Real Estate Investing – The Greater Good

February 6, 2009


Real Estate Investing – The Greater Good
by James Miller

So much of the focus on Real Estate Investing seems to be on making money. That is the first and truest motivation for what we do.  I feel that there is nothing wrong with this. Being a capitalist, I think anything that gets the Money moving in our economy actually does us good.

But before I turn this into  Gordon Gekko’s Greed is good speech, I want to talk about the other side of what we do, when we buy or sell a place using creative real estate techniques.  I want to talk about how it helps people and the overall good it does.

Think of the benefits to our local economy and community when we do the following investing action:

When we buy a fixer upper, repair it, and resell it with seller financing:

1) We are saving this home from further ruin that time can create. At some point homes become so deteriorated that after enough time only the only choice is the wrecking ball. By saving these homes we are indeed recycling them and keeping a large amount of material out of the landfill.

2) We raise the property values in the local neighborhood. This may or may not happen to any significant degree, but it makes it easier to sell your house if it is sitting next to a freshly  restored Victorian, as opposed to being next to something that looks like a haunted house.

3) We increase local tax revenue. While we never like to see it coming, we benefit the community by creating more assessed value in a home that benefits the tax roles.  This is a dollar savings that  minutely lowers everybody elses taxes.

4) We minutely lower the cost of housing by providing another viable living space.

5) We give hope, usually to a family that is transitioning from renting to the American dream of home ownership.  We are providing renters a way to start building equity in their home even though they may not be able to qualify with a bank right now.

6) We give hope, to the seller we buy from who could not move their home otherwise. This is especially true in this tight market.  I have talked to Realtors who have sold nothing over the past six months.

With our ability to sell via lease options and other creative means, we are constantly and consistently able to sell homes.

7) We are good for the economy. I believe that if there were a massive push from our government to educate it’s population on the ways of creative Real Estate Investing we could pull out of this economic slump without the need for huge bailouts.

The banks would still have to take a hit, but a nation of savvy and creative Real Estate Investors and home buyers could eliminate the inefficiencies in the market.

If you think about all of the people out there right now who would gladly rent or sell their property with creative financing, just to get out of it, but they don’t know how, so they are letting it go into foreclosure.

Compare that against the amount of people that are ready, willing, and able to come up with a little money down and make the monthly payments in order to get into a home of their own… but they don’t know these options exist.

If you compare these two things then we know that there is room for us to make a difference in our economy without a huge infusion of bailout cash.

…..Then again, maybe I am just an idealistic dreamer.

Since posting this I have read Francine Hardaway’s open letter to two mortgage companies. In her blog, she talks about how much better things would be for her and her lenders if  they would accept a reduced interest rate as opposed to her only other option…Foreclosure.

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Getting the most from your Contractor

January 25, 2009


Getting the most from your contractor.
by James Miller

1) You must accurately communicate the work to be done.

I always do this in writing, unless I am working with someone who has a proven track record with me.

While it isn’t a contract or true “specification”, I usually work up a word document that I later print out, or turn into a PDF if I am e-mailing it. I use a lot of pictures and text box call outs on these pictures to indicate what I want done.

See this Adobe PDF example of a siding project we contracted out.

I find that this document clearly outlines what we want to accomplish and eliminates the confusion that can often times happen when you try to verbally describe the work to be done.

It takes me a bit more time to create a document like this, but I can only imagine the costs it has saved me by not having to stop the contractor’s crew and ask them to rework something.

Please keep in mind that the above example document is not a contract, but rather an outline of the way we want the work preformed. I have no idea how much merit it would carry if you end up in court with a contractor, but I am guessing it is better than nothing at all.

2) Always use a contract.

I have to admit I do break this rule if I have a some proven experience with a certain contractor and the job to be preformed is relatively small, like fixing a stoop, or putting on a screen door.  If the job is larger, like building a deck, or pouring a foundation, I will certainly use a contract, regardless of my history with the contractor.

TIP: The contract you use should contain incentives for finishing on time or before, and penalties for each day, after the completion date, that they are late.

3) If it is not working out with the contractor, get rid of them.

Before the siding job on the 602 W. Division property, I had a different contractor wrap the windows in aluminum. The bid came in at $1200, which was a very good bid for the amount of windows we had (28 I believe).  He didn’t really have a contract, but instead tried to get me to sign a one page document which only outlined the terms of payment and not the work to be done.

I wrote up my own contract for the window wrapping and agreed to his unheard of 50% down payment requirement, mainly just to get him to use my contract.

This was a mistake my part as he wrapped about 25% of the windows, and then the started finding excuses to not do the rest.

I personally think that he just didn’t like the cold weather.

I should have gotten rid of him and moved onto the next guy, as it took him four months to finish a job that most other contractors could pull of in a weekend.

He also used my dumpster to get rid of building materials from a project that he was working on at home.  It was easy to figure out who had done it as he was stupid enough to throw away his junk mail which had his name and home address,  along with his construction debris.

I am a pretty generous guy. If someone asks to throw something in dumpster we have, I will usually let them throw away just about anything.

This guy threw away a large amount of material, without asking, and when I called him on it he lied and said it wasn’t his.

Not exactly a class act if you ask me.  It also pissed me off.

I could have saved myself a lot of pain if had I gotten rid of him right away.

Instead, I held out hope for his reassuring promises that were continually punctuated with excuses.  He eventually stopped taking my calls and only finished the work when I filed a small claims action against him.

When the work was done, he demanded payment the same day he finished.

I am certain, if I had not had a contract he would have never completed the job.