SPEND MONEY TO MAKE MONEY RULE

By
Real Estate Broker/Owner with people first...then business Ran Right Realty BRE Agent 636943

Start-up in anything usually takes a hard investment. It is money to be spent according to planning with the intent of getting a return on not only the funds, but on time spent too. Its similar to the principal of "if you want to do business, you must be in business". This "outgo" ($$) at first looks like you are going in the wrong direction but that is how making money often begins

PRIME THE PUMP

To sometimes get something started, you have to prod it so that it starts its cycle to produce. Investors and entrepreneurs have learned this principal and practice scrutinizing where to invest instead of should I invest. Money planted into anything needs to come back and then hopefully reproduce itself

BARE NECESSITIES

I recently had a listing where nothing was done to it for 30 years. It was owned by the original owner who made the necessary repairs from time to time and that's all. When he died, it became a rental & the heirs continued with the same approach. They rented it out at less money & did nothing for seven years

RAISE THE RENTS!

I was contacted to manage this property during this stage. I was told to raise rents shortly after I took it over and the potential to do so was definitely there. The home was way way below market. In the process of raising rents, the tenant, who was there for seven years spoke up when he got the increase

REPAIRS PLEASE

Yes, we were paying low rents. Yes, an increase is due after all these years and the tenant remained cooperative. But then he said this. Are you going to make repairs? Indeed significant work had to be done especially since we were wanting to bring it in line with the market. That meant spending money

PROTECT THE INVESTMENT

The owner was not eager to do so. He felt the rent was low enough, the people had been there for years, & became close-minded. Upon closer examination, I saw where if money was spent, we could recapture it no problem plus improve the badly needed property. Took some doing/arguing, but finally got some minor things done which supported the rent increase

LETS SELL!

About one year later, the owner decides to sell. The tenants were asked to move and I go to inspect the property for sale. It was run down, used up and mostly from wear & tear. No abuse noted but lots of neglect. Now comes an interesting point for this posting one of which many sellers will face

WHAT IS TOP DOLLAR?

Do we clean it up, price it based on current condition and then try to sell and see what happens? It will sell, but not for top dollar because of the needed & way past due repairs and upgrades. A fixer upper attracts a certain mindset buyer that doesn't want to spend money acquiring but instead fixing up.

DOLL (dollar) IT UP

That means all offers would be low ball and or require repairs while the property sits for days. Then, there is the other approach. Spend money here, doll up the place & then, we go out to market asking for top dollar, having a pristine product, where people are afraid to lose it if they don't act quick enough

70 % versus 100%

Getting the owner to spend money wasn't easy but instead like a tug of war for everything that came up. I wanted things done 100% and the owner was of a 70% mindset. That's good enough was his position every time something came up. I wanted it done completely and he wanted it done just enough

LETS SEE WHAT HAPPENS

Now I know what will happen when we go out to market. First, the seller will want top high dollar. That is expected. But I saw where we wont get it unless we set that up. Eventually, we met in the middle plus area and went to market. It is interesting to note the following:

30% COMES BACK TO HAUNT

What we didn't do, what could have been done and would have not garnered any notice but instead brought us the top dollar prize caught all the attention and was the basis for people hesitating, critiquing and making them want to spend less not more to acquire the property. The "less done" stood out. That less was the 30% we didn't do

100% BEGETS 100%

We ended up getting things fixed and upgraded that should have been done originally and the story ends on a happy note. How? The asking/purchasing value is there. Plus, all the money spent to fix it up so that we could get top dollar in just a few days into the market place came back and then some

SEEING IS BELIEVING

No one can successfully argue against: New appliances, fresh paint inside and out, new carpet and tile flooring throughout, and just about anything that stood out was attended to. When compared to every other home in the market at the time, it stood out for being a buyers first choice. DOM Four days!

END MATH

Not every penny spent returns its penny plus. However, kitchens and bathrooms when remodeled do pay for themselves and return a profit as well. Fresh paint helps to close a deal as does new carpet, window coverings and flooring. Worse case is you break even. Best case? Top dollar & less time

YOU BE THE BUYER

What always works is the role reversal. I tell sellers to picture them buying this home. What would you like done? What would you object to when first visiting? Would you pay top dollar or see something to cause you to go the other way? When we put on the buyers shoes, we walk that walk

SPEND MONEY TO MAKE MONEY

 

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Winston Heverly 06/03/2016 10:02 PM
Topic:
Real Estate Best Practices
Location:
California
Tags:
investments
days on market
top dollar
purchases
return on investment
remodeling
fresh paint
buyers choice
renting it out
newness

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Rainmaker
1,064,986
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Had this very argument/conversation with a co-owner of a property of mine about a year ago.  The intelligence of sprucing up eluded him.  He decided to buy me out instead.  Guess what?  He's still sitting on his property ... unsold, Richie Alan Naggar.   Definitely proof of the validity of your advice ...

Gene 

Mar 19, 2016 12:13 AM #38
Rainer
3,111
Sultan Akhtar
Apkgamedownloads.com AGD - Clarksville, NY

Hahahah Sir A Meaning Of Sultan is King.

Mar 19, 2016 12:14 AM #39
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Hello Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ...people remain blind to themselves and guys like Gene & Richie plus others try to point that out. Not everyone who has eyes...sees....is what we learn and continue to learn too until we get it. When then becomes the question

Sultan Akhtar ...thank you your highness

Mar 19, 2016 12:20 AM #40
Rainer
3,111
Sultan Akhtar
Apkgamedownloads.com AGD - Clarksville, NY

sir am really sorry please don't mind am new on active rain .

Mar 19, 2016 12:23 AM #41
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Sultan Akhtar ...relax and enjoy the log-in....

Mar 19, 2016 12:28 AM #42
Rainmaker
295,742
Anne Lok
Blue Elephant Realty Inc., Brokerage - Toronto, ON
Toronto Modern Real Estate

Ritchie- Thanks for the great blog post. I often look around my own home  and refer back to these rules. First is putting myself in a buyer's role. Just a fresh coat of paint does wonders. Investment on small items can offer greater returns. 

Mar 19, 2016 12:45 AM #43
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Hello little Anne Lok ...most excellent commenting and thank you Anne

Mar 19, 2016 12:49 AM #44
Rainer
191,848
Joy Bender
Pacific Sotheby's - La Jolla, CA
Who You Hire Matters

Hi Richie so true many sellers are very reluctant to spend money not hearing or comprehending there's a rate of return on investment.

Mar 19, 2016 01:01 AM #45
Ambassador
2,436,035
Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

If the house has been neglected and is severely outdated, the sellers cannot expect to get top dollar.  Asking them if they would pay top dollar for the property is a good way to get them thinking at least.

Mar 19, 2016 01:13 AM #46
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Hello Joy Bender ...it is as simple as you say dear Joy...thank you

Hello Ed Silva ...yes to your comment. Whether it gels? Welcome to Real Estate

Mar 19, 2016 02:55 AM #47
Rainmaker
908,388
Pamela Seley
West Coast Realty Division - Murrieta, CA
Residential Real Estate Agent serving SW RivCo CA

Sellers need to understand if they want top dollar their property has to be top-dollar value to a buyer. It's ok if a seller doesn't want to spend money, but they won't get top dollar for their property. It took time, but you convinced your seller. 

Mar 19, 2016 05:21 AM #48
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Hi there Ms. Pamela Seley ...your comment stands. I felt like a dentist at times pulling teeth...

Mar 19, 2016 05:23 AM #49
Rainmaker
382,792
Mary Hutchison, SRES, ABR
Better Homes and Gardens Real Estate-Kansas City Homes - Kansas City, MO
Specializing in Brookside, Waldo, Prairie Village

Sellers want top dollars for their house, esp in a hot market...yet we ask them to do a few things that WILL IMPROVE value and sellers don't want to do it...takes too long..they think their house will sell anyway.  Can be frustrating.

Mar 19, 2016 01:18 PM #50
Rainmaker
2,981,655
Joan Cox
Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Richie, great lesson for that Seller, and they do need to do updates along the way to see the return they are hoping for!  

Mar 19, 2016 11:15 PM #51
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Hello Mary Hutchison, SRES, ABR ...it boils down to opinions & everyone has one

Hello Joan Cox ...it is not a hard rule to grasp if you check the emotions

Mar 20, 2016 12:00 AM #52
Rainmaker
296,358
Doris Freeman
RE/MAX REALTY SOURCE - Jackson, TN
Broker/Agent, Realtor, Madison-Gibson-Crockett

Great post, some very important tips and information, Thanks

Mar 21, 2016 12:00 AM #53
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Doris Freeman ...good of you to join us all...thank you Doris

Mar 21, 2016 12:05 AM #54
Rainmaker
3,710,669
Barbara Todaro
RE/MAX Executive Realty - Franklin, MA
"Franklin MA Homes"

Good morning, Richie....I just saw the reblog on this post.... wise words from you, as usual...

Jun 03, 2016 10:41 PM #56
Rainmaker
601,333
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Hi Richie Alan Naggar We've all had this kind of client. They want the best price but aren't willing to provide the best product to sell.

Congratulations on getting them to see the light.

Bill Roberts

Jun 03, 2016 11:41 PM #57
Rainmaker
2,127,191
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

When planning for tommorrow ask Barbara Todaro ....best to you

Hello Bill Roberts ...had to earn my keep on this one. Well worth it

Jun 03, 2016 11:54 PM #58
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Richie Alan Naggar

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