Fixer Jay’s Mom & Pop Millionaire Blog

Sad as it may be, anyone can be sued anytime, anywhere for anything! Hey, it’s the American way! Naturally, landlords and property owners fall smack-dab in the middle of this Wild West, shoot ‘em up free for all! The big question for us hard-working landlords and housing providers is: What can we do to protect ourselves?
If you operate real estate and manage the tenants who live there, your first line of defense will always be your insurance policy. Don’t confuse corporations, LLC’s, trusts or hiding on some far away island with the protection you need. When you own mortgaged properties and you have rental customers (aka), tenants living on your properties – you must have adequate insurance to protect yourself from losses. The only thing we need to discuss now is what kind.
Basically property owners (investors) need two kinds of insurance! They need property insurance (a fire policy) and they need liability insurance, which protects against personal accidents and injuries that may occur. I call this the people insurance! Liability insurance for investment real estate owners should provide protection for two different kinds of exposure. The first would be protection for accidents at the property. For example, say the bathroom floor falls through with the tenant standing on it, causing a personal injury.
The second kind of liability for investors is what I would call the imploding liability. It’s a risk for owners but has nothing to do with the property itself. In this situation, the property doesn’t cause the problem, yet the owners and his real estate holdings will be exposed to a loss just the same! Here’s an example of what I mean. Let’s say your handyman worker has just purchased a new toilet plunger at Scotty’s Building Supply and while driving to your duplex loses control of his VW bus and steers right through the middle of a troop of Girl Scouts selling their cookies on the sidewalk. Obviously, the property had nothing to do with this accident; yet• the liability will be tied to the owner and his real estate through the actions of the handyman! Naturally, you as the property owner-employer will be held responsible. You’ll need lots of insurance to pay for the cookies, believe me!

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Substantial discounts must fall in the 20¬50 percent range to make serious money. Don’t tell me how hard it is. I already know. The good news is, it can be done and with a little knowledge, you can do it.

When I talk about these sizable discounts, I’m talking about the difference between what you negotiate to pay for a property and what it will be worth after you become the new owner.

For example, if I determine a shabby looking house is worth $100,000 after I clean it up, and I estimate the clean-up effort will cost $10,000, my goal would be to acquire the property for no more than $70,000 or a 30 percent discount. If you can do this with a HUD, house or foreclosure – fine!

Looking for bigger and more substantial discounts is what led me to my favorite type of investment real estate: small multiple unit properties. I quickly discovered that 30 per¬cent discounts like the single house example above, were like child’s play compared to run-down multiple-unit properties.

Multiple unit values are primarily deter¬mined by the income they generate. The appraisal is the only measurement of value for single family homes.

When a small apartment building or group of duplexes is allowed to become run down, the income or rents the property generates go down with the property. Buying properties with low rents is where discounts can really become substantial-40-50 percent dis¬counts are not unheard of. ‘Investors who learn to participate at this level can rip, snort and rumble when it comes to paying the right price the day they buy.

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Don’t forget this: Fix-up specialists are not remodeler, so don’t try to be one! Like I always say, you wouldn’t be happy with the money they earn. Playing house and remodeling tends to go together. Things like splitting up big rooms to gain an additional bedroom or dining room – also, making the kitchen big­ger, expanding the bathroom or changing the hallway around seldom pays off. If you’ll stop to think about these schemes, they are gener­ally a matter of preference or taste I More often than not, two people could never agree on rooms or configurations anyway. You’ll be money ahead if you keep things simple! Leave the house alone and simply clean it up and fix what needs fixing!

Fiddling around with the walls and room sizes can throw a house out of balance! For example: Changing a two bedroom house to three bedrooms likely means more people will Jive there. You might need more heat, cooling and electrical circuits. The bathroom and kitchen may be too small for larger families. Just one change could have a ripple effect. If you need more power and more heat – those things could easily cost more than any benefits you’ll gain.

Tags: Fixing For Money, Success Secrets by FixerJay
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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 GUARANTEE IT!

Tags: Fixing For Money by FixerJay
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Daniel Webster said: “The world is governed more by appearance than by reality.” And, that’s exactly how your customers will judge your fix-up job.

If you spend $5000 working under the house, you can consider that money to be mostly a gift for the next owner. If instead you can spend that money for beautification like exterior paint, carpets, new lawns and a white picket fence around the front, you’ll not only be’ in harmony with Webster, but you’ll also be adding sizzle items that both buyers and renters are willing to pay you for!

HIGH PROFIT PROPERTY

My Haywood property consisted of 11 older rental houses on a two acre lot. It was com­pletely overrun with weeds and brush when I bought it. About 50 percent of my fix-up profits were earned by simply cleaning and hauling.

… drive-bys and quick peeks make the sale…

When Haywood sold, I had made a $150,000 profit. The profit cost me roughly $20,000, which I think you’ll agree, is not very much to spend for that much profit. This is fix-up lever­age’ For the Haywood job, I’m talking about 7.5 ­to-1 leverage. That means for every dollar I spent doing fix-up and clean-up, I got back $7.50 when 1 sold the property. I might add that during the 14 months I owned Haywood the monthly rents were increased over $1200. Natu­rally higher rents equate to a higher resale value.

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Every time I attend a “How to Get Rich Quick In Real Estate” seminar, I’m told by some speaker In a dark blue suit that I should always rent my properties to “blue collar” tenants with middle class jobs who have unblemished credit ratings. There is one exception, they claim! It’s OK to rent to senior citizens with an adequate pension income in addition to their regular monthly social security checks.
I suppose that’s good advice, but I also suspect the speaker doesn’t depend very much on rental income to buy groceries like I do. Obviously, the questions I have, along with thousands of other small-time landlords are; what happens If I can’t find tenants in those two categories? What If my properties don’t attract blue-collar workers or senior citizens? The last seminar leader I tested those questions on tried to avoid me at first. When I kept on asking, he sort of turned the other way and his face got real red and twisted – like a man suffering from a chronic gas disorder.
Most Renters Pay their Rent
Contrary to the landlord-tenant “horror stories” we’ve all heard about, most tenants who agree to rent your property will also pay their rent. This fact of life eliminates about 95 percent of your collection worries. Trust me on this I can prove it! The big problems are caused by the remaining five percent who can literally destroy your Iife! It’s the old story abut the rotten apple in the barrel and unfortunately, “destroy your life” is not too strong a term for what can easily happen when innocent, but “dummy” landlords do battle with “ring-wise” deadbeats.
Many Landlords Help Tenants Go Wrong
Have you ever made the rounds to see the model homes when developers present their annual home tours? All the houses are “decked out” with expensive furnishings and yards are immaculately landscaped. If you’re like me and you start the tour looking at houses selling for $75,000 and end up viewing those that cost $350,000 – It warps your value system. Your taste is suddenly “light years” ahead of your financial capacity.
Most folks, who do these, tours like me, are rational thinking people. Their minds can adjust to their pocketbook without too much difficulty, but consider what would happen without this adjustment. The results would be similar to a child at the dinner table whose eyes are bigger than his stomach. Without some kind at help or restrictions, he’ll always take more food than he can possibly eat!
A Tenant Problem Is Your Problem
Landlords need to use this logic when they rent their properties: Never show $800 houses to renters who are not qualified to pay a nickel more than $400. Naturally they’ll want the house they can’t afford. You must always quality the tenants ability to pay rent first. That will dictate the property you show them. Remember the models! If you show an $800 unit to a $400 tenant, I’ll guarantee you’ll either lose him as a customer or he’ll attempt to stretch beyond his financial capacity by agreeing to rent your $800 house. It he succeeds, as many do – you’ll be the one who has a problem – and you’ll also be the one to blame!
Many lower income tenants need help with their finances. Some have great difficulty working out a balanced budget for them. Younger couples are especially overly optimistic about how much rent they can afford to pay. It’s up to you as a landlord-owner to determine how much gross income is needed to pay the rent you charge. I’ve found that most well are tenants would be willing to sign my rental contract for a suite at the Hyatt Regency. The problem is they can’t pay the rent. When that happens, I’ve got a problem too.
Never forget: rent money is like handcuffs between landlords and tenants. It’s the common bond! ” A tenant has a problem paying rent, the landlord has .the problem too!
When you begin to think of rental houses as a business venture rather than simply investing in real estate, it will open your mind to a whole new world of opportunity. The rules at business will help you immensely as an investor-owner of rental properties.

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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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Ask yourself every now and then, what am I doing in real estate? Do I want properties that look good, or do I want properties that pay good? There must be no confusion about your goal.

One of my first recommendations, especially for new investors, is to sit down and plot out exactly how much money you’ll start getting back each month, once you become the owner of a property. Do this exercise before you buy – not afterwards

After doing fix-up for so many years. I must make a confession! Fixing is much more satisfying and rewarding to me than buying the newer sweet-smelling, more expensive houses, although I do own some now. Let me simply make this observation about newer houses: They provide an excellent vehicle to reduce excessive cash flow. High monthly mortgage payments can quickly eliminate the problem.

Knowledge

There are those who incorrectly believe that fixing houses is a job that only experienced carpenters or contractors can do. Nothing could be further from the truth. It matters very little who performs the physical fix-up work, so long as the right things get done. Owners doing their own fix-up work will only enjoy a money-saving advantage, if they fix the right things at the right time. Both are very important. As you shall learn, knowledge is what makes the big money.

Special Requirements?

As a general rule, no licenses are required by owners who fix up houses for themselves. However, if you do it for someone else, for example, as an employee or independent contractor – that’s different! It’s very likely you will need a license to be perfectly legal.

Having fix-up skills can certainly be an advantage because it’s one less thing you’ll need to learn about, but, having said that I’m gonna tell you something you should definitely underline – and never-ever forget BIG PAYDAYS DO NOT COME FROM FIX-UPSKILLS- THEY COME FROM REAL ESTATE SKILLS AND SPECIALIZED “HOW TO” KNOWLEDGE.

Remodel or Renovate?

I discovered there is no inexpensive method to turn older houses into new houses. Herein lies the most important difference between what I do and what remodelers and renovators do.

Often remodelers will replace entire plumbing systems with all new piping. Sometimes they have the entire house rewired. They tear out old flooring and replace floor joists and girders. They replace wood windows with new metal frame styles. Some will even jack a house up to level it. That means they must also fix all the cracks and often re-do the stucco exterior.

Don’t do fix-up this way. Unless money is no object. You’ll lose your shirt if you do.

Since older houses are not the same as newer ones, don’t try to make them so. Instead, try to capitalize on the marketable features not found in the modern day construction. Older houses quite often radiate charm – a homey feeling! High ceilings, woodwork, large porches, yard space, old windows (dressed up), evaporative cooling with separate heating, storage sheds and separate garages and more often than not, mature shrubs and trees. All these items can add to the charm of older buildings. Add a freshly painted white picket fence after everything else is cleaned and “spruced up.” You’ll have lots of customers – renters or buyers, depending on your investment plan.

What’s It Cost?

Since almost every problem can be patched-up, repaired or replaced by skilled mechanics, it becomes necessary to further qualify fix-up work in terms of the economics, “How much will it cost?”
This information will help you decide how much work is too much, and when it’s best to simply pass over the deal and move along to the next one. The fix-up-investor must be concerned with fixing for profits. Not just fixing. This is a very important concept – one you must never forget. The two worst mistakes for beginning fix up investors are OVER-FIXING and FIXING THE WRONG THINGS.

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There is no greater feeling in the world than to wake up Monday morning knowing you are the boss. No alarm clocks, no time clocks, no two-hour commuter traffic to fight, no nothing that goes with the typical, so-called 8-5 shift. It’s total freedom. The day is yours to do as you please. You may give each hour away or you may earn $100 for each. You can decide because you are the boss. You are free to choose. Success or failure rests solely with you. But then, after all, who would you rather depend on the most? Who would you choose to have in control? I would pick me ever time.

Self-discipline is the crucial issue. You must have it or develop it quickly. It is not an option. You cannot survive without it. Train yourself well and you’ll have no problems. ENTREPRENEURS are the shepherds of the world. They are the leaders. They choose to create for themselves and everyone is better for it. They are not content with 2-week vacations and company paid dental plans. They do not require union negotiators to state their conditions for peace at the plant. ENTREPRENEURS are self-starters. They seize the opportunities of the moment to do what is necessary. Quick evaluations, fast action, and the risk of failure only add to the excitement along the way.

If you have the courage, or just plain guts, to take charge of your life, ENTREPRENEURING offers a lifestyle second to none. It is indeed the ultimate freedom on earth. It’s the difference between the shepherd and sheep.

Working for net worth should be near the top of your goals list after you get started. As you begin to develop some expertise and ring savvy from reading books and going to seminars, suddenly one day a light will flash on and you’ll begin to understand that working for your net worth is far superior than working for some nit wit. All income from wages is ordinary and therefore taxable, which means you’re really working for yourself and your non-working partner, the taxman.

I’ve heard it said that many employees must work the first 2 days of every week just to pay their taxes. It’s very easy and a good deal more productive to work 100% for yourself. Creating and building your personal net worth is a super method for acquiring wealth because you no longer work for ordinary taxable income. The cash you need will come from rents, refinancing, and borrowing against equities in your properties. As you acquire more property, you create more alternatives for tax-free cash.

Your properties end up paying for your car and many other expenses that used to be paid with after tax money you earned at a regular job. The net worth concept allows you to pay expenses from pre-tax money. Don’t look for the gimmick, there is none. It’s simply a better way to play the game since it allows you to end up with all the chips on your side of the table. Can you think of a better place for them?

SUCCESS IS DOING WHAT YOU LIKE TO DO AND MAKING A LIVING AT IT——-

Tags: Fixing For Money by FixerJay
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Dreams can be a powerful stimulant for your imagination. When you study autobiographies of wealthy people, as I like to do, you’ll discover that some mighty successful folks got that way starting with only dreams and imagination.

The majority of people today don’t spend even one hour a week planning some kind of strategy for their financial future. A successful land salesman friend of mine said: “Most people I know are just too busy earning a living. They never make any ‘real’ money!”

I advise my students that your bank account will grow much faster and a whole lot fatter if you can look beyond the ugliness of the mineshaft and see the glitter of gold inside. With most run-down properties, ugliness is very shallow and up-front. It’s what shows and creates the undesirable image. After a little experience, most house fixers agree, ugliness like beauty is only skin deep and is quickly erased.

Often you’ll find the biggest rewards are off the beaten pathway. This might be your first step towards “big bucks” and real cash flow. Try to think about investing a little differently. Isn’t it the folks with vision who always seem to get there first and make the most money? Followers are always lagging behind and are never quite certain about what they’re doing. Generally, they show up too late after the competition has “bid up” the bargain prices. Often, they get snookered into buying properties using the “Greater Fool” theory. Many traditional investors have long since given up any ideas about making profits. They’ll be happy just to break even. Their biggest concern about the properties they own is getting their original investment back.

The big reward for house fixers who learn to solve ugly house problems is seller concessions. Sellers who have problems are highly motivated to make deals. It’s these deals that earn big money. There is no way to make “cash flow deals” with folks who might sell with enough persuasion. Terms such as seller financing and discount prices don’t come from sellers who are still proud of what they’re selling. For every “barn burner” transaction I’ve made there has always been a seller who has very few options to bargain with.

Allow me to clear the air about fixing houses for money. First, lots of people can fix up houses, but the majority comes up short on the money part. They don’t earn much money for all their time and effort. People get paid for their skills. You won’t make a killing in the fix-up business from painting a house or hanging shutters. The house will look better, but your bank account won’t.

Following is a list of the top five conditions that create the biggest purchase discounts; the best buying terms and ultimately the biggest profit potential for us house fixers.

1. Ugliness: pigsty looks, tons of junk -discount range 30-50%.
2. People problems: unruly deadbeats, non paying-discount range 30-40%.
3. Older: junk, deferred maintenance -discount range 25-35%.
4. Rundown: out-of-state owners, tenant manager-discount range 20-30%.
5. Cosmetic fixer: needs paint, minor tune-up-discount range 10-15%.

These are averages based on my personal experience and are intended to give you a good idea where the most money can be made in the fix-up business. Also, these five conditions are often found in combinations. Property ugliness combined with people problems are almost a sure recipe for success for skilled house fixers.

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