Fixer Jay’s Mom & Pop Millionaire Blog

For the vast army of “Mom and Pop” investors, landlording skills are the price you must pay to become lots richer than your snoopy neighbors. Granted, landlording is the most unromantic part of being a wealthy tycoon – but for aspiring real estate investors who wish to make it to the Promised Land – take my advice, learn about landlording at the same time you learn investing skills. Both are inseparable parts of your “becoming rich” plan.

WEALTH MUST INCLUDE RIGHT INGREDIENTS

To make the big bucks in this business, you must hold onto your rent-producing properties. Flip-flopping and selling off assets might sound a little more sexy, but its short lived at best. Selling works in direct opposition to retaining income, depreciation credits and avoiding the tax collector. Combined with appreciation, these are the main ingredients for wealth. Obviously, keeping properties requires handling the tenants, who pay you their money every month – but as your collections grow landlording becomes much more tolerable, and eventually, more fun!

YOUR EDUCATION NO MATCH FOR YOUR TENANTS

Finally, learning “street skills”, as well as rules and regulations in the book, will make your landlording job 100 times easier. You must learn enough street knowledge to gracefully handle tenant intimidation (#1 cause for landlord suicides). Also, you need to learn my special techniques for handling routine renter business by mail, as opposed to personal confrontations or obnoxious phone calls. You’ll totally fall in love with this technique – I promise

If you ask folks who are successful long-term real estate operators what made them that way – I’Il bet I can tell you their answer. It’s their ability or skills to handle the peqp1e who live in their properties! Do-it-yourself investors like me don’t become successful without landlording skills. No one is born with these unique set of skills, but it’s nearly impossible to succeed without them.

To make the big bucks in this business, you must hold onto your rent-producing properties. Flip-flopping and selling off assets might sound a little more sexy  but its short lived at best. Selling works in direct opposition to retaining income, depreciation credits and avoiding the tax collector. Combined with appreciation, these are the main ingredients for wealth. Obviously, keeping properties requires handling the tenants, who pay you their money every month – but as your collections grow; landlording becomes much more tolerable, and eventually, more fun!

JOIN ME ON FEB. 26 27 28 AT MY ANNUAL MANAGING TENANTS AND TOILET SEMINAR

FOR DETAILS – CLICK SEMINARS OR CALL 1-800-722-2550.

Finally, learning “street skills”, as well as rule, and regulations in the book, will make your landlording job 100 times easier.  This is where I can help you the most.  I have years of “tender loving” tenant management under my belt and I’ll share my triumphs, as well as some pitfalls. When you finish my seminar, you’ll have enough street knowledge to gracefully handle most tenant intimidation (#1 cause for landlord suicides). When you learn my special techniques for handling routine renter business by mail, as opposed to personal confrontations or obnoxious phone calls, you’re gonna totally fall in love with my training –

I’LL GUARANTEED IT!

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Many small mom and pop type investors give up the opportunity to make a ton of money and have a wonderful free come and-go” lifestyle simply because they never see the importance of learning to be a skilled landlord. You don’t become a skilled landlord when you acquire houses. You become the owner-that’s all! Skilled landlording will … take some education.

Basically there’s just two ways to learn landlording. You can learn from people like me or you can learn from the tenants. If you pay me 10 times more than I charge to teach you, it’s cheaper than learning this job from your tenants.

Every landlord should know and under­stand landlord-tenant laws in his own area. Once you know the laws, your fear of rent­ers or of being intimidated will vanish. An overwhelming number of property owners incorrectly assume these laws favor deadbeat tenants. I can assure you this is not the case, although sometimes it appears that way. Laws are mostly about equity. Remember, there are unscrupulous landlords as well as naughty tenants.

Landlords often find themselves in seri­ous hot water with tenants because they try to inject too much logic and common sense into tenant management. Logic and common sense have their place, but they seldom count for much where legal issues are concerned. For example, it is nearly impossible to effectively force your personal living standards and ideals on your tenants. To do so could seriously affect your sanity. What earthly good would it do to make a million dollars from your rental properties if your tenants drive you crazy?

Tags: Managing Tenants and Toilets, The Joy of Cash Flow Investing // Add Comment »

Today can be the first day on the road to your financial freedom! Now more than ever, income real estate will work for newcomers and “old salts” alike. A collapsed housing market, coupled with failing mortgage lenders, has created a depressed market, ideally suited for small-time do-it-yourself investors. Why is this good – you ask?

To begin with, income real estate like duplexes and small apartments are caught in the downturn same as the houses we live in! The big difference however - ­rental units earn you money – houses cost money! Since the general real estate downturn includes all real estate, houses and income units alike, an extra­ordinary lifetime opportunity presents itself!

Rents are actually increasing as more homeowners lose their houses and are forced into renting. Income property prices have shrunk to 20 year lows, just like houses, however; the financing for older rental units that I mostly recommend, can now be negotiated between the buyers and sellers. In other words, we’re once again back to seller financing where cash flow can be automatically structured in the deal. No longer are small-time investors stuck with what the bank says.

If the train left the depot without you before, this Is your time and opportunity to catch up! You can now buy properties with seller financing and cash flow that make sense. For many, it’s a second chance to buy real estate that can lead to financial freedom. Today, you can often start with cash flow, build a second income and even switch to full-time real estate investing. It’s truly the perfect real estate investor storm.

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Real estate agents account for 95 percent of all the real estate sales. Therefore, anyone who thinks going around agents is good business, needs to rethink the issue. In my own case, I would have nowhere near the real estate holdings if it weren’t for my professional real estate helpers.   My two agent-brokers have been involved in 60 percent of all my activity, both buying and selling. Believe me, in this busi­ness you will need help if you expect to make any serious money any time soon.

I pay real estate commissions if agents bring me good deals. Real estate wealth has nothing to do with stiffing agents. If you get the reputation for being a “tightwad,” you could lose out on valuable tips and good deals simply because the sales people don’t want to deal with you. How much time would you spend with a client who thinks you don’t deserve to be paid?

I can buy a property quickly. To an agent that means fast paydays and they all like that. My requirements are: the property must fit my strict financial guidelines and just any property won’t do. Property qualifications are needed to determine if the property is a candidate. Agents won’t hang around you if you’re a looky- loo. No agent worth his salt can afford that nonsense. My agent’s job is to know exactly what I will buy. He doesn’t call me about every property for sale in Redding. A good agent will immediately qualify the property to determine if it has potential. My agent knows I don’t normally want deals where new bank financing is required. He also knows I want sellers who will carry paper. He knows I rank small “leper” properties, like four to six houses on a single lot or a bunch of ugly rundown duplexes, at the top of my buying list. When he hears about those kinds of properties, he acts quickly.  Finding a good agent is not a lot different than finding a good wife or husband. It’s simply a matter of weeding out until you find the right combination.

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Fixing run-down houses for profits is not the same thing as remodeling houses. If it were, lots of custom builders and remodeling contractors would end up rich and handy­man-types like me would be working for them. Fixing houses the way I do has a lot more to do with budgets and accounting than with hammers and wallpaper. Fixing is my goal, but only if there’s a profit to be made.

You need to understand that “leverage fix-up” is the kind of fix-up that adds money to your pension plan. If it costs $20,000 to fix up a $70,000 rental house you bought for $50,000, you’re better off waiting for social security. There’s just not enough fun spend­ing a ton of money not knowing if you’ll ever get it back, even without a profit.

This is what many small-time re-modelers do. And of course it’s the reason that a large number of them end up 25 years down the road with nothing to show for their skills but a used Chevy pickup, a box of worn-out tools and no health insurance. It’s not because they don’t know what they’re doing. It’s because what they’re doing doesn’t earn them enough profits. I’m trying to show you a way that you can earn 10 times more money than journeyman re-modelers, with 10 times less remodeling skills. I call this maximum leverage of your personal efforts and its much more fun and lots more profitable.

The most frequent questions I’m asked about fix-up are: What is your dollar limit and where do you draw the line and simply walk away? Dollar limits are a matter of writing out my fix-up cost estimate and then adding that to the amount I’m willing to pay for the property. If those two numbers are higher than 80 percent of the fixed-up market value, I generally back away, especially on lowered properties.

For example, let’s take a house that I figure will have a $65,000 market value after my fix-up work is done. I’m willing to spend $52,000 total to acquire the property and do the fixing: $43,000 purchase price and $9,000 for fix-up work. If my fixing estimate is on target, I’ll end up with $13,000 equity when I’m done.

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Real estate agents are the eyes and ears of the real estate business. I’d be hard pressed indeed to think of any successful investors I know who got that way without benefiting from their services. At least 50 percent of all my business over many years has been directly involved with a real estate agent who was paid to make the transaction happen. I’ve had several situations where an agent referral to a non-listed property or a special tip about an owner who needed to sell was all it took to create a big pay day for me.

More than once I’ve heard real estate gurus tell their audiences that an excellent strategy or technique for getting rich is to completely avoid paying commissions. Certainly I’m not one to recommend throw­ing your money away, but I must tell you paying commissions should be helping you make more money; otherwise you need to re-think your investment plan. Even in the worst case situation for me, assuming I paid a full six percent commission, I would still have 94 percent of the value left for me-plus all the benefits I acquire with a high-profit property. To me, that doesn’t seem like such a bad trade-off.

No one will make you rich except you.

I would recommend that a new investor simply walk into five or six realty offices sit down with an agent who is on the floor and discuss the kind of properties you wish to acquire. Some agents will jump through hoops to help you. Others will shine you on. Personalities will naturally play a role. Some people you like-some you don’t.

The hard fact is that no one will make you rich except you. No agent will make you rich. No other person will do it for you. You alone must make it happen. However, real estate agents are powerful helpers if you will teach them what you want done. You must give them parameters regarding what constitutes a good deal for you. They must know what you will buy and how fast you can close the deal so they can get paid.

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Nothing comes ahead of cash flow! If you have it, you can continue to grow. You can transition from smaller properties to larger ones or fixers to pride-of-ownership. You can use your cash flow to buy mortgages for passive income or take a trip around the world. Cash gives you choices!

When you own the houses, you have your own personal money machine! Obvi­ously, you must maintain the property and provide the necessary management. But, in exchange for doing that, you control the money. It’s yours to spend any way you choose. The basis for wealth behind nearly every rich person can be traced, back to the ownership of a patent, a copyright or a deed! Owning income real estate puts you in with the right crowd.

In terms of investment risk, rental pro­perties are about the safest kind of invest­ment you can make. Residential renters are easier to attract than commercial tenants. Houses are considered a basic necessity of life. The risk of loosing your investment houses, with any equity, is almost nil. Buy them right and structure the financing so your tenants can pay them off and you’ll be very well rewarded for your initiative.

Houses aren’t glamorous like shopping malls and high-tech commercial buildings but they are far better suited for investors, who start with very little cash and no reserves.

Most investors and wanabees are better off to stay away from strategies that sound slick. Over the past 10 years, I can recall the names of at least a dozen so-called invest­ment gurus who expounded the virtues of a wide assortment of “get rich” techniques. Most of these pitchmen are bankrupt or working at a filling station today.

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It’s not a sound idea to buy houses that don’t pencil out on the day you acquire them or shortly thereafter. There’s only one reason I know of to buy investment real estate-that’s to make money. If it can’t, then I don’t want it regardless of whatever else I may like about it.

I have been sucked-in on future value, higher potential, and pride-of-ownership many times but I learned my hardest lessons early in my career before I lost the ranch.

If your goals are investing for current income and long-term security with the least amount of daily management involve­ment, then my strategies will work for you. There are many things to learn and most of it should be accomplished during the early steps of your investing. On-the-job training is most effective.

When you acquire properties with financing, you should always insist on long-term pay backs, the longer tthe better, but nothing less than 10 years. Be very careful when you agree on the amount of the mortgage payments. Investment properties that have combined mortgage payments higher than 50 percent of the scheduled income are too risky, unless of course, you have adequate back-up resources to pay for negative cash flow.

I’m always satisfied when my mortgaged properties earn small positive cash profit consistently every month. Little profits allow me to buy more properties, which in turn provide additional little profits. First thing you know, little profits add up to big bucks.

It doesn’t happen overnight, but when you consistently keep the profits rolling in, you have the money to take on bigger and better opportunities when they present themselves.

There are several, good economic reasons, why I favor keeping a flock of rental houses, but the reason dearest to me is they furnish me with cash every month, come rain or shine!

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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!

Fixer investors enjoy a 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 them!

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!

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It goes without saying, but it’s extremely important: FIXER PROPERTIES SHOULD AL­WAYS BE CLEANED UP OUTSIDE FIRST! This effort includes removal of all the trash and broken items, like falling down fences and junky sheds. Overgrown bushes, trees and shrubs must be neatly trimmed. Lawns can be raked, re-seeded and groomed. Even weeds can be turned into attractive green yards with regular watering, re-seeding and routine mow­ing.

Here’s what’s really important here! These outside improvements I’m suggesting are not using very much of your fix-up budget, You can really leverage your fix-up plan with plain old “Grunt Work”. That’s my term for non-­skilled labor. But, believe me; it counts just as much as the higher skilled stuff when it comes to making a bottom-line profit.

Avoid the Two Deadly Sins

Whatever else you do DON’T PLAY HOUSE WITH YOUR FIX-UP PLANS and DON’T SPEND OVER 10 PERCENT OFYOUR ORIGINAL COST ESTIMATE.

Both of these DON’TS are not the easiest advice to follow! I don’t expect you to get ‘em both right on your first attempt. That’s exactly what I did and I don’t know of any shortcuts to help you! It simply takes practice!

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