Archive for the ‘foreclosures’ Category

How to learn to operate a fixer upper house business

Wednesday, March 28th, 2012

Learn the Ropes

My wife and I didn’t know much about repairing houses before we started our fixer-upper business, but like fine wine, we got better as time went on. One important rule in the fix-up profession is that you must constantly strive to become self-sufficient and learn all aspects of the profession. You must become an expert in your new business, even if you only do it part-time.

You can learn from others, but you have to rely on yourself to get ahead. Like the novice swimmer who is tossed in the pool, sometimes it’s sink or swim. You must learn by doing.

Trust Your Own Judgment

There are times when destiny forces you down a certain path in life. Other times, you make you own destiny by choosing to walk down a difficult path.

My plan when I bought my first fix-up house was that I could learn as I went along. I thought if others had learned to do it, so could I.

When I bought my fist fix-up house, it was like being stranded on a desert island. I was forced to learn new skills to survive, like Robinson Crusoe. The best way to learn new skills is by putting yourself in a situation where you are forced to change and adapt.

Before embarking on his life-transforming mission, the hero in the book Dune was advised, “Unless you change, something inside you sleeps.”

Foreclosure Update

The bank accepted someone else’s bid over mine for the foreclosed property that I bid on. My new target property is a 3 bed, 3 bath townhouse that is being offered for $69,900.

In this market, persistance is the name of the game. You just have to keep looking and keep bidding until you land a property at the price you desire.

 

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Tax tips, forclosure houses, and self directed IRAs for real estate investors (video)

Saturday, March 17th, 2012

It’s an honor, once again, to have tax accountant, Sean McCoy, E.A., Chartered (PC), discuss tax tips for real estate investors, particularly in light of the looming deadline to submit income taxes.

Today Sean will discuss:

1. Changes to the tax code that affect real estate investors;
2. Issues related to purchasing forclosed properties;
3. Pros and cons of self-directed IRA accounts to purchase real estate; and,
4. Tax considerations when owning out of state properties.

Here is the complete YouTube interview.

The Peaceful Warrior and Fixer-Upper Houses

Wednesday, March 7th, 2012

As we operate our fixer upper and rental house businesses, its always good to do things that contribute to our positive attitude and keep our spirits up.

My wife and I were watching the movie the “Peaceful Warrior” Saturday night, and I was really inspired by the movie.

In a nutshell, one night when a gymnast, Dan Millman, cannot sleep he wanders in to a service station and meets a mysterious man. Dan injures his leg in an automobile accident and the mystic helps the gymnast to overcome incredible odds and tap into new worlds of strength and understanding. Here’s one of my favorite scenes as Socrates teaches Dan a valuable lesson.

Dan Millman: Life has just three rules?
Socrates: And you already know them…
Dan: Paradox, humor, and change.
Socrates: Paradox…
Dan: Life is a mystery. Don’t waste time trying to figure it out.
Socrates: Humor…
Dan: Keep a sense of humor, especially about yourself. It is a strength beyond all measure.
Socrates: Change…
Dan: Know that nothing stays the same.

At the end of the film, Dan is trying out for the Olympics, after making a startling comeback from his accident. A teammate asks him if can share some tip that he has learned from his training with Socrates to help him do his routine. Dan tells him to get rid of the garbage in his mind, to just forget about winning and his parent’s expectations, and to just focus on the routine.

But, the teammate just doesn’t get it. He replies that he has to win the gold medal, and everyone is counting on him to win. If he loses, he will let himself, and everyone else down, and he’ll never be happy.

What’s really interesting is the expression on Dan’s face as he listens to his teammate, and his realization that he used to think exactly the same way.

How this relates to fixer-upper houses

The movie made me think about how the fixer-upper business is like being a peaceful warrior. The Peaceful Warrior said, “Service to others is the highest good.”

I don’t think its stretching things too far to say that we provide a service. We purchase properties that are worn out and shunned by society. We rehabilitate the houses, make them presentable again, and provide a nice place for people to live in.

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Get in on the Greatest Real Estate Fire Sale in History

Saturday, March 3rd, 2012

“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.

How to Force Yourself to Write

An amazing time to buy a foreclosure

Monday, February 27th, 2012

The past several months I have been searching for another investment/rental property to purchase, and have so far come up empty. Several times I found one, only to have it sold before I got my bid in. Today, I got my bid in on the above pictured foreclosure house. There are four bids on it and the bank will select one of us sometime this week.

The house is 3 bedroom, 1 bath, 1,400 sq ft, property in a nice neighborhood. The price is $53,000. It needs somewhere between $5,000 – $10,000 work to bring it up to rental condition, e.g., replacing sheet rock, electrical work, roof work, and flooring. It sold for $149,000 in 2006. I should be able to rent it for around $800/month. I’ll purchase with cash, if I get the house.

I would have preferred 2 bathrooms, but the house is in a good location and is otherwise a pretty good deal. I know several people with children who only have one bathroom and it works for them, even though I’m used to two.

Now is the time to take action

If you are just sitting on the fence, now is an opportune time to get into a investment house.

Of course, you must conduct a good inspection of the property either before you make the offer, or during the 7 to 10 day inspection period after your bid is accepted. Usually there are is no history of the property for you to examine, on foreclosures. It’s sold as is.

My main motivation is to that I can fairly inexpensively purchase a rental house, and it will provide me with an unusually large stream of income. I have other rental houses, but this new one will produce much more revenue because most of my income on the other properties goes to pay the mortgage company. Since I’m able to pay cash, this time all the revenue goes to me.

Rentals better than pensions

The great advantage of owning real estate property over having a pension is that your pension is fixed and what you get when you start it, is all you will ever get. For rental houses, the amount you receive from tenants goes up over time, with inflation, and you can never use it up.

The double win

It’s like being able to bet your money in Las Vegas, but then you get all the money that you lost back again when you leave. You get the monthly payments, like a pension. But, if you ever want to sell your investment house, you get the entire amount that you spent back again, and usually a lot more than that.


OTHER BLOG ARTICLES:

I encourage you to check out the insightful article How do you handle the whining tenants? over at landlordinvestor.com.

Low-end market houses becoming affordable for first time buyers, and Weekly Blog Roundup

Friday, February 29th, 2008


The real-estate slump has an upside for first-time home buyers looking to spend $200,000 or less. As median-home prices continue dropping, the supply of homes for sale in the much-coveted low-end market is swelling. That’s good news for those of us operating fixer upper house businesses.

The subprime debacle, foreclosures and “short sales” in which a buyer offers less than what is owed the bank, continue to drive Phoenix real-estate prices down. That, in turn, makes more homes than ever affordable for first-time home buyers. Bidding wars on “short sale” properties with multiple offers are breaking out.

Under-$200,000 market gives home sales a push in the Arizona Republic describes this new phenomena.

Weekly Blog Roundup

Thee were some truly outstanding posts this week. Some highlights from this week’s blogs include:

Conniebrz.com hits the jackpot at a thrift store; notetalk’s article gives good insight into what home buyers are looking for in a house; extremeperspective sees lease-to-own as a way out of a financial spot; johnreed.com tells us, in his own “sensitive” way, why we don’t need advisors, networks or mentors (okay, I admit that’s his webpage, not a blog); wealthisgood deals with tenant problems, and retals’r’us is closing in on selling a property.

Also, gatherlittlebylittle describes the epiphany that inspired him to put his financial house in order, and moolanomy describes differences between Prosper vs. LendingClub.com peer-to-peer lending.

Thrift Store Shopping: Major Score at conniebrz.com
Characteristics of First Time Home Buyers at dequalss.com/notetalk/
Where to Get Rich? at extremeperspective.blogspot.com
Do You Really Need Team of Advisors? A Network? A Mentor? at johnreed.com
There is Light at the End of the Tunnel at rentalsrus.blogspot.com
My Financial Epiphany: The Storm of My Life at gatherlittlebylittle.com
LendingClub Highlights and Giveaways at moolanomy.com
Late Rent, and Landlord Craving at wealthisgood.blogspot.com

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Weekly Blog Roundup – Fixer Upper & Rental Tips & Other Useful Information

Saturday, February 23rd, 2008


How do we find of satisfaction in life? In our consumer society, we are molded to think buying the latest high density TV or other useless products, that instead of making us happier, only wind up wasting our time and costing us more. Usually these are products that we’d wiser, deeper, and more insightful people by not owning them. How many CDs, or DVDs, or McDonald’s hamburgers do we truly need to make us happy? Only $25 and a gym bag at christianpf.com is a particularly thought-provoking article along these lines.

But true contentment in life is found through introspection and reflection. By looking inside we can overcome our wants that lead to buying useless products, and lead us to what truly makes up happy. What makes you happy? As unique individuals, we much dig that out of our own inner self.

We don’t always have to blaze a new path, we can learn from others that have already blazed the path. The best blog posts, like all great writing, have a way of inspiring us, teaching us, and serving as a beacon to draw us a new direction. Below are some blog postings that might serve as beacons.

Managing Tenants Part Four: The Home Office (a thing of beauty and a joy forevermore) at Biggerpockets.com.

When Tenants Don’t Pay (Part 2—The Reality, The Reason, and the Response) at twowiseacres.com.

Spinning Plates at rentalsrus.blogspot.com.

Poor, Poor Neglected Real Estate Blog at flipthyhouse.com.

Renting vs. Buying – Myths that created the housing bubble and the foreclosure crisis at Iboughtaduplex.com.

Setting rental rates for Condo #1 at livelearninvest.com

Feb19Condo Conversions and the Dark Underbelly of the Subprime Mess at spencerbarron.com.

Outwardly Simple and Inwardly Rich at millionairemommynextdoor.blogspot.com.

Did My Realtors Lie to Me?? at wealthisgood.blogspot.com.

Info on Terry’s Book

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Buyer’s Market – Another Take

Sunday, September 16th, 2007

Here is another take on the ever approaching, seemingly never arriving, buyer’s market. Entitled A Buyer’s Market . . Or Not (scroll down the webpage to see the article), the author makes the point that banks are closing the doors to new mortgage customers, and the only investors who can take advantage of the “bargains” will be those with hard money.

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