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May 20, 2009 Now That's Funny
One night a few years ago I got the most unusual phone call that I’ve ever received at about 10:30 PM. I was soaking in the tub when the phone rang. (Yes, I have a phone in the bathroom.) Upon answering the telephone I found that it was a collect call from the county jail. I accepted the charges because they didn’t specify who it was. God forbid, it could have been a relative or close friend. Certainly, that’s what one would expect at that hour: a family member or close friend. I mean, who else would call at such an ungodly hour? You’re right, a tenant. Worse yet, it was a tenant who I paid $50 to move the day before her eviction hearing just last week! She was one of those who insisted she would stay until the last minute. Consequently, I paid her to save the additional $40 set-out fee, my court appearance, and avoided the 5-days plus it takes after receiving the court judgment. Furthermore, I wanted to save the aggravation had she appeared with a free lawyer and/or a continuance. This was, indeed, the same tenant who left the unit with two broken windows and in a pig sty condition. I even paid her brother $40 to remove the unit from debris. Once the call was connected I could hear yelling and echoing in the background. It was indeed the county jail. She said, “This is ………., I know you’ve probably never did a favor for anyone or helped anyone out, but I thought that I’d give you a call. I have a check for $120 on me right now. My bail is $120. If you bail me out, then I will sign this check and give it to you right when I come out. (I found it uncanny that she was sitting on a government check for that exact amount!) First of all, everyone knows that when you ask for a favor, you want someone to do something for you that is inconvenient to them. That’s why they call it a favor. It’s a hassle. Furthermore, one does favors for those he loves or cares about their well being. Favors are a way of showing love, likeness, and compassion. Second of all, everyone knows that the absolutely last thing that you want to do when asking for a favor is to insult someone like remarking: “I know you’ve probably never done a favor for anyone or helped anyone out before….” I mean, everybody knows these two basic social skills. Right? Well, evidently not. Thirdly, when tenants are evicted, they hardly expect to have contact with that landlord again. Common sense tells them that the landlord wants totally rid of them and will ruin their credit for seven years. Although this tenant violated all three laws of common sense, apparently she saw something in me that only few can imagine. I’ve been known to even surprise myself sometimes. Just last month I wrote a tear-jerker article about how I helped a poor mother’s three little girls with bags of clothing and toys right before Christmas. Even I was teary-eyed while I wrote it. Maybe I’m not the landlord from hell after all. Maybe I’m just misunderstood. Maybe I am capable of showing love and compassion beyond the common man. Maybe I’ve changed after all these years of being robotic-like. I’ll bet now you think I’m a wonderful human being and you’re wondering what I said to that woman. I replied, “You’re right, I don’t do favors for anyone. Sorry. Good-bye.” I abruptly hung up. Now that’s funny!
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May 20, 2009 Now That's Funny
Preparing units can be disconcerting knowing that whoever moves in will do their share of damage. Repainting units every time tenants move, along with insuring that everything is code, is one of the repairs that I always make. In fact, even if a tenant has only been there two months I always repaint. My idea of painting and touching-up is most assuredly different than that of most landlords’ perspective. When I first purchase a unit and it becomes empty, (I never paint when an apartment is occupied) I will paint all walls and ceilings flat latex white. This not only serves as an easier way to paint, saving time from cutting in the color on the wall from the white on the ceiling. Owners must be aware that there are over 300 shades of white, so the key is to maintain a consistent paint brand and grade. This concept is paramount For example: After a tenant moves after only being there two or three months, there really isn’t much that needs to be painted. It’s almost borderline as if to paint, or not. Other times, the lower walls, handrail areas, and the strip above where the couch was make the unit look dingy and calls for some attention. Whenever you’ve had a tenant for many years, you must repaint the whole shot. When touch-up is called for, my magical touch-up is recommended. I can paint three bedrooms, one bathroom, living, dining, and kitchen in 35 minutes and with a half gallon of paint, and I won’t even use a brush! Consider that I am matching perfectly the color of paint. Further, the only dingy part is from baseboard to about three feet high. Imagine that I get a paint roller and pan and I race through the apartment. Six large rooms, bath, and hallway are done in no time flat. To further complicate matters there are mitigating circumstances. Those which are out of the ordinary do require drastic measures. I had this one efficiency that was always so dingy looking from tenant nicotine that made touching up impossible. The problem was that the paint color had actually changed due to the tenant smoke. My son informed me that he had experienced serious wall and ceiling stains due to waterbed damage. He stated that he took green porch and deck paint and it looked great. I visited the unit and it looked great, other than making the front room a bit dark. We agreed that since my problem was so severe, he would paint my efficiency a porch-and-deck brown. He called up laughing after the job was done. He proudly announced that he not only painted the walls brown, but the ceiling as well. I was concerned and couldn’t drive over there fast enough. As he unlocked the door and I looked in, I couldn’t believe it. We both laughed so hard I lost my breath. I envisioned never having to paint the unit again. He remarked that the dark color would even hide the roaches. In fact, I haven’t repainted the unit in over five years, and that includes many, many move-outs. Earlier this year I was giving a speech in a workshop where I told this tale. Someone in the audience announced that he had the exact same problem, only he took a different approach. He took a paint chip of the nicotine stained wall and matched the color perfectly at the paint store. He painted all the walls and ceiling that awful dingy-yellow color and it resolved his problem as well. Now that’s funny!
May 19, 2009 Investment Strategy
So many times I encounter axioms that people hold onto. I came across one the other day where it stated, “A part of success is learning how to deal with failure.” It’s like one must accept failure as a common occurrence. I’ve got a better one: “A part a success is learning how to avoid failure.” Start thinking positive. Hang around positive and successful people. Stay away from losers. Get and keep the frame of mind of a winner and you surely will become one!
May 17, 2009 Investment Strategy
No matter what I do, it seems that all that I eat, sleep, do, and think is about real estate. In other words, regardless of what I’m doing, somehow it is converted into real estate terms and analogies. It’s weird, I know; I can’t do anything without that incessant, and sometimes aggravating, diversion. It’s not always bad, though. I have a business mentality, and often it is, indeed, mind stimulating, invigorating, and healthy for my real estate mindset to think in such ways. Years ago, I took my little six-year-old to the community pool for something for her to do. For the previous three weeks before that, she’d been taking swimming lessons for 45 minutes per morning, and has elevated to an advanced swimming class of Level-3. I saw her dive off the low diving board many times into deep water. Near the end of her lesson, I cringed as she dove off the high dive. She appeared to do quite well. I worry just the same, though. She’s only six, and she’s so small. As we entered the pool area, I headed for the shaded umbrella table area for a business meeting with a friend. My daughter dropped her swim bag, removed her shoes, and donned her goggles. As she prepared herself, I thought of how all the previous times we had gone to the pool I had her remain in the shallower, three-foot section. There she would be safe and easy to watch. I contemplated whether to say anything to her or not; she has, after all, been off the high dive. At that moment I decided not to say anything and to let her run loose. She immediately darted toward the mid-section of the pool, which is between the three-foot and the deepest sections. She jumped in and played alongside the edge of the pool. Shortly thereafter she was doing handstands in the center of the pool. After a bit she got out and went over to the low dive for numerous jumps. Near the end of our outing, she played with friends in the shallow end. Indeed I had made the right decision. Why confine her? Why tell her of her limitations when she can decide for herself? Evidently, she had not exceeded her limitations where I thought she might. In fact, never would I have predicted that she would roam safely throughout the pool area. Granted, I watched her, but I also watched her succeed. When I got into real estate, many loved ones assured me that real estate was a mistake for me. Everybody had valid horror stories that would convince most that real estate was the wrong direction. My father was the most critical of all. He reminded me of how I had stripped my bicycle pedal as a teen, how I hadn’t ever fixed anything in my entire life, and how I hadn’t any tools! “Property owners need to fix their apartments. You can’t fix anything!” he would say. He was right, you know. I couldn’t fix a leaky faucet if my life had depended on it. Not so surprisingly, there was no way that I could even change an outlet or light switch, let alone a light fixture. My dad was right; he knew my limitations. Real estate was not right for me. In essence, I didn’t have a toolbox, nor knowledge to fix anything. He tried for weeks to discourage me and to point out my shortcomings, which were obviously many. (As you now know, I didn’t listen to him and invested anyhow (Not to spite him, but in spite of him). As I watched my little girl move about the entire pool area, I was pleased that I withheld my advice and good intentions. Although I was concerned, I let her discover her own limitations for herself, which far exceeded my initial assessment. Today, she found that she could move about the pool like the big kids, and grew in ways that she is unaware. Had I intervened, she would have been held back by my good intentions. I was pleased with myself that I allowed her to grow with experience and confidence. Your family and friends want the best for you as well. They want you to succeed, and more importantly, they don’t want to see you fail. Undoubtedly, they will tell factual tales that will horrify you, and hopefully for their sake, prevent your investing in real estate. My advice is to listen to their stories so as to prevent the same thing from happening to you. Read, listen, and learn everything you can to educate yourself and develop strategies and techniques before the purchase of that first piece of property. However, don’t allow others to impose limitations on you; discover limitations for yourself. Follow your dreams, and don’t succeed to spite them, but in spite of them!
May 15, 2009 Now That's Funny
There are students, and then there are those close relatives who ask advice without the courtesy of buying a home study course. That’s fine, some relatives think you owe them a living and don’t want to spend the money, even for the sake of changing their lives. At real estate investment meetings, where I was president, at speaking engagements where I sell products, and over the phone where investors call, I give free advice even to those with no money or who are on the fence whether to take that next step or not. Most of my freebies only converse with me a time or two and then realize eventually there’s a price to be paid for information. There is one exception, though. I’ve been giving advice for two years to a relative who constantly asks for advice, but has not once taken it. At this moment, I don’t know why I even accepted her calls. It all began a little over two years ago when she got the urge to invest in real estate and to change her life. She hated her job and wanted to ultimately work for herself. Certainly, I could relate to that! After all, I’ve lived it. Early on she would tell me of a property that she was interested in and I would tell her not to buy it because the price was above retail, or because it needed too much work for her. She would buy it anyway. Problems would arise either through poor cash flow or repairs and, hopefully, my future advice would bail her out of her latest fiasco. She called about 6 months ago to explain that she had another situation. Her problem was that a tenant had moved, giving her the 30 day notice required, painted the apartment at his expense, steam cleaned the carpets, and left it spotless. How was this a problem? She wanted to know how she could beat him out of his $750 deposit! When I explained to her that she was wrong and needed to get out of the landlord business, she stated: “You never give your deposits back!” I explained that when I don’t return a deposit, it’s because back rent, or damages, were due. Once she called to tell me that she had a lawn that needed mowing and what she had done, seeking approval. She stated that while the husband was out of town, she confronted his wife on the front porch, demanding that the lawn be mowed immediately. When the wife argued that her husband did all the mowing, she offered to mow it herself for the tenant for a fee. When asked by the wife as to the amount, “Fifty dollars,” she replied. The tenant declined. Can you imagine the fury the husband felt when arriving home from out of town? His wife was picked on by a mean landlady. In the past, I’ve written tales about landlords being mean spirited. Not knowing who she was then, you now know. About 18 months ago she called me about a leaking roof at one of her newly acquired buildings, of which I advised her not to buy. (Her purchase price was $10,000 above wholesale.) I told her to repair the roof leak at once because when it last rained, it dripped on the tenant’s bed along with a handful of drywall. I informed her that at this early stage, perhaps a patch job could buy her some time. I gave her two names of roofers who both reported back to me that they both had, indeed, given her estimates. I simply assumed that the roof had been fixed. About a month later she telephoned again to discuss other scenarios. I asked about the roof leak because she hadn’t brought it up and I was curious as to what had happened. She yelled that I told her to ignore it and not worry about it. I told her that was ludicrous. I had even referred my two roofers! I again advised that she better fix it immediately to avoid a lawsuit. She said that the tenant was moving out anyway and it didn’t matter. A couple of months ago, she telephoned me at midnight, explaining that the entire ceiling had caved in and wanted to know what to do. I told her that she should have fixed the roof a year and a half ago and I didn’t want to discuss it any further, particularly at midnight. The conversation came to an abrupt halt. To make a two year history short, she bought everything that I advised her not to and major problems arose from every deal. Financial disarray, poor cash flow and needed repairs without the money to make them, were the cornerstones of her real estate investing. Nothing made money. Everything suffered losses. At the beginning, she had a nice home and retirement money set aside. Now she has no retirement established, nor does she live in that nice home anymore. She now owns all that mistake ridden rental property and resides in a trailer. She called two nights ago discussing landlord woes and then abruptly announced, “I’m writing a book!” Surprisingly I replied, “On what?” She bragged, “On real estate investing. There is so much that I know that isn’t anywhere in anyone else’s book. I’m already done with five chapters.” She then asked, “Can you help me find a publisher?” I was astounded. I’m sorry, but shouldn’t there be some element of success before advising others? Is the goal for novice investors to go from rags to more rags? I doubt it. I stated that the last time I was on the phone with my publisher she had joked about a writer who had called her because her publishing company had a book at the bookstore just like the one that he had written. The writer couldn’t understand why she wouldn’t want another book on the same topic. I assured my writer/investor/relative that my publisher already had a landlord book. Further, I added that whomever she contacts would want her credentials/experience, which has made her an expert. She couldn’t get off the phone fast enough. I recalled how my publisher flew from Oregon to visit with me and confirm my background and expertise. I visualized someone from New York flying in to Columbus to sit in her doublewide to maul over all of the money she’d made! Don’t get me wrong. I’m not opposed to anyone writing a book, or living in a trailer. Further, I’m not trying to set limitations on her. What troubles me is that, if packaged appropriately, someone could take her advice seriously, and that would be quite a disservice to the reader. To that, I am opposed. I can’t help but wonder what she’ll entitle her landlording book. Here are a few titles she could use:
Learn How Not To Invest in Real Estate
From Rags to More Rags in 90 Days
Live in a Trailer by Christmas
Maybe there’s a place for her in infomercials. Certainly, she would epitomize what we typically imagine their knowledge base and experience to be. As I hung up the phone, I predicted that she probably would no longer call for advice. I also realized at that moment that was the end of my advising her if she called again. She was the expert. Why should she waste her breath on me? It’s amazing how she knew-it-all the whole time anyway. It just took me to bring it out in her. Now that’s funny!
May 14, 2009 Investment Strategy
We all have excuses for failure. The only difference is that some choose to use them as a handicap while others choose not to. In other words, losers use excuses where winners overcome objections and move forward. It’s unbelievable at how many people have remarked in the last three months about the reason that I do volume is because of the contacts that I have created over the last 18 years. Their excuse, upon my handing the course to them in person, is that it will be harder for them because of their empty stable of contacts. What surprises me is their defeatist attitudes and excuses without even beginning the course work. I submit to you that the only thing lacking is education, experience, and confidence, obtained through experience. Consider this, about every 60 days I have a whole new set of buyers and sellers. For the most part, these are people that I’ve never met before. Granted, I first go to my tickler file for quick and easy sales. Yes, I contact recent buyers to buy more properties. But if the bulk of my buyers and sellers are new to me, doesn’t this dispel the notion that you will not be successful because of the lack of your networking base? It should. I agree that it will take a good three months to evolve into a rhythm whereby you create new birddogs, referrals, and partners at a regular base. People lose interest. After a couple of months all of these folks need to be replaced with new contacts. Indeed, the more you contacts you create, the easier they are to create. Nothing beats education and experience. The positive note is that once you’ve developed the technique of networking, through experience, you can have the deals that I have and make the money that I do. Leave the excuses for the failures and for those who are afraid to grow with new ideas. Overcome this objection and move forward. Get educated, get experience, and get some money!
May 12, 2009 Investment Strategy
Just about everyone I encounter wants a serious job or career change. The reasons vary from financial considerations to simply a strong desire to work for themselves. They see my lifestyle and interpret for themselves what I do and what I’ve done to achieve my success. What they perceive is quite simple: I make the right investments and I make money. It’s real simple, isn’t it? What if I put that simplified analysis to their jobs? They get trained/educated, they punch in and punch out, and they get paid on Friday. I contend that those who decide to go for the career change to real estate, with this perception, are putting themselves behind the eight ball and have a rude awakening coming. The rude awakening will be a result from lack of thought and preparation. The preparation for a career change goes far beyond one reading books and memorizing home study courses. Don’t get me wrong, establishing strategies and techniques are paramount to succeeding in real estate. Getting oneself positioned for a career change is as equally important. For example, flat out quitting your high paying job without lining up your dominoes is a big mistake. Investors should assault the real estate market with strategies that create additional income and net worth, so that when the job is terminated, income continues. For example, an investor could make $60,000 on a job and an additional $60,000 from real estate investing part time. This is where one could enjoy an income of $120,000 for awhile, whereby he could pay off bills and further get situated before quitting his job, forever. It’s not simply a matter of desire and ability, but a matter of readiness for the job and income change. Why quit your job too soon and needlessly put yourself behind the eight ball? True, big money can be made in real estate. I’m testament to that. True, I also quit my job at the drop of a hat. However, I had only a low paying job that could be replaced any day of the week. For those like me, it’s of no consequence. It’s for the others that cause concern. Life is difficult enough without suffering losses and setbacks. Keep your wits about you and engage in deliberate planning and preparation before quitting that good paying job. Real estate is sweet, but only for the few who are poised for success.
May 9, 2009 Investment Strategy
Invariably, we all find ourselves in predicaments, some self induced, others not. For example, your car could overheat on the way to work without any advance warning. However, if the fan belt had squeaked over the last two weeks and snapped on the way to work, that would be something that could have been prevented. Of course, real estate is no different than anything else. It has its own situation comedies that sometimes are and sometimes not self induced. This article, however, will focus on a self-induced type scenario that puts investors behind the eight ball. Perhaps a bit of preventive maintenance is in order. For two months I’ve been talking with a local investor about buying wholesale and how to accomplish that feat. Realistically, its not that easy unless investors pay due diligence and bide their time. I now fully understand why they say, “Patience is a virtue.” Over these past two months he has dropped by countless time at my apartment complexes for one-on-one communication. His dropping by is the good news. Speaking to others about real estate is the art of networking and the essence of buying wholesale. So that is not the issue. The problem is that we’ve always talked about the same piece of property! Every time I’ve heard the story, I’ve consistently came to the same conclusion: “Don’t buy it. Find something else.” It all began with the honest interpretation of a novice investor. Houses in the neighborhood retail for $75-80,000 in fixed up condition. This house is quite run down and all real estate agent showings have not only brought no offers, but very negative comments about the condition. My investor friend stated that the house was two doors down from the one he lives in and it would be a real convenient investment. I advised that $45,000 would be a generous offer. In time, this deal has grown to desperate proportions. It’s now worth every penny of $90,000 and it needs very little repair! He now has it in contract for $80,000. He’s so excited, he can’t wait for it to close. What a deal! It’s so convenient. He can work his day job, drive home, and literally walk two doors down to work on his investment. I’m of the opinion that most investors buy one bad investment that goes sour and then they get out of the business, never to return. It takes due diligence to find good deals and it takes a great deal of patience. New investors get in a hurry to get their feet wet and to get into the business—–right now! Investors should bide their time and get their picks and shovels out and dig deeper. My newfound friend will be one of those. Although I’ve consistently advised against its purchase, he’s moving ahead with it. He dressed the deal up the best he could to win my approval because it was important to him. Even dressed up, the deal is bad and it will, guaranteed, sour. Why can’t he move on to something else? There is nothing else. He’s found no other deals where he could move on to. This is convenient as well. Has this investor put himself behind the eight ball? Is this one of those predicaments that could have been prevented? Are his two biggest mistakes lack of patience and lack of due diligence to find great deals? Yes, yes, and yes. Are you to be the next investor to get in and get out? Time will tell. Become knowledgeable, confident, streetsmart, and patient. Furthermore, for me, making money has always been inconvenient.
May 7, 2009 Investment Strategy
Investors often ask if I’ve ever had to foreclose on notes that I’ve created. It is their biggest fear. It is fear of the unknown, so to speak. It is fear from what they’ve heard about. It is fear from those lingering horror stories about foreclosing on the guy who gives you a hard time and makes you wish that you were dead. Most of all, it is fear from losing money. Those who know me find me the same way, indirectly. They understand that if I play cards all night and lose, I want to die. I hate feeling like a loser. It’s weird. When I spend $5,500 at Disney World, it’s OK. When I lose $20 at cards, it’s not. Some things, like this, are beyond me. However, my perception of notes are altogether different. Notes are a business. Until now, all of my notes have been a winning proposition. In other words, I have yet to lose money on my notes. Granted, I have taken less than what I had expected in some cases, but I have yet to lose money on any of them. Notice the buzz words “Until now.” What exactly does that mean? It means that I have a foreclosure in progress at this time. My attorney filed in December ‘95 or January ‘96. We’ll address this issue momentarily, but first allow me to address “I have yet to lose money” first. If you buy a home for $100,000 and put $20,000 down, you would have real money in the property. Furthermore, if you paid down on the loan for a number of years, you used real money as well. Let’s say that you now owe $70,000 and you want to move. If you financed the property for a nothing down buyer, you would in essence be loaning them $30,000 of your money. If he defaults and tears your house up, you would be in despair. And so would I. It would be understandable. You have 30 grand in the property. It would be a bad situation. Consider if he were obstinate as well. He would not move unless and until the bailiff set him out. You needed to hire an attorney and go through the entire foreclosure process and lose money at the same time. This is totally contrary to what FAST-FLIP is all about. FAST-FLIP is not carrying a note on your home. Furthermore, it is not about losing money. For the most part, my flipping is done with investing less than $4,000 and getting it all back at closing. I leave the closing with a note as profit, instead of cash. Do you see the difference in the example above and me? I have no money in my project. I have no nightmare. Now, let’s address and analyze my until now situation. I created a note for approximately $13,500 payable monthly for about $119. He will not make any further payments and is considering bankruptcy. Is this a nightmare? You still need more information? Allow me to provide further details. When I sold it was to two men, partners in a corporation. Not only was the corporation liable, but the two men personally as well. (Is it looking better yet?) One partner wanted out so the other released him. Does this release his liability to me? No, because I did not sign anything to that affect, nor would I. It is both men and their corporation who are the current owners as far as I am concerned. Where’s the nightmare? Where’s the problem? I see none. I feel none. I have no money, real money that is, in the project. Will I lose money? No!
May 5, 2009 Programs
This is the book Streetwise Investing In Rental Housing by H. Roger Neal®. At last, here is a common-sense guide to real estate investment. One that outlines an effective hands-on strategy for owning and managing profitable investment property. H. Roger Neal® will be releasing a second edition soon!
