Archive for April, 2008

What I Would Like to Say to Wannabe Real Estate Investors, but Shouldn’t

“Get up and do something, anything! What are you waiting for?”
I never rant on this blog. I never put people down (except stupid property repairs). I never want to upset anyone.
Maybe I need to step outside of my Minnesota nice exterior and introduce you to a pattern interrupt. If you have read every real estate [...]

“Get up and do something, anything! What are you waiting for?”

I never rant on this blog. I never put people down (except stupid property repairs). I never want to upset anyone.

Maybe I need to step outside of my Minnesota nice exterior and introduce you to a pattern interrupt. If you have read every real estate investing book, ordered every late night-infomercial program, attended multiple expensive training “boot camps”, but still have not or can not pull the trigger to buy investment property, this is your day.

As buyers, we are seeing some of the largest roll-backs of prices in recent history. Who would have ever predicted that we would see capital deflation in the housing market? I understand that statistically the market is only down 5-10% (depending upon who you ask), but every day I find properties that are currently selling for 25%-50% of their pre-2005 values. Talk to your neighbors, watch what is selling.

Whenever anyone asks me how the market is going these days I tell them it is smoking hot. Then I always say the same thing: “If you have money, now is the time to spend it”. Are you waiting for your Internet stocks to rebound before buying property? Do you think those government bonds are going to bring you extraordinary gains?

Let me explain why your excuses for not getting into the market and buying investment property simply do not hold water:

1. I am waiting for the market to go down more. Tell me how you are ever going to know where the bottom of the market is…If you are holding an investment property for 5-10 years, who cares if you miss that extra 2-3% in price drop when you are buying a property at 25-50% off its previously highest sale values.
2. I have heard that the market is going to get worse before it gets better. Possibly…but I am not telling you to leverage everything you own and put your family in jeopardy to buy investment property. Do something that you are comfortable with, can afford, and sleep well at night, but DO SOMETHING!
3. I don’t want to own property in North Minneapolis. OK…There are fantastic opportunities everywhere for any size and type of investor.
4. I have a busy job/family life/hobby and don’t have time to manage properties. No problem…Put them into property management or partner with someone who has time and experience!
5. I don’t know how to be a landlord. I didn’t either when I started…Get around other people that do it and simply figure it out. Call me, I’ll talk you through it. You are going to make mistakes, accept that fact. Just do the best job you can and learn from them.
6. I have heard that evicting tenants can take months. No it doesn’t. It takes some landlords months to make the decision to evict. The process takes about 2-3 weeks.
7. What if my tenants don’t pay their rent. See #6.
8. My [insert name of person here] owned rental property and said it was a terrible experience. For every negative experience…I would say I know people that have made millions owning investment real estate.
9. I don’t have any money. Now that may be a legitimate reason…But even there I may be able to show you how to get started in this market.
10. Everyone says the tenants will trash my property. Maybe…but if you are doing a good job at screening your tenants, you will minimize that risk. Additionally, that is what the damage deposit is for.

I can continue to address your concerns and hear your objections. This is the best market that we have seen in a long time and it may be another long time before we see it again. Ultimately, you need to decide if you are really serious about buying investment property or just pretending.

Stupid Property Repairs #3

I am naming this issue: “The Stupid Property Repair in the Pink House”
Again, when looking at North Minneapolis Investment Property, (which lately seems to be the place for stupid property repairs, but I am not going down that road to figure out why!), I found this gem.
But, let’s talk about pink for a minute… The [...]

I am naming this issue: “The Stupid Property Repair in the Pink House”

Again, when looking at North Minneapolis Investment Property, (which lately seems to be the place for stupid property repairs, but I am not going down that road to figure out why!), I found this gem.

But, let’s talk about pink for a minute… The below walls are not only painted pink in this room but so are the ceilings (and it has pink carpet just to round out the mess). This is not some 7 years olds room, but the entire dining and living room!

Click for larger view.

In that pink house we find an interesting plumbing repair. It appears this repair person was unsure about the proper materials to use to connect a new plastic plumbing pipe to an old cast iron pipe. As I always say, “When in doubt, use duct tape or its equivalent.”

Click for larger view.

Ah. Plumbing repairs and pink rooms all in the same house! And you too can buy this beauty for only $34,900!

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Next Investment Property 101 Seminar

Our next Investment Property 101 seminar will be next week on Wednesday, April 16 in Burnsville, 6:30 pm to 8:00 pm.
From his experience of owning 15 rental properties, Ryan O’Neill will teach you a concrete, non-infomercial way to build wealth through real estate. This seminar will be a one and a half hour presentation in [...]

Our next Investment Property 101 seminar will be next week on Wednesday, April 16 in Burnsville, 6:30 pm to 8:00 pm.

From his experience of owning 15 rental properties, Ryan O’Neill will teach you a concrete, non-infomercial way to build wealth through real estate. This seminar will be a one and a half hour presentation in regards to wealth building through real estate. There is no charge at all, no contracts you sign with us, no consultation fees, no hidden agenda. The seminar simply will be an excellent opportunity for you to learn more about our process: how you get pre-approved, what type of low-down loan product to choose, and then how we step you through the process of finding the home and helping you get it rented out. Whether you are a beginner or an advanced investor, this will be a great chance for you to learn more about how you can build your long term wealth through buying real estate.

Click Here to Register For Seminar or call 952-649-1456.  Drop me an email and let me know you are coming so I can make sure to meet you.

Investment Property Partnerships

In any business you will find partnerships. Sometimes they are built originally from friendships, sometimes they are between complete strangers. Regardless of their origin, partnerships can create a huge synergy by drawing on each of the partners strengths and bolstering their weaknesses. Conversely, I have seen some miserable partnerships that rival celebrity marriages!
Real Estate Investment [...]

In any business you will find partnerships. Sometimes they are built originally from friendships, sometimes they are between complete strangers. Regardless of their origin, partnerships can create a huge synergy by drawing on each of the partners strengths and bolstering their weaknesses. Conversely, I have seen some miserable partnerships that rival celebrity marriages!

Real Estate Investment partnerships can be even more tricky as you have assets (property) and liabilities (mortgages) that are not easily divided and/or disposed on. I think the keys to success is obvious, but not many people do it prior to starting the partnership.

You must define everything in writing and then have that document reviewed by a competent attorney. Here are just some items to think about when buying or owning Investment Property with one or more partners:

• Who is responsible for day to day management of the property? Who is the back up partner if the primary is on vacation or unavailable (and does anyone know how to reach the “other” partner(s))?
• If the property requires a major capital improvement (requiring major costs), how will the partners divide up the costs and/or time to oversee the improvement?
• What happens if one partner dies, becomes incapacitate, divorced, gets married, or goes to jail?
• Do you have insurance on each partner to allow the partnership to buy out the partner’s heirs? Does that insurance keep up with the value of the investment?
• How will any profits (or losses) from the sale of the property by allocated?
• What if one partner wants to do a 1031 exchange, but the other partner wants the cash when you sell? How do you handle the tax consequences?
• Are any partners allowed to pay themselves from the operating funds?
• Can partners take profits from the investment real estate during the year? If so, how is that managed?
• If you have an apartment vacancy that requires the partners to infuse cash into the partnership, how much does each partner pay?
• Can one partner force the other(s) to buy him out? If so, how is the price set?

Partnerships can help the average real estate investor become great. It can also lead to frustration and misery in the wrong situation. Only through careful planning and written documents can you insure that your new partnership will be successful.

Have you always wanted to buy investment property, but never knew where to start? Don’t Wait! Get Started now.

Foreclosure Prevention Workshops

Although I hope none of you are in this situation, I thought it would be good to pass along this information:
St. Paul and the Minnesota Home Ownership Center are sponsoring a series of foreclosure prevention workshops for people who are concerned about making mortgage payments, know someone who is in trouble or just want more [...]

Although I hope none of you are in this situation, I thought it would be good to pass along this information:

St. Paul and the Minnesota Home Ownership Center are sponsoring a series of foreclosure prevention workshops for people who are concerned about making mortgage payments, know someone who is in trouble or just want more information. Two similar workshops last fall drew more than 250 people each.

Mortgage lenders and community-based organizations will be available to offer free advice and answer questions, and attendees will be able to hear short presentations on legal rights and the foreclosure process.

Scheduled workshops:
• April 22: 4:30–8:30 p.m., Minneapolis Urban League, 2100 Plymouth Av N, Mpls.
• May 20: 4:30–8:30 p.m., Discovery Elementary School, 301 Second Av NE, Buffalo
• June 5: 4:30–8:30 p.m., Eagan Community Center, 1501 Central Pkwy, Eagan

Call the Home Ownership Center at 651.659.9336 or go to www.hocmn.org for more information. St. Paul mortgage foreclosure prevention counselors are available at 651.266.6626 or www.stpaul.gov/foreclosure. Renters with foreclosure questions can call HOME Line at 612.728.5767.

Source: Star Tribune

Raising Investment Property Rent

Here is a great question that I received today: “Obviously this can only be done when the lease renews, but how do you decide when and how much to raise the rent on your tenants?”
As you imagine, that can be a touchy subject. I think raising the rent depends upon a couple items:

If the tenant [...]

Here is a great question that I received today: “Obviously this can only be done when the lease renews, but how do you decide when and how much to raise the rent on your tenants?”

As you imagine, that can be a touchy subject. I think raising the rent depends upon a couple items:

• If the tenant decides to leave, can you re-lease the property for minimal cost and no vacant months? Losing a month of rent at $1200 is not worth the extra $20 you were going after.
• Do you feel like the tenant is paying a fair market rent? If it is low or average, the tenant may not be able to find anything better and so they may be fine with an increase.
• If you are leasing in the spring, you can be more aggressive because it will be easier to re-rent that property than in December.
• Hopefully you are talking with the tenant 60-90 days prior to the lease renewal about their plans and the rent increase, to give you time to release the place if they decide not to renew.
• Work with the tenant to see if they will let you set the lease renewal to 18 months (locking their rent) in exchange for the rent increase (you actually get a benefit of locking them in longer).
• I would have the conversation with them verbally or in person so you can read their response. Also, it is tougher for them to say no to your face.
• Use your best sales techniques to show them why they should both stay and accept the rent increase. At the end of the day, be honest.
• Lastly, if they are a great tenant and I am nervous about replacing them, I may just leave it alone.