Plan And Prepare

Just about everyone I encounter wants a serious job or career change. The reasons vary from financial considerations to simply a strong desire to work for themselves. They see my lifestyle and interpret for themselves what I do and what I’ve done to achieve my success. What they perceive is quite simple: I make the right investments and I make money. It’s real simple, isn’t it?

What if I put that simplified analysis to their jobs? They get trained/educated, they punch in and punch out, and they get paid on Friday. I contend that those who decide to go for the career change to real estate, with this perception, are putting themselves behind the eight ball and have a rude awakening coming. The rude awakening will be a result from lack of thought and preparation.

The preparation for a career change goes far beyond one reading books and memorizing home study courses. Don’t get me wrong, establishing strategies and techniques are paramount to succeeding in real estate. Getting oneself positioned for a career change is as equally important.

For example, flat out quitting your high paying job without lining up your dominoes is a big mistake. Investors should assault the real estate market with strategies that create additional income and net worth, so that when the job is terminated, income continues. For example, an investor could make $60,000 on a job and an additional $60,000 from real estate investing part time. This is where one could enjoy an income of $120,000 for awhile, whereby he could pay off bills and further get situated before quitting his job, forever.

It's not simply a matter of desire and ability, but a matter of readiness for the job and income change. Why quit your job too soon and needlessly put yourself behind the eight ball? True, big money can be made in real estate. I'm testament to that. True, I also quit my job at the drop of a hat. However, I had only a low paying job that could be replaced any day of the week. For those like me, it's of no consequence.

It's for the others that cause concern. Life is difficult enough without suffering losses and setbacks. Keep your wits about you and engage in deliberate planning and preparation before quitting that good paying job. Real estate is sweet, but only for the few who are poised for success.

H. Roger Neal™

Get Out Of The Appliance Business

Unless you are entirely furnishing efficiencies, do not supply furniture or appliances in the inner city units. In other words, one bedroom units and up are taboo when it comes to any furnishings.

Efficiencies are virtually impossible to rent unless they are entirely furnished with appliances and usually with utilities included.

On the other hand, tenants who rent one bedroom units and higher can fend for themselves and come up with something to furnish their units. Appliances for the one bedroom units are indeed difficult, but the tenants do manage to acquire them just the same.

On a ten unit building that I own, I have found myself buying at least three refrigerators per year. The tenants have always managed to rip off the door handles. In fact, roaches actually stop refrigerators from working by crawling into the motor area. Anyhow, the refrigerators are either too large or too small. Tenants always want someone else’s when their neighbor moves out.

Invariably on Thanksgiving Day, someone’s oven doesn’t work. Of course, they’ve known it for months, but waited until this day to tell you.

I did something really smart this summer. On all of the units, one bedroom and up in that ten unit, I sold the appliances to the tenants for one hundred dollars for each pair. I provided receipts and stated, “When they break down, throw them away and the replacements are your responsibility.”

Last month, a tenant replaced a refrigerator herself. Granted, she bought a used one, just like I always had, but it wasn’t at my expense.

I find that cutting expenses is just as good as raising rent. It’s like the government cutting a program and not raising taxes.

My tenants agreed that one hundred dollars for each pair was a good deal. They questioned my motivation. I answered, “I’m getting out of the appliance business; I just rent apartments.”

H. Roger Neal™

Collecting Rent In Person

When I was at a speaking engagement, someone in the front row remarked how he couldn’t believe how I still collected my rents in person. Although we had never met before, he was implying: With all of my experience I should know better by now.

I found in 1979 that most people who rent from me have no concept of what a stamp and envelope are, aside from where to buy them. In fact, they don’t even have checking accounts!

Having learned this early, I put together some self-addressed, stamped envelopes and handed them out to all of my tenants, blindly hoping they would mail money orders. This would certainly put an end to the awful task of rent collection, not to mention the expense involved in using a city, special-duty, uniformed policeman.

What do you think happened? Well, no checks came in the mail. In addition, I found that they had removed the stamps for more important mailings.

Do you think what separates me from my critic, and the masses at large, is that I not only charge rent---------but I collect it as well? Contemplate the fact that I not only buy wholesale, complete repairs cheaply, but I actually collect market rents as well. Scary, isn’t it?

H. Roger Neal™

Don't Walk The Tight Rope

When we sell properties we must use every safety precaution available to us. There are many things we can do to protect ourselves. The most important thing: Run credit checks on your buyers.

In one of my seminars last year, I encountered a woman who had owner-financed a very large apartment complex to a fellow member of her real estate association. She stated that after a long legal battle she had finally got the property back. Furthermore, she stated that he had bled the property dry.

Of course, this included:

· Not paying on the mortgages

· Not paying the real estate taxes

· Not paying insurance

· Not paying water bills

· Not making repairs

· Etc.

I usually enjoy talking about evictions and foreclosures because I know I have it down to a science and no financial harm will come to me. This time was different, though, because an elderly lady got burned so badly it was difficult for me to digest and console her. All I could do was listen and cringe.

Eventually, I did ask the same proverbial question I always do, time and time again: “Did you run a credit check?” And she said, “No.”

The Safety Nets.

Whether you decide to run credit checks or not, you’ll most assuredly make the final decision. All I can do is recommend and reiterate. That’s all.

· My advice is: “Run credit checks----------Even on friends and relatives.”

Regardless of your decision to run the credit check, I also highly recommend another safeguard.

· Get an “ASSIGNMENT OF RENT AND LEASES.”

This clause allows the mortgage holder to collect all rents upon default. In other words, while you are waiting for the foreclosure process to return the deed, you can collect the rents and pay bills as if you had!

I further advise, in addition to the credit check, that all of your mortgages and notes have a clause which I am about to disclose. It can be inserted or added in addendum form. Just tell your title agency or whoever is orchestrating the closing. Admittedly, it is a lot of legal mumbo-jumbo, but it does want you want it to!

Why walk a tight rope like at the circus? Wouldn’t it make more sense to use the safety nets provided? Sure it would!

• Sellers: You’ll love it.
• Buyers: Read it and weep.

The Clause:

ASSIGNMENT OF RENTS AND LEASES.

Mortgagor hereby absolutely and unconditionally assigns, transfers and sets over unto Mortgagee, its successors and assigns, all present and future leases covering all or any part of the Mortgaged Property and all of the rents, income, receipts, revenues, issues and profits now due or which may hereafter become due under the leases or any extensions or renewals thereof, together with any and all rights and remedies which Mortgagor may have against any tenant under any of the leases or others in possession of the Mortgaged Property.

Mortgagee shall not be obligated to perform or discharge any obligation or duty to be performed or discharged by Mortgagor under any of the leases; and Mortgagor hereby agrees to indemnify Mortgagee for, and to save Mortgagee harmless from, any and all liability, damage or expense arising from any of the leases or from this assignment, including attorneys’ fees. This assignment shall not place responsibility for the control, care, management or repair of the Mortgaged Property upon Mortgagee. Upon any default in the payment of the indebtedness, or upon any default in performance or observance of nay of the terms, covenants or agreements of this Mortgage or any one or more of the other instruments securing the Indebtedness and Obligations all rents assigned hereunder shall be paid directly to Mortgagee, and Mortgagee may notify the tenants under the leases (or any other parties in possession of the Mortgaged Property) to pay all of the rents directly to Mortgagee. Rents collected by Mortgagee may be applied toward the payment of taxes, assets, insurance premiums, repairs, protection of the Mortgaged Property, and other charges against the Mortgaged Property, or in the reduction of the indebtedness and the payment of interest as Mortgagee may elect.

Mortgagor shall not lease the Mortgaged Property without Mortgagee’s consent, however if Mortgagee consents to a lease Mortgagor will comply with and observe the duties of lessor thereunder and Mortgagor will furnish Mortgagee with a copy upon request. Mortgagor agrees to provide Mortgagee a separate Assignment of Lease upon request to clarify the rights of Mortgagor and Mortgagee therein. The absence of a separate assignment will not affect the rights of Mortgagee granted hereby.

H. Roger Neal™

Think Smart, Act Smart.

Achieving financial independence is accomplished through both thinking and acting, or working, smart in all areas of landlording. A part of thinking smart is learning how to deal with hard-core tenants. Learning to act like a businessman or woman with respect to landlording is difficult for many investors. Recently, one of my students commented that he goes through phases, he’s either too easy or too hard. “Right now,” he commented, “I’m too easy on my tenants.”

Investors must put procedure into landlording as do other businessmen. For example, when someone wants a gallon of milk, they pay for it or they don’t get the milk. That’s procedure. There’s no compassion built into the process. It’s not religious or feelings based. It’s cut and dried, just like your procedure for landlording should be.

Landlords must always be one step ahead of their tenants. Simply having procedure isn’t enough. Investors must build creative thinking into landlord-tenant relations. Certainly, we must be creative to buy whole sale, which is truly a creative art in itself. Why can’t we mold ourselves a new, creative way of dealing with tenants? We can. As you’ve found out, tenants are savvy and professional in their own right.

Talk about creative, tenants can obtain hundreds and hundreds of dollars annually, in addition to all their welfare, SSI, health care, and food stamp benefits. They obtain money, food, clothing, and utilities through churches, utility companies, agencies like United Way, and countless outreach groups and government agencies. That’s right, in addition to their standard entitlement package.

Am I suggesting that many tenants work the system? You bet I am. They not only work the system, but the system itself perpetuates and literally encourages them to do so. For example, no agency will help with utilities unless and until there is an actual shut-off or notice to shut-off. Why pay gas? Why pay electric? Why pay water? Why pay rent? Logically, it would be stupid for poor tenants to pay everybody on time. Essentially, you’d have to be a moron to not take advantage of the system.

Welfare will provide a one month’s free rent check once a fiscal year. Why wouldn’t they take advantage of that? In the process, if your landlord is a marshmallow you’d be on top of the world. Understand that you have a long way to got to even catch up with the street smarts of tenants, let alone being one step ahead of them like I am. You need to start now. It takes the wildest ideas to outdo and outsmart these folks. That’s a fact. My procedures are woven with creative ideas, and as you know now, they better be to stay ahead of the game.

Case Study.

As most of you know by now, I collect my rents in person. This way I find out early that I’m not going to get my rent and I give an eviction notice on the second of the month. That’s procedure.

When I went up to collect her rent, she stated that she was going to move. I said, “That’s fine, but just in case here’s your eviction notice.” She knew the drill because we had gone through it before. I dropped back a week later and she again stated that she was not going to pay rent and she would be waiting until the last minute to move. I’ll hand it to her, at least she was forthright.

I suggested that if she moved immediately I would pay her $100. She said, “No.” After she received her court papers she called me. She stated that she still wanted the $100. I agreed that she would receive the money if she was out by Wednesday. She did not move then either.

The day before the hearing was Sunday and she again called me. She wanted to know if the $100 deal still stood. I said that it was now $50. We set a time that day and I changed the locks while she finished moving. She signed a move-out statement that she and all occupants were out of the apartment and anything left in the apartment was abandoned.

Changing locks immediately and getting a signed statement are procedure. Paying tenants to move is an example of building creative thinking into landlord-tenant relations. Tenants work the system. Why can’t you? Now you have the opportunity to create an environment for success with creative strategies, like this one.

Most of the time tenants want an agency to pay rent for them. When serving them with the eviction notice, suggest that they take that notice to an agency for help. That agency will inform them that they require the actual court papers, but at least this will get the ball rolling. You, too, can work the system.

Stay one step ahead of tenants:

1. Hand out eviction notices A.S.A.P.

2. File those notices A.S.A.P.

3. Always keep the lines of communication open. (Never be mean or argue with tenants.)

4. Return many times to negotiate a move-out settlement and/or get updated on agency payment.

5. Send tenants who owe and desire to remain to agencies for assistence. Actually name agencies who might help them. Tenants need direction. Surprise them with the suggestion and the location. Help them work the system, thereby helping yourself.

6. Get a signed tenant statement admitting that the tenant and all occupants are totally out of the unit and anything left in the unit is abandoned.

7. Change locks while tenant signs move-out statement, (Found in Contracts, Etc. and Streetwise Landlording Home Study.) Tenants could take money from you and not move. Get the statement, keys, and change locks before money is paid.

8. Only pay what you must. Measure the losses with respect to the timely tenant move-out and co-operation to what you will pay for the move-out. Take into consideration tenant’s deposit and damage, court costs and attorney fees.

H. Roger Neal™

Real Estate Investment Guide

When you tell someone that you’re going to invest in real estate they automatically think that you’re either going to buy-fix-sell, or you’re going to be a landlord. And, that’s probably what you think as well without any clear real estate strategy, or techniques.

Furthermore, real estate investors feel they must make a choice between landlording and flipping. (Flipping is buying and reselling as fast as you can.) As for me, H. Roger Neal™, I perceive landlording as the mashed potatoes and flipping as the gravy. Those who understand my landlord program do not understand why I flip. Likewise, those who understand my flipping programs don't understand why I bother to landlord.

It's easy to understand, really: They both make money. Landlording affords me the opportunity to generate monthly income on a steady basis and, once established, I need only maintain it. With landlording you will need down payment and repair money. Sometimes, when there is not seller financing, you will need the wherewithal to obtain bank financing.

Furthermore, you will need time to manage and make repairs. Once you have the properties bought, proper management and repair in place, this could work for you.

Flipping, on the other hand, allows me to buy and sell many properties without the cumbersome task of adding them to my portfolio. Furthermore, flipping needs to be done on a regular basis to keep cash sums coming in. Consequently, you’ll need to be constantly networking to keep the deals coming in.

Insofar as buying real estate to fix and sell, that is another totally different animal. You need to examine how much time you have to devote to the repairs required. If you plan on making repairs yourself while working a fulltime job, it could create many problems in both your home life and your ability to perform at your job the next day.

If you plan on hiring everything out, beware of serious employee theft issues. Vandalism after they’ve left the premises is another consideration. Hiring the right person to oversee the project is paramount. Also, I don’t recommend more than one major project at a time, regardless of working a job, or not.

Why would you flip real estate? You can flip just about anything! My policy is to not let any good deals get away. Whether you have money or not, whether you are too busy with a full time job or not, there is no excuse for not capitalizing on every good deal found. With some methods like H. Roger Neal™’s $1 DOWN, you can flip any real estate, anywhere, at any price.

Now you’re beginning to understand what you’re up against in the real estate investment world. So should you invest in real estate as a landlord, as an investor who fixes and sells, or just flip properties with H. Roger Neal™’s $1 DOWN program?

Well, that’s something for you to figure out after weighing all the options and variables. Just saying that you’ve decided to invest in real estate is certainly not enough in the thought process department to get started. Now you know there is a bit more to it!

Let your conscience be your guide as to what your time constraints and financial abilities are. Develop a real estate strategy and use techniques that make sense for you. Be realistic about the course you choose. Have fun, and go make a lot of money!

H. Roger Neal™

Real Estate Guru

There are so many people promoting themselves as a real estate expert, and real estate guru, that I’m choking on it. Yuk! Like everything else, you need to weed out the bad from the good. Real estate is really no different than anything else. For example, you go into the hardware store and you want to buy a big, cordless drill with a battery pack. You stand it the aisle and you see so many to choose from that it’s exhausting. You want a good drill? Here’s what you do. Talk to people about what they have and what they recommend. Then go to the hardware store and read the boxes about the products. Look at the prices. I know. I can get a cheap drill for 40 bucks, but I don’t want a cheap drill for 40 bucks. I want a good drill for a decent amount of money. That’s it. As for the real estate guru, it’s the same thing. When I started writing books and public speaking in 1990, there was a lot to learn about writing style, organization of materials, the presentation of products, and speaking delivery in front of audiences. There was, indeed, a lot to learn. My best learning environment, for me, was speaking at real estate conventions where there were thousands of people and about 15 different real estate guru’s. I would go on for 2 hours, off for 2 hours, and so on and so forth. In other words, the real estate guru’s would rotate. As for me, I get bored easily. I would either go into the rear of a room where another real estate guru was speaking to learn pricing and technique, or I would stand in the hallway talking with a student, or guru. I remember, long ago, I was speaking at a real estate convention Clearwater, Florida. I overheard a student ask one of the guru’s, “If you make so much money in real estate, why do you waste your time on books and tapes?” The guru’s face got so red it was unbelievable! Not only that, he became silent. He was dumbfounded and became speechless. I put my head down and covered my mouth to hide my laughter as I walked away. I wanted to get as much distance from them as I could. When I turned the corner, I erupted from laughter. The guru had been exposed for the fraud he was. I’m sorry, but it was funny. I write and speak because I had always wanted to become a History professor at The Ohio State University, but it didn’t happen for me. To exacerbate the problem, my mother always told me that I’d be a loser without a college degree, and that’s how I feel to the day. I’m simply trying, endlessly, to have others accept me, and perceive me, as intelligent. Furthermore, I’m trying to gain recognition. As you know, while working for yourself, there’s no pay raise, title, certificate of a job well done, or gold watch. When I complete a spectacular real estate deal, no one knows. After reaching the pinnacle of the real estate profession, there’s no, “Good job, you’re the best”. As for myself, H. Roger Neal™, it helps me feel good about myself to have others want to do what I do, have real estate change their lives like I did, and appreciate me for what I’ve accomplished. As for my mom, she died a few years ago never accepting my success and achievements. She’s not around for me to continually convince her that I made it, without that college degree. The funny thing is that I was talking to someone just yesterday who had the same problem and we actually discussed going back to college! I just wish that the young man at the Clearwater real estate convention had asked me that question long ago, or today, so that I could have, or could, explain to him that once you have made money, the childhood demons that we all have rise up to haunt us. Furthermore, it’s healthy to exorcise those demons through healthy and constructive ways, like writing and speaking. As for my mother’s passing and not overcoming that issue, my speaking nationally, and particularly in Las Vegas, it’s about the best I can do to make myself feel better. It works pretty well, too. I love it and it gives me quite a mental lift. As for that other guru long ago, I have no idea what happed to him. I must admit, though, it really was funny!