I was also on Rich’s show a couple of years ago to promote my earlier magnum opus“Fix em Up Rent em Out.”
Today, Rich asked the question,
“Does the city have to inspect a house before you can rent it out?”
My answer was,
“No the city doesn’t do inspections unless you have constructed a guest house, or added or room, or make some major modification to the property. You must comply with building codes, but if you don’t make any changes, the city is not involved.”
When to Hire an Inspector
While there is not need for the city to do an inspection, prior to purchasing a new home, it’s critically important to hire your own inspector to make sure that everything is “operational” in the house that you want to purchase.
Usually, the owner has to fill out a “disclosure” form that informs you of any existing problems that the house has, that he or she is aware of . Sometimes, owners will have a report available by an inspector that they hired to inspect the property.
Even in that case, you still need to hire your own inspector. It may sound like a case of “dueling inspectors,” but I like to have a report written by the guy that is representing me, not the guy who is representing the seller.
Hiring a good inspector is especially important when you are purchasing a foreclosed property, where there is usually no owner present. Then, the only thing you have to make your decision about the condition of the house is the inspector’s report.
Tid Bits: NBA Trivia and Unwise Career Moves
1st NBA Basket
Prior to my interview with Rich, I was listening to his radio show and I learned that the first basket scored in the NBA was by Oscar “Ossie” Schectkman, who recently passed away at age 94.
I also learned:
4 Things that People do to Help their Career that Actually Hurts Their Career.
1. Staying too long with the same company. Employers wonder why you haven’t changed.
2. Being too good at something you don’t like doing, because you’ll be hired to do it more and more.
3. Keeping your mouth shut. You should tell supervisors before they make mistakes. You may get fired, but improves your status under point #1.
4. Putting in a recommendation for a friend. If the friend is a failure, it reflects badly on you.
As Rich Peterson says, “We’ll’ see you down by the riverside.”
“The greatest real estate fire sale in the history of the United States rages on.”
— CNBC
Foreclosed properties are selling like hotcakes. Now is a great time to get some great deals on investment properties Besides the price, below are four reasons why you can count on real estate to provide you with security today and in the future.
Cash flow
With a good rental property, after all the expenses have been covered, including mortgage, vacancy rate, repairs, and property management, you can still receive a good cash flow. This provides a reliable monthly income for as long as you want to keep the property. As the amount of rent that you charge goes up, your profits go up. See Table 1 (U.S. Census Bureau, 2012) for historic monthly rents in the U.S., from the U.S. Census Bureau.
Demand for Housing
There will be always be people in need of a place to live. With our growing population, a gain of one American born every 14 seconds, we will have a population of 400 million by 2050. Based on our current immigration patterns and population growth, there will continue to be a demand for housing well into the foreseeable future.
Appreciation
In the short term, housing appreciation seems to unpredictably rise and fall. However, in the long term, over a 60-year period, house values show a steady and consistent upward trend. According the U.S. Census Bureau, from 1940 to 2010, the average increase in the value of a house was about 5% per year, adjusted for inflation. Table 2 (U.S Census Bureau, 2012) shows historic home values.
While appreciation of 5% may seem low to some people, when we consider that we only put a small percentage down, between 5-20%, and we receive monthly rent checks that more than cover mortgage payments, it begins to make sense. If we don’t allow periodic dramatic rises and falls in home values to shake our confidence, we can count on steady, long-term, profits from our investment properties.
Tax savings
Our kindly Uncle Sam wisely gives tax incentives to real estate investors. The federal government allows you to depreciate your investment (or reduce your taxes to account for physical deterioration of the house) on Schedule E of your annual tax form. In addition, you deduct expenses related to your investment from your gross income on IRS Form 1040, and reduce the amount of income that you pay taxes on.
Opening up the old mailbag again, I am printing my response to a recent fixer upper email question that I received.
Hello Terry,
I’m writing you with a somewhat specific question.
I am looking at a house at xxxx Star St. in Duluth, MN. It’s a vacant house (so many are nowdays) and the listing price 39k. Repairs look to be 10.9k plus a fee of 1,100 for re-registering it as occupied.
I walked through the house, visually it’s fine. I like the house, don’t get me wrong. New windows, carpets, paint, etc. But the repairs are mostly plumbing etc. Should I put in my bid for 39k EVEN or throw it down for 29k?
It’s in a fairly low crime area, but across the street is a halfway house for prisoners just getting out into the world…Prior values in the 200k for this area before the Great Collapse….
Thank you for your time,
Malcom
Dear Malcom,
What I see is a red flag that should influence your decision.
The location of the house across the street from a halfway house is going to considerably limit what you can do with the house. Regardless of whether you are going to turn it into a rental or flip it, you have a very limited pool of potential tenants or purchasers. In my opinion, most people would not want to live there.
Consider, if you had a tenant who had a choice to rent your property, or one in another neighborhood nearby that did not have a half-way house across the street. Which would they choose?
Granted, the purchase price is low. However, in my opinion, it’s better to spend a little more money for a house that doesn’t have a glaring defect.
There are a lot of properties on the market right now, and many at bargain basement prices. If I were you, I would consider looking around for another one.
Donald Trump said, “Sometimes your best investments are the ones you don’t make.”
Fannie Mae has established it’s new HomePath progam to reduce its portfolio of tens of thousands of foreclosed homes. This present real estate investors with a great new opportunity. Fannie Mae must sell these houses to stop the bleeding of red ink, and will finance the transaction to new owners with attractive terms.
The benefits include:
•Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
•You may qualify even if your credit is less than perfect
•Available to both owner occupiers and investors
•Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
•No mortgage insurance
•No appraisal fees
•Also eligible for HomePath Renovation Mortgage
•HomePath Mortgage financing is available from a variety of lenders – both local and national.
Get more details, and locate properties in your area at:
A good question came up today during my radio interview with Dave Kebler of WRNJ Radio in Hackettstown, New Jersey.
I was asked if it was now impossible to get a loan, either to refinance a house or to purchase a fixer upper rental house.
The answer is no, it is not impossible to get a loan. Granted, it requires more paperwork and squeaky clean credit, but loan money is still available and at great 4.5% rates for 30 year loans. I have taken out 3 loans in the last 12 months.
Is it worth it to take out loans for investment properties?
The economy is still as flat as Rush Limbaugh’s trampoline, but there has never been a better time to invest. From the perspective of mortgage interest rates and low real estate prices, this is a time of great opportunity.
When I was a Peace Corps Volunteer in Central America, people would ask me if the streets of American were paved with gold. I said, they’re not paved with gold, but they are paved with opportunity. And they still are.
Upcoming radio interviews
Aug. 11, 8:10 am, Mark Wayne show, WICH 1310 am, Norwich, Connecticut.
August 17, 6:50 am, Jason Mansmith show, WRPN 1600 am, Ripon, Wisconsin.
August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.
August 25 at 8:08 am, I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.
I was watching the movie Australia last night, starring Nicole Kidman and Hugh Jackman. It was such a classic tale that it sent chills down my back.
A man starts up a small cattle empire in the outback of Australia. He is killed and his inexperienced wife has to take over the operation. She’s in way over her head, but in order to save the ranch she has to drive the herd thousands of miles to the market. She asks her ranch hand to lead to trail drive.
The tough ranch hand assembles a rag tag group, which include of a drunk, two aboriginal women, a young boy, and the wife, to herd the cattle. Despite stampedes, poisoned watering holes, and other travails, they keep moving on.
We are what we are
Before the trip begins,the ranch hand addresses his team and goes over the “dos and don’ts” of working a cattle drive.
At the end of his speech he says, “Well, we are what we are.”
He said it with some degree of exasperation at having to use vastly unqualified people on the drive.
But, I also thought that he said it with a sense optimistic determination. As if he is saying, “This is all I have to work with. Its not as good as it could be, but I’m going to make it work and we’ll get these cattle to market.”
You don’t have all the experience that you might want to begin, but you don’t let that stop you. There’s a lot to learn and you learn as you go. Your determination gets you over a lot of obstacles.
Upcoming Radio Interviews
August 20, 8:30 am, I will be on David Sutton’s show, KSRN 1490 am, Los Alamos, New Mexico.
August 25 at 8:08 am, I will be on Jeff Anderson’s show, KSDR 1480 am, Watertown, South Dakota.
Make yourself right at home. Pull up a chair, have a cup of coffee, and check out some of my articles, useful links, or previous posts. Hopefully, you’ll discover some useful investing information.
First and foremost, I am putting the finishing touches on my new book entitled “Never Sell Your Home! How to turn your home into a rental house.” Watch this space for further developments.
Even with rising interest rates, now is still a good time for do-it-yourselfers to start a new income stream with a rental house or two. House prices are still at rock bottom lows, but before too long they will start moving up again.
The key is to find a good fixer-upper house in a location where people like to rent. It’s still the best way to start your own business, and establish some long-term economic security!
Sometimes going through tough economic times is just the push that we need to start on a new path.
When tough times hit, I like to reflect on Lincoln’s saying, “We can complain that the rose bushes have thorns, or we can rejoice that the thorn bushes have roses.”
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In his book, Achieving Excellence in Life, author and radio host Mark Maxon states that a foreign-born individual relocating in the United States is four times more likely to acquire a net worth of one million dollars in his working lifetime than a natural born citizen. He identifies the reason for that as conditioning. Growing up in the US, we are taught “Money doesn’t grow on trees; “We can’t afford that, we’re broke;” and “The streets aren’t paved with gold.” While in other countries, people say, “The streets are paved with gold,” and “In America anything is possible.” I find that pretty interesting.
Wednesday, I will have the pleasure of being interviewed by Mark Maxon about my book Fix em Up Rent em Out. I invite you to join us. You can listen to us live at http://themaxonshow.com/, and selecting “click to listen live”.
Details for upcoming radio interviews:
August 12, Mark Maxon, KTALK AM 630, Salt Lake City, Utah, 10:00 am Mountain Time
August 14, Gillian Sutton, KRSN AM 1490, Los Alamos, NM, 7:30 am Mountain Time
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I’m pleased to announce that my book, “Fix em Up Rent em Out,” is an Award-Winning Finalist in the Real Estate category of the National Best Books 2008 Awards, sponsored by USA Book News.
Top 50 Amazon Reviewer D. Blankenship says,
What this work does give you is ideas and an outline, that through hard work, common sense, and a bit of luck, you can do quite well for yourself and have a bit of fun while you do it. The author is quick to point out the down side of every aspect of this business and points out ways, if there are any, to avoid them. On the other hand, the author does a wonderful job of pointing out the positive. He not only emphasizes the financial aspects, but does a very nice job of drawing attention to the many side benefits involved, and there are many of these! I like the way that the author directs your attention to the fact that a job well done is a wonderful feeling. The author has listed given us a great list of other books and resources to turn to which I find most helpful. Actually, his list of places to go for information is almost worth the price of the book alone.
How Abraham Lincoln Used Stories to Touch Hearts, Minds & Funny Bones
“Timeless wisdom! The author shows how we can develop these skills and put them to use in our daily lives and businesses..” — Don Blankenship – Top 50 Amazon Reviewer.
“The book is much more than a collection of stories. It teaches us the importance of storytelling as a means to succeed in life and build relationships with your family, friends and employers.” — Awdhesh Singh
“Highly recommended! Improve “people skills” by becoming a more “people friendly” “approachable person.” — Alma Jones
*2013 NATIONAL AWARD WINNER *
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Brian V. Menard, Amazon Reviewer
"Sprouse is one of the most practical authors in this genre I have ever read. 'Carve Out Your Niche' is downright inspiring."
Don Blankenship, "Top 50" Amazon Reviewer
"Invaluable for anyone seeking to successfully write, publish, and market their own work"
The Midwest Book Review
FIX EM UP RENT EM OUT
Purchase FIX EM UP RENT EM OUT (paperback)Award-Winning Finalist in the Real Estate category of the National Best Books Awards, sponsored by USA Book NewsGreat information for anyone starting out in the fixer-upper business. The author has served his apprenticeship in the trenches.
-- Fixer Jay P. DeCima, Investor and AuthorTerry Sprouse has created a profitable rental business in his spare time. What sets him apart is he took action.-- Bob Zachmeier, Investor, Educator, Author With the wit of Will Rogers, this book provides simple guidelines for restoring homes, and sanity to our crazy lives. --M.D. Matlock, Ph.D., P.E., C.S.E.