Real Estate and Life

Rehabbing, Fix and Flip, Rental Properties
1

I had an appointment to show a house Saturday so I had to leave straight from the golf course to make it on time and I had my 14 year old son with me. We got there a few minutes early and spiffed the place up a bit. Soon the prospective family arrived. They were in a car that was older but clean. The husband and wife got out with their 2 kids. They looked like an all American family. The kids picked their rooms and the wife loved the kitchen. The father loved the game room and everybody loved the big backyard. My son could really see them living there as model tenants and kind of gave me the thumbs up.

I took their application fee and application and ran it. They came back to be a mess. They had four 90 days lates and one 120 days late. He had been convictions for DUI 3 times, possession, and theft. All these within the last 3 years or so. When I called him to tell him I was not going to rent to him because he doesn’t may anybody and he is not going to pay me either. My son could not believe that people that looked so normal and next door types could have that kind of past. I told him that except for the prison part most people are a mess financially.

It really opened up his eyes. He thought that bad people looked bad. I told him that all people look the same. It is not about how you look it is not even about what is in your heart it is about how you act. The only difference between bad people and good people is how they act. Bad people act bad and good people act good.

So the next time I tell him to clean up his room, I am going to ask him if he is a clean person or a dirty person.

2

with a job verification and a larger deposit, why wouldn’t you rent to them? I suppose it depends on the area, have you rented that house out since?

3

Great story Bluemoon. My son (13) has some very interesting views on life also. He lives with his mom who just became a Registered Nurse. The two of us were driving to his mom’s the other day and we drove by this huge mansion that was set some 300 yards off the road. Beautiful home. He says “Dad, you know who lives there? Some guy that owns 5 or 6 construction companies. He’s not even that smart, he doesn’t have his masters in anything! Can you imagine that dad??”. Of course the judgements he had about sucess were focused around “degrees” and “professionals”, as he got those from his mom.

I took a breath and patiently explained to him that just because you don’t have an official degree in something doesn’t mean your not smart or not successful. I am a huge believer in making your dreams happen and doing what you love, and that there is more than one way to get there. This summer I am taking him under my wing and showing him how the real estate game works and that even though I don’t have a plaque on my wall I am successful.

4

First, there’s plenty of people out there with jobs that don’t pay the bills, so a good credit profile is essential.

Second, the landlord with a rental next to one of mine used to get a large deposit for those not so credit worthy figuring if someone can come up with three months deposit should be OK. He since learned different when a tenant paid three months deposit, then didn’t pay anymore, and it took this guy nine months to evict.

Third, I ran into a coffee shop owner who make it a habit of not paying rent, knowing the system well enough that it takes the landlords a full year to evict him. Asked him how he managed to rent if he has such a bad record. His answer was “it works every time, he dangles a few months security, and the owners figure that it should be OK, never realizing he’s got no plans to pay afterwards.”

Don’t take chances, rent to someone with a clean record.

5

He always seems to have a nonstop supply of good tenants and rents his houses within weeks not months. Why take crap when another good tenant is just around the corner?

6

JaredfromIndiana -

I have a bachelors degree, a masters degree, and a Ph.D. None of those degrees have helped me to secure my financial future and I’m working to play “catch up” now. I will teach my children about investing and if they want to use some of the profit to pursue graduate degrees out of a love of learning, that’s fine. But higher education and financial security certainly aren’t positively correlated…they might even be inversely correlated!

Topaz

7

I have a bachelors and an MBA. Schools don’t teach you how to make money. They teach you how to be an employee. My employer pays me a lot of money, but what I am doing is trading time for money. That is what school teaches you to do. If everybody learned how to make money it would ruin the economy. There would be nobody to pump the gas, or fix my flat tires or do my taxes. We need worker bees to make life easier. But I want my son to know how this stuff works. Donald Trump was told by his dad how the “world” works. He may still work but it should be because he wants to not because he has to.

8

Why did it take him 9 months to evict? He must have been doing something wrong, as it should never take that long.

9

Reminds me of a story.

I used to eat “sushi” once a week, same time same place, and it annoyed me that the same delivery guy would come by the same time, at 12:15, banging into my favorite chair at the sushi bar, and once almost knocking me over. I was annoyed and told the owner to use another delivery service, and I don’t feel like eating at another time. The owner, also the sushi chef, said the owner of the wholesale company is a good friend of his, and added, in fact, “another of your countryman from China”.

I asked “does your friend make a lot of money”?? His reply “he just bought an office building, so he must be doing OK”. Then he laughed and added I wouldn’t believe this guy’s background. I said “try me”.

I’m told this guy was raised on a farm in China, swam to Hong Kong to escape poverty, and is TOTALLY ILLITERATE. But he grows the “best vegetables”. Amazed I asked, “so cannot read or write English”?? The answer, he can’t read or write in ANY LANGUAGE.

I wondered out loud how some illiterate man can run a wholseale business, and buy an office building. Answer?? He has several young kids with MBA’s working for him.

At the time I was going to this sushi restaurant, I worked at a company founded by six Jewish boys who left Germany right after Hitler took over. All of them left with the shirts on their backs and had little formal education.

About 15 years ago, the founders were in their seventies, turned the business over to professional managers, i.e. MBA’s from Wharton, and the president of the company even had a PhD in business and management.

Business started going downhill soon after, and the president issued a report on how “difficult” the business enviroment is. An oldtimer scoffed and said "six Jewish guys could start a business in 1932, during the great depression, but a MBA, PhD from Wharton cannot handle a simple recession in 1992.

The company closed up.

10

A newbie here with two small rentals in Oklahoma. I have been looking for a good screening website. Any experiences and opinions would be greatly appreciated. :beer

11

Frank, that’s GREAT story!

I know a lot of people who’s kids are going to College because their parents think it’s THE only way to be successful. I know a guy who just got on the Fire Department, no college, 20 years old, lives at home with his mother. This kid has saved almost $100,000 in the last 3 years between the FD and construction. He has been buying homes and flipping them. He’s smart, buys ugly low end houses cleans them up and sells 'em for under market value.

Now lets compare this guy to your average College grad. with a degree in English, Business, Poly Sci., you name it, all just about worthless, and he’s $100,000 in debt when he walks across the stage to get his diploma. College boy starts off entry level or goes to grad school, (= more debt) pays his student loans and new car payment and after a few years scrapes $15,000 together for a house down payment. That kid just locked himself up for the rest of his life. How’s he going to save $100,000? He’s not.

12

I wish I had found these forums 10 years ago… I’d be like that 20 year old kid in the fire dept.

13

When I was a kid, I used to work for the guy that owned “Forest Electric” (now www.forestelectric.net) in NYC…he been raised and still had a had a summer home near where I grew up. We called him “Loopy Leo”. Leo literally had a 3rd grade education and owned the largest electrical contracting company east of the Mississippi! Leo always told my dad that he was successful because “brains” are the cheapest thing that you can buy and that there are brilliant people graduating from college twice a year.

Keith

14

Very true. And those entry level grads will work for peanuts.

15

I think we need to be careful here. Obviously, a college education isn’t for everyone. Many of us may know someone who has been very successful without much of an education. However, I find that to be the exception and not the norm. There are all kinds of studies which indicate higher educated people earn more. And, yes, they are trading time for money.

I have spent over 2 decades working as a classroom teacher and principal and I have been involved with rei for the past year. I will have 3 kids in college next year. 2 of them think they know what area they want to concentrate on in college but that could change.

When might you recommend to a young person that they might not what to go to college? I don’t think you need a college education to be successful but what do you need? Most likely a very strong work ethic and a support system of some kind.

College isn’t for everyone but for most it seems to make the most sense.

Brian

16

I believe the persistence it takes to complete a college degree is good for developing emotional maturity. I hope that my two children decide to finish college. I just don’t want them to make the mistake of assuming that college will teach them everything they need to know about money, because it most likely will not.

Topaz

17

Society overvalues college degrees. To often college is seen as the only route to success. This may be true for the masses but not everyone. Unfortunately, my family has put a very high emphasis on college…

I just finished my 4th year of college at Boston University and now I’m only 4 classes away from my bachelors. During the 4 years I have acquired a lot of knowledge, but the focus and end goal was on how to get a job, how to be a good employee and how to advance up the corporate ladder. I learned how be successful in the corporate world but nothing about how to handle money. I’m fortunate that my grandfather taught me about money and success.

I’m a bit of a rebel and I don’t neccessarily want to work 50-60 hours a week in a job to only make $35,000 a year, while I am making someone else rich. I will work 80 hours a week if I’m the one who reaps the benefits of my work, not someone else. It was really frustrating becuase everyone at the university was so focused on getting a job and couldn’t see past that. My mom is the same way, she just wants me to get a job, but thats all she knows and at 49 doesn’t have much to show after working for 20 years in a job. I don’t want to be trading time for money for the rest of my life, which is why I’m going to invest in real estate. I see myself working for 5 to 10 years in a job so I can obtain enough rental holdings to become self sufficient.

In hindsight, I wish I would have been able to use the money spent to send me to college to invest in real estate. Instead, I’m starting out at 22 with $16,000 in debt… It’s time for me to go, I got some work to do.

18

SullivanExpress,

Excellent post. If you are willing to really work hard and sacrifice for the next few years, you will make it!

Good Luck,

Mike

19

On the college issue - I firmly believe in education and think it’s one of the best gifts you can give to your child. I would definetly encourage my kids to both go to college even if they choose to get a degree in wood working. Collge opens your eyes to different people and different propectives. My 2 cents…

On the tenant issue…we rented 2 years ago to a lady with a 503 credit score. She had several 60 days and 90 days late payments and chargeoffs.

We thought we were being “mr. & mrs. nice people”. The woman is nightmare. Never pays her rent on time. We are giving her the boot this month after her lease expires and hope to find a more reliable tenant.