Fixer Jay’s Mom & Pop Millionaire Blog

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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The most difficult part of buying property right has nothing to do with contracts, paperwork, escrow instructions and pre­senting offers, but rather finding sellers who

Really and truly desire to sell their properties. We are always looking for sellers who have compelling reasons to sell. Sometimes the fear of losing their property in foreclosure creates pressure but many reasons are hidden and are not so visible.

You must never forget that a real need situation must exist for the seller; otherwise you’ll have great difficulty buying a property with the kind of terms you need to make the trans-action a profitable one for you. You must locate sellers who, for whatever reason, have a real need or a strong desire to sell.

Don’t pursue sellers who don’t have some kind of urgency. You’ll be wasting your time. In the long run you’ll discover your time is more valuable than money.

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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!

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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 re-modelers and renovators do. Believe me, it’s a very expensive difference.

Often re-modelers 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, wood­work, 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 customer’s renters or buyers, depending on your investment plan.

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When I negotiate with sellers to purchase their real estate, I spend countless hours doing “Colombo style” detective work. I talk with them, I study their surround­ings. I meet with the kids, I drink coffee with the grown­ups and I try very hard to keep my mouth shut, at least as much as I can for a blabbermouth with a large ego. After years I’m making progress.

FIRST, before you start arbitrarily changing or negoti­ating terms and or conditions, make sure you can show the reason why. If you can’t they’re probably not valid. Worst of all, when you can’t, it will do severe damage to your credibility.

SECOND, it’s more important to listen to the other side. You-can answer yes or no if you train yourself. But lis­tening to others will provide you a wealth of knowledge and information that will help you structure offers or counter-offers. People love to talk. If you’re a good lis­tener, you’ll be very popular with most folks.

THIRD, never get emotional. Don’t be critical and above all, never talk down to anyone. If you humiliate, embarrass or ridicule, you’ll lose all chance of negoti­ating a winning deal. Even sellers who are about to lose their shirts won’t do busi­ness with someone who intimidates or tries to overpower them. Courteousness and understanding are two of the most powerful tools in your negotiating kit. Use them gener­ously; they’ll pay big dividends.

The time consuming part is my effort to find out what the seller wants so we can arrive at a settlement. I have never met a seller who asked me what I wanted! The truth is, most couldn’t give a tinker’s dam about me. Sellers are tuned into one frequency what’s ‘In It for me’ prepare yourself to listen and you’ll do just fine.

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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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Don’t make a game of rent collections. Rent monies are the life blood to apartment owners. Yet, I know many property managers and owners who participate with their tenants each month in a silly rent collection ritual. The tenant starts the game by saying the check is in the mail. Then the landlord begins calling every day or driving out to the property to inform the tenant he hasn’t received it yet. Sometimes this goes on for weeks.

Playing this game will only eliminate whatever respect one party may have for the other. It generally leads to more bickering about other matters as well. Don’t allow yourself to be part of this game. You’ll fare much better if you use the rules already on the books. I’m referring to your state landlord-tenant civil laws and, of course, your own rental contract terms, agreed to by your tenant.

Enforcement of the rules whether it’s the civil code or your own house rules, is the best way to develop a smooth running management operation. Preventive tech­niques are as important to managing tenants as they are for the doctor who manages your personal health. One of my main criticisms about professional property managers is that they very rarely act ­mostly they react. They’re always ready and willing to fix the busted door, but only after the horse is out of the barn.

Landlords who learn to act before small problems become big will control most tenants. This strategy works very well for collecting rents and also for enforcing your tenant rules. Speaking of rules; many landlords have far too many. It’s best to keep your list of rules short and enforceable, rather than long-winded, without any teeth.

One of the most important questions all landlords should ask themselves is, what would I rather be, popular or profitable? You don’t have to be a greedy person or steal candy from babies to become a wealthy landlord. What you must be is a fair-minded business person. Fair-minded business means that accounts receivable (rents) are collected in a timely manner and that your business assets (houses) are maintained properly by the tenants who lease them.

See how simple this stuff is!

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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 computer buff. He has drawers full of houses. 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. He has a good paying sales job, but I figure if he buys a couple more rental properties using his current strategy, he’ll soon be broke.

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One of the major benefits in this business is that it’s very stable and almost 1.00 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. Y?U 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.

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 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.

That was my problem working at the phone company. When I finally got enough seniority to take a five week vacation, I could never accumulate more than two weeks of extra money to enjoy it.

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SMART INVESTORS LEARN LANDLORDING

Many small Mom and Pop type investors give up the opportunity to make money and have a wonderful free “come and go” life style 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 are just two ways to learn landlording. You can learn from people like me or other good teachers or you can learn from the tenants. I can tell you if you pay me 10 times more than I charge to teach you, it’s still 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. This is not the case. Laws are mostly about equity. There are unscrupulous landlords the same 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 our tenants – a common mistake for many new landlords. Think seriously about what I’m telling you here, because it has a lot to do with sanity your sanity. What good would it do you to make a million dollars from your rental properties if your tenants drive you crazy?

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