Fixer Jay’s Mom & Pop Millionaire Blog

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
No Comments »

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 come 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%.

Tags: Success Secrets by FixerJay
No Comments »

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.

Tags: Success Secrets by FixerJay
No Comments »

Inexperienced fixers have trouble saying no! If you figure on spending $700 to paint the kitchen and replace the counter tops, do just that. Don’t replace the cabinets and flooring as an afterthought. If you decide on replacing the worn roof shingles on the street-side of the house because they look so ugly, that’s fine. But, don’t let your roofer sell you on the merits of doing the whole roof at one time because it’s cheaper while he’s there!

You must develop discipline if you intend to say within your budget and be profitable! Lots of folks can fix up houses if the money supply is unlimited – but it’s a whole different ball game if you insist on making money for doing it!

Tags: Success Secrets by FixerJay
No Comments »

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’s 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!

Tags: Success Secrets by FixerJay
No Comments »

Rich people know about the Wealth For­mula – They know it’s nearly impossible to earn BIG MONEY working at a regular job – they understand to get rich – you must earn money around the clock - 24 hours everyday and finally … rich folks do what’s necessary to educate themselves so they can use the Wealth Formula to build their king­ size bank accounts.

Cash Flow Houses Perfect

Owning income producing houses creates the winning formula – the right kind of houses earns money while you sleep. You’re no lon­ger working by yourself – Jay’s wealth plan is simple - YOUR HOUSES ARE WORK­ING 24 HOURS TO EARN YOU MONEY You simply manage the houses … and of course, make bigger bank deposits.

Other Peoples Money

The bottom line is this – you must acquire the know ledge to put this plan into action. It’s you who must find the RIGHT HOUSES and set-up the financing. It’s you who must arrange the fix-up and choose the right customers … After that, its other peoples money that will make your rich.

Tags: Success Secrets by FixerJay
No Comments »

Investors who intend to make any serious money fixing-up rundown houses must police themselves against “over-fixing” and fixing stuff that doesn’t count for much! For example: Don’t waste time changing the wallpaper or redesigning the hallway. It’s not cost effective! It’s easy to fall Into the over-fixing trap and it’s the easiest path I know of to the investor’s poorhouse

 Fixers must learn to concentrate their time and money on things that clearly have proven pay-back value. Improvements made on the basis of personal taste are generally not worthwhile. Don t ever forget it’s your customers (tenants or buyers) you’ll need to satisfy!

A difficult lesson for many investors to learn is it’s unwise to provide too much house for the money! You’ll soon go broke if you keep trying! Many tenants can afford to pay $450 rent, but that’s their limit! Your goal, as a profit-motivated Investor servicing these tenants, should be to provide the very best $450 rental house you possibly can and still earn a profit, of course!

Cheap foo-foo frills can raise rents.

If you over-improve and spend too much money fixing the property, chances are the deal won’t be profitable!

 It’s my policy to give my tenants every­thing they can pay for with as many frills as I can. When I rent out my $450 houses I want them to be the very best $450 houses available. Obviously, they won’t be as good as my $600 houses-and they shouldn’t be!

Important: what you see first is what you fix first. The quickest and most impressive changes you can make to an ugly property is to clean up and fix up the outside. First impressions mean everything. Don’t even go inside until you clean up the yard and paint the house. Start watering the lawn to revive it and change the ugly image of the property. Where appropriate, I like to add inexpensive trees and shrubs. Get the kind with red berries and sticky thorns so the kids don’t pull them up. I also like plastic shutters that clip on the front windows. The dollar returns are highest outside.

The only rule I have concerning frills is they must be “cheap frills.” I generally install economy drapes and traverse rods on my street side windows for appearance. I don’t like to look at wrinkled sheets, Indian blankets and confederate flags when I drive by. In the other rooms I use “K-Mart” grade or equiva­lent curtains or miniblinds. Attractive window coverings allow me to charge about $20-30 more per month rent. My total cost recovery requires less than six months. Another “Foo­Foo” frill I use is inexpensive ceiling fans with multiple light fixtures. I always provide fresh shower curtains with every change of tenant.

“My total cost recovery requires less than six months.”

Fixing rundown houses is about 90 percent common sense and 1 0 percent skill. The basic “how to” skills you’ll need can be easily learned. One method is to spend some time asking questions and watching free video slides at your local “Toilets Are Us” supermarket. Giant handyman stores are in competition to sell you fixtures and building supplies. They are happy to show you what materials to use and how to use them. If you forget the instructions on the way home, you can look at the pictures on the back of the box. Learning to do fix-up today with ready-made replacement parts and all the help available is much easier than it was 20 years ago.

Fences will generally bring in $20-$40 more per month in rents than comparable houses without them. Secondly, they are fairly-rapid pay-back improvements. As a rule the entire cost of rear-yard fencing will be returned from higher rents in a period of 24 to 30 months. These numbers are based on average size yards, requiring 120 lineal feet of standard board and post construction. When you consider the quick payback and the fact that fences are almost maintenance ­free for ten years or so, it’s obvious they are well worth spending money on.

Tags: Success Secrets by FixerJay
No Comments »

When you understand goals are the objective and not the vehicle, it helps you “zero-in” on an investment plan that makes the best use of your time and resources (money). For example, in my case I needed to quickly develop monthly cash flow without paying a ton of cash for my properties (which I didn’t have). Only certain types of properties will provide cash flow, so that’s where I directed my energies. Also, another one of my goals was to quit my regular W-2 salary job. That set up tight restrictions on my time limits because I had to have money to live on within a couple of years from the time I started buying properties.

One major failing on the part of many start-out investors is they develop tunnel vision! They unknowingly create blinders for themselves. They are concerned about the vehicles more than the benefits. If you do that, it’s very difficult to achieve your goals in a predictable time frame. That’s the main reason investors can go alone for many years buying properties – but never have any cash flow. They can only brag about their imagined equities.
It’s my feeling that all investment portfolios should be DIVERSIFIED! You need some properties that provide good cash flow and some that just occupy the lot waiting for appreciation or higher and better usage. By setting goals, schedules, time limits and minimum cash return requirements, you’ll quickly determine which kind of properties you need—and how many of them it will take to get you where you’re going.

ALWAYS STAY IN CONTROL OF YOUR INVESTMENTS

If you study my investment strategy, you’ll learn rather quickly that I insist on having TOTAL CONTROL over my investments. This particularly applies to the financing when I purchase properties. Most older rundown fixer type houses should not require new bank financing. Always try to get sellers to finance the sale or most of it! Seller financing is flexible and cheaper. If you buy affordably priced properties (medium to medium low range), most people can afford to rent or buy from you. Conversely, if you buy high-ticket properties, you will limit the number of people who can do business with you.

Tags: Success Secrets by FixerJay
No Comments »

Every so often I like to mosey in to a motel and listen to those free 90- minute “Get Rich with Real Estate” pitches being offered by several so-called national education groups. A full page advertisement in the Sacramento newspaper said the founder had accepted a challenge to create 1000 new millionaires in the next twelve (12) months. The paper said you could do this with no money down, no experience and even if you had lousy credit. I fully expected my tenants might show up since most of them fit this description.

The seminar leader apparently had not read the full page million dollar challenge ad because he started right out telling all of us how we could earn three million dollars in the next 12 months. Naturally we’d need some specialized training, he said – then the lights went dim. Suddenly, by remote control, appeared giant color slides showing the state capital building and the projected housing appreciation numbers for the entire Sacramento area. I must admit, the numbers were quite impressive, but what really sold the deal was a smiling photo of our “Girlie-Man” Governor beneath this giant headline which read — “‘WE’RE BACK AND WE’RE NUMBER ONE”. Obviously I did learn something new since I hadn’t realized we’d been anywhere! Education, don’t get much better than this!

Being a fast learner, 15 minutes was all the education I needed! I ducked out just before the slide show started up again. I have never figured out how those folks operate so fast – but before I could even drive back to my hometown, only 160 miles away – there was already three separate messages waiting on my answering machine. They all said about the same thing. I could still attend a $7500 specialized training camp in El Paso, Texas, for only $4900 full price. It occurred to me – why do I need to go to El Paso to learn about buying California real estate? Worse yet, what would my Governor think!

One of the most powerful pieces of advice I can give any investor in the early stages (that means starting out) IS to, choose your teacher and/or mentor with the same due-diligence you would use in searching a heart surgeon for yourself or a family member. Folks often ask me — How can I find a good teacher when I’m just getting started? Exactly the same way you find a heart surgeon when you first start having chest pains. You start calling around, and you ask people. Make a list of the names you hear and keep cross-checking them with everyone you talk to. Certain names will begin to appear more often as you collect various opinions! You are searching for a teacher who invests in real estate – and is successful doing it. As one old man of Babylon instructed — If you would desire to know the truth about sheep, go directly to the herdsman. As for real estate investing, there can be no substitute for a successful investor teacher who does the same things he teaches.

Fixer Jay's Telephone Mentoring

Tags: Success Secrets by FixerJay
No Comments »

In order for me to have cash flow after paying only 10% down, I need weak mortgage terms. WEAK MEANS GOOD TERMS FOR ME! For example, let’s say I propose to purchase a rundown property for $100,000 and pay$10,000 cash down payment. That leaves $90,000 left to pay and the seller agrees to carry the financing! Typically sellers will ask for 01% per month of the loan balance as the monthly mortgage payment. That equals $900 and it’s way too much because the property income is only $1,200 per month.

I do not wish my debt service to exceed 50% of the total monthly income; therefore I propose payments of $598.78 per month, including 07% interest, amortized over 30 years. I can tell you right now, my 61-year-old seller don’t like it, but he’ll probably accept the deal anyway! Why you ask? Because his property is rundown and filled with deadbeat tenants and I’m the only buyer to make an offer! Naturally a straight mortgage note at 07% interest for 30 years — Secured by a rundown property is only possible with seller financing. Any self-respecting banker would have thrown me out of his office if I made such a request.

SELLER FINANCING SETS STAGE FOR SUPER PROFITS

This is the part about seller financing you’re gonna love once you get the hang of how it works — And believe me, it works very well indeed! To begin with, you need to understand that most sellers want more cash when they sell! Sellers with “top of the line” properties can generally get more cash because their properties are in demand. Many buyers are interested, which of course means they all must compete with each other — The seller is in control!

Just the opposite is true for sellers with rundown, problem properties. That’s why my weak offer was acceptable in the example above. No 61-year-old seller would accept a 30 year mortgage with weak payments ($598.78 per month) and a low interest rate if he didn’t have to! The reason he accepts the deal is because his property is in scumbag condition and I’m the only offer he has. There is absolutely no question in my mind that he’ll be looking for his money much quicker than 30 years worth of payments. My plan is to buy the mortgage back in the next several years for an amount far less than the note balance. Just how is that possible, you may be wondering!

PRESENT VALUE OF A LONG-TERM DEBT IS MUCH LESS

it’s quite likely my seller will take his $90,000 mortgage note to a licensed mortgage buyer hoping to sell it for cash. When he finds out what the note is really worth or what the mortgage buyer will pay, chances are he’ll stomp out his office so mad at the price he’s quoted, he’ll never talk to the guy again.

Naturally the mortgage buyer will explain the reasons, but the seller probably won’t hang around long enough to listen! If he does, the conversation will go something like this –It’s that long 30-year term with low monthly payments at only 07% interest, he’ll be told! Also, with just a 10% down payment, there’s not enough margin of security in case the mortgage defaults and the property is taken back! Another thing he’ll be told — Who ever drew this mortgage up didn’t include a due-on-sale provision or acceleration clause! There’s not even a late payment fee either! That makes for a very weak mortgage when you try to sell it.

At the price he’s offered, there’s hardly any danger he’ll sell. After checking with several other mortgage buyers and hearing the same old story, his next stop will be my house to offer me the opportunity! Imagine that, I’m the guy who drew the mortgage up to begin with – with all those weak terms they’re talking about — And now I’ll get a chance to buy it back. What a stroke of luck, wouldn’t you say?

Tags: Success Secrets by FixerJay
No Comments »