Let the RE Investing Show Go On

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In my latest acquisition, the investor that I represent as a property manager wanted to meet one of the tenants. So I said OK, and we have that scheduled for 11:00 AM this morning. This tenant is a good tenant, but is a little anxious, thinking that his rent may increase substantially with a new owner. This is very understandable, and is why I met with him myself last week just to calm his fears.

But, my investor wanted to meet him before I signed a new contract with the renter, so we will be going over there in a few minutes. I hope to get the lease contract completed and signed today, and get our first month’s rent in as the new landlord. From what I see and what I have been told, this renter is a good one. But as you may know, the old “Put your money where you mouth is” applies here. Once we get a couple of month’s rent on time from this renter, then I will become a believer.

The other new renters that we currently have are still in default. Friday I will be getting with them to collect the rent, and inform them of the contract penalties that will be applied next month if they are late again. I will report in tomorrow on what transpires today…


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Mortgage Origination Fees are Hogwash

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I have done several real estate deals now, all involving some type of mortgage or commercial loan. I have only worked a deal once (that I can remember) where I allowed the mortgage broker to charge an origination fee. Origination fees are absolutely garbage and are just additional money that the broker or agent gets to keep.

If you think this is where mortgage agents and brokers make their primary money, you are sore mistaken. They get a spread when they sell the loan to the larger institutions, usually get an application fee, and other minor fees for processing the loan. So if they are charging you an origination fee on top of all of that, get out of Dodge, it is not a company or broker that you want to be dealing with to obtain your mortgage.

The one advantage to some mortgage brokers that charge origination fees are that they should have some pretty good incentive to provide timely, precision service (the one case that I can remember working with one that charged the origination fee provided terrible service, and was the most despicable transaction I have ever been privy to). However, there are many mortgage agents out there that will provide good service without the origination fee. My banker will actually show up in person to a closing, which is unheard of in today’s market, and he didn’t charge an origination fee either. Do your due diligence, and you can find someone local that will provide you this level of service.


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Stay on Your Renters, They Will Try to Sneak Things Past You

Real Estate Investing 1 Comment »

Being a property manager isn’t as easy as you might think. In my most recent deal involving the acquisition of 4 units, the current renters were aware of the change in ownership/management. So one of the renters took the opportunity to be late with their rent payment. Under the existing contract, their rent is due on the 1st, with a grace period until the 3rd. Well, the renter told me that they will not be able to pay rent until Friday of this week, that’s the 11th of the month.

Ridiculous, huh? Yes it is. And they expect to not have any late charges either (I’m just guessing, but I don’t imagine they are going to step up and pay the late charges without me asking or demanding for them). This is the sorry thing about buying into a property that already has renters. If the renters have any clue about what is happening, they may try to use it to their advantage.

I have decided in this situation not to create a first impression of a “tyrannical landlord”. I am going to collect the rent on Friday, inform them of the are penalties outlined in the contract, and if the problem happens again next month, I will enforce all late fees, etc that the contract allows. It just stinks as a new owner that there are people out there that will take advantage of every inkling of an advantage. Anybody else have any good rent stories? (You can post them at the bottom of the page).


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Aftermath of a Real Estate Closing

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Ok, so now we have the 4 units. But now comes the hard part, getting the repairs done and getting settled in with the new renters, or should I say, getting the existing renters settled in with a new landlord. Today, I got a call from one of my renters, concerned that the rent would increase, and wanting to talk to me about it. I had previously talked with my investor, and he did not want to increase the rent.

However, the previous owner was paying for the gas, and we intend to change the 2 units where this renter lives to all electric. So I informed him today that the rent would not be increasing, but the electricity would probably go up some when we change over to all electric. Our inspectors told us that it is a safety hazard to have a gas water heater in the bedroom closet, and that switching it to an electric water heater would solve the problem.

So for us the advantage will be that we will not have to pay for gas anymore. The renter was fine with that, but requested that we paint the outside of the house. As there are some other repairs that need to be done (and he would be ok with putting them off if we paint the exterior), I think it will be a good idea to comply with his request.

So now I will need to get in contact with my repair guys, and get some firm bids established to complete the work. The original numbers that I put together include some $15,000 in repairs, which I hope will be more than enough to cover the cost of the repairs. I already have a couple of estimates in, and it doesn’t look like it will top the estimated amount.


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Read Read Read Your RE Closing Docs

Real Estate Investing 1 Comment »

Well, on New Year’s Eve, we closed on our 4 unit duplex deal. So now we have the title, and will begin collecting the rent. This was a good deal, but even so, you need to read your closing documents. The lawyer, the banker, the seller and my buyer all missed an important detail - that the cost of the survey should have been paid by the seller. Luckily, I broke off from my family to come back home and be there for the closing.

This error would have cost my investor over $600. Not much money in the long run, but $600 is $600. Unfortunately, the hard work is not over. One of the renters is a section 8, so we will need to push through the paper work to get the transfer of ownership so that we can start collecting the government guaranteed payment. Further, there are some repairs that still have to be done, and the previous owner has to complete the installation of the new water meter, which is scheduled to be completed next week.

Overall, I am pretty happy with how this deal has turned out. If you are diligent, and follow through on your deals, you can make things happen. Get on my RSS list to get free, automatic updates to all the great information here at Personal Finance Resources.


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Some Good Personal Finance Habits

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I saw this post and thought about my community. This post has input from users around the personal finance internet community and solid steps they took to getting their finances in order, as well as links to other articles that would be of help. Check it out and let me know what your thoughts are.

read more | digg story


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Keep Plugging Until You Get to the Closing Table

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Docs, docs, docs. Lenders never seem to get enough documentation. And this was supposed to be a simple deal. Well, in theory, there are a lot things that are simple, but when you get down to actually doing it, things get a little hairy. My lender told me yesterday that they needed to have a copy of the insurance binder, a letter of good standing for the LLC that the properties will be listed under, and that the appraisal STILL hasn’t come in. So I went to work.

We had quotes on insurance costs already, so we went to the insurer and got them signed and paid. So the insurance binder was turned in the same day. So one thing got crossed off the list. But the state showed the LLC not in good standing because of a franchise no tax due statement had not been filed. So we got with the CPA, got the appropriate forms filled out and signed, and went down to the state comptroller office. But the office was closed that day for the Christmas season.

So that shot down our hopes for a Friday close. So today, I got the forms turned in, and the statement of good standing from the state, and faxed it to the lender. I confirmed with him that there was nothing left except the appraisal, which as of today, has STILL NOT been submitted. I wonder what my appraiser is doing…he viewed the properties 5 days ago, and still hasn’t put together the documentation. I guess we will see, stay tuned…

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Wrapping Up Your Real Estate Closing

Real Estate Investing 1 Comment »

With Christmas, it has been tough to get my deal on the 4 units “wrapped” up. I talked with the lender today, and he is missing the appraisal, the insurance binder, and a letter of good standing from the state for the LLC we will be buying the property through. My lender needs at least one business day after receiving all documents for review before going to the closing table. Tough luck, but hopefully it will only push us back to Friday before being able to close.

This is very common in the real estate industry. I met with the appraiser last Saturday to get the properties appraised, and figured all would go well. But it just sometimes takes a little time to get all the players together and finished submitting their paperwork. So today, we will need to go to the insurance agent, get the insurance finalized, and submit the insurance binder to the lender. Our lawyer is working on getting the statement of good standing from the state for the LLC, and hopefully will have that by the end of the day. Apparently, there was a franchise tax that the state was wanting, and we had the CPA take care of it, but maybe it hasn’t gotten all the way through the state’s processing procedures. As far as the appraisal goes, we will just have to wait for the appraiser to finish and get it submitted to the lender.

So we still a little work to do, but this deal is too good to pass up. And we have a good sum of earnest money invested in the deal that we don’t want to lose. ‘Til next time…


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Anyone Finding Any Good Real Estate Deals?

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No doubt about it, December is a great time of the year to buy into real estate. My current deal involving 2 duplexes is coming along nicely. We are hoping to close before the end of the year. This will be a real income booster to my investors and myself for the coming year. Merry Christmas, huh?

We were able to find this deal just by taking a peek on the MLS to see what was available. We were actually a month late in so doing and it cost us getting another duplex. I then drove the property to take a look, and found one of the owners, who was doing some yard work. This investor wanted to get out of the property rental business, and move on to other things. Fluke? Not if you are out there looking.

So here is your chance for feedback. Let me know how you are finding deals, or if you aren’t, what you are doing that could be improved on to find more deals. Just scroll down to the bottom of the page and leave your feedback. Thanks.


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Renegotiating During Your Option Period

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Its a tough thing, but sometimes a real estate deal looks good on the outside, but after inspection it just doesn’t cut the mustard. This is exactly what happened in our current real estate deal. We put 5 units under 3 separate contracts, and 1 of those contracts was for a single family home. The other 2 were for duplexes. Upon initial inspection, the inspectors shocked us with a repair number of at least $20-30k for the single family home. That number blew the cap on the deal, so we had to drop that house. But the other 4 units did not need as much in repairs, and still fit the equation.

The problem in this deal was that the single family home and one of the duplexes shared a water meter, and thus, the sellers put a clause in the special provisions section of the contract that forced these two properties to sell together. This prompted a good chance for renegotiation. So we asked the sellers to pay to put in a new water meter, and we would go through with the purchase of the duplex. Their counter was that they would pay for the installation of the meter itself, and we would pay for the labor to separate and re-route the water supply up to the meter. We agreed, and thus, we were able to save a very strong cash flowing property for minimal additional expense.

The key thing here is, ALWAYS ASK! If you can salvage a deal with some additional concessions from the seller based on unforeseen circumstances, it is always worth asking. All they can say is no, and you can move on to the next deal. If they say yes then hey, you just saved a deal you invested time and money into.


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