All Forum Posts by: Joey English

@Mark Bosworth,

Ok I am back. I actually do a zero interest loan. 

I started out doing a lower purchase price with a crazy high interest rate. People would not balk at 18%. I walked around showing off my loan rates. I thought it was awesome.

Then I learned a couple of things about Lonnie Deals. You almost always get them back. And the ones you don't, either pay you off early or with sporadic extra payments. The latter made AM schedules fun. But when people pay me off early or give it back, I don't get the benefit of the high interest rate I was touting. 

So I started tinkering with my Financial Calculator. Before, let say I was Selling a home for $8,000. They would put $500 down, payments of $275/month for 36 months. The interest would be 19.02%

That means I would make a total of $10,400: $500 down payment, $7,500 principle, $2400 in interest. That is if the note matures. 

Lets say they pay me off in a year when they get their tax refund:

I only get $1,235.11 of my interest. That's over $1200 lost in one year. 

So I started doing it different. I upped my payment to $300/month, for 42 months, zero interest. Sales price of $12,600. 

Basically I built my interest into the sales price. This did a lot of things: I increased my cash flow $300, that is a full extra payment a year, made book keeping easier because it a dollar/ dollar credit, and my people love me because we are able to get them financed at zero percent because they had such a great application. 

Win/ Win/ Win

 Mark I have to step out of the office. I will answer you when I get back in. 

Park manager are the key to Lonnie Deals:

I am a huge fan of mobile homes. Dollar for dollar, I see no other investment that compares to the great returns you can achieve with these properties.

Returns typically run from 33 to 120 percent… or more. Did that get your attention?

If it didn’t, let me explain. Anytime you hear the words “return” or “yield” and see a percentage, pay attention to it; the percentage tells how well an investment performs. Essentially it let’s you how much of your initial investment you’ll get back annually.

So a 33-percent return means you get a third of your money back each year. It also means in three years, you’re paid back in full. Anything after that is profit.

A 120-percent return means you receive all your money back in the first year, plus an extra 20 percent in profit. How many investments do you know of that can do that?

The 33 percent returns tend to happen with land home deals. That is a mobile home on its own land. The 120 percenters are Lonnie Deals. That’s where you buy a mobile home on a rented lot for cheap. You then put it back on the market and offer it with owner financing.

A typical Lonnie Deal goes like this: you buy a single wide for $3,000. You do absolutely no rehab, and you offer it for sale with owner financing. You receive $1,000 down and take payments of $300 a month for three years. The return on it is 179 percent. Can you say, “Yeah Baby!?”

So why aren’t people falling all over themselves to do these deals?

Lonnie Deals are done in mobile home communities, which usually have a park manager. The manager’s job is to make sure lot rent gets paid on time, that the riff raff stay out, and that the business of running the park goes smoothly.

Managers come in all shapes, sizes and backgrounds, but make no mistake, inside the park, they have all the power. That power comes with a trump card called eviction. They have the right to evict home owners for anything they deem inappropriate. When you get evicted from a house, you’re supposed to take your stuff and get out. In a park, taking your stuff means moving your trailer.

The last time we moved a single wide, it cost us $7,000. As you can see, an eviction in a mobile home park isn’t cheap. This is why you must get the park manager on your side.

The way you accomplish this is by first getting permission to do business in the park. The first time you meet, the manager will probably say no, but don’t lose heart. They say no because they don’t know you.

For a park a manger, control is everything. When you tell them you want to buy a house, sell it, and allow someone to make payments, what the park manager hears is “you want to be a landlord in my park.”

This makes them feel like they’re losing some of their control, but it is an easy problem to circumvent. Tell the manager you don’t want to be a landlord and that you just want to be the bank. Also, let them know you want them to approve every buyer. And then agree to not sell a home to anyone the manger vetoes.

Once you establish a good relationship, the park manager will become the key to your success. It is like they’re your park “realtor.” They’ll start giving people your number and even bringing you deals. Here is a tip: when they bring you a deal, reward them with a finder’s fee. Realtors like commissions. This will get the manger working for you.

Patience:

We’re currently flipping a house down in Cartersville and part of the rehab design includes new kitchen cabinets. Now, we don’t normally do cabinets so I didn’t know who to turn to.

I got some recommendations for local cabinet makers and got a few bids on the project. After I picked my jaw up off the floor, I made my way over to one of the two major home improvement stores to see if we could get it done more economically there.

As it turned out, the store was able to get us great cabinets at about a third of the cost of hand-made ones. At this price point, it was a no brainer. We put our order in and waited for the delivery call.

I was delighted to get that call two days early. But when I picked the cabinets up, the fun began.

First off, someone had put a fork lift through the side of our brand new pantry. These things happen; no worries. I took the rest of the order to the job site while the stores staff got a new pantry on its way.

Next, we start installing the cabinets. This was going great until we noticed two of the wall cabinets were missing. A quick call revealed these two units hadn’t arrived with the others because they were a special order; we were told they would be in by the weekend.

Monday came; the new pantry had arrived. However, the two wall cabinets weren’t in. We were then behind schedule on our rehab and couldn’t move forward.

Wednesday morning I got a call that one of the wall cabinets came in. That was awesome, but I had ordered two units. We picked up the pantry and the wall cabinet hoping the other one would show up soon.

Friday came, and the other special order wall cabinet was here. Hooray!

I went to pick it up at the store. That’s when I noticed the damage. It had been sitting in water on the truck, which had caused the sides of the cabinet to swell and blister the finish. UGH!

This was becoming too much. I was now a week and half behind, we’re still missing cabinets, and I couldn’t get an answer as to when the order, paid for in advance mind you, would come in. Can you feel my aggravation?

Oh, it gets better. The sales rep called one of the blue vest mangers over to see what they could do. His response was, I quote, “I don’t know what to tell you bubba. You can have this damaged one for free if you want it.”

My mental response was, “BUBBA? I’m not your bubba. I’m your customer that’s already paid for a product that hasn’t showed up in good order or on time. I guess the slogan “never stop improving” doesn’t apply to management’s customer service practices.”

At this point you have two choices: tell them off or exercise patience.

As a real estate investor, you have to master your emotions. This is crucial during negotiating. If you get caught up in your emotions, you’ll often times make a bad deal.

The other thing real estate investors must realize is this is a people business, not a house business. You’ll go farther and faster if you build relationships with people than if you focus on the house you are working on.

So, on Monday, the cabinets came in. The staff inspected them and made sure to double wrap them for protection. As I was walking to the front with the sales rep, she asked me, “Do you buy houses… in any condition?”

As it turns out, she has a house she needs to sell. By controlling my emotions, exercising patience, and focusing on having good long term-relationships, I secured an appointment to go look at her house. Woot Woot!

Hey John. I don't know if I met you personally but good to meet your cyber acquaintance. The two top agents in Gordon County are Justin Childress, my agent, and Samantha Lusk. Both sell a ton, know their stuff, and are willing to present creative offers. Another couple that will present any and all offer is Houston Long and Bruce Mitchel. Both of whom happen to be investors as well.  I hope that helps and happy hunting on the deal. Just remember, don't force a deal. The best deals are the ones you walk away from. 

Another idea is write up a proposal and have your agent submit it to your sellers explaining why you can pay what you can pay. I have had success with this in the past. If the seller can see your point of view, it can change their mindset from an emotional "they are just low balling me" to a " hey, that seem logical".  I hope that helps.

PS: I tried to post all the agents phone numbers for you. However, Bigger Pockets would not allow me to. 

The four jobs of a tenant

Rental property that produces a positive cash flow is the Alpha and Omega of real estate investing. To have positive cash flow, you need to have a tenant that pays well. But is that all that you need them to do? The Answer is an emphatic “No”.

When we lease up a tenant, we tell them that we’re hiring them for four jobs.

Think about that concept for a minute - hiring a tenant, I mean.

When you hire someone, they do a service for you in exchange for some sort of pay. Today, people are accustomed to US Currency, but once upon a time people worked for room and board.

When you rent out your house, you’re bartering with your tenant. They do the four prescribed jobs and get paid a nice place to live. Doesn't that sound like you hired them?

If you let that sink in, it can change the way you do business with your tenants forever.

So what are the four jobs?

1. Take care of and maintain the property.

Simply put, you should expect your tenants to take care of the house. By setting a good standard up front, you’ll do away with the concept of “normal wear and tear’. I’ve never understood that expression. You don’tweara house and you don’t want anyonetearing anything up. How is thatnormal?

Instead, present them with a house in good condition. Then explain how you expect them to keep it that way. By doing this, you’ll get the house back in good condition… free of wear and tear.

2. Pay on time.

Notice this job came after taking care of the house. We had a couple who got behind this month. When I showed up to meet face to face with them, the house looked great. It was clean, smelled nice, and they had even done some repairs. We’re willing to work with tenants like that. Paying on time is important, but it costs more if someone hurts your house than if they pay late.

3. Be a good neighbor.

As a landlord, this is partially important to you. You’ll have neighbors longer than you’ll have tenants. You’re going to want them to like you - plus they can be extra eyes and ears for you. Require your tenants to be good neighbors. Good Neighbors make good neighborhoods. Good neighborhoods are where people stay for a long time.

4. Be good to work with.

Setting a tenant up for success in this job means asking themto stay in touch with you. Your tenants run into issues from time to time. A call before-hand is better than a rent check bouncing with no explanation. Let them know you’ll be just as good to them as they are to you.

We recently had another set of tenants who were paying on time. I went by to do a surprise inspection, and boy were we surprised. There were six, count em six,four legged petsINthe house. There was household trash piled on the front porch, and the grass was almost knee high. The neighbor complained that the pets were a nuisance.

Pocket math says they were not doing three out of the four jobs.

Though they had paid on time, they weren’t taking care of the house, being good neighbors or being good to work with. It was time to hire someone new.

When you hire your tenants to do the four jobs it eliminates any confusion. Both you and they willknow what to expect. If they do the four jobs, they get paid with a great house. If they don’t do them, you need to terminate the relationship and hire someone who will.

Right now it’s 5:38 a.m. My back, hands and neck hurt, and I’m not the alert morning person I normally am. Straight up: I didn’t get enough sleep. I worked on three different rentals yesterday. It was a full day.

Rental No.1:

We had a busted pipe. When I got the call, it was 30 minutes till Home Depot closed. That meant if we didn’t get all the right materials on the way, the pipe wouldn’t get fixed. Also, it was 30 degrees and there was a puddle of water under the house.

Our tenant’s graciously suggested we wait until the morning. Boy was I grateful.

First thing in the morning I headed out to fix the plumbing. To me the hardest part of plumbing, besides dealing with poop, is that you’re lying on your back most of the time. This means you have to extend and tilt your neck in order to see, hence my sore neck.

Do me a favor: always wear a mask when you go under a house. I tend to forget in the haste of the repair. As soon as you get into the insulation, you will breathe it in and start coughing if you don’t have a mask.

We got the pipe fixed and were on to the next house.

Rental No.2

This is a recent purchase we’re getting ready for market. Today I was running a chain saw. There were some trees that needed to come down in a roundabout in the drive way.

Whoever designed this roundabout must have had a tiny car. Our trucks were having a tough time making the turns because of the trees. How a moving van could get around them, I can’t even imagine. I know this: running a chain saw for a few hours will make anyone’s hands hurt the next day.

We cut the trees up and moved down to remove the stumps. It was then that I saw the “boulders” they used to make the border of the roundabout. I have no idea what kind of rocks these were, but they were heavy and huge. As I was flipping the rocks and the stumps end over end I thought, “People pay good money for this at a cross-fit gym.” (Caution: when incorporating rental work into your routine, individual results may vary.)

Rental No.3

As we were making supper, the call came in that the toilets were backing up into the tubs. It was 5:30 p.m. two days before Thanksgiving. My plumber was swamped trying to clear his schedule for turkey day, so, I gulped down some food and off I went.

This one was a bad one. There was poo in places there should not be poo. I started working at about 6:15 p.m. In the drain line, there are these little capped openings called cleanouts. They’re put there so if a clog occurs, the plumber can snake it out without having to cut the pipe.

If you have multiple cleanouts in the line, it helps you find where the clog is. You know the clog is in front of the cleanout, if when you open it, nasty water comes pouring out.

The trick is to find the right spot for the final twist of the cap. If you do it right, the cap will come off and you can retreat before you get covered. If not… well you get the picture. Ask me how I know.

I got home at 10:30 p.m. Ashley took one look at me and said timidly, “Are you OK?”

I told her, “Yes!”

I’d worked my butt off. I was tired, hurting and very nasty. But the whole day I was working on my retirement. It’s very fulfilling knowing you spent a hard day achieving financial freedom. This was MY day. What have you done to work on your retirement lately?

The other day, Ashley and I were driving in the mountains of Tennessee. As we came into town, we stopped on a bridge that over looked a beautiful mountain river.

Ashley said, “Joey! Look at the size of that buzzard!”

I looked over to see a very large, dark bird in the trees over the river. Strangely, it had white tail feathers. I asked Ashley had she ever seen a buzzard with a white tail. Then I looked up and saw it had a white head. Before I could get out “It’s an eagle”, it stretched out its majestic wings and took flight right in front of us. It was breath-taking.

Have you ever mistaken a buzzard for an eagle? What about a property you thought was going to be an eagle that turned out to be a buzzard? See where I’m going?

Don’t feel alone if you’ve made this mistake; it happens to everyone. When we got started we found lots of “eagles”. I would take them to my mentor just knowing I had a deal! He would then proceed to explain to me why they were not deals.

It was frustrating at the time, but I’m very grateful for that reproof. It taught me how to not get excited and end up paying too much for a property.

Excitement can cause you to buy a house rather than a deal. Those transactions often come back to bite you, and by extension, your bank account.

Bill would always tell me “You don’t buy deals, you create them”.

He was telling me to find a property situation that looks like a buzzard, and turn it into an eagle.

We bought a property the other day that looked like a buzzard. It was advertised as a 908-square-foot one bedroom, one bath house on a half acre lot for $30,000. From the ad it looked like we’d need to do a $20,000 rehab.

Doesn’t sound like a good deal, does it?

There is a little something you should know: this was a bank owned property. Sometimes these properties get advertised wrong. When we inspected the house, we found a two story 1816-square-foot, three bedroom, two bath house. Now we are talking! Erroneously, the bank had only advertised the top floor.

As we pulled up to the house, there was a hand-painted “for sale” sign nailed to a tree beside the drive way. Here is a tip: always, always call on those signs. It will make you a lot of money.

We called the number and left a message. Two weeks later, I got a call back. Remember, the house was advertised on a half acre lot. As it turned out, the previous owner of the house still owned one and a half acres adjoining the property.

He didn’t need the acreage and wanted to sell it for enough to get new windows put into his current residence.

When the dust settled, we bought that big house on two acres for $25,000. We did a $40,000 rehab and sold it for $109,000. Is that a smoking hot deal or what?

Your job as a real estate investor is to solve property problems. In order to do that, you need to get out and look at property so you can get face to face with sellers. Once you find out what they need, you can figure out how to give it to them.

Viewed from behind a computer screen, this deal had been mistaken for a buzzard because it was advertised incorrectly. By going out and looking at it, we saw it could be an eagle.

Deals are not bought, they are created. Get out there and make some of your own.

Hey Bran,

I am in Georgia and there are no licencing law's needed to do a master lease here. I can not speak for other states, but from the courses I have taken and the conversations I have had with other investors for other states that master lease, you need no licencing. When you master lease you are not engaging in property managing as an agent. You are a tenant who just happen have the right to sub lease.  That also makes you a landlord. Therefore, what you receive from your tenant is considered rent and what you pay the owner is also rent. In Ga anyone can be a landlord, and I believe that is true in most other states. ( I personally know guys that successful do master leasing in Texas with no problems) 

Master leasing is the same as sandwich leasing. If you add an option to the mix is totally up to you and what you are hoping to accomplish. Most people that SLO are mainly looking to control and sell a property that they do not own. I like SLO because of the three profit center: the option consideration, spread on rents, and spread on option strike prices. But do realize, SL and SLO are no the same thing. 

The difference is in a master lease, you are not looking to sell. You are looking to rent a property for as long as you possibly can for the passive income. That is the glory of rental property. Master leasing allows you to be a landlord without the joys/ responsibilities/ headaches of ownership. 

Great feed back guys. Thank you so much for it. I did not mean for this to come across as an advertisement. Because it is not. I have no seminar, coaching  course or anything to that nature I am trying to push. I write a weekly article for a couple of local papers on real estate investing which get posted to my blog. It is merely educational, from my experiences, and meant to help educate an hopefully inspire people to gain financial freedom by investing in real estate.  

If there is a better place to post this in the future, please let me know. I am still new to bigger pockets and would appreciate the guidance. 

When starting on the journey of real estate investing, it’s hard to figure out which way you should go. It make’s it even harder when you have little to no money.

This was the problem Ashley and I had experienced. We were broke. I mean flat broke. Like I was going door to door with my pressure washer trying to get up enough work for grocery money kind of broke. We didn’t know how we were going to start investing. We just knew we had to.

As we went to different teachers, we found different types of deals structures that we could get involved in with little or no money. The first one we tried was master leasing.

A master lease is when you rent a house from someone with the right to sublease it. Normally it works like this: you rent a house for a below- market-rate. You put in a tenant who pays you the going rate. You make the spread between what your tenant pays you and what you pay the owner.

This is a fantastic way to have rental income without having to own anything. All you have to do is be able to manage the property. This structure works great with owners who are tired of being landlords. It’s also a good strategy with out-of-town owners.

Case in point: the first master lease we had was on Kids Drive. The Owners wanted to sell their house but couldn’t. They had bought in the height of the market and values had plummeted below what they owed. They had taken jobs in Atlanta and had left the house sitting with a “For Sale By Owner” sign.

We got together with them and found out we couldn’t buy the house because of values. We also found out that there was very little room between what it could rent for and the owner’s payment. The house would rent for $850 and their payment was $800.

For us, $50 a month was not enough for us to go to work.

So here is what we did: We agreed to rent their house for $700 a month. We also got paid the first month’s rent for filling the house. We found a nice couple and rented it to them for the going rate of $850 a month.

I know what you’re thinking: “You mean to tell me the owners were willing to lose $100 a month?”

The answer is yes. It sounds crazy but they came out better than you think. You’ve got to remember their house had been sitting vacant for almost a year. A vacant house costing $800 a month will eat you out of, excuse the pun, house and home.

They went from paying $800 every month to only paying $100 a month. That means their monthly bills got reduced by $700. That was a huge relief for these owners.

Next, a vacant house means utilities, insurance and lawn maintenance bills. All those bills were now being paid by our tenant. Not paying those bills put more money in the owner’s pocket.

But their biggest benefit was the emotional relief. That house was no longer a mill stone around their necks. You just can’t put a price on that.

So, does it always take money to make money?

The answer is no. We literally had no money involved in this deal.

We got the first months rent of $850 and an income stream of $150 a month. That’s $2,650 in the first year. We also got to practice being landlords without having to worry about paying for repairs because it wasn’t our house. This was on-the-job training with little to no risk.

We started out master leasing and we still do them for tired landlords and out-of-town owners. Couldn’t you do the same?