienced Gen X counterparts. Furthermore, 83% of millennials and Gen Xers both agree saving for retirement is a priority.

Similar conclusions are found in a recent Facebook analysis. According to Facebook IQ, 86% of millennials say they save money, while 46% define financial success as being debt free. Only 4% define financial success as being able to buy nice things. Additionally, millennials drive 40% of the financial conversation on Facebook, generating 6.5 million posts, comments, likes, and shares.

3. Time heals all wounds

Sad teenage girl looking out the window | iStock.com/max-kegfire

We’ve come a long way since the darkest depths of the financial crisis. The headline unemployment rate has been cut in half, stocks have recaptured their previous highs and then some, and national home prices continue their impressive rebound. Yet, we haven’t forgotten the meltdown of yesteryear. Over half of millennials (54%) admit their parents’ experience with the financial crisis that began in 2008 hinders their confidence as investors. That figure climbs to 60% for respondents aged 33-39.

Market volatility is a part of investing in stocks. If you allow it to control your retirement planning too much, you risk being too conservative with your portfolio and falling short of your financial goals. Remember, the broad market typically moves higher over long periods of time. Making large financial decisions based purely on emotion is typically a losing strategy.

4. It’s up to employers to educate employees about retirement

People often turn to family members for financial advice | iStock.com

Employers sign paychecks and provide benefits to workers, so it makes sense that they are the primary educators about retirement, right? Wrong. Despite more employers providing financial wellness programs to workers these days, friends and family come first when it comes to influence. SSGA finds 68% of Generation DC say friends and family are the ones who told them to start saving, and over 90% indicate their spouse/partner’s annual salary play a significant part in their own financial wellbeing.

This makes sense considering friends and family are not likely to speak in financial jargon, or host boring slideshow retirement meetings where people are too afraid to ask a question. Research from Thrivent Financial finds millennials are even willing to ask faith communities, religious leaders, or faith-based financial education programs for money advice.
“When asking friends and family for advice surrounding contributions, savers need to ensure that the person they’re turning to is taking their financial situation, age, and career trajectory into consideration, as these all directly correlate to if it would benefit the saver to pay taxes now or later. These types of decisions are personal and unique to the individual and their path, and it’s important to evaluate your current situation before taking action,” explains Mich Wells, Saver Ambassador at Ubiquity Retirement + Savings, to the Cheat Sheet.
She adds, “If friends and family are helping with investment guidance initially, you should be able to maintain this level of attention to your finances. Staying on top of reporting and looking into the performance of your funds will be necessary to maintain the most lucrative outcome. If you want a low-touch experience with your 401(k), you might want to look into the default fund option within your plan!”

5. Everybody needs more financial education about the basics

Money | Micah Wright/Autos Cheat Sheet

Our education system does a lousy job teaching people about money. Look no further than this list of money questions Americans get wrong. Even though 60% of Americans have a credit card, among the highest usage rate in the world, 67% of them are financially illiterate, and only 57% correctly answer the interest topic questions. However, experience is a good teacher, and it shows in the SSGA survey.
Not everyone needs to be taught the basics. For example, SSGA finds 46% of millennials know that buying a single company stock carries more risk than a stock mutual fund. That figure jumps to 57% for Gen Xers and 77% for respondents over age 45.
“Our research highlights numerous opportunities where employers can tailor approaches to meet employees where they are in their life, not necessarily where we believe their generational preferences may exist,” explains Axsater. “Employers can reach employees well ahead of retirement by targeting the 40 plus age group with clear, actionable steps for a better retirement including communications on how to save more, diversify investments and spend down savings in retirement. For younger employees, an over-emphasis on auto-enrollment may be causing employers to miss an opportunity to discuss savings goals and strategies. We recommend rethinking those assumptions.”

Culled from Money & Career Cheat Sheet

What may affect your Retirement-Odunze Reginald C

Schuller (1988:112) noted that success without social respect can be an ultimate and dismal failure. But that is not the feelings of con artist as they continually scheme, plan and put in strategies that will bring in money no matter who ever that is involved. They do not even care about the state of such people; at times they deliberately target retirees because of their vulnerability.

What then makes a retiree vulnerable? The issue of vulnerability will be explained as we progresses on the write up.

Most losses during retirement occur as a result of wrong decision, wrong purchase decision, and the lust for the sweet things of life, mainly womanizing. But the most devastating of such losses is the loss as a result of scam, fraud and any other actions targeted on the financial positions of the retirees.

Old age has one problem according to psychologist, it tend to make old people vulnerable to issues of money making, as they have dream idea of trying to achieve what they fail to achieve during their working career. They now want to achieve it     during old age and by so doing enter into one wrong investment decision or the other.

Whatever they have not achieve they tend to believe that retirement will afford them that opportunity, by so doing they enter into wrong hands who will fleece them of their hard earned money. The result is that most of the retirees return back to work in order to survive and enjoy their old age. But what these scammers do not know is that wealth do not bring happiness as it is stated in Ecclesiastics 5 verse 10-11 “ How absurd to think that wealth brings happiness, the more you have, the more people come to help you spend it and  continuing  in Ecclesiastics 5 verse 12, 14, it sates “ But the rich are always worrying  and seldom get a good night sleep” Riches are sometimes hoarded to the harm of the saver, or they are put into risky investment that turn sour and everything is lost”

And continuing in Ecclesiastics 5 verse 19 and 20, “And it is good thing to receive wealth from God and the good health to enjoy it” “To enjoy your work and accept your lot in life- that is indeed a gift from God, people who did this rarely look with sorrow on the past,for God has given them reason for joy”.

And so in making wealth, it is pertinent for us to have that God given joy that gives one happiness- a lasting happiness.

Anything short of that may not augur well especially for con artist as Robert Kiyosaki in his book Rich dad Poor dad, noted that there are so many ways, one can be rich, and he included the following, through inheritance, playing lottery, investing or by being a crook or an outlaw but there is a price, you risk going to jail. Kiyosaki  (1995:351) continuing he stated that ‘A great story must interest , excite and cause people to look into the future and dream a little, there should also be integrity behind the story, because our jails are filled with great story tellers without integrity”.

So what should  you do during old age as it regards investment and business as majority of the retirees are interested in working and making more money , thereby creating wealth.  And according to Walter Updegrave in an article captioned “ Three Little mistakes that can sink your retirement,  which appeared in Yahoo Finance it states that “It’s almost become a cliché. Virtually every survey asking pre-retirees what they plan to do in retirement shows that the overwhelming majority plan to work.

 Indeed, a recent Merrill Lynch survey found that nearly three out of four people over 50 said their ideal retirement would include working. Which is fine. Staying connected to the work world in some way can not only offer financial benefits, it can also keep retirees more active and socially engaged”

But what happens if retiree involve in spurious contract that may be a scam, intended to dispossess him of his wealth?  There is need for the retiree to embark on the services of investment adviser even if he was an investment guru during his career, the reason is that in what concerns you , there may be likelihood of mistake unlike when you hand it over to an independent investment adviser, as it has been the same with lawyers, as they it  find difficult to handle their own cases as doctors are also in the same dilemma in treating their own diseases.

The idea of getting an expert is to safeguard the retirees fund from con artist during old age but that rest squarely on the retiree.

Odunze Reginald is the Lead Consultant, Chareg Consulting, a management and marketing  consultant  a social media and social marketing consultant , you can visit our twitter anchor @dunzreg, find us on Facebook @ Reginald odunze and reginaldodunze.com, at google+ @ Reginald Odunze and at Linkedin@reginald odunze.