Fixer Jay’s Mom & Pop Millionaire Blog

2010 has been a very difficult year! Downturns will come and go, real estate values rise and fall, but the real human difference is 16 million workers who don’t have a place to work anymore. That’s more than twice as many without jobs since this recession started! Take a look around and ask yourself - who will hire and when? With cheap overseas jobs growing and artificial government accounting, propped up by a wasteful taxpayer bailout – which of our brave employers are willing to step up to the plate?

For us serious real estate investor types, including those who’ve always wanted to be, the New Year could usher in a brand new challenge! To begin with, the folks who invest in income-producing properties like I do – and like I teach others about; have an excellent opportunity to end future unemployment problems once and for all! Naturally, you can’t do this overnight – but if you start right now, you’ll be pleasantly surprised how quick you can begin building financial protection for yourself and family that will last you a lifetime.

My current books, available in most bookstores, show you example after example of small rental properties that can totally set you free - both financially and from the unemployment ranks. I say unemployment, because with just a little investor training, you can become your own boss. For serious-minded investors, my plan is quite easy to follow. You’ll start out part-time while you learn the ropes and develop your skills. Full-time investing can come much quicker than you think because you’ll soon discover – it takes a lot fewer tax sheltered dollars to earn a decent living than working for after tax income.

You’ll find that successful investors rarely seek regular employment again _ because they don’t have to. Along with financial freedom, you also achieve what most people dream about - personal freedom and independence. To me, that’s

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INVESTORS NEED GOOD REAL ESTATE AGENT

Real estate agents are the eyes and ears of the real estate business. Ninety-six percent of all sales and trades involve licensed sales per­sons and their brokers. It would be very foolish indeed to harbor any serious notions about excluding them from your investment plans. The best thing you can do for yourself is to diligently begin searching for a good one.

Before I get started on the How’s and WHY’S of selecting the right agent for you, let me first discuss the issue of commissions – what agents earn when they help you buy and sell real estate. You must first understand there is no such thing as a standard one-size-fits-all commission. They come in all different sizes.

For example, in my town, most agents charge about 6 percent for selling houses. However, that’s not the market I’m part of. House buyers generally represent one time “warn-bam” trans­actions for most agents. I’m a buyer and sometimes seller any time a good deal pops up. Unlike the guy who buys a house and that’s it, I’m good for many transactions. Naturally, I represent a greater source of income for my agent.

Understandably, agents can work for smaller percentage commissions when multiple trans­actions are anticipated. To give you an Idea of what I’m saying here, I’ll share my own experi­ence. The average commission I’ve paid out for all my transactions during the past 30 years is slightly less than three percent of the purchase price. That’s roughly half of the so ­called going rate in my town. I find it best to negotiate the commission fee In advance of every deal I do. Just remember, it must be fair for the amount of work involved.

Agents Who Shop for Themselves

I often hear seminar leaders tell investors to seek out real estate agents who buy and sell properties for their personal investment ac­counts. This advice is akin to leaving your fiancée at an all-night bachelor party, hoping your friends will always do what’s right for her.

I can see no advantage to having my own agent competing with me to acquire bargain properties.

Just like a budding romance, the first thing that has to work is chemistry. It will do you no good in the long run to force yourself into working with an agent who disgusts you no matter how good you think he or she may be. Obnoxious agents are best left to service ob­noxious house buyers since there’s no short­age of either one out there. I mention this because it’s very important to develop a rela­tionship that can last a long time. Lasting together is much easier when you like each other.

The worst part is always breaking the ice ­introducing yourself to complete strangers whom you think might be able to help you. There’s no way to short-cut this procedure, so it’s best to simply charge ahead and do it. When you eventually find an agent who can appreci­ate your goals and is willing to spend time helping you achieve them, you’ll suddenly real­ize you’ve added a powerful new tool to your “wealth-builder’s” kit.

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For “hands on” type investors like my­self, I have long held the notion that the best type of real estate to buy, when you are just starting out, Is something between run­down and ugly and a complete “Junker”. The degree of rundown or ugliness will be mostly dependent upon how brave you choose to be. Personally, I think the braver you can be ­the better off you’ll be with your first several acquisitions.

To start with, sellers of these kinds of properties are not in a position to be very picky about who they sell to. They can’t play “hard ball” with the price and terms like owners of higher quality, nicer looking prop­erties. The main reason is because 95 per­cent of all potential buyers are “turned off” by the rundown condition and ugliness. Conse­quently, lack of buyer competition will greatly limit the owner’s ability to sell.

How can I make It worse?

What this means is, you can almost always buy these properties for much less cash up front (lower down payments). Also, it’s likely the seller will be forced to accept much weaker terms. Lower equity payments and carry back notes are very common. Many of these deals can be 100 percent owner financing.  Ugly-Junker type properties are generally older properties, too. Many of them no longer having conventional mortgages like bank loans or savings and loan mortgages to payoff.

When they do, they are most often low bal­ance loans with good interest rates and al­most always assumable to new buyers. For “start out” investors especially, let me say this loud and clear – Owner financing is the kind you want. Owners are almost always more flexible to deal with than banks.

One very important reason to start out with this type of property is because it’s a good experiment for you. It provides you with an opportunity to learn what you can and cannot do. If you purchase a rundown house or small apartment building that’s already an existing eyesore when you buy it, ask yourself this question: How can I possibly make it worse? Even with very limited handyman skills, your efforts are still likely to make some worthwhile improvements. If you don’t do things exactly right the first time, so what! Who cares! No one but you will probably even notice. Simply do it over again until you get it right.

Finally, there is another important benefit you get which I rank about as high as the others. It’s called confidence in yourself. Once you actually experience positive money coming in, you begin to realize – “Hey, it’s me! I’m really making good things happen!”

Confidence in yourself is worth more than the money. Yet strangely enough, money builds confidence faster than any­thing I know of.

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There is only one good reason I know of to take on an investment partner! It’s when you don’t have enough financial horse­power to do the total deal by yourself. You need help!

Consider the want-to-be investor who knows just enough about real estate to be dangerous. He has more guts than it takes to fight mountain lions, but not enough cash to rent a “pay toilet” in a greyhound bus depot! Nine out of ten times, this joker will attempt to convince someone with money – that by simply joining together, they can both become millionaires! That’s pure horse-pucky, and it’s certainly the wrong approach to use if you’re a broke investor looking for “Mr. Moneybags”.

Looking In All the Wrong Places

Inexperienced folks often think their best friends are the best candidates for investment partners. Frequently you see partnerships develop between friends at the golf course members of the same social club, between people who attend the same church or work together for the same employer. Let me assure you, it’s not nearly enough to guarantee a successful Invest­ment relationship.

The biggest mistake that cashless partners make trying to entice a partner with money is to oversell the deal! They often overstate the benefits the money partner is supposed to receive. If I were to show you all the proposals offered to me, and if we added up all the profits I’ve been promised I would need to rent the Bank of America headquarters building to store my money.

Benefits must be Totally Equal for All

One major problem with most small real estate investment partnerships is that al­most always they are engineered by the broke partner! The typical arrangement I see is where on partner I. asked to put up cash and the other is supposed to contrib­ute equivalent personal services.

I don’t know how you think, but I’ll tell you this much about myself. I’m very skep­tical about anyone who proposes a joint plan using my money, while risking only personal services themselves. My first ques­tion is aimed directly at the heart of the issue. If you’re so smart, and if your ideas are so good, then why is it I’ve got the money and you don’t? Unless the question gets answered to my total satisfaction, I will not consider going forward. And neither should you!

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One of the major benefits in this business is that it’s very stable and almost 100 percent predictable. You can expect to enjoy a nice long career and a very rosy future if you invest in basic housing. Do not allow yourself to get side-tracked.

A few words of caution are appropriate here. Do not get side-tracked. You must constantly stay on guard against the “slicksters” who expound on softer, easier and faster methods that will make you rich. I have discovered this vulnerability in myself. I suspect there is a close relationship between a housing entrepreneur (which I am) and a “make it Quick” speculator which I ain’t. I’m just a sucker for slick sounding “get rich” schemes.

“I’m just a sucker for slick sounding ‘get rich’ schemes.”

After many years investing and with much self-discipline, I have learned to listen politely, nod my head and finally say no thank you. I’m in the housing business and that’s all I can handle at this time. I’ll explain a bit more about just how recession proof income housing really is. I’ll also tell you some good reasons why it pays to stick with this proven winner.

I shall always be grateful to those people who sold me on the proposition that investing in income producing real estate was truly a solid and proven pathway that leads to financial independence. I also discovered it’s the same path that leads to a genuine personal freedom. Real estate investing has given me the opportunity to control my own life and all my affairs.

People often ask me, “What do you enjoy most about being your own boss? Is it making more money or is it the freedom to spend your time doing the things you really want to do?” The answer is both. The way I see it life would be very dull indeed if I had to spend all my waking hours stacking my real estate earnings in a room and guarding it.  On the other hand, without cash flow or profits, I wouldn’t be able to do all the things I like to do even with my freedom.

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Investing in real estate, the way I suggest does not require perfection. There is adequate room for mistakes. They are easy to overcome as you learn! What’s important is that you learn to do better on each new transaction. Mistakes are natural and provide valuable lessons on the path to success. When you read the autobiographies of successful people, you’ll find none have become successful without making their share of mistakes along the way.

If you read about successful people, as I like to do, you’ll find that downturns in the economy or rough times at the bank have very little to do with their success. In fact, most don’t even mention the economy or banks when they discuss what’s needed to be successful. Reading autobiographies of successful entrepreneurs will give you an inside look about what it really takes to make it. I would strongly suggest you read success stories because they help you to mentally rise above the “ho-hum” of everyday problems.

There’s a popular myth we’ve all heard — “It takes money to make money”. William Nickerson, author of the most widely read do-it-yourself real estate book: “HOW I TURNED $1000 INTO A MILLION DOLLARS”, Simon and Schuster (1959), started investing with only $1000 saved from his telephone sales job. Nickerson calculated back in 1980, using an inflation adjustment formula, it would take about $2500 to start out like he did.

Today, 25 years later, Nickerson’s calculation may need to be doubled or tripled again; however, Nickerson was always quick to tell anyone who would listen: It doesn’t have to be your money, nor does it even need to be cash! Knowing what to do – and how to invest wisely is far more important than having the money to invest.

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My decision to lease a house to my tenant – and give him an option to purchase is somewhat different than most lease/option plans – and I do it for the following reasons:

1. To increase the monthly rental income on my larger more expensive houses (25-30%).

2. To secure a good paying tenant for 3 years.

3. Rent to a tenant who thinks more like an owner and will likely take much better care of my larger, more expensive houses.

4. Provides excellent selling profit – plus interest income.

I’m looking for a renter with adequate, verifiable income who for various reasons cannot qualify to finance a home! Likely credit problems – or lack of a down payment – often both.
My lease/option plan solves the two biggest problems facing most lease/option candidates – namely coming up with a down payment, and secondly, qualifying for a new mortgage to exercise the option.
My 36 month plan offers the lessee rent credits equal to the full amount of the down payment required. After the full lease period (36 months), I offer my tenant 2 different choices to finance the option sale with me. I’ll be the banker.

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Like a good husband or wife – a skilled real estate agent can be a valuable asset to every investor! And, much like building a strong and successful marriage, you will need to spend some time and effort finding exactly the right one who fits your style. Chances are you won’t find Mr. or Mrs. Right on the very first date! But don’t be hesitant to dump a few along the way. That’s how it works for everyone during the hunt.

The worst part is always breaking the ice – introducing yourself to complete strangers who you think might be able to help you. There’s no way to short¬cut this procedure, so it’s best to simply charge ahead and do it! When you eventually find an agent who can appreciate your goals and is willing to spend time helping you achieve them, you’ll suddenly realize you’ve added a powerful new tool to your “wealth builder’s” kit.

Real estate agents are the eyes and ears of the real estate business! 96% of all sales and trades involve licensed sales persons and their brokers. It would be very foolish indeed to harbor any serious notions about excluding them from your investment plans. The best thing you can do for yourself is to diligently begin searching for a good one.

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Most real estate investors realize that real property is the best security ¬That’s why they invest. It only follows – if investors have “extra money” (heaven forbid). It should be invested in real estate. Offering small loans, secured by real estate, provides safe, easy money (passive-type) if you decide to stay home and watch TV for awhile. It’s even more attractive to someone like me who’s always on the prowl for a “super buy”—Let me explain.

Naturally I’m happy to earn a high rate of interest on my money – say 4 or 5 times what banks pay — Still I don’t wish to become a permanent “couch potato”. I still like action – furthermore, I like this kind of action which causes hard money lends to throw-up on the couch – namely, a default or fore¬closure on their loan!

Should the property owner (borrower) have the audacity to not send in his mortgage payments to me or any of the other lien holders – whoa be unto him! I’m off my couch and ready for action! I only have 2 lending rules:

1. Would I like to own the property? My answer must be yes.

2. My loan, plus all other loans must not exceed 60% of what I judge the property to be worth (no appraisal needed). See how simple this is!!

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Hey kids, don’t try this at home – you must know exactly what you’re doing before it will work — But once it does work for you, you’re gonna love the results. This is a co-ownership plan where “Money Bags”, the investor, is willing to fork over 90% of the purchase price and fix-up costs in return for 50% of the fixed- up profits. Obviously, “Money-Bags” must be sold on your abilities as a profitable investor who knows what he’s doing and capable of making promised rewards.

My 90/10 plan works exactly like hamburger-helper, only better! As you can already guess you can leap tall buildings in a single bound when someone else puts up 90% of the cash needed. Your 10% contribution takes on maximum leverage - and what’s really nifty, you earn 50% of profits for such a paltry amount!

As most mature adults already know, something that sounds this good is bound to have a catch, so what is it? The catch is you! You must know what you’re doing! The investor who shells out 90% for any deal will do so only if you have a reputation for turning out successful projects. It works slick, but you must be able to present your plan and write up a proper agreement.

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