Fixer Jay’s Mom & Pop Millionaire Blog

Perhaps the most overworked excuse for not investing in real estate today is I’m waiting until I get enough money together to start! Money is not what you need more of – CREATIVE THINKING IS.

One of my favorite buying techniques over the years has been LEMONADE OFFERS. The name comes from lemonade ingredients -lemons and sugar. Lemons, of course, are anything besides cash! Some of the best deals I’ve made were done with nearly all lemons.

Matching Your Offer with the Property

Keep things in a proper relationship! What I mean is – don’t try this technique to purchase a premium “Grade A” apartment building. Owners of premium apartment buildings don’t need to accept your lemons! Don’t waste your time courting them!

Weak sellers, meaning their property is less marketable for many different reasons, will accept weak offers. Sometimes a property looks so disgusting and the tenants are so ugly that not one single buyer makes an offer to purchase.
When this happens, a seller becomes very discouraged, the ideal situation where lemonade offers work best! The seller Is In a serious bind and really needs to sell, anything you offer, within reason of course, will stand an excellent chance of being accepted.

Lemonade offers won’t work unless they are perceived by sellers to be a fair exchange for what they’re selling. Remember, value is in the eye of the seller too! You must always be careful to avoid insulting owners with ridiculous proposals; otherwise you won’t be taken seriously!

A Lemonade Plan that Worked

One property I acquired consisted of a rundown four-unit apartment and two junky houses, all situated on one large city lot. A local property manager was overseeing the units for an out-of-town owner. At the time I purchased the property, vacancies were quite high in my town. Only three of the units were rented. One reason was because the manager had allowed old junk cars and trash to accumulate creating a very unsightly mess. Because of the looks – it was difficult to attract decent tenants. When the owner finally showed up to see what was wrong, he fired the manager and immediately listed the property for sale. The asking price was $120,000 with $20,000 cash down payment.
Here’s the’ offer I presented, which was slightly modified before being accepted!

TOTAL PURCHASE PRICE $105,000
DOWN PAYMEHT TO BE $20,000 CONSISTING OF THE FOLLOWING COMBINATION OF CASH ANO PERSONAL PROPERTY!
$4,500 Cash
4,000 1968 Barracuda 318 engine
1,500 1981 Suzuki SS1100 low mileage
7500 Self-contained ‘71 Winnebago, 60K mi.
1550 E250O Honda generator, used 15 hours
950 Cherrywood hutch, beautiful condition
$20,000 total down payment

The real key to making this deal work was – HIGH SELLER MOTIVATIONI To my knowledge there were no other offers on the property. I also learned the seller was seriously strapped for cash. With just three units rented, he was barely collecting enough rents to pay the mortgage payments. Management fees and maintenance expenses were costing him out-of pocket cash every month! Living out of town with a regular job to attend made it impossible for the owner to help himself. Selling the property was the only logical choice!

Tags: Negotiating With Sellers by FixerJay
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To begin with, investing in real estate for money is a whole lot more about people than the property itself! Wow – I always thought the property counted! I do hope Jay’s not smokin’ those funny cigarettes again! Here’s the deal gang – let me explain in a simple, easy to understand sentence. Real estate investors, like myself, are after the benefits. Benefits are where it’s at – but in order to get them, you must first find the folks who can provide them – or will accept them. Notice it works both ways. Webster told us that - “Confer with another and arrive at a settlement”. That means at least two players must be involved to negotiate anything.

Let me give you an example of this benefit idea so you don’t misunderstand I purchase fix-up houses and I’m always searching for sellers who will carry back the financing – or at least their equity portion. I quite often reject the deals when sellers won’t do the financing. Seller financing is a high value benefit I lust and crave for. I’ll likely buy your fixer-upper houses if you give it to me. If not, I probably don’t want your houses! Can you see what I’m saying? I’m after the benefit of seller financing and that makes your property attractive to me.

When I negotiate with sellers to purchase their real estate, I spend countless hours doing “Columbo style” detective work. I talk with them, I study their surroundings. I meet with the kids, I drink coffee with the grown-ups and I try very hard to keep my mouth shut – at least as much as I can for a blabbermouth with a large ego. I have practiced very hard to do this and after 40 years I’m making progress.

COLUMBO’S TECHNIQUES ARE VERY PERSUASIVE

First, before you start arbitrarily changing or negotiating terms and/or conditions, make sure you can show the reason why. If you can’t, they’re probably not valid. Worst of all, when you can’t, it will do severe damage to your credibility. You don’t need bad credibility, believe me.’

Secondly, it’s more important to listen to the other side. You can answer yes or no if you train yourself. But listening to others will provide you a wealth of knowledge and information that will help you structure offers or counter-offers. People love to talk! If you’re a good listener, you’ll be very popular with most folks. Columbo is very good at this. Often suspects tell him enough to hang themselves. Makes his job much easier, wouldn’t you say?

Thirdly, never get emotional! Don’t be critical and above all, never “talk down” to anyone. If you humiliate, embarrass or ridicule, you’ll lose all chance of negotiating a winning deal. Even sellers who are about to lose their shirts won’t do business with someone who intimidates or tries to overpower them. Courteousness and understanding are two of the most powerful tools in your “negotiating kit”. Use them generously; they’ll pay big dividends. Once again, Columbo is a master at this!

Tags: Negotiating With Sellers by FixerJay
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Operating rental properties and dealing with your tenants are not separate jobs. The fact is, they’re inseparable parts of land lording. I owe a great deal of my real estate success to my land lording abilities. Some folks disagree with me on this issue — They argue that professional property managers are paid a decent percentage of the gross rental income to relieve owners of this thankless task. I’ve known many folks who ended up relieved of their property instead!

Now the good news — Land lording is a profession that can help you to achieve financial independence and a quality of life second to none if you choose to learn it well. A long-time investor friend of mine says it like this — “If you are comfortable with the role of ownership and management, and do not allow yourself to be intimidated by the responsibility for setting down the rules by which tenants may live in your properties, you will find as many others have — That owning and operating small rental properties can provide a vehicle for self-employment and sense of freedom that’s difficult to match in our society today.”

Besides making money, being a successful landlord provides many sought-after personal benefits. For example: you can have a better quality of life for yourself and your family. You can live anywhere you choose and set your own work schedule. You can spend additional time with your hobbies and do those personal things that never get done when you work for someone else. Being your own boss is the envy of every W -2 wage earner. Almost everyone dreams of making a big money working for themselves.

A 10%1 JOB CONTROLS 100% OF THE INCOME

I know man} small-time property owners who consistently earn $100 per hour or more operating their own income properties. Land lording is a major ingredient for making big bucks for the do-it-yourself investor. Owners of small income properties who don’t bother learning the land lording part often throwaway a fortune because they allow the tenants to run their business and control their buildings. That’s a very unwise decision for property owners.

Folks who have heard me lecture or attended my land lording seminars already know I consider land lording And people management the $10 job that earns me $90. Those numbers come from the fact that I charge 10% for managing properties. Naturally when you manage your own properties, you can’t pay yourself – but saving 10% is almost like earning it!

Many small-time “Mom & Pop” investors pass up the opportunity to earn a lot more money with their investments simply because they fail to see the importance of learning to become a skilled landlord. You don’t become a skilled landlord because you acquire houses. You only become the owner. Skilled land lording will require both education and practice.

Basically there’s only two ways to learn land lording! You can learn from people like me who have many years of experience – or you can learn from your tenants! I can tell you right now if you were to pay me 10 times more than I charge for seminars – it’s still much cheaper than learning the job from your tenants.

Every landlord should know and understand the landlord-tenant laws for his particular state. Once you know and understand the laws, your fear of tenants (being intimidated) will vanish. An overwhelming number of property owners incorrectly assume these laws favor deadbeat tenants. I will assure you this is not the case, although sometimes it may appear that way! Laws are mostly about equity. It’s well to remember — There are unscrupulous landlords same as naughty tenants!

PERSONAL CONTROL IS KEY TO SUCCESS

I can tell you from my experiences that many small-time real estate owners fail too often because they don’t see the need to learn about land lording. Almost all investors I deal with are owners of houses and small apartment buildings. All can benefit. Even if you’re basic investment strategy is to buy and sell – tenants will generally be involved in the process. Tenants can make or break a property. Owners who pay little attention to land lording skills are basically allowing property managers – or their tenants to have control over their investment dollars.

I will assure you based on my own personal experiences — Dumb landlords are absolutely no match for the liberated “Rock-N-Roll” tenants today. You gotta know your stuff now because the tenants know theirs never lose sight of this important economic fact — Tenants are the lifeblood for landlords. Tenants are the owner’s customers. Almost every profitable business has customers. Tenants are the most important part of owning and operating rental properties because they supply the money. Obviously a landlord’s problem would be down-right serious if he or she did not have tenants who can pay timely rents.

Good landlords always act first – as opposed to re-acting later! Don’t fight and argue with your tenants anymore than you would fight and argue with your boss over the work requirements at your job. Obviously discussions are fine, but fairness must always prevail. Landlords are the boss of houses. They make the rules for the tenants who live there. Never compromise on the issue of WHO’S IN CHARGE. When tenants get the upper hand while living in your rental properties – you’ve got some serious problems. How would I know this, you ask? At least half .the properties I own today were purchased from extremely motivated sellers who wanted more than anything else to get away from their tenants. I made that possible for them But at a greatly reduced price of course!

Tags: Managing Tenants and Toilets by FixerJay
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Seldom do I recommend that buying a house to live in is the best way to begin investing! However, in Bob and Sue’s case, it seemed like the right plan at the time. My idea was to convert the $700 rent payments into something that would build equity. I also knew after listening to Bob and Sue go through several hours of “true confessions” about their past credit problems, they would be in “deep doodoo” if they had to borrow from a conventional lender. They still didn’t have “pink slips” for their six-year-old twins. In fact, they were still sending monthly payments to the hospital where the twins arrived!

Their situation was like this-Bob and Susan were financially committed “up to the hilt” as far as their present income was concerned. They couldn’t turn-up an extra dime if their lives depended on it!

Finding the Seller

To begin with, I said, let’s start searching the local newspapers for a seller who might be flexible. Look under the headings FOR SALE FOR LEASE – FOR TRADE and even FOR RENT. Also, gather up all the “freebie booklets” with real estate advertising-the kind you find in the paper racks at super-markets or in front of the Post Office! This includes penny-savers and the popular “deals on wheels” paper, which also has a real estate for sale section. All are free!

I explained the ideal property we’re looking for to Bob and Sue. I told them to start calling up ads and talking on the phone. There’s no use driving around until we find a seller who shows some interest in what we have to offer. Basically, the strategy we are trying to use here is called: PAINTING-FOR-DOWN PLAN. Obviously, it’s not just limited to painting. In fact, the only limits I know of would be the capabilities (know-how) of Bob and Sue to fix up the property we find.

First, I estimated Bob and Sue could afford $500 per month mortgage payments if they bought a house. That’s $200 less than the rent they currently pay each month. The extra $200 will be needed to fix up any property we find. $500 will payoff a $65,000 mortgage payment at 8.5 percent, amortized for 30 years. Obviously, $500 can pay a bigger mortgage at less interest or smaller if it’s higher.

The Strategy

Here’s how the strategy works: We start looking for a house that is totally run down. It probably needs painting very badly. The yard looks like the site of a national auto dismantlers’ convention. If gutters exist, they’re falling off. In general, the property is an ugly mess. We’ll also look for an owner who lives out of town. Perhaps recently divorced or recently married, is elderly, job transfer or has tried, but failed, at being a landlord. Don’t worry whether the house is empty (vacant) or occupied. Remember, you’re calling from an ad that says For Sale, For Rent or For Something! The ad wouldn’t be in the paper if everything was “just peachy”.

You will need to know a little about market values. Real estate agents or a friend can help if you are totally in the dark! Although, if you can’t really tell-I’d suggest you start driving around a bit matching up properties with comparable houses and prices in the surrounding neighborhoods. Remember, this job is not like engineering “precision” Swiss watches! Exactness is not our goal here! Being in the “ball-park” is perfectly good enough. After all, the offer we plan to make will compensate!

Once you figure out that the market values are within “ball-park” range, our next task will be to find an ugly property selling for about $75,000 in its rundown condition. A $75,000 rundown house should easily be worth $85,000 or more after it’s all fixed up. Also, don’t forget the highest mortgage we can afford to pay at 8.5 percent interest $65,OOO at 6.5%; the mortgage could increase to almost $80,000 keeping the same payment.

Tags: Fixing For Money by FixerJay
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