It's Thursday, and that means... well it actually means nothing, but I'm in the mood for something a little lighter (not atypical for my personality). So we're going to have some fun with real estate investing today.
Fun Fact 1: Cameron's House from Ferris Buehler's Day Off is For Sale!!!!
I'm convinced that there isn't a single English-speaking person in the world between the ages of 13-55 who hasn't seen Ferris Buehler's Day Off. And one of the more memorable scenes from that oh-so-memorable movie is when, that's right, Cameron sends his dad's 1962 restored vintage Ferrari out the back of the glass garage and into the revine.
This prime Chicago real estate could be yours for the everyday low price of $2.3 million! What are you waiting for? Go out and get an 800 year amortized mortgage, and start partying like it's YOUR day off!
Fun Fact 2: There Are at Least Two Spaceship Homes in the World (that We Know Of)
Ok, here's the bad news: they don't fly. But there is spaceship-shaped real estate in the world, one in Johannesburg, South Africa (right), and one in Chattanooga, TN (below).
In fact, the one in Tennessee was built as a model home, for an entire spaceship-home subdivision, that was (fortunately? unfortunately?) abandoned by the developer.
The Tennessee spaceship real estate model sold at auction for a measly $119,000 in December 2008, which surprised me at first. Where are the Trekkies, I wondered? What about the Star Wars nerds? Sci-Fi Channel regulars?
Then I remembered the property's in Tennessee, where they don't have electricity for things like televisions, and it all made sense.
I guess that's all the fun we're going to have today, class, but keep on keepin' on with your real estate investing, it's us investors who are going to keep this national real estate ship from sinking.
Happy Thursday!
PS Looking for more educational real estate investing articles? For the more serious-minded, here's an archive of real estate investing articles, specifically for landlords and rental investing.
Trying to add some sizzle to your real estate or rental listings? There are a lot of desperate sellers and landlords out there at the moment, so here are a few tips to add that extra spice and secure a signature on that sales contract or lease agreement!
Beach Party!
Remember in college when those wild men down the street threw a beach party in their house by filling it with sand? Well that's probably not a good idea for your open house, unfortunately, but what IS a good idea is making your open house more of a party atmosphere. A keg of beer, a five foot sub, and your nephew's band playing in the back yard will certainly draw the masses. Here's the trick: you want people to have to walk THROUGH the house to get to the party out back, but you have to keep the party ITSELF outside, to prevent damage to the house.
Wine Tasting
Everyone knows an oenophile or two who just won't shut up about wine. Invite them to host a wine tasting at your property, and tell them you'll pay for the wine, but they must stick to a certain budget and provide a certain amount of wine. Invite all your friends, and post flyers or other ads around the neighborhood, and make it a civilized affair! Cheese and crackers recommended.
Remember the Deck or Patio
When it's covered in snow in January, no one's thinking about the deck out back, but in summer cookout season, it will be fresh on their minds and they WILL notice if the deck or patio are in bad shape. Consider re-staining, re-pointing, or otherwise shaping up the deck or patio. Tiki torches can be a nice touch for the evenings, and they're cheap to boot.
Olfactory Staging
Everyone talks about (and spends a fortune on) visual staging, and some even get as far as auditory staging, but few remember the simplest and most powerful type of staging: tempting the nose! Two older tricks include baking cookies or brownies in the kitchen before a showing or open house, and they're a great way to instill a sense of home in the prospective homebuyer or lease applicant. Another great one is grilling steaks, cheeseburgers, or bacon, preferably with charcoal and smoky wood, to make mouths water and appeal to the carnal senses, and of course you can always serve samples of these at the open house to deliver on the promise. If food isn't your bag, consider lighting a few cinnamon-scented candles on each floor of the house.
Getting that sales contract or lease agreement signed is harder than ever these days, but summer is the right time to push, so go above and beyond, and get those signatures!
Part I: Introduction, Defining Destination & Budget Goals, and Becoming an Absentee Landlord
Whether you're a landlord, a real estate investor, or just a regular wage slave looking to escape the drone-like existence of 9-5, most of us have daydreamed about living on a tropical island somewhere sipping pina coladas and having income wander its way into our checking accounts.
What if you could live off your lease income alone? What would that take? What would it look like? No, it's not a get rich quick scheme, or some kind of snake oil I'm trying to sell, but merely a description of a lifestyle possibility that you may not have realized existed. Welcome to the three-part Absentee Landlord series: you are now reading Part I.
Introduction
Let's start with a disclaimer: The Absentee Landlord lifestyle is not ritzy or glitzy, it's not about shooting Kristal corks at your fellow rap star while girls dance in the background, and it will NOT make you rich. What it will do is allow you to live anywhere you like, stress-free, and work-free, with minimal obligations.
"So what does the Absentee Landlord lifestyle look like? Do I even want it?"
The average Absentee Landlord earns only a few grand per month, which is not much by, say, New York City terms. However, the Absentee Landlord can live anywhere in the world, so they don't have to pay New York City prices if they so choose.
The Absentee Landlord has a property management company handle their lease properties, so the Landlord is only minimally involved. Further, all of their payments are made automatically and electronically.
The Absentee Landlord is free to pursue their dreams, whether that means spending a year in Costa Rica learning how to surf, or becoming a ski instructor in the Swiss Alps, or moving to the mountains of China to become a Kung Fu master. The Absentee Landlord lives frugally but comfortably; they lead a rewarding lifestyle.
"All right, all right, I get the picture. In broad terms, what does it take to accomplish the Absentee Landlord lifestyle?"
First, you need to start building an investment portfolio, with a solid, long-term lease agreement signed on each one. Second, you need to maximize your cash flow from these lease agreement investments. Third, you need an excellent property management company, who can handle everything from tenant screening to landlord forms to eviction procedures, etc. Fourth, you need a Goal Budget, which will become more or less fixed. Fifth, you need a Destination, and the accompanying planning. Sixth, you need to go mobile.
The good news is that those steps do not necessarily have to be done in order. In fact, we're going to start with Step 5, before moving on to Step 4, and then we'll adjourn until Part II of this series.
The Destination
What are your dreams? To live in a coconut shack on a white beach with blue-green water lapping your feet? To ski every day? Maybe to help build infrastructure for outlying villages in third-world countries?
We live in a world that is, for better or worse, driven by money, so you'll have to consider the costs associated with your dreams before you can go about budgeting for them. It costs a lot more to live in Hawaii than it does in Belize, for example. Decide on your first dream, print off some pictures that embody your dream, and put them up around your office, cubicle, home, bedroom, refrigerator, and anywhere else where they'll remind you of what you're working towards. For the sake of argument, I'm going to say that my dream is living in an artsy little town on the shore of Costa Rica, where I can surf, sell my photography, and lead tour groups through the canopy of the rain forest.
Your Projected Budget
What is the historical exchange rate? What is the cost of living in this destination? What will your monthly expenses be? In my case, it will cost me roughly $1,000/month for the comfortable house I want within a ten minute walk from the beach, and within range of cell phone and internet services. I will not need a car, because I walk anywhere in the little town I've picked out. I will need to pay for my phone and internet bills, so I'll set aside $50 for each. I will also need roughly $250/month for food and another $250 for entertainment. I'm up to $1,600/month, and I'm going to add 10% for unforeseen expenses ($160) and another 10% for savings, plus $100/month for health insurance, or $2,020 total.
We now have a goal to work towards, so we'll spend Part II of this series going over the details of accomplishing monthly cash flow through lease agreement investing and other Absentee Landlord principles… see you next time!
If you're one of the four people in the world considering investing in real estate right now (five including me), you're probably looking to make the safest bet you can. While short term investment returns are pretty basic to predict, as the market won't shift much over the course of a few months, it's a different story if you're looking to sign a lease agreement and settle in for the long haul. What would a safe bet look like, over a long investment period?
This being an age of bu11$hit litigation and nervous legal disclaimers, let's start with this: there ARE NO bulletproof investments, in real estate or anywhere else. Your tenant could make up a reason to sue you and win, or your city could decide, in their infinite wisdom, that constructing housing projects right next to your rental property would be just peachy. There is risk in any investment, so wake up to that reality before pulling a dime out of your wallet.
That being said, there are certain long term trends that are pretty predictable, and can be identified. Let's take a look at a few of those, and see what we can dig up.
Population
This one is pretty basic: as population increases, so does demand, which of course increases value; just look at that ridiculous water park. Look for cities and neighborhoods that have high long-term population growth projected, and consider the most advantageous spots. Here's a hint: middle class white people don't breed well, because they want to protect their quality of life. Immigrant influx is the fastest vector for population growth, so consider buying in and signing a long term lease agreement here.
Urban Planning
Some cities are FAR more organized when it comes to urban planning, and will make efforts to combat sprawl and consolidate wealth in areas that are already developed. These make for far better long term investments, as sprawling suburban strip mall communities will just keep expanding outward, making supply infinite.
Water
People love water. They love boating on it, swimming in it, fishing in it, and having a view of it. Waterfront property is a fixed supply, while demand will always rise. Caveat: beware of flood plains and hurricane alleys, as these are already hard to insure, and you might end up like these poor schmucks with your car underwater.
Stable Institutions and Employment Providers
Some institutions aren't going anywhere, and provide a LOT of jobs. An example would be a local governments, universities, hospitals, etc. People want to be as close to their jobs as is practical, so find out where the employees like to live, research that institution's long term expansion/relocation/etc. plans, and consider these neighborhoods for a safe long term lease agreement.
This is a short list, but hopefully gives you some ideas in your area. Good luck, and here are a few good sites for a lease agreement (EZ Landlord Forms), rental listings (Hotpads), and credit checks (NTN Online).
Some tenants just plain suck. I'm looking at you, Mr. I-Can't-Pay-Rent-This-Month-Because-My-Pet-Pigeon-Died, and you Ms. I'm-Going-To-Call-You-Every-3-Days-And-Whine. You and all of your friends are a pain in my a$$, and this post goes out to you.
As the years of being a landlord go by, I've found that gut instincts regarding tenants are almost 100% accurate. We justify putting a tenant that we don't feel great about into our rental properties, saying "Oh he had a couple problems in the past, but now he's got a job, and he seems to really like the property…" etc. NO MORE. Here's what to look for when you hand out rental application forms to prospective tenants.
First of all, what do they do for a living, and how long have they been at their current job? Watch for anything that sounds like an excuse.
Garbage: "Well, I was doing construction, but that wasn't working out that well, so I started doing work on cars with my brother, but…"
Legit: "I've been a mechanic for about nine years now, over at J&J Automotive."
Look for definitive, declarative sentences, and watch their body language. Do they look down, or up, or away? Or do they look you in the eye? Sounds like a lot to concentrate on at once, but just listen to your gut.
Second, ask about their housing history. Where do they live now? How long have they lived there? Who do they live with? You want someone who has been living as independently as possible, at the same place for as long as possible.
Garbage: "Things were a little hard for a while, so I was crashing with my brother in law, but it's time for me to get my own place, so…"
Legit: "My husband and I have been living down in Mount Vernon for the last five years, but we're really looking to move out of the city so we can have a yard."
Again, watch out for vague nonsense, and watch out for people who bounce around a lot, or who have been living for free with friends or family.
Finally, ask them about their current landlord. Don't ask how they get along with the landlord, because that'll tip them off, but ask "How's your landlord right now?"
Garbage: "My landlord's such an a$hole, we've been on him for six months to fix this broken plank in the fence, but he won't get off his a$ and actually do anything…"
Legit: "My landlord's been all right. He didn't fix this broken plank in the fence, but for the most part he's been ok."
Basically, you want to see if they're going to be demanding or antagonistic, which MANY tenants turn out to be.
Don't make excuses for rental applicants; if they give you a bad vibe, don't even give them a rental application. There are good tenants out there, but you'll have to put in some work to find them, and if you do you'll be rewarded with a headache-free (and lawsuit-free) experience as a landlord.
By the way here's a free rental application form if you're new to the landlord game, good luck.
We know what the last domino in the chain is: the global economy circles the toilet bowl, and 6 billion people (myself included) all start crying and whining and jumping up and down looking for someone to blame. It's the mortgage lenders! It's the banks! It's Wall Street! It's the CEOs!
The public cries for heads, and the U.S. Government starts looking for unpopular people to blame. What do they do then? They slap the scapegoats with regulation, making it harder for anyone to do business in the future, and a longer economy recovery period. But these are all shallow answers when investigating the true chain of dominoes, because it's all misdirection and finger-pointing, hosted by people who want blame elsewhere so they can be re-elected. So we're going to look at the chain of dominoes a little closer, and discover where this chain started.
Domino 1 (1977): President Carter signs into law the Community Reinvestment Act of 1977, requiring mortgage lenders to lend to borrowers and neighborhoods that they normally would not have. Subprime lending is now mandatory.
Domino 2 (1994): President Clinton approaches the Department of Housing and Urban Development (HUD), and pushes an initiative called The National Homeownership Strategy. Under this initiative, both public and private lending programs are highly encouraged to create looser and more creative lending guidelines, to encourage homeownership for all Americans. They released a document entitled “The National Homeownership Strategy: Partners in the American Dream;” perhaps it speaks best for itself in this little excerpt:
"For many potential homebuyers, the lack of cash available to accumulate the required downpayment and closing costs is the major impediment to purchasing a home. Other households do not have sufficient available income to to make the monthly payments on mortgages financed at market interest rates for standard loan terms. Financing strategies, fueled by the creativity and resources of the private and public sectors, should address both of these financial barriers to homeownership."
Sound familiar?
Domino 3 (1994-2005): Homeownership in America rises from roughly 64% to 69%, due to both private and public lending institutions' newly loosened lending guidelines.
Domino 4 (2001): President Bush continues pushing this moronic initiative.
Domino 5 (2001-2004): The Federal Reserve, led by Alan Greenspan (appointed by President Bush), overheats the economy with extremely low interest rates. Money is now both cheap AND available to everyone, regardless of credit-worthiness.
Domino 6: A real estate buying frenzy is created, due to the cheap and ubiquitous availability of money.
Domino 7: Real estate prices spike precipitously, due to the heightened demand.
Domino 8: Foreclosure rates spike, as undeserving homeowners (inevitably) start defaulting, creating a plethora of inexpensive supply.
Domino 9: Real estate prices drop even faster than they rose.
Domino 10: Bank assets, in the form of mortgages, which have now been traded worldwide in massive securities bundles, are suddenly worth a lot less, as the holders realize that they were inaccurately rated by credit rating agencies, and the collateral they're secured against are worth substantially less than they were 2 years ago.
Domino 11: The world economy collapses.
My question to you: if it was government intervention and regulation that brought us here, through the actions of three bumbling, myopic presidents and their respective congresses, then is more regulation the answer? Is blaming the companies who unknowingly bought up these assets the answer? Maybe blaming the people whose only crime was to COMPLY with government regulations and mandates?
Of course not. The answer is that government regulation to promote a political agenda makes for a bad economy, and we would do well to remember that in the future, instead of letting ourselves be placated when the government (who got us here in the first place) starts offering us scapegoats, and then goes back to the hyper-regulation drawing board to pump out more garbage for businesses to try to bend and twist to maintain compliance.
What a nation of fools we are. We make problems and find scapegoats, just like Homo Erectus did 100,000 years ago.
It's an interesting time in the real estate business. Ok, "interesting" is something of a euphemism, but regardless, these are not normal times. The national real estate market has never fallen this far, this fast, in the history of America, which has lead many experienced and intelligent real estate professionals to flee the industry, while others have respecialized, while some crazed individuals are actually trying to LAUNCH a career in real estate.
Unsolicited Advice Point 1
If you're considering real estate as a career, the only area where it makes sense to enter right now is as a long term real estate investor or landlord. Prices are low, inventory is high, and interest rates are low, which makes it a great time to buy and hold for the long haul. It does NOT, however, make it a good time to become a realtor, as the market is crowded with good, experienced realtors who are struggling, and if THEY'RE struggling, you'll definitely have a hard time.
Unsolicited Advice Point 2
If you're considering going into the mortgage industry, similar advice applies. There is room, in the industry, for debt negotiators, who work with defaulting borrowers to renegotiate the terms of their note, but loan officers, processors, and underwriters are all scrambling to keep their jobs, at the moment. Unless you're a rock star salesman, it's probably not the right time to become a loan officer.
Unsolicited Advice Point 3
If you're thinking of moving, you've probably already considered the difficulty involved in selling at the moment. The solution is to lease your current home out, after buying your new home, and waiting a few years for the market (and economy) to recover from its current state of anemia. This is easier in some neighborhoods than others, but there's a good chance that your current home would make an excellent rental property. If you need it, here's a link for some free rental forms, to help get you started.
It's ugly out there right now, but it won't always be, so hang in there, and put yourself in a position to make a profit in a few years from now when there's a little more life in the market.
Bad tenants suck. They trash your rental property, leave you with months of unpaid rent (and mortgage, insurance, tax & utility bills), cook crack in the basement, invite a rat infestation by leaving their kids' half-eaten pizza lying around, and leave turds in the closet as a going away present for you to find. Not cool.
So what do you do, if you're a landlord, to protect yourself against such savages?
1. Strong Lease Agreement
That crappy lease agreement you bought at Office Depot for $3.99 ain't gonna cut it. Get a lease agreement that's customized for your state, first of all, and make sure it's a ball-buster. Sometimes state government or municipality websites offer them for free, so check there, and if you don't have any luck, a site called EZ Landlord Forms offers a custom lease agreement builder.
As a final note, make sure your lease covers things like late payment fees, cleanliness, and who's responsible for which maintenance & repairs.
2. Disclosures
Bad tenants love to run crying to Legal Aid or some sleazeball attorney when they don't pay their rent and (surprise!) get an eviction notice. So you have to make sure you follow the tangled mess of landlord-tenant laws, and give your tenants a rainforest worth of legal disclosures. Lead paint disclosures are a big one, but some states require others, so find out what your state requires, and don't slack on these, because bad tenants would love nothing better than to take you for all you're worth over some minute legal technicality.
3. Bribe 'Em
It may leave a bad taste in your mouth, but sometimes it's cheaper to offer bad tenants a deal to vacate than it is to evict them. So head over to your rental, clean the half-eaten chicken bones off the couch, sit down with them, and tell them that if they can be out within a week you'll withdraw the eviction, leaving their credit whole, and you won't get a judgment against them. If you need to, kick in a $75 gift card to Best Buy or something, and if they still refuse, move quickly on the eviction and secure a judgment.
4. Follow Eviction Laws
Every state has different eviction laws, so be careful here. You can hire a real estate attorney or eviction specialist (the latter are much cheaper and usually as good) to do this for you, or you can do it yourself if you're strapped for cash. If you decide to DIY, there are usually waiting periods between when you mail the tenants a notice to vacate, file for eviction in the courthouse, etc., and sometimes special forms for your state. If you're going the DIY route, either get the forms from a fellow landlord or you can get your state's eviction down-low on that same ez Landlord Forms site.
Prevent, prevent, prevent! Follow the rules like a good little boy (or girl), and you'll be able to slam those bad tenants quickly and effectively. If you're lax on this stuff, they'll be the ones doing the slamming, so beware!
Real estate can be an infinitely fun and lucrative business, but it can also be tedious, litigious, and miserable. Fortunately for you, there are some things you can do to keep yourself in the territory of the former.
First of all, we're going to recite a cliché for a moment and restate that less is, in fact, more. More properties means more opportunities for something to go wrong (and believe you me, things DO go wrong in real estate all the time), so you'll want to minimize the number of your real estate transactions and maximize your profit from each. For example, some real estate investors are volume investors, who do as many deals as possible with a few causing losses and most creating small profits. This model works for some, but leave them open for much more exposure to lawsuits or other complications that cost time and money.
The alternative scenario is to work on a few lucrative transactions, which means less time wasted on work, and less ownership exposure to the real estate.
How are these lucrative deals discovered? Like everything else in business, the shortest way to success is through networking. Start working on that rolodex, and suddenly you'll find that people come to YOU.
Networking can be a tricky beast at first, so consider the following places to start. The easiest place to start meeting people is through an investment club, so look up some local ones and start chatting up your fellow real estate investors (here's a directory of local real estate investment clubs).
You'll need relationships with at least two local hard money lenders, who can settle quickly on real estate purchases. Ask around your investment club and see who other investors are using, and start establishing a relationship with them. You'll also need several small, local banks, who serve a similar function as the hard money lenders. Likewise, ask around the real estate investment club, and look up local banks on the internet who serve as a neighborhood resource.
Contractors and handymen will be useful, both for doing work on your properties and for giving you tips on what's going on in the neighborhoods where they work and live. Sometimes they can turn you on to real estate deals, or they might tell you about plans for businesses moving into the neighborhood or find good tenants for you. Cautionary note: only use contractors and handymen that are referred to you by someone you trust, as many aren't worth the lint in their pockets.
If you have any tenants, talk to them about what's going on in their neighborhoods. Tell them you're interested in buying more properties, and that you'll cut them deals on their rent if they tip you off for any good deals in the neighborhood.
Get to know at least one good property management company, as you might need their services. They can also turn you on to good contractors, tell you about what's going on in various neighborhoods, and possibly turn you on to good real estate deals.
The point here is the best deals (just like the best jobs) aren't advertised; you find them through your contacts. Build relationships, and maintain them well, because you can avoid many of the headaches in the real estate world by choosing a few lucrative real estate investments and staying away from the garbage.
Real estate investment is scary. Ok, not really, but that's where the blog comes in. An inside look at investing, property management, being a landlord, and avoiding the not-so-fun stuff like, say, getting sued.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
It's Thursday, and that means... well it actually means nothing, but I'm in the mood for something a little lighter (not atypical for my personality). So we're going to have some fun with real estate investing today.
see was built as a model home, for an entire spaceship-home subdivision, that was (fortunately? unfortunately?) abandoned by the developer.
Happy Thursday!
Trying to add some sizzle to your real estate or rental listings? There are a lot of desperate sellers and landlords out there at the moment, so here are a few tips to add that extra spice and secure a signature on that sales contract or lease agreement!
Olfactory Staging
Part I: Introduction, Defining Destination & Budget Goals, and Becoming an Absentee Landlord 
The Destination 
If you're one of the four people in the world considering investing in real estate right now (five including me), you're probably looking to make the safest bet you can. While short term investment returns are pretty basic to predict, as the market won't shift much over the course of a few months, it's a different story if you're looking to sign a lease agreement and settle in for the long haul. What would a safe bet look like, over a long investment period?
Some tenants just plain suck. I'm looking at you, Mr. I-Can't-Pay-Rent-This-Month-Because-My-Pet-Pigeon-Died, and you Ms. I'm-Going-To-Call-You-Every-3-Days-And-Whine. You and all of your friends are a pain in my a$$, and this post goes out to you.
Second, ask about their housing history. Where do they live now? How long have they lived there? Who do they live with? You want someone who has been living as independently as possible, at the same place for as long as possible.
We know what the last domino in the chain is: the global economy circles the toilet bowl, and 6 billion people (myself included) all start crying and whining and jumping up and down looking for someone to blame. It's the mortgage lenders! It's the banks! It's Wall Street! It's the CEOs!
It's an interesting time in the real estate business. Ok, "interesting" is something of a euphemism, but regardless, these are not normal times. The national real estate market has never fallen this far, this fast, in the history of America, which has lead many experienced and intelligent real estate professionals to flee the industry, while others have respecialized, while some crazed individuals are actually trying to LAUNCH a career in real estate.
Unsolicited Advice Point 2 
Bad tenants suck. They trash your rental property, leave you with months of unpaid rent (and mortgage, insurance, tax & utility bills), cook crack in the basement, invite a rat infestation by leaving their kids' half-eaten pizza lying around, and leave turds in the closet as a going away present for you to find. Not cool.
azeball attorney when they don't pay their rent and (surprise!) get an eviction notice. So you have to make sure you follow the tangled mess of landlord-tenant laws, and give your tenants a rainforest worth of legal disclosures. Lead paint disclosures are a big one, but some states require others, so find out what your state requires, and don't slack on these, because bad tenants would love nothing better than to take you for all you're worth over some minute legal technicality.
Real estate can be an infinitely fun and lucrative business, but it can also be tedious, litigious, and miserable. Fortunately for you, there are some things you can do to keep yourself in the territory of the former.
Contractors and handymen will be useful, both for doing work on your properties and for giving you tips on what's going on in the neighborhoods where they work and live. Sometimes they can turn you on to real estate deals, or they might tell you about plans for businesses moving into the neighborhood or find good tenants for you. Cautionary note: only use contractors and handymen that are referred to you by someone you trust, as many aren't worth the lint in their pockets.
;)
;)
