Fixer Jay’s Mom & Pop Millionaire Blog

Real estate investors often complain that their wealth-building plans are seriously hampered because too few properties are available in the areas where they invest. You can’t buy real estate and build much wealth if nobody will sell you a property, right? Obviously, it takes both buyers and sellers to complete transactions! So, the big question is - -Where do you find real estate sellers when it seems like nothing is for sale? Cold calling is a technique where you contact property owners who own the kind of properties you’d like to acquire and try to persuade them to sell.

One of the first questions I’m always asked is — Why in the world would anyone consider selling their property to me merely because I contacted them and asked? There are more reasons than you might imagine, but first, let me confess to you — I did not invent cold calling. Real estate agents have been doing it for years and with enough success to keep doing it. The problem that many real estate agents have with cold calling is, it’s too much work! It’s much easier when sellers walk through their doors and hand them a listing. A big percentage of agents are willing to wait.

COLD CALLING IS A PROVEN TECHNIQUE

Naturally there’s a big difference between investors who operate properties for profits and: real estate’ agents who sell them for commissions. Cold calling can be different too! For example — Agents will sit at the telephone for hours calling long lists of owners. Obviously, that’s got to be very boring! The way Fred, my agent, and I do it is different To begin with, we write letters to property owners rather than make telephone calls! We also do some research before we (make any contact with property owners. This allows us to customize our (cold calls (letters) to fit the property and address any special circumstances pertaining to the owner.

Not every rental property” in my town is a candidate for my “cold call” letters. To start with, my specialty is the fixer real estate! I make money by acquiring properties I can “fix up”. My strategy is to quickly increase the value. Average looking properties without any visible signs of being rundown or neglect does not fit my profit plan, therefore, those properties are automatically eliminated from my cold calling list.

When I’m out driving around, I always keep an eye out for interesting properties I would like to own — Assuming I could buy them for a reasonable price and terms.

I keep a little notebook in my car to write down addresses, number of units and the condition. Also, I jot down my own estimate of their current value — And, the amount I would likely pay. You’ll find it very helpful if will draw a little sketch of the lot and get a measurement from the nearest street intersection (cross street) to the lot. A sketch will help you locate the property on the county assessor’s map when you visit the courthouse. Assessor maps don’t have street addresses, so the measurement will help you find the right location on a scaled map.

INFORMATION HUNTING IS VALUABLE AND FREE

All this information can be found at your local county courthouse or a title company if you happen to know someone who will help you. Assuming you don’t know who owns the ‘property, first take a look at the key location map. It will direct you to the proper assessor plat map where you’ll find the parcel you’re looking for. Once you locate the parcel number, you can then go to the name index and find out who the owner is! Both the courthouse and title company will assist you with this chore.

My research consists primarily of finding out who owns the property and where they live. It’s generally where the tax bills are mailed. I want to know how many mortgages or trust deeds are secured by the property and what their original amounts were. Also, the tax bill win show me the value for tax purposes. I like to know if my own estimate of value is somewhere in line with the county appraiser. I always try to estimate how much mortgage debt is still owed because I’m looking for properties with a lot of equity. You can’t negotiate a good discount if the owner has little equity to give. Also, I’m always looking for the opportunity to create a long-term seller carry back mortgage if I should purchase the property. Obviously, that sets the stage for buying back the mortgage at a nice discount sometime in the future.

FINDING PROFITABLE DEALS IS THE GOAL

The first thing to do is — Don’t panic! Good properties are always available, but it takes a little creative effort to dig ‘em out! Finding the right properties, meaning the kind that will produce monthly cash flow and long-term profits, is one of the most important skills you must develop to enjoy any success in this business. Remember, if this was too easy, everybody would be doing it and they’d all be rich! Finding properties that will earn reasonable profits is one of the biggest challenges for every investor regardless of how many might be for sale in his buying area. This technique can prove very profitable for agents and investors alike – ask Fred, he’ll tell you!

Tags: Finding Bargain Properties by FixerJay
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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,

                          Love Bob, aka , Fixer Jay

Tags: Managing Tenants and Toilets by FixerJay
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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.

Tags: Vision of Opportunity by FixerJay
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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!

Tags: Success Secrets by FixerJay
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