Recent Articles
H. Roger Neal® Pays Buyer’s Bills Off
May 5, 2009 Investment Strategy Leave a comment
Here’s an example of a sweet little deal that I sold awhile back. I originally purchase this 3-bedroom house for $19,000 and worked on it for 3 or 4 days. I haven’t had time to add up the expenses, so I will exaggerate the tally at $3,000. In total, I have about $22,000 total in the deal. This is a deal where this older man called me from my advertisement in the Sunday newspaper. He stated that he wanted $24,000 and wouldn’t take a penny less. He knew the value to be much higher. On the other hand, he had just inherited the property from an uncle, so he originally didn’t have his own money in the property. After a while of listing with an agent, upgrading the interior with paint and flooring, is the time when he contacted me. I drilled him for information that I could use against him. (Anything a seller tells me can and will be used against him.) During our initial telephone conversation, I asked if he were sick and tired of trying to sell the house through an agent. Further, I reminded him that although it was a nice house he had no showings. He countered by stating that there were other buyers in the paper and he would call them. I replied that I would possibly pay $19,000 if I liked the house and that he should contact everyone in the paper and call me last. He called back in 3 days stating that his highest offer was $18,000, but he would take $22,000, if he had to. I stated that my 19 wasn’t an offer, it was a number if I it was worth it. He kept trying to meet me at the house, but every time I refused. I bragged, “I’m a busy man. I have no time to meet you unless you state that if I want it you will sell it at $19,000. I won’t look at the house until you agree to it.” He wanted to get back with a couple more investors who he had called out of the paper, so we hung up. He called back in two hours and said the 19 would be fine. I raced out to the property and, needless to say, I bought it. The interior of the house was impeccable. It even had the swinging wood door to the kitchen and French doors between the living room and dining room. There were hard wood floors throughout with new linoleum in the kitchen and bath. What was left to do you ask? On the interior, it needed a 100 amp circuit breaker and outlets in the bedrooms; there weren’t any. The exterior of the house needed a paint job in the worst way. It looked dull and dingy. An electrician took care of the breaker box and my son used his paint sprayer for the exterior paint job. In less than a week the house was in tip-top condition. I placed my advertisement in the newspaper and began contacting former tenants. I showed the house to two former tenants and they both wanted it. The one who filled out the application first with a $25 fee got first crack at it. She had a housekeeping job with marginal credit standing. In fact, there were about twenty unpaid bills ranging from $45 to $250. She had absolutely no savings and no car. However, she did work regularly and she wanted the house. The house appraised for $55,000 and she got a loan through a mortgage broker for $42,000. Out of the $42,000 came $3,000 for the mortgage broker, all her past due bills were paid, and the gap between the loan to value. (These lenders only loan 65-80% loan to value.) Who gets the gap? Essentially, the buyer does in the form of equity. Lenders want to feel comfortable with an equity position. Why don’t I find a better buyer through a real estate agent? My seller tried that. Remember? How do you expect me to do volume and FAST-FLIPS with agents? You’re right. I can’t. I walked from the closing with about $33,500, netting me with over $11,000! There were no agents used with either buying or selling, no banks requiring down payments and rigid credit standards, and best of all, no serious rehab to contend with. What a sweet deal!
What Are Low Income Housing Tax Credits?
May 3, 2009 Investment Strategy Leave a comment
There’s been much discrepancy about when the tax credit program ends. This issue will clear that up and explain some of the specifics of that program. What does I know of tax credits? Certainly, I’m not a tax attorney, nor an accountant. However, in 1993 alone I received tax credits on four different projects. I’m a national speaker and author, but more importantly, I am an Investor. In the beginning of President Clinton’s term, he signed into law a permanent provision, an unending extension to the Low Income Housing Tax Credit Program. The Democrats listed this law as a budget item. It passed; it’s law. It will take an act of congress to end the tax credit program. As unlikely as it seems, based upon congressional ineptitude, it’s possible. My advice is to get on board with your tax credits and not wait too long because you could lose out in the long run. What Are Low Income Housing Tax Credits? They are credits granted in exchange for investors, both public and private, for rehabilitating or building rentals for low-income families and for restoring historic structures. (This book will focus entirely upon rental units.) The credits are subtracted dollar for dollar from the federal tax returns of both individuals and corporations. In other words, rather than the typical deduction method, the $2,000 in credits are actually subtracted
from the amount owed to the IRS.
Federal Trade-Off:
In the 80’s, the federal government extended the depreciation schedule increased from the 19 years to 27.5 years, except this time there was a trade off. Those investors who rehabilitate historical buildings or low income housing units would get tax credits. Credits are not a deduction, rather a dollar for dollar credit that you subtract after calculating taxes owed. In other words, if your taxes due were $10,000 and you had $3,000 in credits, you would only send in $7,000! The problem is that the application itself is so thick that it is discouraging to even flip through. You can only imagine figuring out how to correctly fill one out. (Most applications are in the millions of dollars. Small projects are few and far between.) If necessary, you could call your state agency and ask questions, and even attend seminars offered and conducted by the state. At the end of Chapter 2 of my book, you’ll find a list of all the state housing finance agencies. The objective is to attract investors for the purpose of renovating and making up-to-code rental housing so that certain individuals have access to decent and affordable housing. In theory, there will be fewer boarded-up buildings and more housing for low-income families. In reality, it seems to be making some impact based upon more than 35,000 units integrated in the program in Ohio alone between 1987 and 1995. Applicants include private investors, public, and non-profit organizations. In Ohio the pace as of 1995 is between 5-7,000 new units annually.
Two Low Income Tax Credit Avenues:
There are two facets of low income tax credits: those involving application for repairs only, and those for both repairs and building costs. If you just want to buy a tenant occupied building and make updates in furnaces, circuit breaker boxes, roofs, kitchens, or baths, it’s plausible. You can work around good tenants. There is a minimum expenditure of $3,000 per unit on all non-cosmetic improvements. You can easily see that one furnace, a new roof, updated electric would easily surpass $3,000. Afterwards, simply make application for the repairs only. The other and more profitable aspect is to find a boarded-up building, or one that will be vacant at closing, and apply for credits for both the repairs and building costs. The agency will frown on applicants who displace tenants, it counters the objective of the program. In the final analysis, you are providing decent housing to low income producing families and you, upon receipt of credits, are guaranteeing that these units remain such by adhering to income limitations for future tenants for a minimum period of 15 years. When neighborhoods are blue-collar and welfare, this is no drawback. If anything, it’s a further incentive to invest in, and upgrade, these areas. Compliance is easy. Individuals, partnerships, corporations, and non-profit organizations can apply for and receive Low Income Housing Tax Credits. Tax credits are also available on historical buildings. However, since I have not yet applied for and not yet received credits of that nature, I’ll defer on that particular aspect of tax credits.
A. Cost of Improvements Only:
The program has installed a repair bonus for investors who rehabilitate in certain census tracts, i.e., run down neighborhoods. There’s no guarantee that this bonus will be awarded, but at least you have a shot at getting it. Let me illustrate the difference between a non-bonus and bonus situation. For example, if your repairs were $12,080.32, ordinarily you would request 9% of that for your annual credit, which is $1,087.23, for 10 years. Over 10 years time, this adds up to $10,872.30. You get back almost every repair dollar invested in the property. With the bonus (2nd Kicker explained shortly) of favored census tracts, you take the repair figure and multiply it by 130% and get $15,704.42. Then you would use this new figure and multiply it by 9% to get the new, annual, repair tax credit of $1,413.40. Over 10 years, this amounts to $14,134.00, which actually exceeds the repair input of $12,080.32 by $2,053.68.
B. Cost of Building and Improvements.
It’s much easier to rehabilitate with an empty building. Your repairs can be more extensive, and save in plumbing headaches later, for example. In fact, the more money that you spend now can be included in the tax credit application. Once the credits are awarded, that’s it. There is no going back and trying to add subsequent repairs to the tax credit, nor will there be any further tax credit applications considered on the subject property for many, many years. Furthermore, you can increase the award by including the cost of the building and its lot. For rehabbers, the lot and building merge into one figure. You can also include all soft and hard costs associated with its acquisition, like fees and loan expenses. By using the same example above for repairs, let’s see what happens if the building costs are $10,610. Multiply this figure by 4%. Your additional tax credit request for the building and lot is $424.40 per year. For 10 years, it is $4,244.00. Couple the $4,244.00 for the building costs with the $14,134.00 in repair costs, and you request $18,378 in tax credits over the next 10 years. You have spent a total of $22,690.32 for the entire project. The units are fixed up beyond code. The mechanicals are such that future repairs should be minimal.
1st Kicker:
Not only can you get $18,378 in credits, which about doubles your money, but you can still depreciate the building ($10,610) and expense and depreciate all of the repairs ($12,080.32). After all this, you still own the building and could sell it later for at least what you have in it. Furthermore, you also make a small bundle on the cash flow and appreciation where applicable. (But for now, ignore the depreciation and appreciation and focus entirely upon profits. Depreciation is really deferred taxes and appreciation may not even transpire in these neighborhoods.) Based upon my experience, you can net $569 per month on a double renting, like this building, for $350 per side. The annual income would be $6,828 and over a ten year period $68,280. Ordinarily, the cash flow and repair write-offs would be the extent of my profit, $80,360.32 for 10 years. Adding in the tax credits of $18,378 increases the 10 year outlook to $98,738.32, without depreciation and appreciation. After 10 years, sell on an installment sale for $40,000. Overall, profits would far exceed the original investment of $22,690.32 by $116,048 over the 10 year period. In other words, your $22,690.32 could turn into $138,738.32. And, this is on just one small investment property with tax credits!
2nd Kicker:
If your project is in a “qualified census tract”, you could increase the requested amount by an additional amount. That amount is calculated on the eligible basis of repairs. Simply, you take the repair basis and multiply by 130% to obtain the new basis. The new number calculated is now what is used to multiply by 9%. (Not to worry. It’s very simple on the application. It is on the application and you need only calculate if it applies.) So, if your repairs total $12,080.32 and you are in an allowable census tract the new figure would be $15,704.42. In other words, rather than requesting $1,087.23 for the repair portion, you would request $1,413.40. This is an additional $326.17 annually, and $3,261.70 over the next ten years. (Unfortunately for Ohioans, our director frowns upon the additional credit. Other states could enjoy this benefit though.)
Why Me? Why Now?
Recently I had a conversation with another investor where I briefly explained the tax credit program. He added that all the government does is keep taking benefits and programs away. I insisted this alone is reason enough to take advantage and participate in the credits. It’s my contention that every time they remove a program they generally replace it with something else, and of lesser value. It is up to us to stay abreast with the new programs and participate in them so that we don’t lose much ground.
Summary:
Just because your project qualifies for credits and is eligible for the added credit from 100-130% it doesn’t necessarily mean that either one or both will occur. Insofar as qualifying is concerned, there must be allocations left to grant to you. This can be overcome by applying early in the year. I would assume that most cases are on a first-come first-served basis like Ohio. When allocations are exhausted, you may be placed on a list like I was where I was in limbo. Shortly thereafter, I was contacted and told that I was granted my credit. As for the additional allowance of 30%, it is left to the discretion of the directors. Inside LOW INCOME HOUSING TAX CREDITS, Small Project Perspectives you will find that the book can be used from anywhere inside the United States. In fact, all the phone numbers for all of the states are listed in the book. It is generic for all of America.
Partnering Your Way To Riches In Real Estate
May 2, 2009 Programs Leave a comment
Partnering Your Way To Riches In Real Estate is the essence of short-cutting your way to multi-millionaire status. The logic is to avoid the laborious task of saving your way through life until you can finally do something.
What Do I Flip With The $1 DOWN®
May 2, 2009 Investment Strategy Leave a comment
So, you ask, what is the most easy, least risky, lowest cost, and most fun plan to implement? Plan IV, the Option to Purchase is by far the most gratifying and easiest real estate method to make money known to real estate investors, second only to inheritance. With the Option to Purchase, you can flip any real estate entity: land, houses, farms, multi-units, and commercial buildings. Regardless of where you are and how much money you have, there is no excuse for failure. (Save your excuses for those who will listen. Other investors only want to hear success stories.) Allow me to address vacant land and farms first. Those in rural areas may complain that there is no city nearby where they could landlord like I do. That is a valid concern. So, you’re out in the middle of nowhere. Do you have land and farms nearby? If so, you’re in luck. Did you know that the Option to Purchase on vacant land is standard for the industry? Well, it is. You know how bank loans are standard for selling a home? That’s how the Option to Purchase is for land. Why is the Option to Purchase standard for the industry for land? Usually there is some sort of contingency involved with building and/or rezoning. Rather than writing it up on a standard real estate contract, you would use my Option to Purchase contract. In essence, with one dollar you would have the option to purchase vacant land, or even an entire farm. (The dollar amount could vary from state to state.) Nearly every builder you will ever encounter would have the Option to Purchase based upon rezoning or the like. Couldn’t you get the Option to Purchase as well? Sure you could, and without all of those contingencies. The contract is simple and brief. It state the seller’s name, your name, the one dollar put down, and the deadline to close. That’s about it. Oh, my! What if it doesn’t close? Will you need to file bankruptcy or kill yourself? No. You lose your dollar, the cost of running ads in the newspaper, and your time. That’s all. Can it get better than this? Yes. Particularly for investors like me who’ll flip anything. Furthermore, consider that you have no real estate bills, repairs, water bills, no city code inspectors, and no……………..tenants! It’s sweet. All right, you’ve acquired an option to purchase. Now what? Advertise your option, (legal in most states, not Oregon and maybe others), call off a tickler file of investors/buyers that you have and will generate. Pass out fliers at your real estate investment meeting. Enlist the help of real estate agents. How hard can it be? Not very. You stand to lose one dollar, have no responsibilities and liabilities, and have only money to gain. The profits can be taken either in the form of cash at closing or a note due and payable monthly to you. The taking back of a note generally facilitates the quickness of the sale. In fact, if you put a one-year balloon in your note you will have the best of both worlds: a quick sale and cash. What about single houses? Certainly that would be the hardest. Why would sellers allow anyone to put an Option to Purchase Contract with one dollar on their house? They’d have to be nuts; wouldn’t they? I’m mean, what are the odds that this would possibly happen? I understand your questions and reservations. Admittedly, it makes sense that this would be the least likely scenario. Fact is, it’s just as easy to find these deals as it is for any of the other type of real estate. What would motivate them to sell a single house this way? Recently, a seller saw this as an opportunity to bypass all of the real estate agent listing baloney. I closed his house in less than 60 days without even so much as running an add. What about multi-units? One seller was a real estate agent who was quite familiar with the traditional methods of seller real estate. He had two doubles in a real bad neighborhood with code violations. We entered into an Option to Purchase and I sold both of them off of one ad. Is it really that easy? Yes and no. It is really easy if you know exactly how to acquire and sell, and you have the right contracts and know how to use them. Until you learn the full process, it won’t be so easy. Once learned, though, it can’t get any easier than FAST-FLIP Plan IV, found in the home study tape course. You will learn how to find and sell in all five plans. All buyers of the tape course are welcome to call on the hotline for 1 year to aid in your studies. The Option to Purchase is indeed surreal.
You Pay Tenants To Move? You’re Kidding, Right?
May 1, 2009 Investment Strategy Leave a comment
In 1973, I received an honorable discharge from the Army. Within a few short years, I acquired a position with the city. This deadly combination of Vietnam veteran and inspecting sewers gave me the personality that I would love to forget. The dubious title, “The Landlord From Hell” was truly accurate back then. When tenants did not pay rent, I was verbally harsh and would scold them accordingly. I misinterpreted the non-paying of rent as an insult, and was out to teach them a lesson. The lesson was that for not paying me they would be evicted. Once the eviction was filed, no money would be accepted. The lesson would not be taught without the full impact of losing one’s home, and hopefully, set out into the front yard. The event was anticipated, and understandably so based upon my recent history. The exact problem was that I took it all personally, and I should not have. My focus should have been, and is now, that when tenants do not pay rent it is because they have chosen to do something else with the rent money on that given month. The key is to understand that it really doesn’t matter who the landlord is at that time. In other words, if you were not the landlord, someone else would get burned instead. Since this is true, how can you logically take it personally? You can’t. Once you overcome this obstacle, you are on your way to understanding this concept. In 1981 I met an older man whose name was John and was about 65 years old. He had been a landlord for many years and had all of his properties paid off. I was really impressed with his vision to buy, accumulate, and pay off so many buildings. Upon retirement, his inability to negotiate good sales for himself made him fall short in his entire scheme of things. However, he could do some serious landlording. Two major points that I learned early, from him and I will never forget, are required to implement the paying off of tenants:
1. Never talk mean to tenants. Always keep the line of communication open. John told me that he had talked mean to a male tenant once, and while in the basement checking a repair problem was locked in the basement. He could hear the man yelling something about cutting him with a knife while rummaging through the kitchen drawer. John broke his way out of the basement window and was chased down the alley by the tenant with knife in hand. Surprisingly, a police car had just turned into that same alley. Under these and similar circumstances, you could never go back and negotiate an exit interview. If you remain kind and level-headed, you could knock on the front door anytime to re-negotiate with new offer. It took me many months to evolve as John had suggested. To this day, I remember scoffing at him, stating that I would never give money to someone who owed me money. It just wasn’t right. However, today I take great pride in admitting that I was wrong and benefiting from the change. In fact, I have become so proficient at negotiating deals for tenants to move, I feel that I have become the “Master At Paying People To Move.” My negotiations begin with, “If you move right now, I’ll give you $100 and I’ll clean the apartment.” When the need arises, I’ll evolve into “$250 and you clean the unit.” Remember that you are sitting on a full month’s deposit. Also take into consideration the cost and time of eviction. Wouldn’t is make more sense to pay $200 for a clean and vacant unit today, rather than going through the cost of an eviction and further loss of rent? (You can deduct the $200, or whatever, from rents collected.) Last September, I noticed an apartment so filthy that I could envision myself being interviewed by a local television station. Although her $375 rent had been paid, I wanted her out now. I told her that she must move immediately and I would pay her $100. She said that she would be out by the next day and have the unit clean. Nothing happened the next day. Her mother showed up and I told her of our arrangement. She and her other daughter removed all of her items from the apartment and called me on the phone. Her mother wanted to give her daughter the $100 as per agreement. I reminded her that the kitchen and bath needed to be cleaned. She remarked that if she mops and scours that it is she who should receive the $100. I agreed that was the fair thing to do. She cleaned and scoured, and I paid her $100. I got a receipt from her and wrote it off on my tax return for ‘95. I sent her daughter’s information to the collection agency and included the $100 that I had paid to her mother for cleaning. The unit was empty on the 15th. I had paid her $100 out of the $375 deposit. I patched walls and repainted. The unit was re-rented on the first of November for $375 rent and $375 deposit. If this doesn’t convert you, nothing will.
2. Take money anytime, even after the eviction has been granted. (When money is the issue.) Over time, I developed this myself. It primarily stems from doing my own tax returns. I noticed that some properties did better than others because of the rent collection issue. My goal was to get all properties to become as good as my best. I quickly figured out that if I accepted $836 from someone about to be set out, it would greatly enhance my bottom line. Consider when this happens three times in the same building during the same year! These two ingredients increase your bottom line and allow you to better get along and negotiate with hard-core tenants. More importantly, it provides you with the proper attitude and atmosphere for collecting more money and setting aside petty concerns about personal insult and revenge. Pay tenants to move, collect money anytime, and join me in the arena of success.
It’s Your Turn To Work The System
May 1, 2009 Investment Strategy Leave a comment
Every month there is a reason for not paying rent. There are annual reasons for not paying rent. Those include: Christmas, Easter, July 4th, Memorial Day Weekend, Labor Day, school clothes, Thanksgiving, Halloween, State Fair. There are occasional reasons not to pay rent as well. Those include: a new junk car, past due utilities, and a death in the family. (The funeral is out of town, of course.) When they don’t pay rent and you respond with an eviction notice you can bet that they have three phone calls to make: one to the city code enforcement, one to the fire department, and one to the health department. They call the city because they have a slummy apartment. If you prepared the unit before they moved in, the inspector will not be able to come up with much. The joke is on the tenant. They call the fire department to complain that they smell carbon monoxide! The firemen show up laughing because no one cannot smell carbon monoxide. They come out anyway because it’s protocol. The joke is on the tenant. The Health Department is called because of roaches. (It would be too easy to mop the kitchen floor, wipe off the table and counter, and take out the trash.) You’ll get a letter in the mail ordering you to exterminate. You go out and spray, or send someone, and all three calls have just about been extinguished. You go to court and get a judgment to throw them out. Now you can go in and finish the code list, among all the other repairs. The calls didn’t save them after all. Again, the joke is on the tenant.
Agencies: Reinvent Helping Out!
Tenants know that many different agencies will help pay their rent once every year. In other words, if rent isn’t paid, all a tenant must do is go to the Welfare Office, for example, and state that their rent has not been paid. The agencies will pay the rent under two conditions:
1. The tenant hasn’t used the service in the last 12 months.
2. The tenant must produce eviction papers from the court.
Consider that a family must budget on a very small amount of money. In fact, after the rent has been paid, there is virtually nothing left. Personally, I can’t imagine functioning on such a meager income! In light of this, I feel that agencies perpetuate the non-payment of rent with their offer to help. The tenant could say that they simply spent the rent money with no excuse. The case worker will cover for her by reverberating, “She just doesn’t know how to prioritize!” I’ve heard that so many times I’m choking on it. These are professional tenants. They work the system and all its agencies. In cold weather, they don’t pay their gas bills so agencies, with United Way funds, pay their delinquent bills and get the heat back on. I admit, it’s difficult to budget with such a small amount of money. Considering that these agencies welcome tenants with open arms, why pay utilities? Why pay rent? Contemplate that you, as a landlord, could turn this around and use it to your advantage, and without changing one Streetwise strategy or tactic. Continue to go in person to collect rent. When your tenant says that his check didn’t come, write out the eviction notice and say, “Take this notice to the welfare office and state that your landlord will soon be filing the eviction. When you get your court served eviction papers, again contact your case worker and show the court papers. Hopefully, the outcome will be one where an agency cuts a check payable to you. Your tenants work the system, and so can you! Furthermore, agencies finance some or all of the initial costs involved with tenants looking for apartments. Agencies pay from one half a month’s rent to the full rent and deposit. In other words, if the rent is $400 per month, agencies will pay from $200 to $800, depending upon the urgency of finding housing for the family and their ability to negotiate a better deal with the landlord. If the landlord cuts a deal, the landlord loses his advantage. If the landlord sticks to his guns, he can put up to $800 in his pocket, depending on the agency. In my county, Children’s Services insists that their limit is one month’s rent. When I state that I want $800 or the tenant doesn’t get the keys, they meet me in two hours with a check for $800. No, the check is not from the tenant. The check is from Children’s Services and it is payable to me. When agencies state that you should allow the tenant to move in on Friday night and that they will mail the $800 to you on Monday, don’t do it. Take it from me, you got a raw deal coming. Once you hand the tenant keys, Children’s Services is out of the loop. You’ll probably never get the $800. In fact, you’ll be lucky to get $200. Am I suggesting that agencies will deliberately lie to you? No. I’m just saying that something unforeseen happens on their application that they hadn’t noticed on Friday. Insist that your policy is NO MONEY/NO APARTMENT! It’s surprising, when you declare that you won’t hold an apartment until Monday, how fast you can get a counselor to meet you with a check. Hold your ground. Show some backbone! There are hundreds of thousands of tenants working the system. You can too! Jump on the bandwagon, without altering the Streetwise strategy.
For example:
Only money holds an apartment.
No money, no apartment.
Full rent and deposit before tenants move in.
No deals.
No credit checks.
Month to month leases.
There’s no need to make modifications. Working the system works right into my system! Let’s address why the agencies help. They help when a family is going to be or who is homeless now. Many times the family is staying at a church or shelter. The agencies intention is to hold the family together by assisting in housing. This is both admirable and a good thing. I find that most landlords don’t want these people as tenants. In fact, government housing and Section 8 programs do credit and background checks to weed these people out too. So most landlords don’t want them, and their government rejects them as well. I don’t. I really do believe that people deserve a second chance, or a tenth chance, if that be the case. You wouldn’t believe how grateful many tenants were because I was the only landlord who would give them a chance by renting to them. Aren’t I a great guy? I think so. I also know that by being a wonderful guy, I also make more money as a result of it. Imagine having a tenant move out on Sunday. While you’re working on the unit on Monday, an agency brings a check to the apartment—while you’re painting—for $800. You simply state, “I think the unit will be ready on Wednesday.” You could allow them to move in earlier or later. I don’t have what everyone knows as an open-door policy. Rather, I like to think that I have a revolving door policy. I shuffle tenants in. I shuffle tenants out. It doesn’t matter who lives there to me. My policy is:
“Pay Rent, Or Get Some Boxes!”
I’m candid and like to get right to the point. You now have a golden opportunity to be different than all the other landlords, like I’ve been.
You can help people.
You can make more money.
These are innovative concepts where you pay tenants to move, don’t run credit checks, you rent to the homeless, and you work with agencies to place families into your units. Hopefully, I’ve given you enough supporting information to convert you to this school of thought. Rather than subscribing to the traditional mentality of running credit checks, turning families with money away, refusing to work with agencies, and just scratching out an existence like all the other landlords, I suggest, I recommend, I insist that you join me in the arena of success and the world of increased CASH FLOW. Here’s your opportunity to work with HARD-CORE TENANTS. Outsmart hard-core tenants, and even benefit from hard-core tenants. You need to be Streetwise as to how hard-core tenants think and why they think it. You need to outwit them and work with them to get money from these agencies. When that doesn’t work, blind-side them with a cash offer to move. Always be one step ahead of the game. Expect tenants not to pay I December because of Christmas, and don’t get mad. Know what is going to happen before it happens. This is the hallmark of a Streetwise Landlord.
Real Estate Training
Apr 30, 2009 Investment Strategy Leave a comment
H. Roger Neal® offers real estate training Ohio in the form of his affiliate network, foreclosure and short sale conference. Once in awhile, H. Roger Neal® offers a landlording session at the beginning on Monday and Tuesday. This type of conference lasts the entire week! Students arrive on Sunday for an evening Meet & Greet from 7-9:00 P.M. On Monday from 9-5:00 P.M. is landlording, and continues through Tuesday at noon. Wednesday is the Affiliate Network. Thursday and Friday are Foreclosures, while Saturday morning from 9-12 noon is short sales.As for the landlording part of the conference, this is for both students who want to landlord only or want to flip properties and landlord. H. Roger Neal® does have a home study course called Streetwise Landlording®. This course and seminar teach students how to become streetwise. Everyone in real estate will tell you how savvy their tenants are, so why not be savvy yourself. Tenants have rights, and they know what they are. They also play on your emotions and appeal to your moral sense of right and wrong. Also, they’ll even appeal to your religious beliefs and faith, which go beyond their legal rights as tenants. Taking advantage of the legal system is their legal right, and they’d be stupid if they didn’t take advantage of that, I concede. They should not only know the law, but should protect themselves from unfair and unscrupulous landlords and their practices. On the other hand, there are landlords’ rights as well. You’d be stupid not to know your rights and take advantage of them as well. Fair is fair, don’t you agree? H. Roger Neal® addresses those tenant and landlord rights and integrates them into a unique management style that he calls Streetwise Landlording®. H. Roger Neal® is street smart and advises you to be as well. As for the moral side of landlording, you need to conduct yourself like a business. If you went into the grocery store and stated that you don’t have any money for food, and you’re family was dying from starvation, they would dial 911 before you could even ask for the free food. You could argue that you had a baby who needed milk or she would die. Again, you’d be in handcuffs before you would blink. That’s the harsh reality, I’m afraid. So, why are you expected to provide free housing that costs you $1,500 per month? Well, you shouldn’t. They need to pay rent, or get out. That’s the discipline. That’s the business. I cover all facets in landlording in this real estate training Ohio from acquisition, management, repairs, and sales. Come and enjoy this seminar with me.
What is and how do you use your best argument used in convincing sellers to carry financing?
Apr 30, 2009 Tell Me How Leave a comment
Actually, I have two favorite arguments to sway sellers to think like I do. I appeal to their common sense with both arguments.
1. I primarily look for motivated sellers who cannot cash out. They’ve listed their properties with real estate agents with no success. In most cases, they haven’t even had one showing. These sellers haven’t the foggiest idea of what seller financing is all about. What they do know is that buyers don’t pay and most buyers want 30 year financing. They have heard of balloon payments, and this is truly a seller’s advantage.
2. I begin negotiating through the agent, or directly with the seller, by talking about a quick payoff. This immediately gets everyone’s attention. They immediately begin entertaining ideas of balloon payments. They want to think about it and will call me later.
When we speak again, they express interest of a balloon payment. I say nothing. They continue with a possible 3 or 5 year balloon payment. (I know at this moment that I got the deal.) I state, “No. That’s not what I meant. I meant that I would pay you off real quick.” They ask, “What do you mean?” I reply, “I mean that I will pay you out in 8 years. I’ll make bigger payments and pay you off in that time.” Somehow the eight year payout is exactly what strikes their interest and the deal is made.
The City Is The Problem
Apr 27, 2009 Investment Strategy Leave a comment
Until now, property acquisition, buying wholesale, has unequivocally been the landlords biggest obstacle. Now, without a doubt, city code enforcement has superseded that long time problem. After traveling around the country, it is clear to me that the mayors of the country had a serious meeting about how to get even with those evil landlords. It is too much of a stretch to believe that all these cities are moving ahead with the same agenda by coincidence. That’s right, the same agenda. What is the agenda? I’d venture to speculate that it was originally formulated with the purpose of good intentions. They wanted to “clean up” the cities, and that’s admirable. The worst issue: Many cities have already passed legislation whereby property owners are charged $50 for every unit they own on an annual basis. This is a fee paid to the city for the upcoming and annual city code inspection. You heard me right; $50 for every unit, every year. Am I opposed to this legislation because I am a slumlord? No. I’m not a slumlord! However, I don’t feel obliged to pay $50 for every unit every year. That’s nonsense. We’re back to the age old issue of treating landlords differently than all other businessmen. They’re singling landlords out because their rich and evil. Pardon me, but aren’t they the one’s who:
1. Rents to the homeless?
2. Rents through Children’s Services?
3. Doesn’t run credit checks?
4. Rents to those when no one else will?
What amazes me is that it is we who provide housing for indigents and welfare recipients where no one else will. What is to be done? Landlord associations and apartment associations need to hire lawyers to roll back the newly instituted laws. If it hasn’t hit your city yet, it will.
Get Out Of The Appliance Business
Apr 25, 2009 Investment Strategy Leave a comment
Unless you are entirely furnishing efficiencies, do not supply furniture or appliances in the inner city units. In other words, one bedroom units and up are taboo when it comes to any furnishings. Efficiencies are virtually impossible to rent unless they are entirely furnished with appliances and usually with utilities included. On the other hand, tenants who rent one bedroom units and higher can fend for themselves and come up with something to furnish their units. Appliances for the one bedroom units are indeed difficult, but the tenants do manage to acquire them just the same. On a ten unit building that I own, I have found myself buying at least three refrigerators per year. The tenants have always managed to rip off the door handles. In fact, roaches actually stop refrigerators from working by crawling into the motor area. Anyhow, the refrigerators are either too large or too small. Tenants always want someone else’s when their neighbor moves out. Invariably on Thanksgiving Day, someone’s oven doesn’t work. Of course, they’ve known it for months, but waited until this day to tell you. I did something really smart this summer. On all of the units, one bedroom and up in that ten unit, I sold the appliances to the tenants for one hundred dollars for each pair. I provided receipts and stated, “When they break down, throw them away and the replacements are your responsibility.” Last month, a tenant replaced a refrigerator herself. Granted, she bought a used one, just like I always had, but it wasn’t at my expense. I find that cutting expenses is just as good as raising rent. It’s like the government cutting a program and not raising taxes. My tenants agreed that one hundred dollars for each pair was a good deal. They questioned my motivation. I answered, “I’m getting out of the appliance business; I just rent apartments.”
