Archive for the ‘house buying’ Category

The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants

Friday, August 10th, 2012

The Arizona Network of Real Estate invited me to give a presentation to their group about my book “Fix em Up Rent em Out.”

I thought the video might be available to the general public but it looks as though that’s not going to happen.

However, so that no one feels left out, I am going to provide  a summary of the key points that I hit during the presentation. As someone who was regularly picked last for teams in gym class, I’m sensitive to people feeling left out. Casting modesty to the wind, I am also including exclusive photos of the event.

So here are:

The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants (based on an article by Andrew Stefanczyk)

1. Choose the Worst Possible Area

Location will determine the kinds of tenants you will attract, and how much rent you can fairly charge.

Do you want these bearded wonders as tenants?

The best approach is to identify target areas in your city where you would like to focus your purchases. I like to focus on “transition zones” (where there is a mixture of housing types) which are good for investors because we can purchase properties at lower prices, and there is high demand to live in these areas.

2. Put in the very best of things when fixing up  an investment property

Use new and expensive sinks, doors, refrigerators, light fixtures, etc. Never shop at stores that recycle construction supplies. Spare no  expense.

Of course, the problem is that tenants will not take care of our properties as well as we would,

Habitat Store

so we end up with many broken or worn out items. The better alternative is to shop at used building supply stores, and to purchase good, inexpensive, supplies for our rental houses. One such store is the Habitat for Humanity store.

3. Make sure you have absolutely no experience in make basic repairs

Not knowing how to change electrical outlets, unclog drains & toilets, and replace broken windows will cost quite a bit down the road.

The better way is to:

A. Learn as you go, and comply with EPA regulations

B. Take construction classes at junior college

C. Learn from handymen and contractors

D. Take the Zen approach to  house repair learn to do everything yourself

5. Utilize fix-up books, investing books, & YouTube to find answers on how to make house repairs

4. Do not screen your tenants

Being as uninformed as possible about who you rent to may be the best way to lose money as a landlord. Do not ask for or check references. Do not call previous landlords and ask questions like, did they pay rent on time? How was the condition of the house or apartment when they left? Did they ever disturb neighbors with loud music or shouting matches? How often would you have to make special trips for repairs? Being as uninformed as possible about whom you rent to will make a huge difference and will increase the chances that you will get tenants that will trash your property and refuse to pay rent.

However, the better way is to:

A. Use a checklist for tenants. Decide what kind of tenant that you want ahead of time.

B. Look at their paycheck to verify income.

C. Check county records to see what illegal activities they’ve been up to.

D. Know the Fair Housing Act. Never select tenants based strictly on “race, color, national origin, religion, sex, familial status or handicap (disability).”

E. To find new tenants, use Craiglist, put up arrow signs, and host an “open house.”

5. Make sure you have not learned about your rights as a landlord

Be completely unfamiliar with the eviction process to guarantee long, drawn out disputes with tenants. Don’t keep up to date financial records or copies of correspondence with tenants. Most states provide online information about tenant and landlord rights so avoid reading these.

The better way is:

A. Get an authoritative legal guide like  “The Arizona Landlord Deskbook” by Carlton Cassler.

B.  Copy forms and letters from your legal book to send to tenants.

C. Comply with legal ways to deal with bad tenants.

D. Use memos to communicate with tenants so you have a record of correspondence.

E. Use a month to month lease instead of long-term lease to more easily scrape off bad tenants like barnacles.

F. Reward tenants for paying on time by discounting their rent $25.  

G. Send good tenants Target  gift cards for Xmas.

In Conclusion

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“Each of us has cause to think with deep gratitude of those who have lighted the flame within us.”

–Albert Schweitzer

Carve Out Your Niche Update

My award-winning book on self-publishing, Carve Out Your Niche, is now available in Kindle format.

The Midwest Book Review called Carve Out Your Niche,

“Invaluable for anyone seeking to successfully write, publish, and market their own work.”

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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

A Secret to Increase Rental Profits: Buy Properties in “Opportunity Zones” (Video)

Monday, September 20th, 2010

When looking for investment properties, don’t just find houses that meet your financial criteria. Rather,  find the house that meets your criteria in locations where people are extraordinarily inclined to rent.

There are nice areas in my town and there are not- so-nice areas in my town. However, neither of those two areas is where most people like to rent properties. The largest majority of people like to rent in what I call “opportunity zones” (also known as “transition zones”).

A great way to maximize rental profits is to buy rental properties in “opportunity zones.”

Interview with Mark Maxon Wednesday

Monday, August 10th, 2009

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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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How I got started in the fixer uppers

Monday, July 14th, 2008

Buying fixer upper houses and converting them into rental houses is a great business. And anyone can do it. You don’t need a certificate, you don’t need a degree, and you don’t need anyone’s permission. You just do it!

To view a condensed version of how I got started in the fixer-upper business, check out my article at ezinearticles.com. This is the version with no bells or whistles, and no accompanying three-part harmony.

The townhouse closing may or may not happen today. If not, Angy has to catch a flight out of town tomorrow. In that case, we will have to sign power of attorney over to me so that I can sign for both of us at closing.

Just like the recipe for my famous extra-chewy chocolate chip cookies, the plot thickens!

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Update on Townhouse Purchase Offer

Saturday, June 28th, 2008

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I offered $100,000 on the $115,000-listed fixer upper townhouse. The owner came back with $110,00. I came back with $105,000, and the owner accepted my offer. More details to come.

It seems that more houses are now being priced to sell. The agent selling the house that I am purchasing told me that she priced the house 10% below what other, similar houses were selling for. Even after that deduction, the owner took 10% less than the lower price. I think there are a lot of motivated sellers out there right now.

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Real Estate Investors and Recession

Saturday, June 7th, 2008


Do you worry about getting through the recession with your fixer upper house business intact?

Check out my ezinearticles.com piece entitled Proactive Responses to Recession – 7 Creative Ways to Make Extra Money With Real Estate.

Looking for motivation to get started in the  Fix em Up, Rent em Out business?

Just Follow Your Dreams.

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Buying in a Down Market, and Finding Ideal Tenents

Monday, April 14th, 2008


Related to the business of investing in fixer upper houses, I’d like to share with you a couple of good articles I came across recently.

5 Tips for Buying a Home in a Down Market
by Bankaholic.com

The subprime mortgage bust has scared a lot of people away from the shaky housing market. The nightly news is filled with images and stories of everyday Americans who are losing their homes because they made greedy and uninformed decisions, they were taken advantage of by predatory brokers, or a combination of these situations. However, the news isn’t all bad. This decline in the market has dropped prices and made housing affordable to many fiscally responsible renters who never considered home ownership to be an option.

If you find yourself house-hunting, make sure that you follow these five simple steps to take advantage of this downturn in the market; if you don’t, you could be the next sad story on your local news. Click here for full article.

What Makes an Ideal Tenant?
by Resty Malia

Who are the Folks That Makes an Ideal Tenant?

Finding the right tenant is a common challenge that most property managers encounters at one point or another in their life. The following bits and pieces of information in this article will allow you to have a better idea in picking the right or ideal tenant.

Searching for the right tenant can be simple or even a challenge sometime, but having an idea of the different types of America’s work force qualities as tenants could help you decide and screen the right and ideal tenant for your property.

So you have done your credit check with your prospective tenant ( you done it, right?) and now you’re probably wondering what part of the demographics would make an ideal tenant.

Generally there are Four (4) Population Strata or Groups where your prospective tenants will be coming from. Click here for full article.

Info on Terry’s Book

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Conducting Formal Due Diligence

Wednesday, January 30th, 2008

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I am currently reading “Real Estate Investing for Dummies” by Tyson and Griswold, a well-written and thorough book that covers the basics of what real estate investors should know. I’ve long considered “Investing in Real Estate” by McLean and Eldred as one of the best introductory texts for real estate investing. Yet after reading the “Dummies” book, I find it equally as good, and perhaps a little more accessable for the new investor.

Here is my list of Top New Real Estate Books that I posted on Amazon.

To assist those who invest in fixer upper houses, I’m incorporating key parts of the “Due Diligence” chapter from the “Dummies” book with my own real estate observations.

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 deficiences, or give you money to to complete the necessary work yourself.

It’s during this time frame that you must get all of your questions answered and be sure you know what you are getting. If done properly, it will require quite a bit of effort on your part. But it must be done, if you wait until after the property is in your possession, its too late to ask the seller to replace that broken furnace.

You should work closely with the seller but take his word for anything. Only trust what you have in writing.

In my case, most of the house that I buy aren’t bought from the owner. They have been reposessed by a bank, the Veteran Administration or HUD. But I still do due diligence by having my friend/handyman go through house with a fine tooth comb. He knows more about the house repair than anyone I know.

There are two key components of due diligence process:

1. review of books and records
2. the physical inspection

A thorough look at these two components should allow you to determine if the property is worthwhile, priced right, and your goals. The due diligence is your last opportunity to either complete the transaction, or cancel the escrow, have your money returned, and look for another property.

Next post: Reviewing Books and Records

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Why Buy a House Instead of Renting & How to Buy a House that will Make Money

Friday, January 25th, 2008

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Why Buy a House?

Owning a home is one of the best investments anyone can make. Don’t expect to get rich by being a renter. The U.S. Federal Reserve Survey of Consumer Finances reports that in 2004 the average renter had a net worth of $4,000 while the average homeowner’s net worth was $184,000. In addition, homeowners have the comfort of knowing that they are building equity and living in a place that belongs to them. They can plant trees, paint rooms, build a wall, and no one can stop them, or raise their rent. If you rent for 30 years at $1,000 a month you could have spent over $350,000, and wind up with no house.

Ways to Buy a House That Will Make You Money

1. Buy a house where you can add value, such as fixer-uppers. Some sellers don’t bother to clean up properties before putting them on the market. This often requires them to accept a lower price, and allows you great ammunition to negotiate a better deal. Painting, replacing old carpeting, replacing old appliances or doing some landscaping, are things that most people can easily do to make a fixer-upper look like Cinderella.

You can also buy a property with enough land, and with zoning, to allow you to build a rental property in the back. Or, you might have a larger house where you can convert one room, one section, or a basement, into a rental.

2. Buy when others are selling. When the economy is slow, and unemployment rates go up, people purchase fewer houses and prices go down. You will have less competition from other buyers and more houses to chose from.

3. Buy from motivated sellers. If you view enough houses, eventually you will cross paths with someone who is highly motivated to sell. They may need to move, or need cash for a new house that they bought before they sold their old one, or for a variety of personal financial problems. How do you know if someone is motivated? Ask a lot of questions!

4. Buy during the holiday season when sales are slow. Hardly anyone looks to buy a house around Christmas time. It’s another opportunity to buy with less competition from other buys, and from motivated sellers.

5. Learn to negotiate. One good way to be a good negotiator is to be in a position where you don’t have to buy. Be patient and be willing to walk away from a deal that doesn’t suit your fancy.

6. Buy in a nice area. If you buy in the right area, you greatly increase your chances for a lifetime of increasing equity in your house.

Here is a version of this article that includes book recommendations I posted at Amazon.com entitled Home Buying for Advanced Dummies.

Info on Terry’s Book

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