Posts Tagged ‘rental houses’

Be a Master of Disaster – Ponder the big picture

Saturday, March 31st, 2018

“I am not bound to win, but I am bound to be true. I am not bound to succeed, but I am bound to live up to what light I have.” Abraham Lincoln, Speech in Peoria, Illinois, 1854.

“Mr. Lincoln retained through life all the friends he ever had, and he made the wrath of his enemies to praise him. This was not by cunning or intrigue in the low acceptations of the term, but by far-seeing reason and discernment.” Leonard Swett, Attorney

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 There are underlying rules that govern how life works. They may not always be readily apparent, but still they work. Yet to some of us, the fundamental rules of life often seem like a mystery. Like when the grandson asked Grandpa,

Grandpa

“How soon will I be old enough to do as I please?”

“I don’t know,” replied Grandpa. “Nobody has ever lived that long.”

A Slip but Not a Fall

After a loss to Stephen Douglas in the senatorial election of 1858, Lincoln slipped on a patch of ice in front of his house. His legs went out from under him, but he put out his arms as he fell, and caught himself before his body hit the ground.

“It was a slip but not a fall,” he muttered. His face was lost in thought and he repeated, “a slip but not a fall.”

“A slip but not a fall.”

To Lincoln, it was an omen that his loss in the senatorial election did not end his chance to be nominated for president. Lincoln saw that his chances were still strong to win the Republican nomination for president. It helped that his fame had spread like wildfire after the publication  of transcripts of the Lincoln-Douglas debates in national newspapers.

Mastering Disaster

In Abraham Lincoln’s world, virtually any obstacle was viewed as a stepping stone, or a lesson, to prepare him for the great things that he expected to happen in the future. If we view our own lives, like Lincoln did, as having meaning and purpose, then we too can frame all of our experiences (negative or positive) so that they always appear to be beneficial to us.

As Alberto Villoldo (The Four Insights) said,

“History is not what actually happened, but how you choose to remember it –that is, how it lives within you.”

Dealing With the Worry Monster

I am someone who sometimes (almost always) worries too much. For example, one

The worry monster

day the exterminator was coming to kill some ants in a rental house I own, at 10:30 AM. I couldn’t be there as I had a job as a substitute teacher that day, so I worried that the tenant would not be there when the exterminator arrived and I’d be charged for a visit.

I also worried that, if the tenant were there, the exterminator would overcharge me because I’m not there to supervise him. I worried about this all morning as I was teaching. And what  did all this worrying accomplished? Not much, except my stomach hurt because I’d been worrying so much.

If I look at the big picture, I would ask myself, “What is the worst thing that could happen?”

1) The exterminator arrives and the tenant is not there, so the exterminator comes back next week.

2) The exterminator charges a little more than usual, but he’s been there before so I know the standard rate. He can’t deviate too much from that.

At the end of the day, the worst that happens is I lose a few bucks and the ants get killed next week. No big deal. It’s not worth getting a stomach ache over. Everything will still get done. The world will not stop spinning.

I took a deep breath.

The long range goal for my rental houses is to hold onto them another 10 years, and then sell them to fund my retirement. As long as I have paying tenants living in the rental houses, the planets are lined up. Everything else, including exterminating ants or even a late rent payment, is just a minor detail.

I start to feel better when I think about it that way.

Patience Keeps the Worry Monster at Bay

Picasso

Pablo Picasso famously said,

“Only put off until tomorrow what you are willing to die having left undone.”

Yet, to be a “Master of Disaster,” sometimes it’s better to exercise patience, and to let things unfold at their own pace.

 

 

 

Upcoming Pesentations:

April 14, 2018. “Publish or Perish.” Pen to Podium Toastmasters. Hardesty Center, 1100 S. Alvernon. Tucson, AZ, 9:00 am.

June 5, 2018. “How Abraham Lincoln Used Stories to Touch Hearts, Minds and Funny Bones.” Arizona Society for Professional Hypnosis. Scottsdale Senior Community Center,1700 North Granite Reef Road, Meeting Room 7, Scottsdale, AZ, 6:30 pm.

October 20, 2018. How Abraham Lincoln Used Stories to Touch Hearts, Minds and Funny BonesPrescott Valley Public Library (7401 E. Civic Circle), 1:00 – 2:00 pm. Prescott, AZ.

 

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Related Links

Like Abe Lincoln, Be Prepared with a “Quip” or a Bit of Humor

Emulate Abraham Lincoln: Make Each Day Count

The “Secret” Daily Affirmations of Abraham Lincoln

Always greet everyone, no matter what they look like

Employ an Affable Lincolnesque Persona

Be a Generous Listener, as Abe Lincoln Was

Deflect Criticism with Self-deprecating Humor

Always Say “Yes”

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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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

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.

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Are You Big Enough to Pay it Forward?

How Take Care of Tenants for the Holidays

Thursday, December 15th, 2011

How should your treat tenants? Treat tenants the way that you would like to be treated.

Think about it, at some point we have probably all been tenants. When I was a tenant, I wanted the landlord to respond to my problems around the house, I didn’t want rate increases, and I wanted to feel that the place that I was renting was my home.

Most tenants are just like you and I, and they deserve our utmost respect, especially over the holidays.

Here are my 4 key tips on how to keep good tenants

1. Practice good communication

The desires of most tenants are fairly common, and easy to identify. Good tenants don’t like noisy neighbors, appliances or other items in their rental property that don’t work, and frequent rent increases. Fortunately, good communication can take care of most of these problems.

One great pet peeve of tenants is when they have landlords who are as slow as snails to respond to their needs. Does it take you 2 hours to watch the television show “60 Minutes”? Then maybe you’re too slow.

If you are slow to respond to your tenant requests for help, you will be perceived as uncaring. The reason for this perception is because you don’t have good communications with your tenants.

Any time a tenant calls me, I will almost immediately return their call. Even though I work a regular 8:00 to 5:00 job, I can still manage my rental house business by having my cell phone with me everywhere I go. This way, I can deal quickly with tenant issues that may become exponentially worse (like a broken water pipe), if I waited to deal with it until I got home from work.

A phone call is good when you need to quickly get in contact with your tenant, but if it’s not an urgent matter, my preferred means of communication with tenants is by sending them memos by regular mail.

For example, if the tenant is not keeping up the yard work around their rental property, I will write them a note in a calm and respectful manner identifying the problem. I make a reference to the section of the contract that requires them to keep up the yard, and asking them to take care of it. A phone call could easily turn into a heated conversation, but with a memo, the tone stays calm and the point gets made. And, I have a written record of what I have told them that I keep in the tenants file folder.

I keep our tenants informed about activities that I have planned for their property. I will send a memo out and let them know well ahead of time if I plan to do some preventative maintenance, on the roof, for example. If a plumber cancels an appointment, I’ll call them so they are not waiting around all afternoon for no reason. It’s really just practicing common courtesy.

2. Timely responses to repair requests

I’ll admit that when I first became a landlord in 2002, this was a low priority on my list. I used to cringe when I’d answer the phone and a tenant would be on the line with a repair request. I knew I was going to have to spend some of my valuable time and hard-earned money to deal with a maintenance request. I would sometimes let the repair linger instead of jumping right on it.

Now, I look at it as an opportunity to show the tenants that I take their problems seriously, and I respond to their concerns immediately. I have a busy schedule, but my tenants have busy schedules too.

Keeping my good tenants happy is my highest priority because it directly affects my profits. The less turnover I have in my properties the more money I make.

What has helped me to respond quickly is that I have accumulated a list of good repair professionals over time. I have plumbers, an air conditioner company, handymen, and other professionals that I trust, on the speed dial of my cell phone, so that I can get them working on a repair without delay.

3. Rental fee Increases

I know that many landlords feel the need to regularly raise tenant rental fees. For obvious reasons, this can stir up the resentment of tenants and may cause them to think about looking for a new property.

I don’t have this problem because the only time I raise rents are when one tenant moves out and another one moves in. My philosophy is, why give the tenants any reason to look for another place to live?

In the case of rent increases for extremely long-term tenants, I think that tenants don’t mind paying a fair and competitive price, as long as it doesn’t seem like an exorbitant increase to them.

4. Warm Their Holiday with a Gift (card)

I may have said this before, but it bears repeating, remember your tenants during the holiday. The holidays are a great time to build the relationship that you have with your tenants. I have established a holiday tradition of buying my tenants a gift card from Target.

Don’t be a Grinch, at the very least, send a nice card.

For more information on giving gift cart for tenants see:A Holiday Tip for Keeping Good Tenants

Are You Big Enough to Pay it Forward?

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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William Nickerson Says “It’s Never Too Late to Start with Rental Houses”

Saturday, February 19th, 2011

You are never too old or too young to start investing in rental properties.

Take it from William Nickerson, author of How I Turned $1,000 into Three Million in Real Estate – In My Spare Time, who said,

“It is never too late to start, although fortune favors early starters. Each day of delay loads the dice against  maximum success. But I know of many successful owners who bought their first income property after retirement at sixty-five. You can always start later in life.”

Age is Relative

To put things into perspective:

Thomas Edison invented the telephone at age 84;

Benjamin Franklin helped in the writing of the United States Constitution when he was 81;

Frank Lloyd Wright designed the Marin County Civic Center in California at age 88, and;

I started buying rental properties as a mere child at age 47.

Too Much Work?

I have a friend who retired when he was 65, but he had to take a job at an Arby’s fast food restaurant to help make ends meet. I asked him, “Why didn’t you just buy a few rental properties before you retired?”

He replied, “It’s too much work.”

Too much work?

Which is more work, being trapped in a restaurant 8 hours a day doing menial labor, or having free time all day, and cashing rental checks once a month? Sure, there is some repair work every once in awhile, but you can hire a handyman to take care of that.

It’s Never Too Early Either

I’ve had young people ask me, “Is it too early to get started?” If you have the motivation and don’t mind learning as you go, there is no better time to build wealth and security than when you are in your 20’s. You don’t have to know everything to start.

I have a friend who got started at age 25. He bought a 4-plex apartment complex. He lived in one unit and rented out the others. He had a sharp learning curve in the beginning, starting off at an Elmer Fudd skill level, but after he had done it a year or so, he had his business operating like a Swiss watch.

Are you too young or too old?

It’s not about age. It’s about just getting started.

Calvin Coolidge said, “We cannot do everything at once, but we can do something at once. “

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5 Tips to Attract Tenants to Your Rental House Like Elepants to Peanut Butter(video)

Saturday, January 8th, 2011

In these 5 Steps you will master my secrets of how to drive tenants to your rental property. Learn which signs work best, where to advertise, and how to word ads and flyers so as to reduce unnecessary calls for information.

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.”

Getting Started with Fixer Upper & Rental Houses (Video)

Friday, September 10th, 2010

I think that buying fixer upper houses and turning them into rental properties is the easiest way to make money in real estate. You can do it in your spare time and still work your 8:00 to 5:00 job. And, rental houses can create a steady new income stream, that could even allow you to retire from your regular job, as I did.

This video which provides a general overview of the process for starting up a fixer upper and rental house business.