Fixer Jay’s Mom & Pop Millionaire Blog

What’s better – a fish dinner tonight, or learning how to fish so you’ll never go hungry again?  I think you know the answer, but did you know that real estate investing works almost the same way?  It might seem more hip or fashionable to purchase bank foreclosed houses (REO’s) and flip them for a profit – but it’s still a one trick pony that will hardly make anyone wealthy!

Most “red hot”, follow the crowd strategies will work quite well quite well for short periods of time- but they can stop working faster than last year’s love affair!  Whey is that, you ask?  Too many contingencies, that’s why!  First, bank mortgages always come and go!  Government manipulated interest rates can change overnight and even the fickle public’s perception of value in the housing market can cause total stagnation!

If your goal is to develop a dependable real estate income, you must learn the business of investing!  In short, you must learn how to fish!  When you learn to fish, you’ll discover that bank financing – whether it’s available or not; won’t slow you down!  Interest rates and public opinion will be only topics at the dinner table, but they won’t affect your real estate income one iota!  The reason is because the business of investing includes a variety of different ways to profit.  If one strategy quits working, there’s a dozen more.

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People constantly ask me, “What kind of investing do you recommend for ordinary working folks with only a few dollars to invest and a limited amount of time to do it?” I have no trouble whatsoever answering these questions because use in my opinion, the same answer fits for all ordinary working folks. My “one fits all” recommendation is to invest your money and your time in income producing residential properties. THAT’S IT!
Most everything in life has trade-offs! Early on in my investment career I made a searching and fearless examination of my financial situation. It didn’t take very long-especially adding up my assets. I determined rather quickly that what I needed from any investment plan was cash flow. Whatever else I thought I might need would have to line up behind the cash flow. It’s a very simple strategy, with cash flow you survive and grow-without it, you won’t.
Over the years, investing for cash flow as my number one priority has paid big dividends for me. Cash flow is what I always advise new investors to think about first. It’s a basic rule of investing the way I see it. When you have cash flow, money coming in, you are growing financially. I call this “Green and Growing.” When you are green and growing all things are possible, investment-wise. Without money coming in, nothing grows except discontentment and the constant worry about financial disaster!

Tags: Fixing For Money, The Joy of Cash Flow Investing by FixerJay
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I’m frequently asked, “How can I purchase properties from experienced owners and negotiate a good deal for myself when I’m only a beginner? I feel intimidated when the property owner seems to know much more than I do. I always feel there’s no way I will come out 50/50 because I don’t consider myself an equal. I have tried to educate myself, but I still lack confidence. I’ve read books about negotiating but I have trouble remembering the simple things I’m supposed to say and do in a real situation. I know things like, He who says a dollar number first loses. Always answer the buyer’s question with a question of your own, and don’t talk too much-listen. I still feel an unequal match for an experienced seller.

To negotiate well, you first must under­stand what the word means. Webster’s defi­nitions are listed as: To confer with another and arrive at a settlement of some matter, to deal with or manage, to convert into cash or equivalents value, and to complete or accomplish? I think you’ll agree, that’s what we’re supposed to be doing when we negotiate.

Seldom are neat and tidy written defini­tions the same thing as doing stuff with real live people. Still, it’s a beginning. Now you know Webster’s version. Here is mine.

Investing in real estate for money is a whole lot more about people than the property itself 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.

When I teach folks how to buy property, I begin to change what they think they’re doing to what I want them to do. I call it “shopping for benefits”. Anyone can buy property; not everyone ends up with benefits. You must learn what benefits you want first, then deliberately set out on a path that takes you to them.

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INVESTING IN RIGHT SEQUENCE

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 too 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.

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” 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!

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SHAKY JOBS – TRY THIS TECHNIQUE AT HOME

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 Investor. 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. The opportunity is right now!  It’s time to learn the basics and get started without delay!

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What will set you apart from other landlords is how well you handle repairs. Tenants will always gripe about high rents. You can’t change that no matter what. However, when they get top-flight service for their money they will accept it better. As a result, they’ll remain your customer much longer which, of course, is what all owners want.

If you rent houses, you should think of yourself as a business person! Business people provide a product or service for money! You provide houses for rent – it’s basically the same. The point I wish to emphasize here is this: If you’ll provide top grade service to your customers, you’ll stay in business a long time. Also, you’ll beat the socks off your competi­tion.

Many part-time landlords get themselves into serious difficulties by “sluffing off” on repair call-outs. Here’s a typical “sluff off’ conversation – ‘Yes, Mr. Renter, I know it’s only Wednesday, but If you’ll just be patient and hold off using the toilet till Saturday ­that’s my day off, you know!” You should ask yourself this Question -If you were the renter I would you accept that answer? I rather doubt it – and neither will anyone else.

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 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. It’s well to remember – there are unscrupulous landlords the same as bad tenants I

Get the Money

Quite often, landlords ask me, “Should I accept partial payments for rent?” My answer is generally yes – If you feel that’s all your tenant has. Of course, you should always give him a Three-Day Notice to Pay or Quit for the balance~ soon as you take the money.

Let’s face facts: many low-end renters are lousy money managers. Most can’t save a dime. Let me ask you, is this the kind of person you should tell, “Don’t come back till you have all my rent?” Can you imagine how lonely you might get before that happens?

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Most buyers, at least 95 percent, place very heavy emphasis on LOOKS. Therefore, fix-up investors immediately have one major advan­tage buying rundown properties. 95 percent of the potential buyers won’t show up – that’s much less competition! Knowing what to buy and how to go about buying correctly makes the difference between profit makers and negative deals. Underline knowing how to buy correctly, then circle the sentence and read it again.

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The most difficult part of buying property right has nothing to do with contracts, paper­work, escrow instructions and presenting offers. It’s finding sellers who really and truly desire to sell their properties. You’re looking for sellers who have compelling reasons to sell. Some­times the fear of losing their property in foreclo­sure creates pressure. That’s an obvious rea­son. Many other reasons are hidden and not so visible however. Always remember this – A real need situation must exist for the seller, or you will have great difficulty meeting your purchase objectives. That is. buying the property with the kind of terms you need to make the transaction a profitable one for you.

Clean-Up Work Brings High Returns

With fix-up real estate, often a simple cleanup and painting, together with a change of tenants, will get you higher cash flow almost immediately. With increased income from rents, you now have a more valuable property. Several of these deals can “pump up” your equities quickly and allow you to build wealth much more rapidly than other­wise. I call this “fast track investing”.

Properties where the owners will carry back the low interest financing are the kind of transactions that allow you to buy real estate with minimum cash down payments – and still be able to get cash flow. Bank financing with higher interest rates or the variable rate mortgages are not the kind you want. Bank financing will seldom be much of a problem when you buy older, rundown type properties like I recommend. The reason is: original bank loans, if there were any, have long since been paid off.

Just remember, It’s the BOOKS (the numbers) not the LOOKS that really count in this busi­ness, unless of course, you want to operate your real estate as a hobby.

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Sticking to basics means buying pro­perties that I know will return me a profit of some kind. I determine this by studying all the dollar numbers plotted in year by year. What I want to see clearly is how much money I will invest in the deal to start, how much more for fix-up and what my monthly fixed costs of operations will be when I’m done. After that, I plot in the expected income, month by month-usually for five to ten years or perhaps to a future sale date.

My yellow ‘pad studies are purposely simple. I’m only interested in cash returns. The two Questions I ask myself are: will I make profits on this deal if I spend x number of dollars and when do I get to have those profits in my hand? That’s what every day ordinary investors need to know.

Too many people get all tangled up with complicated strategies. They seem to have the same mind set as runners who insist that without pain there can be no gain. If you want pain, I suggest you buy a $100,000 house with $850 mortgage payments and rent it out for $600 a month. For those who need higher levels of pain, buy a motel or small business opportunity. If you over­complicate your wealth building plan, quite often you’ll become distracted by information you don’t really need to make money.

For example, a friend of mine is a friend of mine is a computer buff. He has drawers full of complicated studies!  He figures out his rents per square foot, how much paint he’ll use in the next 20 years and the number of qualified renters in the county. Still, he has one serious problem. His computer shows his net worth at nearly $500,000, but he’s paying out $2,100 every month in hard cash so he can stay in the rental housing business. Although he has a good paying sales job I figure if he buys a couple more rental properties using his current strategy, he’ll soon be broke.

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It’s my firm belief that do-it-yourself investors should learn everything they can about many different ways to make profits with real estate. I don’t believe you can reach your maximum potential as an investor until you learn to do many things well. These include buying single family houses, foreclosure properties, rundown apartments, options; wrap installment selling, landlording and buying discount paper. In case I missed anything, just toss it in with the rest because you’ll need to learn them all! It may seem like a large task at first glance. However, all these things I’ve mentioned are related. All the pieces will tie together to make you a “complete investor”.

Before I unintentionally mislead anyone, allow me to say that I also feel very strongly that successful investors must have a specialty. I define specialty as something you learn to do better than everyone else in your investment area. Your “ace in the hole” investment strategy, we might call it! Something you can always count on to make you money when everything else quits working. For example; I specialize in fixing rundown properties. It always works for me — I can count on making money doing fix-up!

TAKE ADVICE FROM DO’ERS

In 1961, millionaire investor, author, Robert W. Kent, wrote a popular “How To” book about his own investment experiences, HOW TO GET RICH IN REAL ESTATE, Prentice Hall, Inc., Englewood Cliffs, NJ. In the very first chapter, Kent writes about do-it-yourself investing – and in particular, investing in the older multiple type income-producing properties that can be purchased much cheaper per unit! “It is feasible, he says, for any sincere man or woman who is steadfast in purpose, and is free of the three cardinal faults; timidity, negativeness and laziness to learn how to invest and do it well.” Those words written nearly 50 years ago have not lost their value today. Kent goes on to say – sometimes the hardest thing to convince people of is the truth. .

Tags: Fixing For Money, Vision of Opportunity by FixerJay
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For do-it-yourself investors like me, assuming you’ve reached a point in your career where you’d just as soon pay a few taxes, rather than keep kickin’ the tenants around – you might consider making small hard money loans on the kind of properties that brought you here! Imagine having nothing to do except watch “Days of Our Lives” and still earn decent money while you’re snoozin’!

The key to tapping this kind of business is to not make loans outside your comfort zone – like loaning money on bare ground which is only good to hold the earth together. There’s nothing safer than loaning on small multiple units, where the equity is sufficient. If they stiff me on payments, I’ll take the property! I’m delighted pink either way.

TRADE SECRET subscribers were told exactly how to set this up and get it working in the June and July (2010) issues. Earning 12-15% interest, watchin’ others do the work is kinda fun! I’ll admit, the big bucks come from owning Colony Houses – but 12-15% works for the “over the hill” gang! If you wish to check out TRADE SECRETS – call Kathy @ 1-800­722-2550 before she shreds the old issues. She loves the sound of that new machine!

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