Fixer Jay’s Mom & Pop Millionaire Blog

Ugly fix-up properties scare many investors away! They simply lack enough vision to see the gold mine hidden just beneath the surface. This goes double when unruly tenants occupy the property.

What this means is that owners of these fixer-type properties cannot demand top prices and good terms like sellers who are marketing nice-looking, sweet-smelling properties. On many occasions, my offer is the only offer. The seller has no choice but to seriously consider my offer when he doesn’t expect another. Reduced competition is worth big bucks, believe me!

When you acquire rundown real estate – then move in quickly and do the fix-up. You add immediate value! I often refer to myself as an ADDING VALUE SPECIALIST. When you buy in cheap and quickly add value, you increase your equity much faster than waiting for appreciation or natural causes to do it for you. Fixer specialists force their equity growth- they don’t wait for it to happen. Buying at substantial discounts, then quickly making improvements is by far the fastest equity builder in the business and don’t forget – EQUITY IS REALLY YOUR PROFITS!

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Folks who come to me for instruction usually don’t have a ton of money to work with! Fixers and trashy-looking properties get passed over by many average buyers because they judge solely on looks! They can’t see beyond the dirt, dust and deadbeats (the 3Ds). This automatically eliminates much of the fix-up com- petition, which in turn creates lonely sellers. Not many serious buyers make offers. Often my offer to purchase is the only offer! Use my INCOME PROPERTY ANALYSIS FORM to make sure you don’t over-pay!

I recommend that all new investors become specialists! Naturally “fix-up” is my choice recommendation. The idea is to become the best at your specialty within your own investing community. Believe me, it doesn’t take long when you practice constantly — Soon you’ll be better than everyone around you. You now have the upper hand!

Later on you may branch out and do other kinds of investing — But in the early years, concentrate on being the very best at your specialty. It will provide your rock solid foundation and always serve you well throughout your career.

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Besides earning pajama money, interest income, you can legally defer taxes on a sale. It’s always sound economics to postpone tax payments as long as you can.

When selling my properties that have existing mortgages already in place (obviously, without due-on-sale clauses) I always insist on a wrap-around mortgage when I carry back the financing. When you mortgage debt in excess of the basis (book value), this issue becomes even more serious! It’s called the loan over basis trap. Check it out!

Interest income on my carry back paper is the same as more profits to me! Carry back financing has made me a ton of money, so I’m not about to change my investment strategy. If you need a bit more convincing about seller financing and profits – you should take a peek at Chapter#6 of my best selling book, “Gold Mines Houses”, McGraw Hill Publishers. On a single transaction _ just one carry-back mortgage, my selling profits were $260,945, but my interest income for agreeing to take monthly payments over time was $939,077. I’ve watched the banks do business like this for many years. If it’s good enough for them it’s just fine with me!

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When it’s time to sellout, take a cruise or step back and smell the roses — Owners of small income-producing properties, like myself, will typically sell to the next generation of up and coming investors. The problem we face is the very same problem we once had starting out. It’s called, lack of cash. Funny how some things never change!

Down payments are traditionally less for older income units – even when they’re well kept and full of smiling tenants! 10% cash down is normally what most investors expect to pay. Many young start-outs with tons of energy to burn feel fortunate to come up with 10% cash. My problem is not really the low down pay­ment — It’s the matter of protection I’m concerned about.

When I sell property for a small cash down payment, I insist on securing my mortgage or note with not just the real estate I’m selling – but also, another property the buyer owns or quite often, his relatives own! For example, a young man wishes to purchase my small apartment with 10% cash down. He doesn’t own any other property, but Daddy agrees to help his son get started. Daddy owns a $200,000 home with a $100,000 first mortgage.

If I’m selling a $100,000 apartment for $10,000 cash down – I will simply record a 2nd mortgage on Dad’s house for an additional $10,000 as added security for me. No payments are required from Dad – and I will generally reconvey (release Dad’s house) after 60 months of faithful payments to me from Junior. Meanwhile if Junior goes bonkers – Dad’s house is on the hook for $10,000. Ain’t Dad great or what!!

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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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Would you rather be popular or profitable? You don’t have to be greedy to be a wealthy landlord. What you must be is a fair-minded business person. Fair-minded means that rents are collected in a timely manner and that your houses are maintained properly by the tenants who lease them. See how simple this stuff is.

You won’t be hated when you demand timely rents. Landlords that insist on timely rents are no different than cashiers in the supermarket.

It’s your business to make sure rents are collected and the rules in your rental agreement are followed. Never let a tenant intimidate you. The most serious mistake new landlords can make is to allow the tenant’s urgency to become their urgency.

After many years of doing this job, I’m hard pressed to think of any situation so compelling that there wouldn’t be enough time to think it through. If there’s a fire at my property, the community fire department will handle everything. I’m protected by insurance on the building. Should someone die in one of my rental houses, I simply can’t do very much. I’ve yet to meet a landlord that would be of much help in this situation. The county coroner is the person you need.

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For many years, I’ve advised readers, both start-out investors and “old salts” alike, to consider investing in multiple-unit properties because the returns are far superior to a single house. Small groups of houses or duplexes – 5 or more, can be purchased for no more down payment than buying just one house, yet the benefits and income will be greater by 5 times. Also, the opportunity to receive seller financing for all or part of the deal is much greater. Seller financing is a tremendous benefit for do-it-yourself investors because terms can be adjusted to fit the purchase. This means it’s much easier to generate cash flow lots quicker with seller financing.

To better under the power and profit potential of my Colony Concept; you can review the 15 minute video presentation by clicking to my home page. “The American Dream” presentation by 2 of my successful students should help you to better understand why colony houses can rip, snort and rumble. If your plans include flow now faster cash - or full-time investing with a worry-free retirement, do yourself a favor – study the numbers and the presentation very closely – you’ll be glad you did!

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Many small mom and pop type investors give up the opportunity to make a ton of money and have a wonderful free come ­and-go” lifestyle simply because they never see the importance of learning to be a skilled landlord. You don’t become a skilled landlord when you acquire houses. You become the owner-that’s all! Skilled landlording will take some education.

Basically there’s just two ways to learn landlording. You can learn from people like me or you can learn from the tenants. If you pay me 10 times more than I charge to teach you, it’s cheaper than learning this job from your tenants.

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 property 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. Remember, there are unscrupulous landlords as well as naughty tenants.

Landlords often find themselves in serious hot water with tenants because they try to inject too much logic and common sense into tenant management. Logic and common sense have their place, but they seldom count for much where legal issues are concerned. For example, it is nearly impossible to effec­tively force your personal living standards and ideals on your tenants. To do so could seriously affect your sanity. What earthly good would it do to make a million dollars from your rental properties if your tenants drive you crazy?

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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!

Fixer investors enjoy A major advantage over all the other investors because there’s no up and down cycles to slow you down. Unlike the general housing market, the fix-up strategy never changes regardless of what the economy does. Although I currently own a number of American dream houses now – I don’t mind confessing – my fixer properties bought every single one of them!

Once you have a few dollars to jingle – and a respectable cash flow, you are now in a position to acquire quality houses, so long as they’re close to break even. I could never move forward very fast until I figured out the sequence! Go for cash flow first – quality houses, second!

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