Please note that index links point to page beginnings from the print edition. Locations are approximate in e-readers, and you may need to page down one or more times after clicking a link to get to the indexed material.
Addendums, 118–119
Agents and Realtors, 147–153
bigger equity houses and, 148
brokers as customers, 151–152
as buyers, 152
contracts and, 109, 118, 120, 121
convincing them to call you, 147–148
difference between, 147
as investors, 149
lease/options and, 149–150, 171–172
listing agents, 148–149
open versus exclusive listings, 150–151
real estate licenses, 152–153
selling through, 217
short-term buying/selling and, 159
Aggressive Tax Avoidance for Real Estate Investors (Reed), 221
Allen, Robert, 12
Amortization schedules, 62, 79, 86, 225
Apartment buildings, 2–5
Applications for rentals, 197
The Art of the Deal (Trump), 110
“As is” condition, 112, 130, 161–162
Assuming an existing loan, 88, 114
Average prices, 5–6
Bankers, referrals from, 177
Bank fraud, 84
Bank loans. See Financing and loans
Basements, 19
Bidding against yourself, 141
Borrowing. See Financing and loans
Brokers. See Agents and Realtors
Bruss, Bob, 166
Bubbles. See Market cycles
Business plans, 170–171
Buying, 15–43. See also Contracts to purchase; Financing and loans; Offers; Sellers
after a crash, 27
avoiding too big or too fancy houses, 19
in best neighborhood affordable, 17–18
buying strategy worksheet, 42–43
checklist, 131
different houses for different reasons, 15–17
finding opportunities, 33–41
first house, 24
house sizes and long-term tenants, 18–19
houses versus apartments and commercial buildings, 2–5
for less than retail price, 11–12
lots, importance of, 19–20
market cycles and, 25–32
neighborhood change and, 20
with nothing down, 12–13
planning and goals, 15
10/10/10 rule, 63–65, 226, 232
value and, 232
Buying and selling, short-term, 155–162
annual profit, 156–157
fastest selling price range, 157
investing versus, 155–156
journal keeping, 158
neighborhood, identifying, 157–158
researching a deal, 158
selling “as is” houses, 161–162
setting minimum profit goal, 158
taxes and, 159–160
time factor, 156
which houses to buy and not buy, 160
Buying strategy worksheet, 42–43
Car buying negotiations, 143–144
Cash flow
for buying versus paying off debt, 224
factors in producing, 21–22
financing and, 20–21
lease/option sales and, 169–170
leverage and, 74–75
quick profit versus investing, 155–156
refinancing versus, 92–93
Cashiers’ checks, 127–128, 199
Cleaning a house before renting, 192
Closing date, 112
Commercial buildings, 2–5
Commissions. See Agents and Realtors
Comps (comparables), 49–50, 125
Construction cycles, 30
Consumer debt, 69–70
Contracts to purchase, 107–122
addendums, 118–119
assuming or taking subject to existing loans and liens, 114–115
be willing to walk away, 119
buyer “and/or assigns,” 111
clauses enforceable after closing, 120–121
copying after signing, 118
earnest money, 111
filling in the blanks, 110–111
form contracts, 109
informal agreements, 110
length of, 120
loopholes, 117
modification by striking through, 118
offer acceptance, written, 121
reading and understanding, 107, 108–109
Realtors’ contracts, 118, 120, 121
right to negotiate or discount existing loans and liens, 116
sellers’ contracts, 110
simple, 108
specific performance, 116–117, 119, 121
terms and conditions, 111–113
written, importance of, 107–108
Corporation structure, 101–102, 160
Crashes. See Market cycles
Credit cards, 70
Credit cycles, 30
Dealer property, 218
Debt, dangerous, 69–79
avoiding personal liability, 29
balloon clauses, 78–79
banks versus individual lenders, 76–77
consumer debt versus mortgages, 69–70
credit cards, 70
good debt versus bad debt, 69
leverage, wise use of, 73–74
negative amortizing loans, 71–72
personal guaranteed, 72
rule for borrowing safely, 73
Schaub’s laws of leverage, 74–75
unintentional debt, 70–71
variable-rate loans, 71
Delinquent homeowners. See Foreclosure and preforeclosure purchases
Demographics, 7
Deposits, security, 182–183, 193–194, 199, 200, 208
Deposits with offers, 127–128
Depreciation, 217
Discount rates, 46–47
Distressed properties, 50–51, 177
Distressed sales, 48–49. See also Foreclosure and preforeclosure purchases
Diversification of properties, 5
Doubling your money (rule of 72), 10–11
Down payments
accepting smaller houses as, 220–221
on houses versus commercial properties, 3
investor financing, advantages of, 97–98
net return on, 65–66
nothing down, 12–13
small, for houses needing work, 161–162
Earnest money, 111
Empty houses
appreciation and, 2–3
in foreclosure, 186
raising rents and, 209
selling and, 216–217
zero-interest, single-payment notes for buying, 88–89
Evictions, 209
Exclusive agency listings, 150–151
Exclusive right of sale, 150
Fair Housing Act, 191–192
Fairness, doctrine of, 140–141
Federal Housing Administration (FHA), 114, 180
Financial calculators, 86–87
Financial incentives for tenants, 203–204, 206
Financing and loans, 55–105. See also Contracts to purchase; Debt, dangerous; Investor financing; Lease/option sales; Owner financing
aggressive, high-risk lenders, 175–176
banks versus individual, 76–77, 81–85
cash flow and, 20–21
collateral, types of, 72–73, 76
credit cycles, 30
fixed-rate versus variable-rate loans, 21, 71
for houses versus commercial properties, 3
interest-only payment versus 30-year amortizing loan, 62–63
lender preference for houses, 4–5
lines of credit, 28, 89, 169–170
at longest available term, 62
long-term versus short-term loans, 21, 71, 77–78
market prices and availability of credit, 48
nothing down and, 13
refinancing, 21, 90–92, 178, 214, 226–228, 229
renegotiating, 29
rental rates and debt repayment, 60–62
safely borrowing a million dollars, 82
sales, financing of, 4
second mortgages, 91
10/10/10 rule and, 63–64, 226, 232
terms your tenants can afford, 86–87
using cash flow from existing property, 92–93
zero-interest, single-payment notes for buying empty houses, 88–89
First-time buyers and interest rates, 6
Fixed-rate loans, 21
“Flipping.” See Buying and selling, short-term
Foreclosing on a property, 219
Foreclosure and preforeclosure purchases, 173–187
advice for delinquent borrowers, 178–179
at auction, 185–186
bubbles and, 25–26
how and why foreclosures occur, 173–174
knowledge and experience, need for, 186–187
lender negotiations, 184–185
lenders, dealing with, 179–180
from lenders after foreclosure, 186
negotiating purchase and lease, 181–184
nonopportunities, 175
from owners in default, 179
prices and, 48–49
renting back, 180–181
sharks, caution against, 174
sources of delinquent homeowners, 175–177
state laws on, 181
talking with owners, 178
testing owner’s motivation, 178
treating people well in, 174
Free-and-clear ownership, 223–230
discounts, asking for, 228–229
goal setting, 223–224
rate of return and, 217
refinancing and, 214, 226–228, 229
retirement income and, 229–230
by selling off some houses, 225–226
using cash flow, 224–225
Fuller, Linda, 235
Fuller, Millard, 235–236
Fuller Center for Housing, 235–236
Garages, 19
Government regulation, 7
Habitat for Humanity, 235
Home equity lines of credit (HELOCs), 89
Home inspections, 112–113, 117, 128–129
House cycles, 31
Income. See also Profit; Renting
calculating, 59–60
free-and-clear ownership goals and, 223–224
operating cost and, 59
paying off loans and, 223–224
retirement and, 229–230
from starters versus more-expensive houses, 16–17
value as separate from, 2–3
Income approach to valuation, 52
Inflation, 8–10
Inspections, 112–113, 117, 128–129, 206
Installment sales, 218–219
Insurance, title, 112
Interest rates
first-time buyers and, 6
investor financing and, 104
prices and rents, impact on, 58–59
prime rate, 89
profit and, 10
10/10/10 rule and, 64
varying, 21
Internet advertising, 195
Interviewing tenants, 197–199
Investor financing, 95–105
by agents, 149
approaching investors, 96–97
borrowing from other investors, 103
for down payments, advantages of, 97–98
first investor example, 102–103
identifying potential investors, 95–96, 105
interest-only terms, 103–104
protecting both parties, 100
rules for, 104–105
shared tax benefits, 99–100
splitting profits fairly, 98–99
title as tenants in common, 100–101
title in trust, corporation, or LLC, 101–102
IRC Section 1031 tax-deferred exchanges, 219–220
Job market trends, 49
Landlord burnout, 210–211
Landlording. See Renting; Tenants
Landlord surveys, 55–58
Lawn care during vacancies, 196
Lease/option sales, 163–172
advantages of, 218
agent sales compared to, 171–172
agents and, 149–150
“as is” condition and, 161–162
business plan for, 170–171
defined, 163–164
to family members, 172
lines of credit on, 169–170
not as management tool, 166–167
option payment, rent, and price, 164–166
qualifying your buyers, 164
renegotiating, 168
risks in, 167
term, monthly credit, and extensions, 167–168
terminating, 168
Leverage, 8, 13, 73–75. See also Financing and loans
Licenses, real estate, 152–153
Liens, 114
Limited-liability companies (LLCs), 101–102, 160
Limited-liability partnerships (LLPs), 101–102
Lines of credit, 28, 89, 169–170
Listings, open versus exclusive, 150–151
Loans. See Debt, dangerous; Financing and loans; Investor financing; Owner financing
Losses, limiting, 29
Lots, 19–20
Maintenance, 18, 22, 203–205, 216
Market cycles, bubbles, and crashes, 25–32
assessing current market direction, 31
bank loans and, 84
buying after a crash, 27
causes of bubbles, 25–26
changing strategy, 31
construction cycles, 30
credit cycles, 30
house cycles, 31
neighborhood cycles, 30–31, 48
opportunities throughout the cycle, 32
preparing for the next crash, 27–29
refinancing and, 229
regional crashes, 26
rent and price cycles, 30
selling and, 213–214
signs of top of the bubble, 27
strategies for surviving, 29
Market prices. See also Valuing a house before making an offer
cycles of, 30
fastest selling price range, 157
interest rates, impact of, 58–59
median (1975–2015), 32
rents, relationship with, 30
time lag in, 27
unpredictability of, 45
Market sales approach to valuation, 49–50
Markets for housing, local versus national, 5–6
Mortgage Guarantee Insurance Corp. (MGIC), 180
Mortgages. See Financing and loans
Move-in and move-out inspections, 206
Multiple Listings System (MLS), 150–151
Napier, Jim, 140
National Association of Realtors, 48
Negative amortizing loans, 71–72
Negotiations, 133–145. See also Agents and Realtors; Offers
being a fair but good negotiator, 134–135
dishonest negotiators, avoiding, 144
ending, 145
fairness doctrine and, 140–141
knowing value before you offer, 140
knowing when to walk away, 144
lease/option sales and, 166
on least important items first, 140
with lenders on default properties, 184–185
loan authority in banks, 137
with multiple sellers in conflict, 141–142
not bidding against yourself and silence as a tool, 141
one-sided deals that fail, 135
of purchase and lease on default properties, 181–184
questions to ask beforehand, 137–139
team ally approach, 142–144
with tenants, 138
where to meet with sellers, 139–140
win/lose results, 136–137
Neighborhoods
average appreciation by, 11–12
best that you can afford, 17–18
distressed properties in, 51, 177
diversifying, 15–16
as dynamic, 7
improved streets, signs of, 50–51
long-term residents, looking for, 51
notifying of rentals, 195
over- and under-improved houses on a street, 51
price trends by, 50
selling and, 214
short term buying/selling and, 157–158
studying a neighborhood, 66
tenants, 190
on the way up, 20
Newspaper advertising, 195
Nickerson, William, 199
Norris, Bruce, 50
North, Gary, 9
Nothing down, 12–13
Nothing Down (Allen), 12
Offers, 123–131. See also Negotiations; Valuing a house before making an offer
acceptance tips, 130
deposits, 127–128
getting the seller’s highest price first, 124
inspections and, 128–129
investor financing and, 95–96
knowing value prior to, 140
low, 47
owners not at the table, 129–130
picking price for, 124–126
sellers’ motivation, understanding, 123–124
sellers’ third parties and, 129
“shopped” offers, 126–127
talking with sellers before, 123
written acceptance of, 121
Open houses for rentals, 196
Operating costs, 59, 175. See also Maintenance
Options to buy, 29. See also Lease/option sales
Owner financing
advantage of, 77
assuming an existing loan, 88, 114
balloon clauses, 78–79
bank loans versus, 76–77
banks versus individual lenders, 76–77, 81–85
burned-out investors, looking for, 84
contract terms, 112
right to renegotiate or discount existing loans and liens, 116
selling to owner occupants with, 218–219
taking subject to existing loans and liens, 114–116
Personally guaranteed loans, 72
Population changes, 7
Postcard mailings, 176–177
Prices. See Market prices; Purchase price; Sales price
Profit. See also Income
compounded rate of, 10
inflation and, 9
lease/option sales and, 164, 165
leasing back default properties, 184
minimum acceptable, 66–67
minimum targets, 158
from rents versus selling, 214
selling a losing property, 216
from short term buying/selling, 156–157, 158–159
short-term versus long-term, 155–156
spent on paying off loans versus buying new houses, 225–226
Property taxes, 22
Purchase price. See also Market prices; Offers
averages, skepticism about, 5–6
below retail, 11–12
diversification and, 5
factors affecting, 7–10
minimum acceptable profit and, 66–67
rental market, studying, 55–58
retail versus wholesale and discount rates, 46–47
10/10/10 rule and, 64–65
Rates of return
average, 10
compounded, 10–11
free-and-clear properties and, 217
long-term, 65–66
return on investment in normal versus distressed markets, 49
rule of 72 and doubling the investment, 10–11
10/10/10 rule and, 63–65
Real estate contracts. See Contracts to purchase
Real estate licenses, 152–153
Real estate owned (REO) properties, 186
Realtors. See Agents and Realtors
Reed, John T., 221
References of prospective tenants, 197
Refinancing
defaulting loans and, 178
for down payments, 90
of loans in default, 178
long-term loans and, 21
market cycles and, 229
to pay off other loans, 226–228
risk and, 91–92
selling versus, 214
unprofitability of, 90–91
Rental agreements, all-inclusive, 208
Rental income, 2–3, 10, 13, 17
Rental rates
cycles of, 30
debt repayment at different rates, 60–62
discounts as incentives, 203–204
house prices, relationship with, 30
interest rates, impact of, 58–59
in lease/option sales, 164
lowering, in soft market, 194–195, 210
raising, 209–210
for renting back, 180–184
setting, 193–194
surveys of competing landlords, 55–58
weekly, 209
Renting. See also Tenants
answering email and phone, 196
applications, 197
bookkeeping, 200
burnout, avoiding, 210–211
cash or cashier’s check for security deposit, 199
checklist of rents, 200
cleaning and repairing before, 192
evictions, 209
expiration dates, tracking, 200
houses never rented, 3
inspection sheets, 200
lawn care during vacancy, 196
laws applying to, 191–192
management consistency and control, 206–207
management policies, 207–208
move-in and move-out inspections, 206
nonpayment, responding to, 208–209
open houses, 196
payment in full before move-in, 199
pay or quit notices, 209
setting rent and security deposit, 193–194
showing the property, 196
signs and advertising, 195, 200
to your first tenant, 202–203
Reproduction of cost approach, 52–53
Retail versus wholesale prices, 46–47
Return on investment (RIO), 49. See also Rates of return
Risk, 13, 75, 76, 91–92, 167, 231–232
Rule of 72, 10–11
Schools, 18
Second mortgages, 91, 175, 180, 185
Security deposits, 182–183, 193–194, 199, 200, 208
Sellers. See also Contracts to purchase; Offers
getting highest price of, 124
motivated and ready to sell, 3, 39–41
motivation, understanding, 123–124
multiple, in conflict, 141–142
with problems, 13
questions to ask of, 36–39
refusal to close by, 119
talking with, before an offer, 123
Selling, 213–221. See also Agents and Realtors; Buying and selling, short-term; Lease/option sales
in “as is” condition, 161–162
avoiding hurry, 3
exclusive versus open listings and, 150–151
getting retail price and all cash, 4
inspection clauses and, 112–113
installment sales, 218–219
IRC Section 1031 tax-deferred exchanges, 219–220
to owner occupant with seller financing, 218–219
to pay off other loans, 225–226
questions to answer before, 213–215
retirement income and, 229–230
right and wrong reasons for, 215–217
taking a house on trade, 220–221
taxes, researching, 221
ways to sell, 217–218
“Shopped” offers, 126–127
Short sales, 48–49
Silence as tool, 141
Sizes of homes, 16, 18–19, 190–191
Specific performance, 116–117, 119, 121
Starter homes as opportunities, 16
Storage space, 19
“Subject to existing loans and liens” condition, 114–116
Taxes
on capital gains, 16
discounts, tax-free, 133–134
investor financing and shared tax benefits, 99–100
IRC Section 1031 tax-deferred exchanges, 219–220
property taxes, 22
on sales, learning about, 221
short term buying/selling and, 159–160
10/10/10 rule, 63–65, 226, 232
Tenants, 189–211. See also Rental rates; Renting
applications, 197
being firm and fair, 206
care of the property by, 18, 19, 22, 197, 201
with credit problems, 198, 201
with diversified employment, 28
eviction of, 191
financial incentives for, 203–204, 206
house and neighborhood to attract, 190
house size and, 190–191
in houses versus apartments and commercial buildings, 2
income levels of, 23–24
interviewing, 197–199
job markets and, 49
knowing the neighbors and, 192–193
legal relationship with, 191–192
long-term, 18–19, 197, 201–202, 204
maintenance and emergencies, 204–205
negotiation with, 138
neighborhoods and, 17–18
nonpayment, responding to, 208–209
“perfect,” 198
poor-condition houses and, 214
reasons for turning down, 202–203
rent affordability, 193
responsible, 22–23
solving problems with, 191
stability and, 198–199
standards for selecting, 200–202
training with management policies, 207–208
what landlords and tenants are looking for, 189–190
Tenants-in-common title, 100–101
Third-party involvement, 129
in trust, corporation, or LLC, 101–102
Title insurance, 112
Title searches, 112
Trump, Donald, 110
Trusts, 101–102
Valuing a house before making an offer, 45–53
distressed sales and, 48–49
how much to offer and, 53
income approach, 52
liquidity and retail versus wholesale, 46–48
market approach, 49–50
market direction and, 48
normal return on investment (ROI), 49
perceptions of the future and, 53
price versus value, 45
reproduction cost approach, 52–53
Veterans Administration (VA), 114, 180
Walk-through inspections, 113
Wealth-building, 231–234
Wholesale versus retail prices, 46–47
34.234.83.135