Personal Finance Resources

In the last article How to Find Multifamily Properties, we focused in on the search and targeting of markets near you. I stress the importance of finding properties near you, because getting involved in properties out of town or in another state is extremely costly and difficult to manage. But after you find a potential property, now what? Sometimes putting an offer together and negotiating is not so easy. Here’s my approach to negotiating a purchase of a property:

1. Zero Emotion
   This is a hard one for some people, as they get caught up in the emotional game of negotiating, and once they get entrenched, they will do anything to close the deal. Their thought process is that they have spent so much time on the deal, that they don’t want to “lose” their time investment, so therefore they “pay” to recapture that time investment. Doesn’t make any sense does it? Exactly. Getting yourself into a bad deal to save your time investment is not a smart idea. So just put off emotion completely. This is business.
2. Calculate Your High Water Mark (highest price point)
   This is the absolute maximum you will go when buying the property. When buying multifamily properties to be used as rental properties, you want to make sure that the rental amount you receive will be at least 1% of the purchase (e.g. if you can rent 2 units of a duplex for $700 each per month, that is $1,400 per month, thus your highest possible price is $140,000). Personally, I like to be closer to 1.5% or even up to 2% due to vacancy issues and maintenance. However, working those high profit deals gets pretty tough. This number needs to be an all in number, in other words, this number should include in fix up costs, closing costs and other up front expenses.
3. Low Ball the Offer
   Your first offer should be considerably lower than your high water mark. Showing the seller a pre-approval letter for financing or offer to buy with cash always makes a low ball offer look better. If and when you talk to the seller about your offer, mention fallacies with the property, and other reasons why the property isn’t worth as much as the seller thinks its worth. If you have access to the MLS, run the comps, and if they lean more towards your number, than show that to the seller as well.
4. Make one or more increases in your offer, before ending at your high water mark
   Always seem pessimistic about increasing your offer, and never seem eager. Again, zero emotion, this is all business to you. When push comes to shove, the last offer should be yours (unless their number comes in at or less than you high water mark).
5. Make your final offer
   End with your high water mark offer. I recommend something other than a whole number. For instance, if your high water mark is $125,000, then offer $124,823, or something off like that to give the perception that it is a calculated number, and you can’t go above it. Most sellers haven’t seen an offer like that, and it will sure get them thinking.

One final thought on how to buy a multifamily property. THERE ARE OTHER PROPERTIES OUT THERE! Just because you can’t come to terms with a seller doesn’t mean the sky is falling. This goes back to point number one, and the most important point, do not give in to emotion. Be patient, submit several offers to different sellers, and wait for the “Yes” answer to a golden deal. I have submitted many, many offers in the past, and have only closed a fraction of the deals. But the deals I have closed have been very good deals, greater than the 1% you should shoot for.

Other Articles in this series:

Make Money in Multi-Family
How to Find Multifamily Properties
Multifamily Property Financing
Marketing Your Multifamily Property After the Purchase
Multifamily Property Management Plan

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As aforementioned, this is the hardest part of investing in multifamily properties. Regardless of what kind of real estate investing your are interested in, you must find properties at a discount. Unfortunately, in the multifamily property world, that aren’t many foreclosures, as most people that buy into multifamily properties are investors. So the trick is to find an investor that needs or wants to dump their multifamily property. I’m going to give you some insider tips to finding those owners who need or want to sell.

Method 1 - Farming markets

This one is very simple to understand, but takes a lot of diligence and work to produce results. You will need to identify target neighborhoods where you want to buy properties. Obviously, you’ll want to be in areas that include multifamily, but I have found that mixed neighborhoods that are nice areas works really well. People like the feeling of being in a “family neighborhood” and not feeling like they are in an apartment complex. The potential tenants that are interested in multifamily properties are looking for that family/neighborhood feeling, otherwise they would just rent an apartment.

Once you have identified several target areas, you will need to drive them, and look for signs. For sale by owner signs are going to be the most promising leads. Usually when realtors are involved, you will likely not get the price you need to make money in the property. I would drive the markets maybe once a week, and look for those signs.

Method 2 - Developing Relationships with Top Realtors

This may sound like I am contradicting myself, but just give me a minute. There is a difference between a realtor, and a realtor who understands investing. Most realtors don’t know squat about creative financing, investing or anything else. All they want to do is sell retail homes for a 6% commission. But, if you can find a realtor who knows a little something, and also works with several investors, now you have a resource.

The best way to make these contacts is the old fashioned way. Talk to a realtor you already know, or look in the paper for the most prominent realtors, and give them a call or show up at their office. Ask them if they work with investors on a regular basis, and offer to take them out to lunch. Build a relationship, and if they see that you are serious, they will call you when one of their investors wants to get out of a deal.

Method 3 - Become a Realtor

This is one of the best methods of all. I got my realtor’s license in February of 2007, and wouldn’t give it back for anything. Access to the MLS as well as working under a broker who understands investing and has put me on to a few clients she doesn’t want to deal with is a gold mine. Also, you can talk to your broker about getting all the necessary forms to conduct business with your clients.

Use the MLS to the max. When you are in the buy mode, checking it every day is a good idea. See what new properties come up on a daily basis. Real estate investing is very competitive, and you want to be the first one to jump on a deal if it comes up.

Just a note - you do not have to push hard or work full time as a realtor. You can get your license and work with a broker on your schedule. I don’t do much retail home sales, mostly I do property management and investing, I don’t even go in to the office most days!

In conclusion, you can always use standard methods like looking at newspaper ads or for sale by owner websites, but the 3 methods mentioned above have a lot more power and will enable you to find properties before others find them through the traditional means.

Articles in this Series:

Make Money in Multi-Family
How to Buy Multifamily Properties
Multifamily Property Financing
Marketing Your Multifamily Property After the Purchase
Multifamily Property Management Plan

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Hey guys, I didn’t get the time to produce the first wave of the “Make Money in Multi-Family” series, but I promise it is coming Monday. I just wanted to give you a state of the union on my current real estate activities. I have a mid-sized house in a good area of town that I have been marketing for a cousin of mine, and today we struck a deal for a lease option/purchase with a nice couple here. The deal is subject to the screening process, but I already have their credit report and application in hand, and what I have verified so far has checked out. Their credit is good, and the job history checks out. Monday I will follow up on their rental history and make sure they are good tenants.

The deal is a good one for the owner. It is a three year lease option, with good down money, and we also negotiated to allow $50 per month of the payment to be credited toward the purchase of the house. So really, this contract is going to be a hybrid between a residential lease option and a residential lease purchase, in that we are taking a substantial amount up front for an option payment, but then also allowing part of the rental payments to be credited toward the close.

So keep your heads up, ask questions of me as you need assistance, and go make some money!

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This will be the first how-to article in a series covering ways to make money in multi-family properties. This episode is just introductory, and will just skim the surface on the major steps involved in acquiring and profiting from multi-family deals. If you are just getting started in real estate investing, and want to maximize the risk on your investment, multi-family housing is the way to go. Alright, let’s get the overview and make some money:

1. How to Find Multifamily Properties:
   This is the most challenging step for the real estate investor. If you are going to invest, you must learn The One Key to Real Estate Investing - buying right. I preach this a lot, and I cannot emphasize the importance of it. If you buy at or near market value, YOU WILL LOSE. The only way to win buying at market value is to hang on to the property forever, and pray it goes up in value over time. The savvy real estate investor knows that the property will not rent or sale for greater than market value, thus the only way to win is to buy at a significant discount.
2. How to Buy Multifamily Properties:
   After you find the property, you will need to be able to negotiate down the price. Rarely will you find a deal that is already priced at a level that will produce the necessary income to take on the risk. You will learn how to negotiate with sellers to get the necessary price.
3. Multifamily Property Financing:
   There are a zillion ways to finance any kind of property, but alas, financing a multi-family property is a little tougher than financing a primary residence, just due to the nature of property. It is investment property, even if you live in one of the units. Lining up commercial financing or finding hard money lenders is one of things you will be learning throughout this series.
4. Marketing Your Multifamily Property After the Purchase:
   You will need to know the prevailing methods to effectively find tenants that are willing and able to rent the property. I will take you through advertising, showing, and properly screening your potential tenants. I have had some trouble with a few tenants that I taken chances on, but in the end, it has all worked out so far.
5. Multifamily Property Management Plan:
   Someone is going to have to manage the property. I manage several properties here in the Belton/Temple area of Texas, and will show you how I manage my properties. It isn’t difficult from a theoretical standpoint, but you must keep emotion out of the game, or you will just get killed out there. People are masterful at convincing others of how bad there situation is, and how they can’t come up with the rent. I will give you some personal stories of how I dealt with such matters.

So sit back, relax, and hang on in the coming days as we plow through the methods and ideas for getting your multi-family empire started. But before you leave, make sure and sign up for my RSS feed, and get this great free information delivered directly to you automatically in a medium of your choice.

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Operating in the small market of Temple-Belton, TX over the last several years has taught me much about the most profitable, the fastest to rent, and the least amount of risk possible when investing in real estate. The following is a simplified side by side breakdown of a small investment property, a mid-sized investment property, and a large investment property. Bear in mind that although these numbers are approximate, I manage at least one property in each one of these categories, and these figures are very close for this market. Let’s take a look:

So as we can see from this table, the incomes are all the same. So in this example, it becomes easy to see the type of property you should be investing in, small houses or multi-family properties are the way to go. Here’s why:

1. Less Risk
   It is easy to see as you move up to the larger properties with higher payments, if they sit vacant then you are losing far more money than if the small house is vacant. Also, potential tenants for higher end houses typically demand more, e.g. a little bit of touch up paint or something probably won’t be a problem for the renter in the small house, but in the larger house, it becomes an issue.
2. Larger Market
   Small houses rent cheaper, and therefore are in reach of more potential renters. Further, folks that make less money tend to want to rent versus folks that make more money. Bottom line, the cheaper the rent, the easier it is to keep a renter and a low vacancy rate.
3. Same Money
   As the table shows (and assuming you are following the One Key to Real Estate Investing - buying right), the earnings are about the same. So in essence, you could buy 3 small properties for the price of one large property, and make 3 times the amount of money.

So there you have it, stick to small properties and multi-family dwellings, especially if you are just entering into the real estate investing game. I started with a 2,600 square foot monster that I tried to flip, and ended up losing about 2 years and $8,000. Now have a couple of my own investment properties, as well as managing several others, all producing nice returns. If you have any comments or suggestions, please leave them at the bottom of the page.

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For many of us out there, entertainment just eats our budget down to nothing. Expensive eating out multiple times per week, $8-$9 movies at the local theater a couple of times per week, sodas and chips every day, and a host of other things really kill the budget. My wife and I are very conscious about money (especially now that I have quit my job and am working full time on my own business) and have spent time finding ways to save money, while still being able to have some fun in a Godly manner. Here are some tips that we have unearthed for cheap evenings that are fun:

1. Buying a DVD from Walmart once or twice a week off the $5 rack.
   Combine this with a TVGuardian to filter out all language and sticking with PG-13 movies and below, and you have a very cheap solution to a fun date night. This is probably our most chosen method, because we both like movies and the cost is so low - $5 per movie, versus spending over $4 to rent a movie, then having to return it. This way, we own the movie and can watch it whenever we wish.
2. Taking a walk down at the public walkway.
   We have a very nice creek that runs through the middle of town, with a very nice concrete sidewalk for walking, and feeding ducks, etc. This is a very tranquil way to enjoy each other and good old fashioned conversation. And best of all, there is no cost for entry!
3. Grilling, instead of eating out.
   With a little bit of practice, guys can make some amazing cuisine on the grill. Often, my wife and I enjoy my grilling far more than eating the same meal at a restaurant. Gas grilling is the cheapest method, however I use charcoal, it is slightly more expensive, but the flavor is much better. Do simple meals like chicken quarters which can be bought for less than $1 per pound.
4. Inviting friends over for dinner and board games.
   On a typical week, we invite the teenage guys from our Church over to our house. They are a great group of guys, and we usually eat and play 42 (a domino game), or watch a movie. Very cheap but we have some great laughs, and really enjoy the fellowship.
5. Playing basketball with a group of guys.
   This one is mostly for the guys, but some of the men from Church get together on occasion and play basketball. This is a zero cost way to have great fun and build relationships.

There are many other extremely low cost ways to have fun. If you have any ideas, please leave them at the bottom of the page in the comment area.

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Before I left my job, a co-worker and friend of mine had a valuable story to tell about retirement, and how to wisely enter into retirement. He had worked for nearly 30 years with the same company, and agreed to an early retirement offer from that firm. He had saved and invested well in the stock market over the course of many years; he did everything right. However, the recession of the early 21st century slashed his retirement accounts. Does this story sound familiar?

In this edition of Personal Finance Resources, I would like to offer some ideas on how to allocate and use your saving while in retirement. Many of the larger financial institutions offer a wealth of resources to save for retirement, but not how to spend your money wisely while you are in retirement. So without further ado, let’s get started:

1. The golden rule of retirement spending:
   Spend no more than 5% of your savings per year, and you should expect to maintain your principal balance in your account(s). This concept is very simple as most CDs, money market accounts, bond funds, etc. are very low risk, but still offer a return close to 5%. So if you earn 5% on your principal, and spend 5% per year, than you should end up with roughly the same amount of money, therefore you can effectively live forever (at least from a financial standpoint, ).
2. Transfer your high risk investments to low risk investment alternatives:
   This is part of the issue my friend was faced with when the early 21st century recession hit. He was still invested in moderate to high risk funds, and as the market fell, he got hammered. Now, over a long time line, investing in these types of funds tends to yield much better results; however, if you are needing your money now (like in retirement), then you need to be in lower risk securities such as bond funds, money markets and CDs.
3. Don’t get suckered into ridiculous spending:
   Timeshares, expensive vacations, and other things all sound great, but can really hammer your hard earned savings. Now don’t get me wrong, you need to have some fun in retirement, but don’t let the salesmen talk you into all the extras that spiral the costs up. Get the basic vacation packages, and don’t buy timeshares. Also, don’t buy new cars every year, or participate in car leases. There is a tremendous expense associated with this type of car buying. Get that new car you want, but keep it for a few years.
4. If you get into trouble and need money, consider a reverse mortgage:
   I’m not going to get into the nitty-gritty details of the Reverse Mortgage HECM, but this strategy can be a life saver for those in retirement that are hurting. The short of it is that you can get money now at a very low interest cost, with a wide variety of withdrawal/payment options.

These are some simplified methods to wisely dispersing your savings while in retirement. Please leave any comments you have at the bottom of this page.

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If you are in the market to buy a home today, and have the credit scores to be able to procure a home loan, then you are probably in the best possible time, place, and position to get a phenomenal deal on a house. As more and more people’s credit scores plunge due to foreclosure, then number of available buyers out there is rapidly decreasing. What this means for you is that you have less competition fighting you to buy that house.

Ok, so what does it mean, not having much competition fighting you to buy a house?

Well, what it means is that the seller is not looking at 3 different offers from other potential buyers besides you. Ultimately, this means that you have the opportunity to buy the house at a discount - if you so choose. But if realtors are involved, watch out, because they are trained to get the highest possible price, and they may try to make you believe that the seller won’t go for your low ball offer.

I had to learn this the hard way. The first investment deal I offered on was a 2,600 square foot house in a nice area of Temple, TX. Now, I had a real estate partner (he was a lousy business man) who took the seller’s agent’s swaying and pushed the price up more than I wanted to spend. The seller’s agent said things like “I don’t think she will go for that, but I will put the offer in front of her.” So we ended up spending more than we should have on this property. Well, needless to say, I have closed any dealings with that partner, and I don’t accept any pricing advise from any realtors that are outside of the realty I work for.

So the short of it is this, think about a number, make your offer, and don’t do a lot of negotiation. Set a highest number you are willing to give before you even send the first offer, and then don’t go over your highest number. Let the seller sweat, instead you doing the worrying about the house. You may really, really want the house, but I promise you there are other houses out there, and if the seller says no to your highest offer, there is another seller out there ready to make a deal. Trust me, I have worked several real estate deals in my neck of the woods, and sellers WILL negotiate. Many of the deals I have bought into are $10,000-$30,000 off the original purchase price. No baloney, the house I am living in now - the asking price was about $70,000, I bought it for $40,000, and had the seller pay $1,200 towards my closing costs. It can be done, but you have to focus. (see more on the key to real estate investing)…

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Student loans are great when you are in college, and don’t have the money to pay for school. But once you graduate and your 6 month grace period is over, then the payments start. Most people think that when you get out of school, you are going to have a $50/month payment, which is a drop in the bucket. Well, this is not always the case, and is getting harder to find with the cost of school spiking upward. The reality of it is, most student loans are about as bad as a car loan, if not worse, here’s why:

High Payments:

Let’s say you spent $50,000 in student loans, and you got a great consolidation loan after you graduated which put you at 3% interest. Well, even with a 15 year note, your payments are still going to be around $350/month. Ouch! How many of you out there have more money tied up in student loans?

Long Repayment Periods:

The previous example is pretty close to real life. My student loan repayment plan was 15 years. So when you compare that to a car loan, which typically is no more than 7 years in a repayment period, you are looking at the equivalent of buying 2 nice vehicles!

No Way Out:

That’s right, there is almost no way of getting out of paying for student loans. If you don’t already know, student loans survive bankruptcy! You can’t even go bankrupt and rid yourself of that ugly student loan. So the best way out of student loans is to be educated about them before going in to school.

The Solution:

You’ve seen the bad news, now let’s look at how to avoid this fiasco. As a high schooler, and I mean, even as a freshman, start seeking out the free money. There are an unbelievable amount of grants, scholarships and other means of acquiring money for college that you don’t have to pay back. Check out How to Find Scholarships for links and information on starting your quest to find that free money for school. It is well worth the investment.

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Hey guys, this is Jeffry’s wife, Sarah. I manage a blog about weddings, and Jeffry asked me to write a post for him today. Since I don’t know as much about managing money as I do about weddings, I figured I would stick with what I was good at. Weddings can be a huge and costly endeavor, and if you’re not careful, you could wind up spending a whole lot more than what you had intended. Statistics show that the average American wedding costs around $28 k. Crazy huh? Thats like a brand new (nice) car for the festivities of one day. I remember when we were planning our wedding, Jeffry was astounded at the costs some of our wedding vendors were wanting to charge. Most couples today wanting to get married can’t afford to spend that kind of cash to pay for their wedding. Whatever the case, it is advisable that every couple create their own wedding budget to help manage their spending while doing their wedding planning. Coming up with a wedding budget can be difficult, and here are some pointers to help you get started.

Determine Your Available Funds

Perhaps the first step in determining your wedding budget is to consider how much money you will have to spend on your wedding. This includes any money from parents and other family members, as well as any money you are planning on spending yourself.

Determine the Type of Wedding you Want

This is something that I cover extensively in my blog. If you only want to have a wedding with close friends and family, then you will not be looking at the kinds of costs that you would if you were planning a larger wedding. Also, another great piece of advice is to determine where you want to spend the bulk of money that you have allotted for your wedding. If you want to have a totally elegant and beautiful wedding ceremony, then spend the bulk of money on your church decorations, flowers and dress, and only have a small snack reception, or cake and punch reception.

Determine Your Costs

This step in creating your wedding budget can be a bit tricky, and will require some work. You’ll need to start getting initial pricing from such vendors as your wedding location, your caterer, florist, photographer, the dress you want and more to get an idea of what everything is costing, and adjust your budget accordingly. Don’t be afraid to negotiate, and get your pricing in writing, with how long the pricing will be good for. Talk to as many vendors as you can, and look for ways to cut cost.

Adjust Your Wedding Budget Accordingly

Once you have all of your pricing, you’ll have an idea of what kinds of funds you’ll need to get the kind of wedding that you want. If you find you’ll need extra funds, then you can look for ways to cut costs, or just look for a short term loan at a low interest rate. With the Fed lowering rates, you’re sure to get a great interest rate on a loan.

I can’t tell you how easy it is to go over your wedding budget if you aren’t careful. I remember I had a really difficult time staying within my budget, and even went over my budget a little bit right at the end. There are lots of tips and tricks that you can use to cut costs at your wedding, so take advantage of all the information that you can to help ensure that you have the wedding of your dreams, at a cost you can afford.

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