Many Subscribers are asking – How can we collect late rent fees? Here is the letter or memo I use – the only part that matters to most “late payers”” is paragraph 4, Late fee collection letters must have teeth to be effective.
SUBJECT: LATE RENT FEES
We need your help with timely rent payments! As you may know already, we are required by the owners to collect late fees for all rent payments received later than five (5) days past the rent due date. Rent due dates are shown on the rental contract you signed when you moved in.
In the case of HUD contracts, rents are normally due and payable on the first day of each month. The only way you can change or modify your HUD lease (voucher) is to contact your housing representative and request a modification. They will require some valid reason.
For those who mail rent payments, the postmark date shown on the envelope will be used to determine if rent was paid within the time limits. All rent payments received later than five (5) days past the rent due date must include a $35 late fee. Late fees are specified in your rental agreement with JMK Traders/One Stop Home Rental Company.
Most residents feel that a “one time” late fee is much more acceptable than a rent increase. Owners will often require us to increase rents when the late fees are not collected.
We appreciate anything you can do to help us with this problem, and obviously, you’ll be helping yourself at the same time.
Sincerely,
There are many good reasons why fixers are the perfect properties to begin a real estate investor career. However, leading the list is CASH FLOW. Fixer -houses by far offer the best opportunities for small-time investors, without much cash to spend, to acquire real estate with minimum down payments and still achieve cash flow quickly. No other real estate I know of will do that!
It is reasonable to expect - after paying an average of 10% down that one can create a positive cash flow property within a relatively short period of time after the purchase. Obviously, the time it takes will depend on many factors, such as how long does the fix-up take - how much market value is added to the property - and most certainly, the skills and aggressiveness of the fixer.
I have learned from experience - cash flow is much easier to achieve buying small multiple residential properties, such as 2 or 3 houses on a single lot, several duplexes with a house or two, or any combination of these cluster type properties. I own many properties from 5 to 8 living units each. They are excellent cash flow producers after a year or so. My goal for a complete turn-around is I8 to 21 months. We’ll discuss this part and the reasons why later.
LESS COMPETITION
Anytime there are fewer buyers who want something and you are shopping that particular market, your odds for success are greatly increased. Competition is what drives up prices. Conversely, the lack of it holds them down. It’s difficult to purchase prime real estate at a discount or get any kind of a break on the terms. The reason: Too many buyers are willing to pay the asking price. Why would a seller need to discount?
There are basically only 2 methods to buy real estate at bargain prices!
Method #1
Situations where you are the only potential buyer who knows about the deal (no competition) and, the seller is willing to accept your offer and terms without seeking outside bids (offers) from anyone else.
Method #2
Where the public knows about a property that’s available but cannot visualize its potential value - like after it’s all fixed up. They are therefore not buyers – only lookers.
Most students who seek my advice are not yet sophisticated enough to be in the information loop where they can benefit from Method #1. I’ll show you several ways I make Method #1 work for me later on! However, two of the most common ways Method #1 is used is by licensed real estate agents who buy their own listings and by friends of probate attorneys who get a secret telephone call when an asset (real estate) needs to be disposed of quickly. In both cases, the public never knows about the deal. Private deals avoid competition - therefore, they don’t get bid-up in price!
Method #2 is how most of my students will buy real estate. We shall focus in a market where properties are for sale. They are even advertised and certainly known to many potential buyers. However, 95% of all the potential buyers (the competition) see ugly rundown houses as pure junk and not even worth the asking price. Most will not make and offer and those who do will totally alienate sellers by insulting them with “low-ball” offers. With 95% of the competition gone, the playing field is definitely tilted in our direction.
Once you find an agent who seems like he or she talks your language! And of course, demonstrates some honest action like jumping right in and finding you a few properties that seem to fit your “looking for” instructions — You’ll be off to a running start.
One thing to remember here - Both you and your agent are new to each other! Don’t make the agent do all the work. You should help every way you can, especially in the “getting acquainted” mode. For example: If the agent is showing you properties in fair condition and you have told him you want junkers. Reiterate your instructions so you get what you want. By helping your agent who is trying to help you. — You’ll end up the big winner.
The benefits you’ll receive by taking the time to develop this relationship will be worth big bucks to you in the long term! Here are some of the most important ones.
1. Your agent has immediate “pipe-line” knowledge about when a bargain property is listed for sale - Either as a member of the multiple listing service or by networking through his associates and contacts. You’ll get the information quickly so you can write an offer fast if the property is what you’re looking for. Being first or near first is important!
2. A good agent will do “weeding-out” for you automatically once he or she becomes accustomed to what you really want. My agent, Fred, always brings me everything I need for making an educated evaluation on each deal. The information provided is normally a property profile, copies of existing promissory notes and either a filled out INCOME PROPERTY Analysis FORM (the kind in my fixer house book), at least the necessary data to fill one out. This is valuable “time saving” work for an investor - Yet it’s needed before any intelligent buying decision can be made. Obviously, it puts Fred closer to a commission if a purchase should result.
3. My agent provides a middleman “buffer” between the buyer and seller. This is a valuable service to me or any real estate investor who owns multiple properties already. “Mom and Pop” real estate owners (the kind I buy most properties from) often feel intimidated negotiating with me one-on-one. They seem to feel that because I own so many properties and am successful. They’ll automatically end of on the short end of the stick! It’s a perception that’s hard to eliminate regardless of whether it’s true or not. Fred can generally diffuse (this problem for me in his capacity as a neutral third party. Sellers often feel that a licensed person will be more sensitive to their needs, as opposed to direct, face-to-face negotiating with a “ring-savvy” buyer.
4. A good agent will never let the commission block a sale. The good ones are creative! Often they’ll take a fraction of what they have coming in order to close the sale. They’ll let you pay the balance later on, perhaps in monthly payments. My first agent, Merv, would allow me to pay him 50% of his commission at closing and for the balance he agreed to promissory notes, anywhere from $50 to $250 per month, depending on my projected cash flow. At one point I was paying monthly commissions of $1250 to Merv. In addition to helping me, Merv was very happy to have the steady monthly income, plus 08% interest.
5. A good agent can put you in contact with moneylenders, both private “hard money” guys and institutional lenders with programs that fit what you’re doing. Lenders shop real estate offices looking for qualified buyers among their clients. This is a valuable benefit to investors who are always in need of funds for upgrading and acquisitions. Naturally you and your project must qualify in order to take advantage here. Nonetheless, money is always the ammunition that keeps investors in the hunt.
As you might guess - The benefits must flow both ways between the agent and investor here’s what you shouldn’t do if you want to develop a profitable relationship!
A. Don’t chippy around! Use your agent for all your transactions unless you have special agreements or exceptions agreed upon. Loyalty will move mountains.
B. Don’t try to squeeze the commissions. If you are like me, that is, you negotiate commissions, do it before the agent goes to work! Not after the deal is written up and in escrow.
C. Don’t send agents on “wild goose” chases! The veterans will dump you if you try. But don’t even do it to the inexperienced dummies. Soon they’ll catch on and will have nothing more to do with you. I’ve heard “so-called” real estate lecturers tell novices to instruct their agents to draft up and present “low-ball” shotgun offers to purchase properties from the multiple listing book. Ask any respectable agent what he thinks of that advice! Take it from me; don’t waste your agent’s time with such nonsense.
D. Don’t make a ton of offers without ever closing anything. No agent can survive without “paydays” same as you. Take better aim so you’ll hit the target - Close the deals.
E. When other real estate agents call you direct - Always refer them to your agent. Also, some sellers will insist on dealing direct. They don’t want to involve an agent! That’s fine, but tell your own agent about the exception. Sometimes I pay Fred a small fee $500-1000 to help me do the legwork in the background. If you take good care of your agent, you will benefit the most in the long run, believe me!
Like most successful investors, I suffered through a probationary period! That’s when there’s almost as good a chance of going broke as being successful. What finally saved my bacon was when I started buying the kind of properties that would earn enough income to pay me every month. That might not sound like much to some folks - but to me, it was the discovery that kept my investment career alive - and my faith intact!
I can tell you from experience - buying the right properties, in the right sequence, makes all the difference in the world. If you’re like me, cash flow is always the biggest concern! It took me several years and some seriously overloaded Visa cards before I gave up the notion that average three bedroom, American dream houses would set me free! They almost broke me instead! Don’t misunderstand me here - I’m not saying they’re not a good investment - I’m saying they don’t provide any cash flow! My dream was to be a full-time investor and have my real estate support me.
BUYING THE RIGHT PROPERTY FIRST
When you don’t have a lot of money - and you need cash flow rather quickly, you must invest in the kind of real estate that will produce it. Single houses can produce it someday - but not until the mortgages are paid! If I was lucky enough to earn $100 per house, not likely with a mortgage - I’d need more houses than I could ever afford just to earn pauper’s pay. Fortunately, there’s a “faster, better way!
The better way is to start with fixer-uppers first - and concentrate on cash flow. With fixer properties, you can force the value up with sweat equity (yours or somebody else’s). With fixer properties, you won’t get stuck in a holding pattern, waiting for appreciation or a turn-around economy. This is very important, if your goal is to create wealth during your lifetime so you can enjoy it yourself!
BUILDING WEALTH DURING YOUR LIFETIME
Once you have a few dollars to jingle - and a respectable cash flow, you are now in a position to acquire quality houses, so long as they’re close to break even. I could never move forward very fast until I figured out the sequence! Go for cash flow first - quality houses, second! At my Fixer camps - this is what I’ll show you how to do.
Fixer investors also enjoy another major advantage over all the other investors because there’s no up and down cycles to slow you down. Unlike the general housing market, the fix-up strategy never changes regardless of what the economy does. Although I currently own a number of American dream houses now - I don’t mind confessing - my fixer properties bought every single one of then
There are many good reasons why fixers are the perfect properties to begin a real estate investor career. However, leading the list is CASH FLOW. Fixer houses by far offer the best opportunities for small-time investors, without, much cash to spend, to acquire real estate with minimum down payments and still achieve cash flow quickly. No other kind of real estate I know of will do it!
CASH FLOW QUICKLY
It is reasonable to expect - after paying an average of 10% down that one can create a positive cash flow property within a relatively short period of time after the purchase. Obviously, the time it takes will depend on many factors, such as how long does the fix-up take - how much market value is added to the property and most certainly, the skills and aggressiveness of the investor-fixer.
I have learned from experience - cash flow is much easier to achieve buying small multiple residential properties, such as 2 or 3 houses on a single lot, several duplexes with a house or two, or any combination of these cluster type properties. I own many properties with 5 to 8 living units each. They are excellent cash flow producers a year or so after fix-up. My timetable for a complete turn around is 18 to 24 months.
LESS COMPETITION
Anytime there are fewer buyers who want something in a particular market, your odds for success are greatly increased. Competition is what drives up prices. Conversely, the lack of competition keeps prices down. It’s nearly impossible to purchase prime real estate at a discount - or expect to get any sort of a break on the terms. The reason: Too many buyers are willing to pay the asking price. Why would the seller need to discount?
There are basically only 2 methods to buy real estate at bargain prices:
Method #1
Situations Situations where you are the only potential buyer who knows about the deal (no competition), and the seller is willing to accept your offer and terms without seeking outside bids (offers) from anyone else.where you are the only potential buyer who knows about the deal (no competition), and the seller is willing to accept your offer and terms without seeking outside bids (offers) from anyone else.
Method #2
Where the public knows about a property that’s available but cannot visualize its potential value - like after it’s all fixed up. They are therefore not buyers - only lookers.
Most students who seek my advice are not yet sophisticated enough to be in the information loop where they can benefit from Method # I. Two of the most common ways Method # 1 is used is by licensed real estate agents who buy their own listings - and by friends of probate attorneys who get a secret telephone call when an asset (real estate) needs to be disposed of quickly. In both cases, the public never finds out about the deal. Private deals avoid competition - therefore, the selling price don’t get bid up!
Method #2 is how most of my students will buy real estate. We shall focus in a market where properties are for sale. They are even advertised and certainly known to many potential buyers. However, 95% of all the potential buyers (the competition) see ugly rundown houses as junk- ~~ poor investment not even worth the asking price. Most will never make an offer and those who do will likely alienate sellers by insulting them with “low ball” offers. With 95% of the competition out of the game, the playing field is definitely tilted in our direction.
Make no mistake about it - all the financial ducks are lining up in a row! We’re about to experience the mother of all buyer’s markets. Right now, the only question you should be asking yourself — What must I do to prepare myself so I can take advantage of all the bargains coming down the pike!
First, you must decide about buying the right kind of properties that will do you the most good. You want the kind that will start cranking out money in the shortest possible time! For most small-time investors, the right kind are small multiple unit properties with tenants who are already paying the bills. Owners who sell these kinds of properties today clearly understand they must provide seller financing in order to make a deal. Since mortgage money has all but dried up, you’ll get terms that will start you out with cash flow! Seller financing is about to enjoy its finest hour, so don’t miss the boat!
In order to seize these extraordinary opportunities, you must be ready and willing to oversee the customers who will ultimately make you rich. Some folks will tell you - there’s no money in land lording, so you’re better off to avoid it! I will tell you from experience, that’s a whole lot of baloney! As a matter of fact, it’s the renters who have made many of us rich. You should never intentionally avoid customers who are willing to pay you their hard earned money every month. To do so violates every sound business practice I know of!
Learning good land lording skills will put you in the driver’s seat for negotiating some super profitable bargains. Many cash flow properties already have decent paying tenants; but the buildings are run down and terribly mismanaged. Turning these under-performing properties into your own personal gold mine can be your ticket to long-term financial security. The only requirements to seize these golden opportunities will be your abilities to manage paying customers and negotiate transactions without traditional financing.
The window of opportunity is now! While financial markets are confused and frightened owners think the sky is falling. Now is the perfect time to strike. While it’s true that home prices have declined - it’s just the opposite for properties that generate income. Rents provide an ideal hedge against inflation. The key, of course, is to pounce on confused sellers before they figure out; the sky is still a long ways up!
To acquire the right properties, you must take over the sellers’ problems! After all, that’s likely the motivation for selling! This is where your management skills can earn you super paydays. My strategy is very simple, yet effective! Take over the seller’s short-term management problems in exchange for long-term financial benefits that will last you a lifetime and guarantee your retirement.
Successful investors who have attended my land lording seminar, MANAGING TENANTS & TOILETS, held once each year in November, will be he first ones to tell you they owe most of their success today to their ability to manage the customers who pay for their properties.
When Beth Rosander attended my Fixer Camp in the early ’90’s, her situation was a bit more urgent than my typical students. Recently divorced with two small children to raise and very limited support payments, Beth needed to earn additional income fast. Further complicating her life, she lived near the San Francisco Bay Area amongst the highest priced houses in California.
On a positive note, Beth understood how fixing up houses could rapidly increase the value! She and her ex-husband had completely remodeled her 92-year-old house and nearly tripled its value. That experience gave her the courage to continue without him. She even learned how to tile a bathroom floor, she said –Well, maybe not perfect, but certainly acceptable! Her main problem, she explained to me, was writing up the offers - plus finding additional money for down payments and fix-up. That’s the reason she came to my Fixer Camp!
During her three days of training, Beth explained how she first had tried working at a local grocery store. Her net income left over for living expenses after paying childcare, was $42 a week. In San Francisco, that just about covers your parking bill. Obviously, Beth decided rather quickly - she needed another way to earn a living where she could keep the children with her. Her house remodeling experience seemed to be her only logical salvation!
At Fixer Camp, Beth learned everything she needed! She learned how to write up offers, how to estimate her fix-up costs and how to get financing to acquire more properties.
In May of 1993, Beth’s house fixing success came to the attention of San Francisco Examiner real estate columnist, Corrie M. Anders. Corrie’s half-page spread in the Sunday Examiner profiled several of her recent projects, including pictures. During an on-site interview, Beth explained how she fixed the roof and remodeled a bathroom that had a garden hose running from the into to fill the tub. She spent roughly $21,000 on materials and her helper, worked long days and nights herself for over month – then sold the place for a $40,000 profit – just ninety days after she started.
According to Corrie’s article, Beth’s average profits were about $30,000 per house, and that included a period of sluggish sales for several years after the Desert Storm invasion. Obviously, Beth’s fix-up ventures received more notoriety than most Fixer Camp students get – Still, it was her personal efforts that made things happen. Beth took what she learned at Fixer Camp, added the elbow grease and presto – along came her well-deserved profits!
If you were to interview Beth today (she married her house fixing helper), I’m almost certain she would tell you something like this – Learning the information you need from a teacher who does it himself will prove invaluable for you success. Naturally, it’s up to the students to make things happen – but leaving Fixer Camp with the knowledge about what to do back home can quickly put you ahead of the competition.
“Call me when you find a good deal and I will buy it.” This is what I used to tell real estate agents when I began to invest in real estate. I cannot say that my phone rang off the hook. Most real estate transactions are listed and sold at retail prices. Most financing for these sales is from traditional lending institutions. So where did I expect to get these “good deals”? Sometimes, a property is under priced. In that case it is usually snapped up quickly by either the agent or their investor friends (try to be that investor friend). Maybe you find a place that is in need of simple cosmetic fix up. In that case, you can offer a little less and maybe get it, but there are lots of other competing investors doing the same thing.
So, why weren’t all my new real estate agent friends calling me with the good deals? Why was my phone so quiet? The answer is that good deals usually are not handed to you. YOU NEED TO CREATE THE GOOD DEALS FOR YOURSELF. No one else is going to do this for you. It is not your agent’s job to do it for you.
FIND A PROPERTY OR A SITUATION THAT IS OUT OF THE ORDINARY
This may buy you a little time to get a jump on your competition. Instead of looking for the same simple, little house that everyone else in the marketplace also wants, try to find a property or a seller that stands out from the rest. You want to focus on properties that that YOU CAN INJECT YOURSELF INTO TO CREATE VALUE.
These unusual situations could include any number of different types of properties or sellers. You may find a seller with several (or many) separate houses to sell; a property with a group of individual cottages on it; an unfinished house and a separate unit; a house and a separate building that could be converted to another unit; a seller that is having financial difficulties; a seller that is determined to get his high asking price but may be flexible on the terms; a seller, that because of tax consequences, does not want all cash out of the deal; a property that has houses with obsolete old wood foundations; a seller that is overwhelmed with bad tenants and management headaches; or multiple owners of a property that dislike each other (divorce or a bad partnership); or a seller that just can’t sell his property because of some major physical flaw.
In a slow market, these types of properties may be on the market longer than usual. In a hot market, they may be on the market a LITTLE LONGER than everything else that is selling quickly. YOU WANT SOME BREATHING ROOM TO MAKE THE DEAL HAPPEN. You want to look for a property that your competition may not want or, because of the unusual aspect of the seller or property, the buyers take too long to analyze, thus giving you a jump on them.
You need to define what you want to do. Do you want to buy one or two fixers and sell them for cash or are you going to buy, fix up and keep them for longer-term profits? Don’t just make this a goal you will do SOMEDAY. If you focus on getting a few houses and devote some effort, you will do far better than just dreaming of buying them SOMEDAY. Have you ever noticed that if you want to know the time, you will see clocks; if you are hungry you will see places to eat? The same is true if you are focused on buying houses, you will find them.
Plot out how much money you want to make this year, next year and in 5 years. When I decided to go full time, I started buying houses one at a time and realized that this approach was taking too long. I needed to speed things up if I was going to make my living as a full time investor. So I changed my focus to buying groups of little houses and cottages. Again, you will see, that when you change your focus you will start to fine what you are focusing on, just like seeing the clock when you are looking for the time.
Why did I try to buy groups of houses on one parcel? I discovered the price per house in a group was almost always cheaper than the price of an individual house, and they rented for the same amount as a house on its own lot. I also found that some of these groups of older houses were not real easy to finance through traditional lenders. Now you ask yourself, how would I buy them if! Can’t get them financed? The answer is that you can always find the financing for a deal, but maybe this financing has to come from the seller. If I can’t get financing from a bank, and I don’t have a huge bag of money to pay all cash to the seller, and there is not a line of people waiting to buy the property, the seller may be forced to carry the financing. This can be good for you because maybe you can get flexible terms or interest rates, and good for the seller because he can sell his property quickly and not have the delays and headaches of waiting for appraisals, approvals, inspections, etc.
WHAT SEEDS DO YOU HAVE TO PLANT
Take an inventory of the talents and resources that you have. Do you have any money to buy some houses now or do you have nothing? Do you have equity in your home that you may borrow on, a savings plan at work you may tap, or maybe an IRA you want to use? Now, I am not telling you to invest your retirement savings into real estate. I am just suggesting that you at least take an inventory of what you have.
When I bought a group of 24 houses on Boulder Way in Sacramento, California, I used my IRA. I paid the 10% penalty and just incorporated the amount of the penalty into the purchase price of the houses. The property expenses offset the tax on the proceeds. The cash flow from the houses paid a whole lot more than the interest that I was getting in the IRA account. Also, it did not take a very long time for me to clean up the property, put in better tenants, raise the rents and increase the value of the property many times more than the amount of IRA money that I originally invested.
One of the best ways to sell single-family houses anywhere and almost anytime is with lease options. My special lease option works in good times or bad, regardless of an up and down economy. You’ll find my lease option is different than most selling options because I’ve eliminated the two biggest reasons why most lease options fall apart. Naturally, my lease option agreement is designed to fit my own special needs, but there are excellent benefits for both sides. Options designed with my plan can be a good solid money-maker - plus, they provide an excellent opportunity for weak buyers to become property owners.
As with all my real estate transaction- it’s the benefits that make the deal work. Benefits for both parties must be attractive and desirable, otherwise - who wants to deal? Selling with a lease option the way I do is not dependent on a good economy and works regardless of whether banks are making mortgages or not! Here again, as with most of my real estate transactions - I will control all the moving parts! Once the parties agree, there will be no surprises later on caused by events that I can’t control.
My typical transaction involves a house with a market value of $250,000 that generally rents for $900 per month in my town. The rent to value ratio is only .0036 per month - or 4.32% annual return (12 months x .36 = 32%). Obviously, from a cash flow standpoint, there’s no contest when it comes to renting cheap inexpensive houses versus larger homes with acres) 0f carpet. Quite often people say to me — Cash flow is not everything, ya know! I agree - but it’s still a long ways ahead of whatever’s in second place! Remember I told you - cash flow is my primary motivation, but here are other benefits for me as well. Here are the most important to me
1. CASH FLOW - HIGHER RENTS - 25-30% RANGE
2. TOP SELLING PRICE - SOMETIMES 110%
3. LONGER TERM TENANT - 3 YEAR MINIMUM
4. BETTER PROPERTY UPKEEP - MAINTENANCE
5. INTEREST INCOME, LONG-TERM CARRYBACK MORTGAGE
My lease options are designed for a period of three years. Tenants must lease my house for the full 36 months - then make their choice either to buy the property or terminate the lease. I do not extend my leases since there is no reason why my tenant cannot follow through and complete the purchase. The reason for 36 months is because that’s how long it will take my leasing customers to accumulate the down payment from the monthly rent credits I allow him for that purpose.
