Personal Finance Resources

This is going to be short and sweet today. I ran across a potential deal about a week or two ago, which I am following up on, for four duplexes about a block away from where I already own/manage property. But these properties were not on the market, there is no MLS listing, for sale by owner sign, advertisement in the paper, etc. I found these properties through a tenant connection, which I will explain in a minute.

Before I move on, I want to give you some help in finding your own deals. I have talked about some of the different types of properties to look for, that would typically be sold for less than market value. Properties like HUD repossessions, and  multifamily properties are some examples. The tip I am interested in discussing today involves one of these strategies - Farming Markets.

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For everyone out there that is intimidated by negotiations of any kind, this should be a help to you, especially if you are looking for real estate. Some of these real estate negotiation tips will be basically negotiating tactics, while others will be very specific to getting the price down. Often, real estate agents are the primary negotiators, and frankly, I haven’t seen any good ones yet. All I have seen is this typical scenario:

Buyer’s Real Estate Agent:

“Mr. Buyer, the seller has said they won’t go below $X. What do you want to do?”

Great negotiating tactics huh? My thought exactly. And yet, this is very often the case for most buyers. Again, this is another testament to how bad realtors are, as a whole. But if you understand some basic principles about negotiations, you can use them to turn the tables your way. Let’s look at some of these principles:

Knowledge is Power

No, I am not talking about “The More You Know” commercials on TV. However, this principle is the most powerful principle in real estate and in any other negotiations. It demands listening and research, to understand what is motivating the seller to sell, what the property is worth, what repairs need to be done, etc. Let me just quickly touch on a few tips you can use to gain the advantage in your negotations:

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I don’t have a whole lot of time today to share with you all that is happening (I have a couple of real estate appointments setup for later today), but I wanted to give you a quick update. I was able to successfully remove a slow/non-paying tenant out of one of my investment properties. A few days later, I was able to lease it back out. This is the first tenant that actually read all the through the contract, and point out some issues that she had with it. This came as a refreshment to me, in that most people don’t read it, which is not really the problem, the problem is, they don’t think they have to abide by it, or they don’t care. So hopefully with this savvy renter, there won’t be any issues with keeping up the property, or paying the rent on time.

Also, one of my appointments today will be with someone who is looking to lease out my doublewide just north of Belton. As you may remember, I had to ask the previous tenants to vacate due to non-payment of rent. It is amazing how many people don’t care about paying their rent. But, I digress…anyways, these people sound like they might be more stable renters, and I have introduced a price slightly above what the previous tenants were paying. So we will see what we can do.

All in all, things are kind of in a lull, but with the potential to ramp back up. Come back soon for more information on real estate investing and personal finance.

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Well, here we are again, with me giving you information on how I am getting burned, so that you won’t get burned. Just last week, while working on an addition for one of the duplexes we have, we had some materials and tools walk off the job site. Now, understand that I am in Belton, TX, and theft in the historic district where we live (and also, where this duplex is located) is extremely low. Often, I leave the door to my shed wide open, and have not ever had anything stolen yet. But, even so, we had some 2 x 4 studs and 1 x 4 pieces of lumber that walked off the job site in addition to a ladder, and pry bar. This is very disturbing, considering I did take some preventative steps prior to the theft.

When the delivery truck showed up on the job site, I had them deliver the materials into the back yard of the property, that was not fenced, but did however have many trees, a debris pile and other obstacles that prevented easy access by vehicle to the job site. So, these crooks must have gone on foot to retrieve the lumber, and carry it out to their vehicle. It is a sad day we are living in. So, since we don’t have a secure area to place the materials (other than inside the duplex) we have resorted to placing them on top of the roof. One other note that I will make, it is interesting that the materials didn’t disappear until I was on business out of town. So here are a couple of practical, but hopefully obvious tips:

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If you are strapped for cash, but have a little that you would like to invest in real estate, than the use of an REIT, or real estate investment trust, can help you gain an entrance to several different pieces of property at the same time. This article will give you some basics about this particular type of investing.

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Here’s the situation. We have a duplex that is 100% occupied. Now, it has an interesting design, and when I say interesting, I mean that it was designed poorly. It is a one story duplex that has pitched roofs over the outside half of the units, with a flat roof through the middle. What has happened is that the flat roof does not have a proper drip edge in the back where the water drains, and therefore the Masonite on the rear exterior of the building has rotted out.

Now, we had it in the plans to repair this issue…at some point. But, due to the insurance company finding out about the rotted exterior, they have issued a warning letter stating that we must do something about the exterior of the building or they will cancel the insurance on the property. So we have been working to secure a quote to fix the damages. But…

With the issue being forced by the insurance company, we see an opportunity to increase the value, and perhaps the rent that we can charge. There is a porch in the back of the complex that has exterior walls on three sides, and already has the full pier and beam foundation ready to go underneath it. So we are thinking about demolishing the deck, and adding a laundry room to each of the rental units. As they currently do not have a laundry room, it would be of importance to a renter to have this luxury, and with the added square footage, we might be able to charge more rent.

Problems with the repairs

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This is a good resource to look at when you are looking to get into real estate investing, or you are struggle with investing in this downward market. Check it out, it helps you to understand that there can still be a lot of money made, even though the price of homes are dropping rapidly.

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The typical lease purchase agreement involves a tenant that gets into the property like a normal lease, i.e. they have a security deposit and first month’s rent (if not last month’s rent as well) due and payable up front. They usually pay a slightly higher than market rate of rent, with a portion of the rent being credited to the purchase of the home. The term of the lease and the buyer’s price are determined and negotiated up front, and are all spelled out in the lease.

If the tenant exercises their option to buy at the end of the lease, then all goes as outlined in the lease. But if they fail to buy at the end of the lease, then the owner has the right to cancel their lease, and to retain all rent monies paid during the term of lease, including all monies that were to be credited toward the purchase of the home. Let’s take a look at a quick example:

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When I first examined property management fees, I thought that they seemed to be a little high for the work involved. But, over the course of time that I have been in property management, I have seen many different types of tenants and found that overall, the money charged to the owner is well worth it, probably too cheap. Consider the following costs and efforts expended by the property manager:

1. Advertising Costs
   Advertising is expensive. Just running an ad in the paper over the course of a month could run up a 3 digit bill. But further, many realtors have websites, with incur monthly costs as well as time and effort to gain exposure on the web. And what about the costs of signs and fliers? Truly, advertising carries a high cost.
2. Communication Costs
   In today’s world, a realtor almost has to have phone, internet, and email connectivity to be able to make a living. Most realtors go a step further and maintain their own website, in order to generate more exposure for their properties. So just the costs alone of these services tend to be high, and the time it takes to accept phone calls, check emails and voice mails can pile up quickly.
3. Office Costs
   Many realtors do not own their own office, however they pay an office rental fee to their broker for use of an office inside the realty. These costs tend not to be cheap, either.
4. Gasoline and Automotive Repair
   In times past this wasn’t as much of a problem as it is today. Today, many realtors are just getting scalped at the gas pump, and driving back and forth to your property and waiting for the no-call, no-show prospective tenant is extremely expensive. I have begun to call contacts just before I spend the time and gas to get to the property.
5. Ongoing License and Dues Costs
   All realtors have to pay for license renewals, and most realtors are members of a local board of realtors. Of these, many are also paying dues to have access to their local MLS (multiple listing service). Combined, these costs can add up to 4 digit per year expenses.
6. Tenant Maintenance
   This is the most costly for property managers. No matter how much screening is done to a perspective tenant, there is still no guarantee that the tenant will pay, or will take care of the property. As I have begun to manage more and more tenants, I find that a small percentage of the tenants costs me a ridiculous amount of time and money just getting the rent from them every month, not to mention the costs associated with cleaning up their messes.

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After having to evict my previous tenants, and looking at our business and personal finances as well as the market for homes in our area, I have decided to try renting or selling my mobile home. I think it is best to go ahead and provide both options to the market as a way of getting someone to take action sooner. I want to be fairly transparent with this series: I want to give you the details of how I bought in to this property, what has transpired up to now, and what will happen as I move forward. So, here is a rundown of how I got involved in this property.

Buying the Mobile Home

At the time, I had a partner in my real estate business, and we were living in a home that we had every intention of turning for profit. We had bought in at a good price, fixed the place up, and were enjoying it while we were waiting to sell or rent it. Well it came time to do something with it, and we ended up owner financing it. So now we had to find another place to buy. So I did the research and saw solid potential in a double wide on a 1/3 acre lot on the outskirts of town. So we did the math, and bought in to the property for $26,500. This was a very good price, considering most similar properties in the area were selling for $40,000 or more. We did the work to repair it, and built a 12 x 16 foot shed on the property as there wasn’t any storage available when we moved in.

Dissolution of the Partnership and Rental of the Mobile Home

Several months later, I got married. Further, my partner was engaged, and planned to marry his wife about month after my marriage. So it was decided for me to find another house and start my life with my new bride, and he with his new bride. All was well until he got married; his wife got sick for several months, and they finally moved to another state, where her family lived. So obviously, I couldn’t continue the partnership when my partner was not around to provide any help. So we dissolved the partnership and I rented out the mobile home for $600 per month. This was a nice income producer, considering my total PITI was around $350 per month. But then troubled arose…

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