Fixer Jay’s Mom & Pop Millionaire Blog

Since almost every problem can be patched up, repaired or replaced by skilled mechanics, it’s 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. The two worst mistakes for beginning fix-up investors are over fixing and fixing the wrong things.

Changing the looks always adds value the fastest. It’s not by accident that I always begin my fix-up projects with the front yard. I’ve seen professional appraisers value identical houses $10,000 less because of plain old filth and junk on one property. In other words, a clean house is worth $10,000 more simply because the owner hauls away the trash and keeps the house looking nice. Think about that for a minute! That’s a lot of money for ordinary clean-up skills. Suppose it takes a whole week (40 hours) to haul away garbage and clean up a property. That’s $250 an hour, or nearly as much as a brain surgeon gets’ on his days off!

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I discovered there is no inexpensive method to turn older houses into new houses. Many amateur fixers try to accomplish this task only to find their bank account disappears faster than the house changes. Herein lays the most important difference between what I do and what remodelers and renovators do. Believe me, it’s a very expensive difference.

Often remodelers will replace entire plumbing systems. 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 redo the stucco exterior. Don’t do fix up this way. Unless money is not the object, you’ll lose your shirt.

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. High ceilings, wood.. Work, large porches, yard space, old windows (dressed up), evaporative cooling with separate heating, storage’ sheds. Separate garages, and mature shrubs and trees. Add a freshly painted white-picket fence after everything else is cleaned and spruced up and you’ll have lots of customers: renters or buyers, depending on your investment plan.

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Many property owners over-improve the houses they live in. They add all sorts of extras (whistles and bells) that surrounding houses in the same neighborhood don’t have: fancy kitchens gadgets, add-on rooms, finished garage interiors, costly backyard. Improve­ments including in-ground swimming pools are just a few that come to mind.

There’s an old saying in real estate circles that says you can spend all the money you want on a $75,000 tract house, but you’ll still have a $75,000 tract house when you’re done. That’s pretty much a real world fact of life. You might be able to sell for a few more dollars than the neighbors, but rarely are you likely to ever get your full investment back.

They call this “over improving.” It’s done every day by countless thousands of homeowners. It’s even done by rental property owners who haven’t read my books about fixing rundown houses. I offer sound advice on what to fix and how much to spend. Of course, I’ve spent lots of years figuring out what works and what doesn’t.

If by some strange circumstance you find an over-improved property matched up with an owner who urgently needs to sell, BINGO­ you’ve likely discovered a quick path to instant built-in equity. Someone else has already done the work. All you have to do is find the situation.

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Fixing for looks is every bit as important as fixing the toilet or the roof!

It’s important to understand that rent and buy decisions are often made in a matter of seconds by folks whizzing by the property in automobiles at 30 miles an hour. The first look and the first impression count for everything. If your property doesn’t generate positive vibrations on that first peek, you can forget the brand new carpets you installed inside.

Tenants and buyers alike will judge your house exactly the same way they judge a book, by it’s cover! Knowing this fact about our customers can be worth thousands of dollars to you if you’ll apply it to your own fix-up strategy. It’s for this reason that I constantly instruct my readers to concentrate their main efforts on fixing what shows. Create good looks before anything else you do because that’s where the fix-up battle is won or lost.

Folks are always fascinated by my “foo-foo” beautification techniques. “Foo-foo” is my term for cosmetic fix-up or gingerbread. The primary goal is to upgrade the looks. Webster’s Dictionary defines cosmetic as correcting defects or to make beautiful. In some cases my techniques might stretch Webster’s definition a bit, but on balance, most folks agree: foo-foo techniques really do make ugly houses more pleasing to look at.

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Many fix-up jobs will return their costs very quickly. Leading the least of quick returns are painting (inside and out), general cleaning, yard and landscape work, fencing, carpets, window coverings, modern faucets, light fixtures and Formica counter tops in kitchens and baths.

Here’s another quick return sugges­tion for some extra rental income: look for properties with garages or carports when you’re shopping. Garages and closed-in carports are worth $20-$45 more per month to landlords. Even junker garages with leaky roofs are well worth their fix-up costs with in reason. Why garages? Because most tenants want them! They ask for them and they are willing to pay extra for them. Don’t build garages where none exist, just look for them when you’re buying. Garages and carports will always add to the potential long-term value. They will also help the prop­erty rent faster. I like garages because my customers like garages. They are willing to pay more to get them. It’s a bottom line economic decision.

Painting is easy for most people. Always buy medium grade paint. Cheap paint costs more because it will likely require two coats and twice the labor. Expensive paint is not necessary for rentals and quick turn-around prop­erties. Buy in five gallon containers. Buy a regular standard “house-mix” and always select easy to get colors.

It’s best to use one color for all your’ buildings. When you finish with one bucket, open lip the next and continue painting no matter which property you’re working on.

The only difference between out­side painting and inside painting is the weather. It’s easy to make $1,000 per day in added value with outside painting and general property clean­up. No one ever told me I could make $1,000 for one day’s work during my entire twenty-three years at the phone company.

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Unless you’re a cash buyer, good fi­nancing is absolutely essential to earning big profits. If you can’t offer decent fi­nancing when you decide to sell, you’ll end up making concessions to the buyer, which will greatly reduce your potential profits.

What I do, and what I recommend for you, is to mentally sell your property at the same time you are negotiating to buy it. In other words, think ahead to when and how you plan to market the property someday, specifically the kind of financing you’ll be able to offer to your buyer in the future.

If you agree to mortgages that can’t be assumed (due-on-sale clauses), you’ll restrict any future sales to a buyer who must qualify for new financing. If you agree to short-term notes or mortgages, most buyers will balk at assuming them. High mortgage payments are also re­strictive because buyers are concerned about cash flow.

The best kind of financing you can have, when it comes to making a future sale, is a long-term (20 to 30 years) seller carry-back mortgage without a due-on-sale provision. Also desirable are payments that are 50 per­cent or less than the current rental income along with a modest interest rate. This type of mortgage can easily be wrapped (wrap-around) by a new all-inclusive mortgage allowing the seller to earn extra profits on the interest spread. Also, avoid big income taxes from the sale by using installment reporting.

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Buying for cash is one way you can get big discounts, especially in a buyers’ market. With good knowledge about your buying area, it’s not too difficult to purchase

$100,000 houses for $80-$85,000 cash! Every time you do it, you’ll make $15-$20,000 at closing! Five or six deals a year will earn you $100,000 in profits, plus $4,000 worth of monthly income! With cash flow and tax savings, you’ll likely earn 20 to 50 percent annually. And, with appre­ciation, it’s even higher. It’s a good sound plan. It’s safe and offers excellent earnings to investors who have the cash.

If you’re not quite ready to pay cash just yet, then it’s absolutely necessary that you learn an alternate strategy for profit-making. I call mine “The Poor Investor’s Plan for Profits.” It’s also a bit more complicated than buying for cash. But, if you do it right, you’ll end up just as wealthy as the investors who had money to start.

Rental Houses Pay the Grocery Bills

One of the biggest reasons I’ve kept my flock of rental houses over the years is because they provide me a guaranteed income. Having a reliable income allows me time to market my properties without being under the gun. There’s a tremendous disadvantage having to sell when you need the money to live on.

Waiting for Mr. Right can often be worth 20 to 40 per­cent more when you’re negotiating with a full stomach… Therefore, it’s always my standing advice: Buy a few good rental properties to start with. Get a monthly income established so you never look hungry when you’re selling. Buyers can always smell a starving seller a mile away.

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Ring savvy investors understand that time is much more valuable than money, Money is can be lost on a bum deal or two – but you can always earn it back! With time however, once it’s spent, you will never get it back!

Just for the record, let me say – my kind of investing is the year-round, all season type! I invest for cash flow! I don’t speculate or guess what the future might hold. Since I must live my life in the present, I prefer to own investments that pay me as I go along. Renting properties to tenants who pay all my bills may not seem very sexy or glamorous, but I’ve never once gone broke! The fact is – investing my way is about as fail-proof as any investment can be.

A SOLID FOUNDATION WILL GUARANTEE WEALTH

Investing my way is ideal for CAREER CHANGERS and folks who need to earn more income in a reasonable period of time. Also, it doesn’t cost an arm of a leg to acquire my kind of properties. As you will learn, older rundown properties earn much bigger profits and are likely to cost 3 or 4 times less than regular houses when purchased in small multiple groups or colonies. The math is real easy to understand. Renting a $50,000 dwelling for $695 per month will make you a whole lot richer – and much faster than renting a $200,000 house for $1000. You won’t need a calculator to figure which is best! Just try it for awhile and prove it to yourself.

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In 1970 my license was mailed to the broker at Forestland Realty, located in the small town of Jackson, in the heart of California’s gold country. It was my first job as a real estate salesman. By the year’s end I had earned $7200 in commissions! Not too bad for a start I figured, but still far short of my million dollar dreams

Mr. Roper, my real estate instructor, taught me enough to pass the examination on the very first go-around. At the time I remember thinking he was the smartest instructor in the world – but as things turned out, passing the real estate examination is not the reason I’m still thankful to Mr. Roper today. Instead, it was a casual remark he made to the entire class of 76 students! Here’s what Mr. Roper said

Commissions will not make any of you rich! Rich folks, he said, are the ones who get their names typed on deeds. They are the property owners. He then told us a simple formula for becoming wealthy! He said we should invest 10% of all our commissions in income properties. That way, he said, we’ll be earning money even as we sleep.

Before I sold most of my houses some years back, my rents had soared to nearly 5100,000 a month.  Naturally I had expenses like everyone else – but I must tell you, I’m still a long ways ahead of any commissions I ever dreamed about earning.

Folks often ask me — Is it hard to earn $100,000 every month from rents? When you first start out, it seems impossible, but as you begin to learn, it starts getting easier. First you’ll earn $1000 a month – and before too long you’ll reach $5000. The best part about investing the way I teach – you can quit after 10 houses or keep going till you own 200 like I did.

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