Archive for the ‘fixer upper houses’ Category

Security in Retirement with Fixer-Uppers

Monday, February 20th, 2012

Are you like me and never socked much money away for retirement? We are not alone. The Employee Benefit Research Institute’s Annual Retirement Confidence Survey found that pre-retirees (Americans between the ages of 55 and 65) greatly underestimate how long they are likely to live and how much money they will need in retirement.

Experts say that we need to change our mindset from “assets” to “income” in retirement planning. It’s not enough to know how much money we have in savings; we need to know how much income our savings can generate over time.

There is no better way to change our mindset and our portfolio from “assets” to “income” than by investing in real estate. If we invest wisely before we retire, and can have a stable of reliable rental properties that generate steady monthly income. We can look forward to a retirement that provides security instead of uncertainty.


Don’t rely on politicians to provide you with retirement security. If you want it done right, you must do it yourself.

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Property Inspection and Due Diligence

Saturday, January 28th, 2012

Although I used my handyman friend to inspect the first fixer upper house that I bought, in later houses I hired a professional property inspector to go through the house and to provide me with a complete inspection report.

The Value of the Inspector’s Report

The inspector’s report can be used to help you negotiate a lower price on the house if they uncover anything in the house that is in need of repair. Hiring a qualified property inspector is a good way to make sure that you are really getting what you pay for in a house.

Due Diligence Allows You to Correct Deficiencies

Once you have made an offer on a house and it had been accepted by the seller, the “due diligence” period begins and you have until the close of escrow (or completion of the sale) to check out the physical and financial condition of the property. If you discover that the property has problems, but you think the deal is still worth pursuing, the seller may be willing to correct any deficiencies, or give you money to complete the necessary work yourself.

Two Key Components of Due Diligence

There are two key components of due diligence process:

1. Review of books and records
In my case, there are usually no records to review. Most of the houses that I buy have been repossessed by a bank, the Veterans Administration or HUD, and the owner is long gone.

2. The physical inspection
When there is no owner present this makes the physical inspection all the more important.

The due diligence period is your last opportunity to either:

1.) complete the transaction, or

2.) cancel the escrow, have your money returned, and look for another property.

“Carve Out Your Niche” TV Interview Monday

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Efficient Design – Green adds Green

Tuesday, January 17th, 2012

This is a guest post by: Erik Braunitzer of Douglas Elliman Real Estate Company, agents for NYC Apartments.

The bathroom is an essential part of most every home. However, the bathroom is also an area that is often neglected when it comes to creating an environmentally friendly and green space. Luckily, when designing or remodeling your home, the nation-wide renewed focus on green living has opened up an entire marketplace full of green items.

And what most homeowners and contractors don’t realize is that going green really boosts the value of your home. Things like geothermal heat, 95% efficient furnaces and walls made with reclaimed materials are just a few examples of expensive but worthwhile home investments. One of my favorite areas of focus is the bathroom.

Recycled Glass Tile: Tile is a commonly used throughout the bathroom, from floors and shower walls to backsplashes and accent work. Consider using recycled glass tiles, which come in a wide range of colors, shapes and sizes. Recycled glass tile is installed in the same manner as regular tile, and can come in pre-spaced squares allowing for easy installation and grouting.

Sustainable Harvested Woods: Wood is often used for vanities and even flooring for bathroom spaces. However, many wood products require the use of environmentally unfriendly or even illegal logging practices to supply the material. Choose products with a Forest Stewardship Council approved sticker on them, or choose more environmentally friendly products like bamboo, cork or wheat straw. Storm-feld tree products are also an option for a greener bathroom. Avoid wood products made from particle board, which often contains formaldehyde.

Recycled Metals: Recycled metals can be used in your bathroom from cabinet pulls to fixtures. Look for products such as recycled metal counter tops, vessel sinks made from recycled metal, recycled aluminum tiles, salvaged brass faucets, and recycled bronze metal hardware.

Composite Terrazzo: Another way to use recycled materials for vanity countertops is through composite terrazzo products. These counter tops are made from a wide range of different materials, such as recycled glass, which is then combined with an epoxy binder or cement to create the hard and formed surface of the countertop. Because there are different types and colors of materials used in each piece, you get a unique finished look to the product you install.

Salvaged Products: Whenever possible, try to use recycled salvaged products in your bathroom remodel. Often times home owners will get rid of light fixtures, cabinets or sinks that are still in style, but that do not fit their own current personal style. Purchasing these products from salvage stores reduces the chances that the product will find its way into a landfill, as well as can provide a unique or vintage look to your bathroom space.

Windows: Install windows in your bathroom to bring in natural light. The more natural light you have flowing into your bathroom, the more open it will feel and the less electricity you will need to use, which reduces your energy waste and brings down your electric bills. Install Energy Star rated windows to help reduce the loss of heat or cold air during the winter or summer months.

Toilet: Toilets make up a significant portion of water usage in most households. Each flush can waste gallons of water, even though newer toilet designs can provide the same performance with less water. Look for toilets made to the HET Standard (or High Efficiency Toilet) which guarantees you’ll be using less water with each flush.

While these steps may seem small, every choice helps create a better world for you, your family and generations to come. By making these simple choices, you can make a positive impact on the environment, all without sacrificing style or function in your bathroom.

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Background Checks for Tenants

Wednesday, December 28th, 2011

This is your way to verify that the impressions you have of your applicants are true. Everyone who wants to rent my house has to fill out an application form. I will select usually the top one or two candidates, based on the processes mentioned above, and then call all the references and former landlords listed on the application form.

Always try to verify the references by telephone. You wouldn’t be the first landlord to be given a fake reference, and people will often give more candid opinions when you speak to them.

I don’t run credit checks, but I do like to see copies of their paychecks. I do a criminal background check by searching county court house records, and I check the sex offender’s registry list.

A high priority for me is that they make enough money to pay the rent. Don’t go by what they say; go by what their paycheck says.

They may say, “So anyway, my wife/girlfriend is going to get a job in a couple of weeks, and we operate a successful E-bay business, so the rental payments won’t be a problem.” Weeks turn into years and all the while they will have trouble making their monthly payments. Someone who has a stable, good paying job is an ideal tenant.

3 Books that Changed My Life

Are You Big Enough to Pay it Forward?

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Avoid Perfectionism with Fixer Upper Houses

Wednesday, July 6th, 2011

Govern a great nation as you would cook a small fish. Do not overdo it.
–Lao Tzu

A key to fixing up a house is to know when to stop fixing up. You want the house to look good, yet you know that people are not going to care for your house the same way that you would. For rental properties, I don’t purchase the most costly, or even new, materials. I do a lot of my shopping at stores that recycle construction materials, like Habitat for Humanity’s Re-stores. You can get bargain basement prices on things like doors, kitchen cabinets, hinges, toilets, paint.

Need I say more? It’s a fixer-upper person’s paradise.

If I know that I am going to sell the house I may install higher grade of materials, especially where it really counts, like the kitchens and bathrooms. As Lawrence Dworin says in Profits in Buying & Renovating Homes:

“It’s easy to get carried away on renovation projects – wasting time and money on repairs that buyers won’t pay extra for. I assume you like to do good work. We all do. And we’d like every finished project to be a showplace. But you can’t make money that way. Your buyers have a limit on what they’re willing to pay. That’s why you’ve got to limit repair costs. In this business, you concentrate on fixing code violations and creating a clean, safe, livable house.”

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Do tenants pay utilities, and how much for damage deposit

Saturday, October 16th, 2010

Here is another letter that I recently received that asks some pertinent and common questions, that I would like to share with you.

Dear Terry,

We’re moving along towards renting out our first rental house…and I was reading your month-to-month lease agreement from the Never Sell Your Home book– it looks very good and we plan on using much of it, but I did have a few questions:

1) What % of the monthly rent do you require as a security deposit?

2) Should the Lessee(s) be responsible for all utilities, or should I pay the utilities for them?

Thanks for your help – !

Steve Klausman
Santa Fe

Dear Steve,

Congrats on your progress in preparing to rent our your first house. Don’t get discouraged if it’s rough sledding at first, the first house is the one that you learn the most from.

Security Deposit

In answer to your first question, the amount that I charge for security deposit is the amount of one month’s rent. So if the monthly rent is $900, the security deposit is also $900.

Some tenants may have trouble coming up with both the rent and the security deposit at the same time, in this case, a tidy sum of $1,800. So, I sometimes let them pay the security deposit over the course of 2 months, to make it easier on them.

Since you are just starting in the business, something to do from the beginning is to keep the security deposit and the monthly rental money from your business in a separate bank account from your personal bank account. The IRS doesn’t like to see the funds mixed together.

Who Pays Utilities?

In answer to your second question. I always have the tenants pay all the utilities themselves. Not only does it encourage them to conserve, but it vastly simplifies the process for you. Also, I have the tenants put the utility accounts in their own name, so that I’m not liable for their expenses.

In most states, you can sign up for a “Landlord Agreement Account” with the utility companies that allows you to switch the accounts to the tenants and back, with less paperwork and expense.

As you move along feel free to send me more questions as they arise.

Your (self-appointed) personal rental-home consultant,

Terry

Letter on Selecting Tenants

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Money for buying rental houses

Tuesday, August 10th, 2010

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.

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Joe Sabah, Get the Job You Really Want, and fixer upper houses

Monday, July 26th, 2010

In the book How to Get the Job you Really Want and Get Employers to Call You, author Joe Sabah says,

Are you willing to pay the price to have your life be the way you really want it? We all know there is a price to be paid for everything in life. If we stay in the same circumstances we are now it may cost us our life. Serious illness can be caused because of stress, the stress of being in a job we hate. Take the time to consider what price you are paying now for what you have in your life.

For me, the perfect job was buying fixer-upper houses and renting them out. It provided me the independence and financial security that I desired, and I could do it while still working my 8:00 to 5:00 job.

If you don’t like your job, if you are having your hours reduced, or if you lose your job altogether, it may be time to consider establishing a business that will provide you with some additional economic security.

How would you answer Joe Sabah’s question, “What price would you be willing to pay to have the life you really want?”

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New CD Course Now Available

Tuesday, December 1st, 2009

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My new 4-CD course entitled “How to Start Your Own House Fix up an Rental Business in Your Spare Time” is now available!

It’s specifically designed for the beginning investor who wants to learn through the convenience of listening to CDs. I start from the beginning and guide you through all you need to know to get started.

CD #1 is Start Your Own Fix Up and Rental Business
This CD takes you though the steps you need to know to get going including identifying target neighborhoods, doing due diligence, paying for rental properties, how to do taxes.

CD #2 is How to Manage Tenants and Enjoy It
Tenant issues are what detour many people from this business, but follow the time tested techniques that I use and you will find that managing tenants is a lot easier than you thought.

CD #3 is How to Learn to Make Repairs
I did not start this business with many repair skills. But I learned as I went along, and you can too.

CD #4 is Form, Tables and Contracts
This includes the nuts and bolts you will need to run your business. You receive a form to screen tenants, application forms for tenants, eviction notices, sample letters to tenants, tables that allow you to calculate how much your monthly payments will be when purchasing a house, and much more. These are the forms that I use in my own business.

The CD Course includes a 14-page workbook that I have written to further guide you along the way to starting your business.

And for a limited time, I am offering a bonus CD with an electronic copy of my award-winning book “Fix em Up, Rent em Out.”

For more information see my website at TerrySprouse.com

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