Real Estate Investment, Co.

CURB APPEAL Louie the Lender once financed Carry the Contractor. Carry had the added advantage of being married to Bonita the Broker. Together they bought and beautifully refinished a home in a very desirable block in Philadelphia. The price they asked was below the comparable sales prices on the block. Very few of the properties on the block were as neat and sparkly on the inside as their new creation. The house sat for months. The cold weather turned to spring, the traditio...nal selling season. The house continued to sit. The loan was overdue. No one could understand why the house did not sell. One Saturday Louie drove to the property. The first thing that Louie observed was that Carry the Contractor had left a dirty wheelbarrow and some trash from the rebuilding job on the front lawn. The lawn was muddy, had no shrubs or flowers and was chopped up. Bonita the Broker had not advised Carry that it would be smart to take off the stickers that came with the new windows after they were installed. Though a new front door had been placed on the home, the screen in the door in front of it was broken. And then it all went down hill. The inside of the property was beautiful, but no one who saw the sign in the lawn (advertising the brokerage company) had any interest in seeing it because the property had no curb appeal. It was Monday morning when Louie advised Carry that you sell the Sizzle and not the Steak. By Tuesday afternoon the issues were addressed. On Thursday a woman with a buyer’s broker noticed the house and put in an offer. Carry learned not to be like the monkey who peels the banana, throws away the fruit and eats the skin. Curb appeal counts. See more

COMMUNICATION (AGAIN) Other communication failures should be noted. Cruise through your neighborhood and notice the brokers signs on the lawn, they invariably say, Prudential, Fox & Roach, Billy Broker 215-484-3068. Almost never have I seen a sign that says Lovely rehabbed house for sale, four bedrooms, 3.5 baths, fully air conditioned, fireplace, new carpet, financing available. Call Billy 215-484-3068. Once in a while I have seen people bright enough to put a container on... a post on the front lawn with flyers in it that describe the house. They are few and far between. Most brokers can expect an $18,000 commission to get your $300,000 house sold in six months meanwhile they take on little or none of the risk. Neither Sally the Seller nor Billy the Broker will spend $100 on a sign that tells buyers why your house is the best deal in the neighborhood! What are we missing? Are we out of line if we advise Bennie to employ a broker who knows how to communicate on his behalf? He should not just go through the motions by rote in the hope that he’ll make a commission? For a good example of communicating an offer to sell a property, see the following description and pictures. See more

Once again, we caution you against using standard forms that brokers will recommend. The following is an agreement to sell, such as a good real estate lawyer will utilize. Its main job is to protect the seller as much as possible, contrary to the buyer’s agreement in the Find ’Em section of the book. We don’t include it so that you can use it yourself. We merely want to show you how entirely different an agreement can be. It all depends on who you are trying to protect, from what and how. Each paragraph has its own important significance. There should be no such thing as boiler plate.

CAPACITY It is good to start building your real estate empire with a single family home or a duplex at best. Multi-unit buildings have different complexities. They require more owner maintenance. Tenants in a multi unit building have less a sense that their unit is their home. You need janitorial help, snow removal, rodent control, storage lockers, owners electric and water bills and safety measures in common areas, alarm systems, etc. Don’t try to acquire property on the fol...lowing geometric schedule: 1 unit, then 10 units, then 100 units. Grow arithmetically: 1, 2, 3, 4, etc. Midrise properties are different from single-family units. High-rise is entirely different from midrise. There are elevators to deal with and union help is often required. Management offices are necessary, with permanent employees. Sol the Syndicator once got a call from Boris, the Big Deal Broker. Boris submitted a 20-unit apartment building to Sol for purchase. What are they looking for? inquired Sol. A million dollars, answered Boris. It’s only $50,000 a unit. That’s ridiculous! shouted Sol. There’s no way I’d pay more than $40,000 a unit for that old junker. Well, why don’t you come over to the office and let’s talknabout it? said Boris. What, and get locked out of my apartment? Walk before you run. Run before you fly. Know your own capacity and ability. Don’t be a big shot! See more

CAUTION Once again, we caution you against using standard forms that brokers will recommend. The following is an agreement to sell, such as a good real estate lawyer will utilize. Its main job is to protect the seller as much as possible, contrary to the buyer’s agreement in the Find ’Em section of the book. We don’t include it so that you can use it yourself. We merely want to show you how entirely different an agreement can be. It all depends on who you are trying to protect, from what and how. Each paragraph has its own important significance. There should be no such thing as boiler plate.

CAPACITY `It is good to start building your real estate empire with a single family home or a duplex at best. Multi-unit buildings have different complexities. They require more owner maintenance. Tenants in a multi unit building have less a sense that their unit is their home. You need janitorial help, snow removal, rodent control, storage lockers, owners electric and water bills and safety measures in common areas, alarm systems, etc. Don’t try to acquire property on the fo...llowing geometric schedule: 1 unit, then 10 units, then 100 units. Grow arithmetically: 1, 2, 3, 4, etc. Midrise properties are different from single-family units. High-rise is entirely different from midrise. There are elevators to deal with and union help is often required. Management offices are necessary, with permanent employees. Sol the Syndicator once got a call from Boris, the Big Deal Broker. Boris submitted a 20-unit apartment building to Sol for purchase. What are they looking for? inquired Sol. A million dollars, answered Boris. It’s only $50,000 a unit. That’s ridiculous! shouted Sol. There’s no way I’d pay more than $40,000 a unit for that old junker. Well, why don’t you come over to the office and let’s talk about it? said Boris. What, and get locked out of my apartment? Walk before you run. Run before you fly. Know your own capacity and ability. Don’t be a big shot! See more

CHARITY It is helpful to belong to builders and landlord associations. Don’t be cheap. Give of your time and money to your church, synagogue or favorite charity. However it is equally important to be the master of your own objects of charity. Don’t let tenants force charity upon you. Never give a key to a tenant without the first and last month’s rent and a security deposit regardless of their story or promise to bring the money tomorrow. When a tenant pays rent late, the fac...t that its Christmas and he wants to buy nice presents for his family does not do much for your family, whom you would like to treat equally as well when you don’t have the money. Worse yet, don’t let tenants establish the precedent that better late than never is OK. Don’t hesitate to send a 10 day notice that you will terminate the lease, evict or sue if in fact the rent is often late. Lenny the Landlord has heard many sob stories, but in his 25 years almost no tenant has ever asked him, How is your health? How are your wife and kids? Is everything going well for you? On the few occasions he was finally asked, it was from a grateful tenant who pays regularly and gives him no trouble. Pick the objects of your charity; don’t let tenants force themselves on you as such. Remember something: Every tenant you give a key to who knows how to work the system with a sharp lawyer, can cost you darn near a year’s rent and lots of legal fees. Meanwhile, the taxes and insurance run and the condition of the property runs down. See more

CASH FLOW Attached to this section is a hypothetical cost projection. It is an illustration of an investment in an inner city, 3-4-bedroom rental property. Please notice the many aspects of its acquisition, construction and financing. At the end of the month, there is a cash flow $418.00 left. However, the project will completely pay for itself after 25 years of faithful management. It will double or triple in market value and constitute a substantial asset, free and clear of... any mortgage. It will also produce at least double, possibly 3-4 times, the net income it produced initially when the mortgage existed. Much effort must be expended to: find it and finance it, supervise its construction, find and sign a tenant, handle needed repairs, collect the rents, re-rent and re-decorate it from time to time. If indeed one has the patience to do all of the above they may not only have a veritable cash cow, but also some day, they’ll find they may have created a $100,000-150,000 saleable asset with little or no cash investment. See more

CHEAP SKATES In a previous chapter, I advised you to build a rental property out of iron and stone if possible, Build a resale property like a dollhouse, as cutesy as possible, with pretty kitchens and bathrooms that appeal to the feminine half of the buying pair. That does not mean that you should skimp on decent construction. Regardless of whether you are selling or renting, you cannot construct out of chewing gum and chicken wire. It is essential to keep in mind there is ...a short range and a long range. In the short range you may be saving a few dollars by being chintzy with construction. In the long run, you will pay many times the amount you saved to your lawyers or for increased premium costs to your insurance carrier when something goes wrong as a result of you being penny wise and dollar foolish. In addition think of the time you’ll lose involved in litigation or the anguish you’ll suffer resulting in sleepless nights. We never have time to do it right the first time. Where then does the time come from to go back and redo the entire job a second or third time? See more

CARING FOR PROPERTY If the toilet, sink or roof leaks then fix it quickly. If not, when it seeps through the floor into the level below you will not only need to fix the toilet, sink or roof, but any other valuables it lands on, ceilings, carpets, walls, hardwood floors etc. An entire ceiling may collapse, carpets may grow mold, wiring can be short-circuited and burn the house down. If you anger a tenant she may put your rent in escrow and report you to the department of lice...nses and inspections. You will wind up fixing the problem anyhow but you will double your grief along the way. If someone is injured in addition to living with guilt, your insurance premiums will rise. You may be part of a lawsuit. Who needs it? Tell your lender how much you care for your properties and your tenants about your programs to control maintenance sensibly. It is important for a lender to think he’s not financing a slip-shod developer or slumlord. If you don’t care for your property, neither will your tenants Don’t be afraid to give your tenants your cell phone number. If a pipe breaks, he may call you and say, What are we going to do? and you may make an executive type decision and say something to him like, Get a few buckets of water then turn the water off. We’ll have someone out in the morning! See more

CLEANUP It is helpful if your agreement with your contractor provides that each day his workers take time at the end of the day to cleanup. This is particularly so as the job progresses. In addition to eliminating safety hazards for workmen, agents and prospective customers, a neat appearance of the property at 4:00 p.m., when most of the workers quit, allows for prospective customers to come through. Most of them will want to come after their workday ends. A floor without sa...wdust and dirt and remnants of other parts of the job lying all over impresses prospects that the people doing the construction care. That in fact, they take pride in their work. It’s almost impossible to sell off blueprints. Few buyers have the kind of imagination to buy a house they cannot touch or feel. It’s less difficult once a house is framed out. In fact as each stage of the house is completed it gets easier and easier. The sooner you can sell it, the sooner you can rid yourself of those dreaded soft charges we keep warning you about. It helps if the property becomes more and more inviting to the ultimate buyer, starting with the day you settle on your purchase. Keep the outside clean also. Cut the grass, remove all trash. Maintain your curb appeal. See more