If you want to flip houses like on all of the reality flipping tv shows, you are going to have to fix those houses up. That should be obvious. If it is not, you might want to look for another way to invest.

So who is going to do that work? Are you qualified and capable of making the repairs? If you are, should you be doing the work yourself?

In this article I will be discussing several different approaches to having a house rehabbed so that you can sell it for a profit. I will even share which one I prefer and why, just in case you’re curious.

Option 1: Fix It Yourself

If you are knowledgeable in construction and home remodeling you have the option to do the rehab yourself. A lot of new investors are tempted to do this to ‘save a buck’, but I think they end up costing themselves money because they forgot that time is money and they just wasted a bunch of it.

When you do-it-yourself, you focus your time and energy on lower paying tasks. I’ve been taught that you should figure out how much your time is worth and hire other people to do the things that you can pay them cheaper than the amount you came up with. That’s sound advice.

Of course there are exceptions to this. There might some things that you could hire someone else to do but shouldn’t because they won’t be able to do what you do as good as you. Say that fast.

But when it comes to rehabbing houses, you are probably better offer just hiring other people to do the work. That way you can manage them and spend your time finding more deals. The people that do the work themselves tend to do less deals than the ones that hire out the work. One of the reasons is the time spent working on the houses but the other is that they are not able to keep their marketing and deal finding going.

The leads and deals you are getting today are usually a product of the work you put into getting them over the last several months. So when you first start work on that rehab, you might still be getting leads. But this will likely soon end as you fail to keep up the work required to get those leads. This is a real problem as it will take time to ramp it up again once you start to work at finding more deals.

I don’t know about you, but I can’t stand spending hours making trips to Home Depot and Lowes.

I understand that for some people, fixing up the houses themselves is a passion and if that’s the case, go right ahead. Just be sure that it really is a passion of yours and not just an excuse to get out of your comfort zone and delegate jobs.

Option 2: Be The GC

Another option, and a very common one, is to be the GC (General Contractor). When you are the GC you hire subcontractors to do the work for you. You have to find and hire the different tradespeople to do the different jobs required for the rehab.

Your responsibilities also include scheduling all of these tradespeople so that they are not having conflicts and stepping all over each other on the job site. One of the fastest ways to piss off a busy contractor is to schedule them for a job that requires something else to be done first. If that something is done first, they cannot do the work they are supposed to do. When they are busy, their schedule is tight and cannot easily be changed. You will likely have to find someone else to do the work or wait until they are able to fit you back into their schedule.

This happened to me early on in my rehabbing career. I still had a mentor and he was none too pleased. We were wrapping up demo on a large fire-damaged property. The sheetrock had been removed from most of the house and the sheet rockers were scheduled to come in the next day to start hanging the drywall.

They gave us a great price but mentioned that they needed everything prepped properly or they would leave and we would have to reschedule. Being the prudent new rehabber, I stopped by the job site a couple days before hand (I think it was the weekend). To my disappointment, most of the nails from the original sheetrock were still in all of the studs. Either I failed to make it clear to the demo crew or they just forgot to remove them. Let’s say they forgot. That will make me look a little better.

I was getting nervous. What the heck was I going to do? Nobody would answer their phone from the demo crew (likely because it was a weekend) and I needed this done. Well, I’ll just have to do it myself. I started pulling thousands of nails out of the 2x4s. Talk about time consuming.

My mentor showed up at the house unexpectedly. I thought he would be proud that I was doing what I thought was necessary. He felt differently. He proceeded to tell me how stupid it was. My time was worth way more than that. While he was belittling me (Ok, it wasn’t that bad), I was just thinking, “la-la-la-la. Yeah. Ok. Whatever. I did try to find someone and this isn’t difficult work anyway.”

Looking back though, I understand it wasn’t the immediate work that I was getting a talking to about. It was the idea that I should not be doing all of those things. If I was willing to do that, what else would I be focusing my energy on that I shouldn’t be? The lesson was bigger than just about me spending the time to pull nails out of 2x4s.

We only have so much time in a day. As the years go by, it seems that that amount of time is constantly shrinking.

Be careful how much time you spend on this

You could end up spending too much time handling all of the subs. I’ve heard of some investors that will hire each separate person through craigslist for each job. For instance, they will post a job for painting the inside of a house for $400 or something crazy and hire someone that responds to the ad to paint the interior of the house. They do this for all of the things that need to be done for the rehab.

THAT MUST BE VERY TIME CONSUMING.

I cringe just thinking about it. Especially because whenever I’ve tried to hire someone from craigslist, they were just junkies trying to get an advance on the job to get their smack.

Meeting that many different contractors at the job site and trying to figure out whether they will do the job correctly and on time must be very painful. How much could they really be saving? Are they actually getting references and looking at what other work they’ve done. I doubt it.

Of course, once you find some great subcontractors that consistently give you professional work at reasonable prices, your life becomes a lot easier.

Option 3:Hire a GC

You could also just go out and find a general contractor (GC) to manage the whole job for you. This is the option I prefer. When you don’t have much experience or knowledge of construction, you should start with this option.

A good GC is worth their weight in gold. When you find a good GC to handle your jobs, your life becomes so much easier. You are free to spend your time doing the things that generate the most return (finding deals, getting houses sold, etc.).

A good GC will be able to learn exactly what you expect and make sure that it happens consistently. You will no longer need to check on job sites every day or every other day. When I have a good GC, I check on the jobs about once a week.

A good GC will communicate with you when necessary. When someone comes up that needs your input, they won’t hesitate to get in touch with you and give you your options. I really don’t like when contractors do extra work and then tell me about it. Usually they don’t do what I would have wanted done. That’s a problem.

There are two types of GC’s. There are the ones that just manage their crews. They don’t do the work themselves. These are great but they are more expensive because they tack on their fee to the cost of the job. Some are pretty outrageous and some are reasonable and can easily be worth it.

I prefer the GC’s that work with their crew. They are always at the job site making sure the job is being done correctly and to your specifications. If a contractor is not always on the job site and he is not good at managing his crews, you could get shoddy work that takes longer than expected. They might then try to convince you that there are extras so that they can cover the added expense of the subs taking longer and wanting more pay. Basically, passing the buck on to you…

These tend to be the smaller operators. The guys with the big ads in the yellow pages usually aren’t these type of contractors. These guys are usually found by seeing their work truck driving down the highway with their company name and phone number on the side. You can also find some of them by driving through neighborhoods where lots of rehabs are taking place. Stop in and get a card from them. If the GC is on the job working, your will want to keep their card.

Conclusion – Extra Tips

Regardless of which option you choose to use, be sure to be as specific as possible with what work you want done. Make sure to have the finish materials specified as clearly as possible. You should have SKU’s for fixtures and other materials, paint color codes and sheen to use, etc.

In addition to that, make sure any hired contractors understand what you expect. You expect professional work, deadlines be met, the job site kept clean and secured, extras agreed to in writing before being done, and draws be made ONLY when the work has been done that warrants each draw.

So there are some of the options when it comes to having work done on a fix and flip.

Do you have another option? I’d love to hear about how you approach the fix up on a flip. Please share in the comments below.

Photo: Cindy Cornett Seigle

The post Who Is Going To Do The Work On Your Flip House? is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

When it comes to investing in notes there’s typically only two ways to go about it: you either find them or you create them.  Sure, with a background in real estate investing, you could create rehab loans for fellow contractors just like the hard money or private lender does. Now the biggest challenge with notes you create is that they tend to be short term, which can start to become a disadvantage especially when you get to the point where you have more money than deals.

You could also enter the “Seller Financed” world and crank up your marketing machine in hopes of the phone ringing, giving you the chance to buy a loan with all the perfect note criteria that you may be able to sell to a broker. I’ve gone down this path, and I’m not so sure it’s as easy as it used to be. The criteria is so strict, and the financing behind the broker has pretty much dried up, and when you throw the “Safe Act” into the mix, along with some seasoning requirements you now have the makings of a pretty tough business model.  Even if you find the perfect deal with the perfect note, I’m not so sure you can repeat it very often. So, what else is there?

You could always go after pre-existing institutional notes from a trade desk, loan servicer, or broker. I know what you’re saying, Pre-existing what now? No, you don’t have to originate nor do you have to market or go to the courthouse to find some notes. It’s as simple as just picking up the phone or going on the computer to buy a note! You don’t have to face the problem of finding someone to lend to or not having enough notes to buy. You now enter a world where capital is your primary focus, instead of marketing. Although some trade desks only sell pools of notes, others allow you to cherry pick your assets with your tastes in mind: whether you base your decision on geography, risk tolerance, or desirable fair market value.  With notes just a phone call or click away, you can now build a repeatable business model where you’re actually trading notes instead of searching for notes.

How Trading Works

Before I get into the different trading avenues, I should explain how the trading process works. After loans are originated, banks sell a portion of these loans for a multitude of reasons: to reduce their exposure in a particular asset class, because of capital constraints, or because of pressure from regulators. The major bank usually have a trade desk whose primary task is to sell notes to investors, some in fact have multiple trade desks that sell based on categories of notes. Usually these big banks aren’t really interested in selling notes on an individual basis, so they almost always sell notes to larger fund investors. Many of these very large fund investors then either service these loans in house or place them with a servicer, and if they choose to sell some notes they usually work through said servicer’s trade desk, through a broker, or through their own trading platform.

So, How Do You Get Started?

For investors starting out in the note business, the four best places to find product are banks, servicers, brokers, and trading platforms.

To narrow the field, a great resource to find smaller local banks and funds is a web service called Distressed Pro. For a nominal fee, not only do they provide contact information for asset managers and trade desks all across the country, but they also have data on who has what type of assets in their portfolios at any given time. Once you find a source that sells notes you’ll have to apply to gain access to product along with signing an NDA (non-disclosure agreement) or non-circumvent agreement prior to bidding. All of these options may sound overwhelming so let me simply the roles of each a little further:

Related: Cash Flow Notes: Step by Step How to Invest in Performing Notes

Funds/Banks/Servicers –

As described above, a trade desk is a department of a bank or fund that sells to investors. Most large banks do not sell individual notes to smaller investors looking to cherry pick. If you want to buy direct from banks and you’re just starting out, you may have more luck going to a smaller local bank. An even more promising route may be to buy from a fund – these outfits usually buy direct from the bank or from an even larger fund or servicer. Some examples of funds that sell directly to investors are Granite Loan Solutions, Kondaur Capital, and Gemini Capital. Distressed Pro also lists many more asset management companies and banks by region. They not only have the listings for all of these places, but they also organize contact information lists for the asset managers and trade desk workers at these outfits; so you’re not just calling bank tellers asking, “can I speak to the trade desk please?” If you’re starting out in the note business, this is by far the most effective route to go.

Brokers – Brokers can be found a number of ways, one of which that has surprisingly been successful for us was searching LinkedIn. The term “broker” has become a bit of a misnomer in the note industry, so when searching for these guys look for people with a title like Whole Loan Trader or Portfolio Manager. Keep in mind, brokers do charge a fee for finding you product but if you find the right one with the right contacts, the fee becomes a cost of doing business that’s easy to pay. Brokers are great for pool trading, so if you’re looking to buy one note a broker may not be your option just yet.

Related: Private Lenders…Where are Your Borrowers? Tips for Finding Qualified Borrowers

Note Online Trading Platform – Different than a traditional trade desk, an online trading platform allows you to see the product a broker, servicer, or fund sells online. Sites like FCI, NoteMLS, Auction.com do just that. It’s a great way to view notes on your computer that you may want to cherry pick and to also get an idea of market pricing.

Especially if you’re not dealing with a major bank, any transaction should be treated as “buyer beware,” My partner John always said, “There’s no such thing as a bad note, just a bad price”, so that can be determined by your due diligence and by having “reps and warrants” in place contractually, as well as other safeguards and buyback agreements.  The best advice is to try contacting these companies to jump in and get your feet wet, start out small, and gain experience.

So at the end of the day what strategy would you rather have? A strategy where you hope someone calls in and gives you a deal from your marketing or a strategy where you contact an asset manager at a trade desk once or twice a month telling them that you have “X” amount of capital to deploy this month? I know which one I would rather have.

What’s your best way for finding notes?

Photo: Hans Splinter

The post Marketing for Notes: Is There a Better Way? is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

Money. Is that the only thing holding you back from building cashflow?

Capital seems to be the biggest determent for many investors who want to start investing into cashflow real estate. There is a solution to the dilemma of cashflow and investment capital.  What is it?

A Master Lease may be that solution!

What is a Master Lease?

Dictionary.com defines a master lease as a “controlling lease under which a lessee can sub-lease a property for a period not extending the term of the master lease.”

A master lease conveys rights to the Lessee (Master Lease Investor) that help make this an ideal solution to the investment dilemma. Master Lessee gets two major rights through a master lease:

1. Right to control the asset for a period of time
2. Right to sub-lease the asset

These rights allow a Master Lease Investor to acquire cashflow assets with limited cash capital.

Is Now a Good Time for Master Leases?

Let us breakdown today’s investment environment. Owners can’t sell as prices are still depressed from the heights when many of them bought their houses and not all buyers can’t get mortgages yet everyone needs a place to live. This leads to growth in gross rental rates.

Growing rental rates and difficulty selling real estate is a perfect mix for implementing the Master Lease strategy with the right sellers.

Who Should is the Right Seller?

As a master lease investor, you need to get creative on who you can approach with this strategy. The beauty about this strategy is that you can approach any owner with it but there are certain owners who would be more open to the idea:

1. Free and Clear out of town owners who want to sell for a specific price and cannot achieve that price in the current market. Their motivation is driven to achieve that hurdle number and may not need all the cash today and do not like renting given the headaches associated with the tenants and repairs.
2. You can target owners who bought their assets at the height of the market and need to sell but cannot due to the market value being less than their original purchase price.  These owners maybe motivated to accept a Master Lease contingent on it working for their debt carry costs due to the inability to refinance and not achieving the price that they want for the asset.

Types of Master Leases

The two most prevalent master lease types are:

I.         A performance master lease requires the master resident to pay a percentage of the funds he receives from his sub-resident only when he receives those funds.

II.         A fixed lease, on the other hand, generally requires the master resident to make payments even if he does not have a sub-resident.

There are many hybrids given that each owners has different needs. As a master lease investor you can negotiate any and all aspects of your master lease - the variable or fixed rent amount, the term, the liability for expenses, escape clauses, etc. The key is to draft your documents by design based upon your negotiations with the owner rather than by default (i.e. using a standard realtor lease).

Fears Associated with This Strategy

Many investors are more fearful of executing a long-term lease as a master lessee than they are of buying an investment property. I think this is an irrational fear since it is easier to terminate a lease than it is to get out of title so the liquidity risk is less with a Master Lease strategy.

Some investors also think that they may have to be licensed under their state’s real estate brokerage law to engage in master leasing. Usually this is not true. Licensing is generally required for property managers (with few state exceptions) because managers have a fiduciary relationship with their principal.

Perspective of a Master Lessee

Pros
Long-term secured lease without an option often acts as a stealth option, since the owner must negotiate with you to remove your lease from the property when refinancing or selling. A master lease in many ways allows you to test drive a property before deciding whether or not you might want to buy.

The master lease is a great way to get your foot in the door for future negotiations. A master lease gives you the opportunity to build the relationship that leads to future purchases and often owner financing. Don’t make the mistake of thinking that your master lease is the final negotiation. It should be the first negotiation that can lead to one or more future negotiations.

Cons

You have first payment risk to your landlord. This simply means that you still have pay the rent to the owner even if your sub-tenant stops paying rent. This liability is similar to the liability that any owner of cashflow real estate would have to the lender who gives you money to buy the asset.

You can and will have variability in cashflow associated with unexpected repairs that can lead to negative cashflow. You can mitigate this risk by conducting a home inspection prior to master leasing the investment and craving out special repair ceilings within your master lease agreement.

Landlord-Tenant court. This is something that all buy & hold investors have to deal with so welcome to the club Master Lease Investors. You can mitigate this risk by conservatively underwriting your tenants so you can weed out the good from the bad tenants.

Capital Improvements to make the unit rentable. As a master lease investor you may rent the unit that needs to be cosmetically repaired to get top market rent for the asset.  Be prepared to have a few months worth of capital reserves built up prior to making a master lease investment.

Real Life Example: Strawberry Court, New Jersey

The “Situation”

A friend, Joe , purchased a condominium unit back in 2006 but had to relocate to another location nearly 1 hour away due to easier commute to his job

The move for his job caused Joe to rent out the unit to a tenant. Joe was a part time landlord at best given his demanding Wall Street job. Over time, Joe grew tried of the tenant complaints and the unexpected repairs that arose at the unit.  While the tenant always paid on time, the sheer time spent managing the tenant got too much for Joe. So when the tenant vacated the unit, Joe decided to sell the unit “as-is” instead of fixing up the damages caused by the tenant and re-renting the condo.

Joe put the unit on the market with the simple goal of breaking even. Joe received a few offers on the unit but all the offers were from investor buyers who wanted nearly a 20-30% discount from the list price. (Good Side Note: Condos are typically more illiquid than single-family homes depending on where the unit is located.) Joe was unwilling to accept those offers as it would cause him to experience a loss that he was unwilling to take. After months and lots of frustration, Joe reached out to me to see if I would be interested in buying the condominium.

I walked the unit with Joe. While walking through the unit, I asked Joe about what he wanted exactly from the offer. Joe stated that he was looking to sell the unit without taking a loss as he did not want to rent it out and take on tenant headaches. Joe was willing to be creative about how the deal would be structured and had a really good mortgage interest rate on the unit after his recent rate readjustment. I went back to my office and completed a basic market analysis with the following findings:

Market Research Findings

CMA Market Value- $175,000

Rental Value-$1,200 per month

I ran my math and approached Joe with the following offers:

Offer I- $130,000 All Cash

Offer II-$162,000 with $25,000 downpayment so that Joe could pay off his second mortgage. Joe would give me a wrap mortgage wherein he would make a 100 basis point more than his carry cost for a period of 5-years thereafter I would cash him out completely.

I reviewed the offers with Joe and explained the pros and cons for each offer. Joe needed to net $165,000 in order to not take a loss. Offer II would get Joe to that number given the additional interest rate spread along with continuing to pay down his mortgage principal for the next 5 year period. We shook on it and signed a Letter of Intent (LOI), which laid out the structure of our deal.

Lawyers can really muck up deals

I have nothing against the law profession and there are some great real estate transaction lawyers out there but at times the wrong lawyer can muck up deals. That is what happens with me as Joe’s lawyer was uncomfortable with the wrap mortgage structure given that it invoked the due on sale clause. Before you all jump down my throat, I did explain the due on sale risk to Joe before we signed the LOI.

Creativity arises when it seems that all is lost.

After the attorney sent  over the kill letter, I spoke to Joe again and told him that his price was not achievable in today’s market without doing rehab to the unit or being creative on the selling terms. I then remembered the master lease strategy and I thought why not talk to Joe about it

A Master Lease became the solution that we both wanted!

I explained to Joe the idea of a master idea. I told him that with a master lease I would give him a fixed monthly payment, which would be below the fair rental market value of the unit, but I would take care of upgrading the unit and any minor repairs that arose in the unit. Joe thought about it and liked the idea of continuing to pay down his mortgage and make a small profit without taking on any of the variability and tenant risk. We had a deal.

Deal Details

Joe needed about $650 per month to break even on costs after we agreed on the master lease idea. I worked my math and realized that I would need to invest about $3,50 to fix up the apartment to make it rental ready and carry the property for a few months before it produced any cashflow. To make myself whole and make a profit, I wanted a 60-month lease term so that I could make my initial investment and make my target return on equity requirements. Joe agreed to the term but wanted stepped up payments so we agreed to a $770 master lease payment that stepped up about 5% per annum.

Download a Copy of My Master Lease Document

We struck a deal, and I crafted the master lease document that laid out the terms of our agreement.

I gave Joe a security deposit and the first month rent and started down my novice journey as a master lease investor. First thing that I needed to do was repair the unit to make it rental ready and I wanted to spend $3,500 which did not work out given the extent of the labor shortage in our market following hurricane sandy. I searched for over a month to get the right quote but I could not find anyone so I bite the bullet and decided to complete the work for $5,000.

My project manager, Vinnie, managed the asset and completed the rehab job within three weeks and within the newly established budget.

I thought great the construction is done, and I will be able to get a tenant right away but I mistimed the construction completion. I completed clean up of the unit for showing near the first week of new month and no tenants were out there looking for a rental. So I waited another month and give Joe another $770 while my team searched for a new tenant.

I finally find Mike. I am strict tenant underwriter so I denied a few tenants before I found an acceptable tenant in Mike. Mike rented the unit for $1,200 per month and was responsible for his own utilities. I created a new sub-leasehold interest with Mike subject to my master lease interest and I became his landlord.

Strawberry Ct Investment Summary

Investment Costs

Cosmetic Upgrades-$4,750 (projected only $3,500)

Project Manager Fee-$1,000

Security Deposit-$1,200

Vacant Rent- $2,310 (3 months originally projected only 2 months)

Total Investment- $9,260

Investment Returns

Gross Rent: $1,200

Payment to Joe: -$770

Net Rental Cashflow: $430

If this net rental cash floe holds up then this investment payback period including return of the security deposit through rental cashflow will be appx. 24 months.   Now this is a projection and the payback period can and maybe longer if unexpected repairs or vacancy occurs which forces me to invest more cash into this investment. So what are the major takeaways from this case study for me?

My Takeaway(s)

*I was able to secure a projected net cashflow after reserves and vacancy of $250 per month. In the state of NJ, I cannot buy $3,000 of annual cashflow for under $10,000 investment.

*Remember projections are just that projections. Be prepared to spend money at times and do not get dejected on cost overruns. Figure out where you went wrong and correct it for the next investment. My mistake was not getting an updated quote from a contractor post sandy and rather relying on my rule of thumbs established before the construction demand surged occurred in my area.

I hope this post inspires you to be creative and not let money be a deterrent to building your cashflow wealth. I am by no means an expert on using the Master Lease strategy, but I wanted to share my experience with you the readers.

I look forward to hearing your thoughts and comments in the comment box below.

Happy Investing

Photo: Kevin Dooley

The post The Master Lease: A Case Study on How to Achieve Cashflow with Little Capital is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

In your real estate business, it’s critical to your success that you learn to ask the right questions when someone calls. When you get the right information every time, it will help you to quickly determine whether or not you are dealing with a motivated seller. Always bear in mind that even thought this person isn’t a motivated seller today, it doesn’t necessarily mean that they won’t be motivated in the future. Time and circumstances change all things.

I have a rule of thumb that I follow regardless of which category they fall into. So long as the house is one that I am interested in buying, I keep them on the mailing list until one of these things happens:

• I buy the house.
• Someone else buys the house.
• They ask to be removed from my mailing list.

That’s it. Don’t disqualify someone because they aren’t a motivated seller today. Keep on marketing to these folks. I have bought houses several years after I started marketing folks. Absentee owners that are “long distance landlords” are a group of people that sometimes become very motivated after a tenant trashes their house one too many times.

What Questions Should I Ask?

You should always use a standard Property Information Form to be sure that you don’t forget anything when a seller calls. I like to keep a stack of them on my desk. If you do that, you will always get the information that you need. Some of the things I have on my Property Information Form are listed below.

The Sellers Contact Information

• Their name, phone number and email address; try to get all of their phone numbers.
• The property address
• Be sure to get the name of the person that actually owns the house. Often the person calling may not be actual owner or the decision maker.
• Ask whether the property is vacant or occupied. If it’s occupied, who lives there? Is it a tenant, a relative etc? This will have an effect on how you can access the property.
• In the far right corner of my Property Information Form, I list the referral source and the type of referral:

-DM –Direct mail campaign

-PR – Probate

-AO – Absentee Owner

-Other Type of Referral (Bandit Signs, Referral, Ad etc.)

-What state do they live in?

It is important especially when working with absentee owners, to know which state they are calling from so that I know which time zone they are in. I don’t call them too early or too late.

The Property Information

• The number of bedrooms and baths
• The style and type of construction such as “brick ranch”
• Whether it’s built on a basement, slab or crawl
• When the kitchen and bath(s) were last updated
• Types of flooring: carpet, hardwood or other type
• The ages of all the major systems such as the roof, HVAC, etc.
• The type of fuel used for the heating system
• Be sure to find out if all the utilities are on in the house
• Ask them what repairs and updates they would do if they were to live in the house. You will be amazed at the information you will get just by asking this one question.

Try To Determine Their Motivation

• How long have they owned the house?
• Why are they selling? Probate, absentee owner, facing foreclosure (What’s their motivation)?
• What is their asking price? You want to find out what their “expectations” are.
• How much the house is assessed for? A lot of the time sellers have no idea.
• If the house is listed, if so who has it listed? When is the listing over? Ask if it’s OK to keep them on your mailing list just in case the house doesn’t sell.
• Do they have other properties to sell? Never forget to ask this question.

Existing Mortgage Information

You want to get specific information on what (if anything) is owed on the house. You may find out very quickly that you can’t help this seller no matter how motivated he is especially if there is no possibility of a short sale.

Figure Out What Your MAO Is

I have this right on the bottom of my form. I list the ARV (after repaired value) and the dollar amount of the repairs needed. Since I am a wholesaler, I also have a place to list the wholesale fee I want; “Me”. These figures will tell me my MAO or my “maximum allowable offer”.

I have set the form up so that I can put two sets of figures in this area. What I will do is figure the MAO for a complete rehab, and a “to rent” MAO. Landlords won’t necessarily do the same level of work that a rehabber would do for a retail sale. Some won’t do any updating at all; they will be OK with a bathroom that has pink tile if it is in perfect condition. After all, they won’t be living there. Doing this second MAO gives me another way to “create a deal” if I can’t get the seller quite as low as I need for a rehabber to buy this house, and I have landlords that would pay a little more.

Related: BP Podcast 012 : Wholesaling and Marketing with Sharon Vornholt

Other Tips

When you talk to any seller, not only do you want to find out their motivation is, but you want to know if they have a “number in mind” to just walk away and be done and to be rid of this headache.

What problem do they need YOU to solve? Always remember; it’s never just about the money. When they have given you a number, wait a little bit before responding. Then ask them, “is this is the best you can do”? Once again, just wait. Wait for them to speak first.

You will be amazed at the number of people that will immediately drop their asking price significantly. Finally, ask them what they will do if they don’t sell the property; if they get stuck with this unwanted house.

I have uploaded the form that I use in my business in the BP File Place. You will find a number of good forms there that you can use. Just pick one and always use it.

Do you have any other information that you ask for when you speak with a seller?

Photo: Neal Sanche

The post How to Talk To Motivated Sellers on the Phone: The Benefits of Using A Standard Property Information Form is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

This question seems to continually pop up on my radar, and I don’t know why – this seems pretty simple to me.  What am I missing guys? (See Brandon’s article last week “Is it a Lie to Tell the Tenant I’m Not The Owner?“)

When I first started in the game of landlording, I remember reading a lot of opinions on the subject, and there is certainly a lot of advice out there which would suggest that hiding your identity as the owner of the building from your tenants is beneficial.  Eight years into this life as a landlord I have developed a strong perspective on the issue, and it runs contrary to this advice.

I Always Tell Everyone Involved That I am the Owner!

This gives me the opportunity to say to my tenants – if you have a problem, come to me; but know that if I have a problem, I am coming to you…nice, neat, and everything out in the open.

Realizing that this is somewhat of a bold statement in the face of an age-old argument, and respecting opinions on the other side of this argument, I feel that I owe an explanation.  I will approach this discussion from two focal points – moral, and practical.  Don’t worry – this won’t take long…

Let’s Get the Morality out of the Way – It’s Easy

On the “morality” level this conversation is a non-starter in my view.  Follow my logic guys – this isn’t rocket science:

If you own the building, but tell tenants that you are just the manager, then regardless of what your reasons are – you are lying!  I am not necessarily passing judgment here; well, may be I am…But more than that, this is simply statement of fact, isn’t it?  You are not being truthful, which is how we define lying.

Are you the kind of person who is comfortable with lying?  Does your wife know this?

Now the Practical Piece

First a general thought – I believe that energy breeds energy.  As I stated in Podcast 14 here on BP, you can certainly be a schmuck and still make money.  But, you will find it difficult to hang on to your success.  Why?  Because honest people will eventually figure out that you are not one of them and will quit doing business with you, while at the same time your “ways” will attract business partners, customers, and clients who will eventually swindle you!  You are not the best at your game, and eventually somebody will come along who will burn you.  This is a fact – happens all the time…take it or leave it.

Now, according to some people the main “advantage” of telling tenants that you are a manager and not the owner is that it creates a buffer.  The thinking goes something like this:

Tenant’s question:       Hey, can I get this or that repaired?

Your answer:              I don’t know.  I will need to ask the owner…

And this, apparently, is beneficial because it buys you time to make up your mind and creates a bogeyman should you decide to decline – you can blame “the owner”.

May I suggest that if you need time to think things over, there is nothing wrong with simply saying to the tenant – let me think about it.  Furthermore, if your answer is no, why not just say – my answer is no and here is why; I hope that you understand and can except my answer, but if not please feel free to move out and it’ll be my pleasure to find someone who’ll be too happy to live in this wonderful apartment.

OK – this only works if you are respectful of your tenants needs, stay on top of the repairs, and are the kind of a landlord who goes above and beyond WITHIN REASON.  This would not work if your goal in life is to get out of your responsibilities…but, be aware of the following:

Question:      If you lie to your tenants, why should you expect your tenants not to lie to you?  And if your tenants think that it’s OK to lie to you, how long do you think you will last as a landlord?

The answers to the above describe precisely the reason why most landlords burn out and get out of the business before being able to realize the benefits of it.  Landlord/Tenant is a business relationship, and it must be built on a foundation of honesty and respect.  Besides, we can rationalize this all day long, but isn’t there anything sacred in life any more, such as Don’t Lie…

Photo: Dyanna Hyde

The post Should You Tell the Tenants that You Are the Owner? [Counterpoint] is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

James Taylor has a great song titled, the Secret O’ Life. The main lyric is: The secret of life is enjoying the passing of time. In my opinion, not a truer phrase has been spoken. Why does it seem to take us reaching our 40′s to figure that out? Another media reference is from the movie Along Came Polly, with Ben Stiller and Jennifer Aniston. Funny movie. At the end of the movie Rubin’s (Ben Stiller) father, who rarely talks, but finally speaks some rather profound words. He says, and I’m paraphrasing, “It’s not about what you did in the past, or what you THINK you may do in the future, it’s about the ride for goodness sake. It’s not worth going through all this, if you’re not going to enjoy the ride!”

Our Fathers Day Fishing Trip

In our business and our personal lives, it is so important to enjoy the ride. It is a habit that if learned, can yield great results in both our personal and business lives. In the end, aren’t they really the same anyways?

Let me tell you about this past weekend. Friday, my 13 year old son and I took off for Brooklyn, NY to go deep sea fishing out of Sheepshead Bay. It was his 13th birthday present. It just so happened that it was also Fathers Day weekend. The plan was to leave on Friday at 1:30PM, make the 7:00PM boat. I thought that 5-1/2 hours should be MORE than enough time for a 3 hour trip. We planned to stay in a hotel after fishing and come back the next day. I decided early on that no matter how the weekend played out, I was going to enjoy the ride. Well, what a ride it was. We took off from the Albany area at 1:30 PM, GPS said it would take 3 hours. Our boat left at 7PM. Plenty of time, right?

Wrong!!

Have you ever experienced rush hour traffic in Manhattan? Wow, what a mood killer! I rely so much on GPS, that I did not take into consideration we were traveling right into the heart of the beast at rush hour. Well, we were in bumper to bumper traffic for several hours with no place to go. I told my son that we were going fishing no matter what it took. I said I have no idea what day or boat it will be on, but I WILL make it happen. Of course, we missed our boat that evening, so we decided to make the best of it. I called the captain and explained we were rookies and severely misjudged NYC traffic on a Friday night. He laughed at me, as any good New Yorker would , and said he would move us to the boat the following night.

We decided to have a great trip and add on to our adventure. Since it was apparent that the big city had gobbled us up and we were going to be stuck in Manhattan anyways, we decided to punt. We went to the top of the Empire State Building, ate diner in a great little restaurant in Hell’s Kitchen. We rode several blocks in one of those carts pulled around by a guy peddling. We finally left Manhattan and made it to our hotel in Brooklyn. In the morning, we got up, had breakfast at a Russian restaurant, (who knew they served Ice Cream with their pancakes), then walked to the NY Aquarium. From there we spent several hours at world famous Coney Island, enjoying the sights, sounds, ocean, beach, and local food. Then back to have some true NYC pizza, and finally to the boat. I drove home after the trip, and was able to spend the first several hours of Fathers day with my firstborn son. It was a great trip and one that we will never forget. Even if he is starting to be too cool to walk next to me!

Was The Day All Roses?

Not a chance. Here is the other side of the trip. Imagine the potential stress level in the car as we sat in traffic, realizing that no matter what we did, we were NOT going to make our boat. I knew my son was disappointed and was afraid we would not go fishing. Have you ever heard the language, car horns, and hand gestures as NY’ers fight in grid lock traffic? Wow, it is enough to cause heart disease! I think I even learned some new words! My back is severely out, and I think I have a slipped or bulging disk, so almost every move is agony. It was badly irritated when the buggy guy ran over a pothole. We were hungry and tired. The lines and crowds at the Empire State Building, even at 10PM are insane. At a price of $76 for the two of us to go up, that can be stressful in and of itself! Parking two different times only cost me about $70 for the night, what a deal! We are in the wrong business!!! The next day, the hotel was pushing us out at 11:00 even though we had no place to go. We tried to get a cab, but ended up walking the 3 miles to Coney Island. Lines were long at restaurants, as it was very hot at the beach. The Aquarium was only half opened because Hurricane Sandy really destroyed much of it last year. I heard a bunch of people complaining about that. The driver of the cab could not change a $100 bill, so I had to go around looking for change as he waited.

On the boat, by accident my hand hit the exact spot to delete my email voucher proving I had paid for the trip! The fish were scarce, and we only caught one small very odd looking fish. The boat stayed out about an hour later than it was scheduled to, trying to find fish to catch. We did not get back to port until after 1:00 AM. We had a 3 hour drive ahead of us to get home for Fathers Day. That puts me home at 4:30 AM. We had to go back through NYC, and I was shocked as I was in bumper to bumper traffic at 1:50AM!! Are you freaking kidding me?? The city was alive like it was 8:00 on a Friday night. I was amazed. Now I understand why it is coined, The City That Never Sleeps. I drank a Red Bull to stay awake, had some chocolate, and set the cruise control at 78. At 4:15 AM, I am within 5 miles of my home and get pulled over for speeding. Despite my best effort of smooth talking and name dropping, I still get a ticket. It was greatly reduced, but a ticket none the less.

Why did I tell you all of this? Because what we choose to focus on will determine our happiness in life. I had to literally sit back and make an effort to THINK about all of the negative things that happened. I was not programmed to see them while they were happening. I was determined this trip to focus on enjoying the ride, whatever it was going to be. If I did start to think negatively, I quickly told myself: “Enjoy the ride Glenn. You can’t control it, and if you try to you’ll be stressed and miserable, so sit back and enjoy it brother.” The first paragraph is exactly how I experienced the trip. It was really amazing, bad back and all. I know I have limited time with my kids being young and I think this was one of those trips we will talk about forever.

Imagine If we Graphed Our Success and Struggles

If we were to make a timeline and charted every up and down on the trip as they happened, it would be one of the most violent roller coasters you would ever see. If we allow them to, our emotions will go up with each success and down with each challenge, thus making it very difficult to truly, Enjoy The Ride. Remember what we choose to focus on will determine how we see the world and our situation.

How Does This Apply To Our Businesses?

I have done hundreds of negotiations both buying, selling and renting. Every single deal seems to have something that displeases somebody. Think of all of the people involved in any transaction. Problems can be a simple as a lack of communication from agents, appraisers, lawyers, inspectors, mortgage brokers, banks, code enforcement, contractors, and more. I really do not want to list all of the negative things that can happen in almost every deal. Each one of us can fill in the blanks for all of the trouble we have had with our deals. If we do that, we would probably crash the server! The issues start from day one and really don’t end until we are out of the deal, and even then the problems can continue. In the end though, don’t most of our deals end with a positive outcome? Did all of our worrying change the outcome one bit? Actually, it probably made it worse! We should all remember that this is all part of the ride of being a Professional Real Estate Investor.

It would be best if we always focused on the prize. Focus on the goal you wish to achieve. It doesn’t matter if you wholesale, flip, buy and hold, buy and sell notes, etc. Decide what your end goal is and stay focused on it. You will have issues, and the more deals you do, the more issues you will have. How you decide to handle those issues will determine your success in this business and in your life. If you choose to enjoy the ride and not sweat the small stuff, you can be a much happier investor!

As far as we know, we’ve only got one trip around this crazy life, so let’s make sure we are all enjoying the ride. As I read back through this article, I realize it may seem as though I have this mindset mastered. Let me say for the record, I do not, but I am working on it! It is a process that I work on day in and day out. Hopefully I am a little better at it today than I was yesterday. I hope this article helped some of you gain some perspective today and that you all have a great week ahead. Focus on all of the great things happening to you every day and more will come. If you have not yet started investing, stop thinking about it, jump in and Enjoy the Ride.

The post Enjoy The Ride: A Story of Traffic, Stress, and a Great Father’s Day. is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

Today I pulled up a Purchase Rates Assumption from Chase Mortgage just out of curiosity to see what the rates are like today.

So this is what I find:

30-yr fixed: 3.875%

15-yr fixed: 3.125%

7/1 LIBOR ARM: 2.875%

Agency 5/1 LIBOR ARM: 2.500%

Okay, I usually don’t deal with mortgages and I don’t have the best idea of what exactly entails a 7/1 LIBOR ARM or an Agency 5/1 LIBOR ARM. But I do notice there’s a big discrepancy on the interest rates between a 30-yr fixed and an Agency 5/1 LIBOR ARM. Over the course of interest payments, it can potentially make a huge difference.

Related: Check out Today’s Rates in the BiggerPockets Mortgage Center

But Which is Better?

First, I’d like to say between 30-yr fixed and 15-yr fixed, I am a big fan of the 30-yr fixed, especially in today’s environment. I like 30-yr fixed rates because right now real estate debt will not get any cheaper. I will elaborate on this concept in a future post why 30-yr fixed is better than 15-yr fixed.

So now let’s compare 30-yr fixed to 7/1 LIBOR ARM and 5/1 LIBOR ARM.

So ARM, or adjusted mortgage rates, goes like this. The first part of the number shows you how many years the current interest rate is fixed for. With aspect to LIBOR, the future adjusted rates would be a certain percentage over what the LIBOR rates are. LIBOR is the London Interbank Offered Rate. It is a rate that banks in London use to lend to each other. Unfortunately, as we’ve learned in recent news, it often gets fixed by banks amongst themselves.

Since we don’t know what the market is going to be like in five to seven years, can we be certain that interest rates won’t rise dramatically?

It is hard to say. Typically there are caps to ARMs that limit how high the rates would go. However, you certainly don’t want to see your rate go from 2.5% in one year and 7% the next. The changes in interest rate can dramatically change your monthly payments.

But what if your investment plan is to own the piece of real estate for only three years? Now would that make sense?

Yes. It is still, however, a speculative bet. The market constantly changes so you never know whether it will be a good time to sell before your LIBOR changes.

On the other hand, you can protect yourself by refinancing again. The rates may be lower depending on the market environment, but it is safe to say that it won’t be as low as 2.5%.

Are you ready to take that risk? Or would you rather pay 1.375% extra for the peace of mind that your interest rate will never, ever change?

Photo: Chris Butterworth

The post Do Adjustable Mortgage Rates (ARMs) Make Sense? is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

There was an auction for a couple of investment properties in my area not to long ago and I decided to go and try my hand.  I have never had any success buying properties at an auction.  Someone always seems to be doing too much at auctions, such as asking for or paying too much.  Would this auction be the same or would I finally get to say I have purchased a property at an auction?

Unfortunately, I still cannot say that I have purchased a property at an auction.  The owners were asking for too much.  However, the auction was still interesting and in my mind worth going to for a few reasons.

Lessons Learned at the Real Estate Auction

First is simply for the experience.  An auction can be intimidating.  You are bidding out in the open against others standing right there looking at you.  No hiding behind an e-mail offer here.  The auctioneer is pointing at you and trying to get you to bid more.  You have to be cool and focused.  It was worth going just to get some more of that experience under my belt.

Second, the auction validated my investing knowledge and techniques.  Prior to the auction, I toured the property, reviewed the financial statements, ran my numbers and developed a maximum bid.  During the auction, several other investors also showed up to bid.  Soon after the auction started, the price was quickly established a bit above my max despite the best efforts of the auctioneer.  The market had spoken and it felt satisfying that I was in tune with the market.

The market spoke again at the second property auction.  This property was a four-plex in a desirable area surrounded by single family homes.  The owners had poured a lot of money into the property and it was in great condition.  The single family homes in the area were selling for $300,000 plus.  But the numbers on the four-plex did not justify a price much above $160,000 and again, and that was the price were the bidding stopped.

It did not matter that the property was fixed up so well.  It did not matter that the single family homes surrounding it were selling for so much more.  This was an investment property and the market dictates what you can generate in rent and thus what the price will be.

So finally, participating in this auction reminded me to listen to what the market is saying and to trust what my numbers are saying to me.  Sometimes we need to be reminded of that every once in a while as bidding, competition, hedge funds or whatever else drive up prices.  We as investors need to remember that 2 + 2 always equals 4, never 5.  If the numbers do not work, walk away.  Let someone else win the bid.  You will still be there in a couple of years to likely pick up the same property on.

Photo: Gillian

The post So I Went to a Real Estate Auction is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

While there are questions as to whether or not the housing market in certain metros has grown with unstable speed, there are particular areas that remain promising areas for property investment. Considering that the housing market has been on the rebound for still less than a year, the opportunity for investment gains through intelligent property acquisition remains open. Granting that certain areas might be too expensive, or otherwise too uneasy in their outlook (California springs to mind), which areas might be prime considerations for investment allocation?

According to a new report from Forbes, many of these promising markets remain in more populous metro regions. Comprehensively speaking, the regions noted in the Forbes article tend to combine lower median home prices with the likelihood of persistent consumer demand. Many of these areas also experienced particularly sharp plummets during the 2008 crash and were much more gradual to recover than California’s sudden-rebound markets.

Among the regions that the Forbes piece noted as promising growth metros was Las Vegas, whose plummet in real estate values was so drastic that its rebound was subsequently prolonged past many of America’s other major property markets. As a positive (but somewhat unsurprising) consequence, Las Vegas’ return to health has remained even and steady, and its growth outlook for the immediate future remains promising. To return to the counterexample that’s emerging in California, there’s a respectable chance that the Golden State’s rise in home values is too meteoric to be sustainable. Home prices could in fact rise so drastically that a bulwark of potential buyers could be forced to waylay purchases, resulting a potentially dangerous jostling of the supply-demand equation.

What About Other Metros?

In addition to Las Vegas, the Forbes report was keen to point out both Chicago and Atlanta as two promising big-city housing markets. The former could emerge as a particularly appealing metro for long-term property investments, with the area’s median home price having grown at gradual but stable levels (without having risen too high) throughout the past year. In addition, Chicago has a persistently low rate of unemployment and a strong local economy, a factor that helped the Windy City avoid some of the recession’s worst economic pitfalls. The metropolitan area surrounding Chicago has also developed rapidly throughout the last decade, as certain regions outside the city have become promising job hubs as well- the Illinois Technology Corridor being the quickest to spring to mind.

In terms of Atlanta, the city’s home values have maintained similar trends to those found in Chicago. Its local home prices remain lower than those throughout Chicago, which value gains have been somewhat sharper. Atlanta’s local economy also remains exceptionally healthy, and the area’s diversity of industry, high presence of major corporations, and growing digital and technology sector all forecast growing appeal for young professionals- one of the major (if not the major) health signs in a local market. As a general rule, it seems that job growth and the continued ability to draw financially secure first-time buyers, may be the strongest barometer of a local housing market’s stability and ensuing appeal as a source of property investment.

Ultimately, for those looking to find secure and more long-term real estate investments, metros with slower value growth and positive employment outlook are likely your best bets. Beyond the regions that currently stand out, certain other housing markets will inevitably emerge with similar demographic and growth trends. Metros with more organic growth motivators – as opposed to those with more pronounced hedge fund manipulation – will likely remain the safest considerations.

Photo: sunsurfr

The post Growth Opportunities in Undervalued Markets? is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

I had just hit the snooze button for the third time…

Although I had a busy day ahead of me which I knew would be good for my business, I dreaded the thought of even getting out of bed and going to work.

For some reason that particular morning, I just couldn’t stand the thought of getting up out of bed going through my normal morning routine, kissing the wife and kids goodbye and heading off to a job that I had over the course of the previous few months had very little interest in doing.

I hated the thought of telling my kids to “follow their dreams” and here I was not even doing it. Frankly, I felt like a fraud for not pursuing what I really wanted in life and could be totally passionate about.

For some reason that day, I just hated the thought of getting in my van and making another pitch for a product and service I no longer had passion for.

I was just burnt out.

Something had to change.

Big Changes on The Way to The Same Thing

Rewind a few years prior, I had just departed my family’s flooring business, moved to a new town and started looking for work. I actually started interviewing for jobs with flooring manufacturers after running my family’s business!

I soon found that I was actually over-qualified for some of the jobs I was interviewing for. Needless to say, I didn’t get any job offers.

After the fourth interviewer had told me I was over qualified for working for them, I thought to myself: “Why the hell am I trying to go work for someone else? I should just start up my own flooring business!”

After all, I was a flooring guy, right?

So I did start my own franchised flooring business and made it pretty darned successful.

But two years later, there I was lying in bed, feeling completely trapped and unfulfilled. I was right back to doing the same thing I was doing before.

Worst of all, I was lying to myself. I was back to doing a “job” even though that job was my own business, it was still a J-O-B because I had no passion and no enthusiasm for it whatsoever.

Do What You Love and You’ll Never Work a Day the Rest of Your Life

I had always been fascinated by real estate though…

I had tried to sweep it under the carpet…because I was a flooring guy.

But was I?

Deep down, I knew I wasn’t really a flooring guy, it’s just what I did for work. But after that first little taste back in the late 90s, I had gotten a glimpse of what it was all about.

And that little taste had convinced me that what I really wanted was to be a real estate investor. But for some reason something for the last year or two I had stifled it.

But here it was coming back again….

“What Are You Gonna Do, It’s All You Know”

It’s not like I hated my job – it was just that I was tired of doing something that I didn’t really love to do anymore. The only reason I had done it is because up until that point, it was all I knew.

But just because people kept telling me I should stay in flooring because it was “all I knew” – I knew that was no reason to not do what you love.

Deep down, I knew I could do it – I just had no idea HOW to do it.

Plus, I had just turned 40 and I was at the point in my life where I was about halfway through my work life. And I thought to myself: is this all there is?

It wasn’t about the money at all. It was about passion. I am confident I could have made that business into a million dollar business – I’m convinced of it. In fact, I was already halfway there. I just had zero interest in doing that.

I knew what I wanted to do – and it had nothing to do with money. Sure, I knew plenty of people “making a killing” in real estate investing. But that wasn’t it. It wasn’t about the money, it was all about doing what you love to do.

Passion and Hard Work Beats Cluelessness Every Time

I knew what I wanted, but there was just one problem. I had no idea how to get there and how to do it while supporting my family. After all, I was completely switching careers and taking this flyer in the real estate investing business without a real safety net – which quite honestly, scared the crap out of me…

Later that day, after a long talk with my wife – “the day of the alarm clock”, I made the decision to wind down my flooring business and make plans to go headlong into the real estate investing business.

And although success did not happen immediately, I could actually say I was a full-time real estate investor – and best of all, I was doing what I loved to do…and still do to this day.

Not too shabby for “a flooring guy”.

Are you doing what you really love to do? Are you not listening to that inner voice that’s been telling you to follow your passion? Or have you done it, made the scary leap and never looked back?

Please leave a comment below and share YOUR story of how you did it or if you haven’t done it yet, leave a comment as well. Perhaps together, we can get you to follow that inner voice and pursue your dream too…

Photo: Indy Kethdy

The post How to Never “Work” Another Day In Your Life… is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

Some might complain that it’s just another “greeting card holiday” but I believe Father’s Day is a time to honor the man in our life who was likely responsible, above all else, for crafting our character, work ethic, and personality.

Last month, I wrote about “Five Things my Mom Taught Me that Made me the Real Estate Investor I Am Today” and it was great to sit back and reflect on all the way’s I’ve grown as an investor because of her.

However, mom was only 1/2 the equation.

Today, I want to look at five things I learned from my Dad – about life, about business, and about character – that helped create the kind of person I am today.

Have you learned these lessons from your Dad? Definitely be sure to leave a comment below and share your stories!

Family First

I honestly don’t know how he does it.

Nearly every day for the past 30 years, my dad has woken up and driven to a job he doesn’t love to provided for a family that he loves completely. It doesn’t matter if he wants to be there or not. It doesn’t matter if he’s not feeling well (I’m not sure he took a “sick day” in my entire growing-up life!) He shows up and works hard every day to provide – because for my Dad – family comes first.

I’ve learned from him that true love takes sacrifice. It takes getting up in the morning and sometimes doing the things you don’t want to do because it will benefit someone else.

However – just because life means working hard – it doesn’t mean only work either.

In the same vein, vacations were not some inconvenience but rather a chance for the family to be together, to explore, to interact with the world around us. You see – vacation was about family as well.

My Dad once said to me, “You know, I could have skipped all the vacations and fun times we had, and probably had millions of dollars in my retirement fund… but then I’d be an old rich man with no memory of the things that really matter in life.”

This lesson is one of the most important lessons I have ever learned – and something I believe most investors need a constant reminder of. In our quest for success – it’s important to take a page from my Dad’s book and remember – he who dies with the most stuff still dies. Work hard, provide for your family, but enjoy the time you have. I, for one, plan to never forget that lesson. Family first.

Encouragement Can Go Miles

Many people complain of their father being distant, un-emotional, uncaring, hard.

Not my Dad.

From t-ball to high school musicals to starting my real estate business – my Dad has always encouraged me and showed me how proud he was of me (though I think he’s still shocked I didn’t choose Law School and instead spend my time with ruffians like all you real estate investors!)

His encouragement has given me the confidence I’ve needed to take (calculated) risks and pursue entrepreneurship with the gusto I have.

Just yesterday morning I woke up to an email from my Dad letting me know how proud he is of the accomplishments I’ve done. I can’t adequately express how much those words mean.

Real estate investors: this is HUGE.

Don’t forget to encourage those around you. Let your team know that you appreciate them. Let them know when they’ve done something right. Celebrate their accomplishments.

The Value of Turning Ugly to Beautiful

It’s so obvious now – I’m not sure why I didn’t see it growing up.

My Dad loves to buy ugly cars and turn them into something beautiful. Over the years, he has gone through dozens of vehicles that he bought for cheap, fixed them up, and either sold them or gave them to his family to drive.

I’m sure you can see it – but up until last year, I never made the connection.

I never realized how much of my real estate entrepreneurship I gained from this side business of his. Just as my Dad bought ugly cars and either “flipped” or “held” them – I’ve done the exact same with houses. I’ve learned that finding the right deal often takes research and hard work – but the payoff is all worth it.

It might take looking at 99 deals to find the 1 that will bring you success.

Human Connection is Key

My Dad is probably the friendliest guy you’ll ever meet (well – you probably won’t meet him.)

As such – he makes a lot of connections with people. We have a joke in our family that no matter where he is in the world, he will always run into someone he knows. As a kid, I use to complain because we’d be walking through DisneyWorld and would have to stop and talk to someone for 15 minutes that he knew from his past. However, I now realize that one of my Dad’s strongest gifts was his ability to make friends and build trust.

In real estate – this is one of the most important character traits you can have. This is a “people game” and as such, those who can navigate the muddy waters of networking often do the best. I’ve learned from my Dad not to be shy, but to be open, friendly, and engaging with everyone I meet.

Do you do the same?

Be a “Righteous Man”

Finally, there is a phrase my Dad used time and time again as I was growing up. Above all – he wanted me to be a “righteous man.”

I looked up “Righteous” today in the dictionary, and it said

(of a person or conduct) Morally right or justifiable; virtuous.

Everything my Dad taught me growing up revolved around this. Helping those who needed help, making the hard decisions because it was the right thing to do, and standing out as someone to be trusted were all lessons that were taught not only with words, but through example.

You’ve heard it said time and time again in the BiggerPockets Podcast by nearly every single guest –

Integrity is key.

As a real estate investor, it’s important to stand out as someone to be trusted, as someone to feel comfortable doing business with. It doesn’t matter how much money you could make – without integrity, it’s nothing.

So thank you Dad for always molding me, guiding me, and disciplining me into a “righteous man.” Though I’m sure I have a long way to go to reach that point – your guidance and support have meant everything to me over the years and I continue to grow as both a real estate investor and as a person because of the lessons you taught me. Your hard work and dedication to our family has been a shining example for me and the rest of the family to follow.

I love you Dad!

Do you have a lesson you learned from your Father? Share in the comments below!

The post 5 Things Dad Taught Me That Made Me the Real Estate Investor I Am Today is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.

As a vacation rental strategist, most of my work is founded on the basis of positive vacation rental growth: how to improve your performance, how to get more out of your investment, how to enjoy the process. But sometimes, just as important as sharing the positives, is sharing the potential downsides of a serious life change. So not to get anyone’s hopes up too artificially high, I’ve decided this week to examine the top six reasons the booming vacation rental industry may not be…for you.

1. You don’t like challenges

If you are the type of person who shies away from competition, gets nervous under fire, or avoids personal change, then vacation rentals are probably not for you. Vacation rental investing, as it sits now on the very beginning cusp of something massive, is all about encountering challenges and fashioning a solution to resolve them.

Most successful VR owners encounter challenges like difficult guests, maintenance issues, and niggling competitors on a monthly (if not weekly) basis: the key is to their success, as a result, is taking them head on and moving forward. If just reading about these kinds of challenges freak you out, vacation rentals may not be for you.

Related: All Rental Listings Are Not Created Equally

2. You despise technology

From digital welcome guides to online group payments, the vacation rental game is getting increasingly technological and if you are a technophobe who eats granola and screams at anyone who owns a TV set, then vacation rentals are probably not for you.

Vacation rental investment requires the embracing of technology and – as a one-person show – using weapons like smartphones and laptops to simplify and maximize your work flow. In that same breath, being open to new ideas and not being stuck in your ways are both characteristics of successful vacation rental owners. If you tend to oppose these trends, vacation rentals may not be for you.

3. You don’t stay in vacation rentals yourself

Like any good salesperson, being passionate about the product you are promoting is a must. If you don’t opt to stay in vacation rentals yourself when you travel; if you don’t really know or appreciate what makes vacation rentals a great alternative to hotels; if you haven’t researched what kind of ideal vacation rental you want to operate…if you are really just using the momentum of a happenin’ industry as a motive, then vacation rentals are probably not for you.

4. You are not the DIY type

The principles of the vacation rental industry, from top to bottom, are founded very much a Do It Yourself (DIY) paradigm. From vacation rental guests who prefer to cook their own meals to vacation rental owners who sometimes need to quickly repair their own leaky faucet, successful investors in the vacation rental space are almost always DIY-types: individuals who don’t mind trying to fix problems (from marketing to maintenance) by themselves before giving the professionals a call.

If the idea of starting a DIY business by yourself is too daunting (because let’s face it, running your own vacation rental means running your own business), then vacation rentals are probably not for you.

5. You don’t embrace the idea of hospitality

One thing many owners overlook when getting involved in the vacation rental industry is that it is actually a sector of the tourism and hospitality industries. While it might not seem so – What? I’m just letting some family stay at my house for the weekend!?! – investing in vacation rentals means becoming the most immaculate host.

Related: 5 Things Vacation Rental Guests Really Want

Sure, with the right resources, you can do this from nearby or afar, with assistants or by yourself. But if you want to reap the financial rewards of the vacation rental game without taking the time to understand your guests and make sure they feel at home; if you want to use your vacation home for you and only you; if you don’t like the idea of someone else sleeping in your bed, then vacation rentals are probably not for you.

6. You’d prefer the quick buck to the long run

Slick investors are often looking for the biggest return in the shortest period of time possible. Operating a successful vacation rental is not like flipping houses. It is more like growing a plant: it requires care, thought, love, and (most of all) time in order to flourish. You can do all the right things in the vacation rental industry (buy the right property, make the right upgrades, offer the right price) but if you’re not willing to wait and watch your brand grow, your success is likely short lived. If you are the type of investor who prefers quick, no-strings-attached projects – projects that bypass that level of trust and relationships – then vacation rentals, my friends, are probably not for you.

Photo: Marcel Germain

The post 6 Reasons Vacation Rental Investment Is NOT For You is property of The BiggerPockets Blog. and is Copyright © 2012 BiggerPockets, Inc. All Rights Reserved.