TheLandlordBlog.com

Last week I had posted about my neighbors who are trying to rent out their house with one of the largest property management companies in Phoenix.  I had been seeing people come to look at the house, they weren’t able to get the lockbox open, and they would leave frustrated.  I was mystified why these people were showing up without a management representative there to show and sell the merits of the house to them.  They were given the lockbox code and could have stolen the appliances, damaged the house, or easily taken up residence.  This happens around here a lot!  I also noticed that the management company never even listed the house on the MLS like they said they would, and the only place it was advertised was on their own website.  The listing on their site was a measely one-photo 10-word poorly written ad.  The efforts were pathetic all around considering the money they were paid to service their client.

Yesterday my neighbors came to the house and so I went over and talked them about how things were going.  It turns out they had never once heard from the management company ever since they hired them.  They had placed many calls and none of them were ever returned.  Three times they drove to the management office and talked to whoever was in the office, but it seemed to fall on deaf ears.  What they did manage to find out was that they do in fact give out the lockbox code to anyone who calls and asks for it.  They don’t follow up with any of these people to find out if they liked it, want to rent it, need to negotiate the rent/terms, etc.  No follow up!  And the area manager for this part of town has been put on administrative leave for poor performance and nobody was handling his accounts.

The story gets more pathetic the more I learn.  This is one of the largest firms in Phoenix.  They pay for big-spread advertising in the investment magazines.  It all looks good on paper but there is definitely more to it than meets the eye.  Buyer beware!  Can’t wait to meet my new neighbors and hear how the experience with this company was from their perspective.

This is why you need to be educated about property management even if you don’t plan to manage your properties.  You have to be able to ask the right questions, make observations, and know if you have a bad company or a good one.  www.landlordsystem.com teaches you this and more.  Armed with education, you will improve your profits, guaranteed! 

When you’re refinancing a property soon after you originally purchased it, there are some tricks you can use to curb the costs while increasing your cash flow at the same time!

First you need to know that you generally have to wait 12 months before pulling any cash out during a re-fi.  This is how people often get at the equity that’s built up in their property.  They suck it out and then use that cash to buy another property.  If you re-fi before 12 months, you are limited to a “rate and term” re-fi.  This means the purpose of your re-fi is to get a better rate and/or different term.  We want to do a rate and term re-fi right after purchase in order to get into a pay option arm, even though we put only 5% down, which is less than the minimum 10% down it would take to get into this arm right from the get-go.  We don’t want to put 10% down because that’s more money out of our pockets than we need to spend.

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As I watched a segment on Good Morning America today with Warren Buffet’s kids, I was reminded of the classic debate over money.  Does money make you happy?  Buffet’s kids insist that it does not.  They say their dad isn’t happy because he has money, he’s happy because he’s doing what he wants to be doing.  They’re half right in that doing what you want to do is a source of happiness, but the other half of what makes this possible is the fact that you have enough money to be ABLE to do what you want to do. 

For me they lost points in the credibility department however because they have no idea what it’s like to not have money.  They mentioned how they got 75 cents a week for allowance when they were kids, and adjusted for inflation, today this would be $4.75, which is far less than the average $10/week kids get today.  So they contend they actually had less when they were kids than most kids have today.  Please!  They go on to say how their dad put a slot machine in the attic for them and each week they blew their allowance on the slot machine.  Guess they didn’t need that allowance so much after all.

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The guidelines on pay option arms are changing on a regular basis, so what I’m about to say may not be true 100% of the time, and across the entire gammet of credit scores, but this has been my recent experience anyway.  Because these arms use negative amortization, there needs to be some equity in the property to pull from each month when you make less than the interest-only payment.  That is where the bank is going to get the rest of the money to cover the interest that is due.  So far that reason, you generally cannot do these arms and finance 100% of the property at the same time.  I actually have heard that Bear Stearns will do this on owner occupieds now, but I certainly have not found anyone willing to do it on a rental.

So you need to have equity in the property.  Just how much equity?  Generally 10%.  On a non-owner occupied rental, the lender doing the arm will generally lend you 80% of the value of the house.  You can back that up with a second mortgage for another 10%, with the remaining 10% being pure equity that’s in the house for the arm lender to pull from. 

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This is completely off-topic but just way too funny not to share!

 http://waiterrant.net/?p=328

If you missed our 80/20 Training Call the other night with Brad and Mary Wozny, you’re in luck!  The call was recorded and the replay line is ready for you.  If you’d like to receive notices of these calls and invitations to participate live, sign up at www.landlordsystem.com

Brad and Mary Wozny are a mother-son investing team that live in Canada, don’t use their own cash or credit, don’t leave their desks to look for deals, and managed to earn $1 mil in real estate profits during the first 93 days they were working together!

If you’re worried about the real estate bubble, or slowing markets in your area, their message is for you.  Their investing techniques take all of the risk away from the investor.  Your credit and money are not at risk.  The absolute worst case scenario with their approach is that you end up walking away from a deal disappointed that it didn’t work out.  There’s no financial loss whatsoever!

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Continuing on in our discussion of this financing strategy, today I want to talk about a pay option arm.  This type of loan product is new to many people.  I first learned about it a few years ago and the popularity of this loan has increased incredibly over the last couple of years with the high appreciation we’ve seen in many markets.

Now I’m not a mortgage broker, so I’m sure someone smarter than me could challenge me on some of the details.  I want to share what I know from experience and I will do my best to be completely accurate, but this is my disclaimer.  I have 4 of these mortages right now and will have more soon.  I’m not going to convert some of my properties to this type of loan because either A) they are commercial properties and this is not offered there, or B) I’m locked into 4.x% interest rates and am fine with keeping those loans in tact. (more…)

We’ve all heard that you make money when you buy, and this is true.  You can also make a good deal an even better deal if you put some creativity into your financing strategy.  There is a very simple recipe to follow when buying any non-commercial property (4 units or less).  I recently deviated from my multi-unit buying to pick up some homes in appreciating markets.  I was new to single family home investing and quickly learned that there are tricks involved, and oddly enough, realtors don’t seem to know about them and most mortgage brokers don’t either.  So I thought it would be worthwhile to pass along what I’ve learned.  Here’s the recipe: (more…)

I love to be outside and when it’s 110 degrees here in Phoenix, at the very least I want to look outside.  So as I sit at my computer, my blinds are open and I get to look out at the goings on in the neighborhood.  I haven’t been able to figure out why yet, but ever since moving here we’ve noticed that everyone lives cooped up inside their homes.  All the blinds are closed and all you see for activity is garage doors open and close and cars drive in and out.  I walk our neighborhood with my dog everyday and we are the only ones here with our blinds open.

Anyway, our neighbors across the street just moved into a new home and they are trying to rent the one here.  We played Cash Flow with them a few months ago and I like to think that has something to do with their strategy   They hired one of the big name property management companies here in Phoenix.  I’ve been seeing people come to their house, knock on the door (as if they think someone is home), then they go to the side where the lockbox is.  A few seconds later they go back to their cars looking frustrated, sometimes even throwing up their hands.  It seems to me they can’t get the lockbox open.  This is happening again and again so I decided to go check it out. (more…)

So we met with a custom home builder today. We’re researching options for our clients who could build homes and flip them for a profit. Here’s the bottom line on the turnkey situation this builder has:

• Find an acre lot, max price for the land that will yield a good profit is about $125k
• Finance the lot with the construction costs - they have M&I bank on deck with a streamlined cookie cutter program
• $50k down
• Nothing to do until the house is about 80% finished
• At that point start to market it
• Split the profits 60% to builder, 40% to you

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