NEW: BP Podcast 66: Flips, Apartments, & Protecting Yourself From Professional Tenants with Michael Blank

Hide this
Blogs » Real Estate Consultant » Tennessee » memphis » Memphis Invest Blog

3 Totally Idiotic Ways to Blow Your Real Estate Investment Earnings

Thursday, May 23

 

investment earningsAs it turns out, success can prove to be a very alluring temptress.


To become successful in the real estate investing business typically takes a lot of determination, commitment, and hard work. A lot of long hours have to be put in and many thankless tasks have to be performed before one achieves the kind of financial freedom for which many people get into this business.

For those who are fortunate enough to achieve a high degree of success -- for our purposes at the moment, let's say that means making a boatload of money -- the temptation can be to develop the mindset that they've "made it." 

Even someone with a good head on his or her shoulders can be tempted by this fallacy, even though the truth is that one should be socking plenty away to absorb the bumps in the road that a long career in real estate investing can provide. To put it more simply (and bluntly), it's easy if you aren't careful to get downright stupid with how you spend your money.


Just for kicks, your favorite Memphis real estate professionals have compiled a short "don't try this at home" list of ill-advised ways to blow your investment earnings. And though they do all sound like fun, just say no, people. Just. Say. No.

1. Buy your kids braces made from solid gold.

Sure, orthodontic work can be expensive, but if you want it to be crazy-expensive, nothing says "I've arrived" like spending a ludicrous amount of money on bling for your children's chompers.

"But what if my kids don't need braces?" you ask? Nonsense. They don't "need" that diamond-studded or ruby-encrusted iPod you're going to get for them, either, but you're not letting that stop you.

2. Forget luxury cars and go with a jetpack.

No, we're not kidding. Believe it or not, there are a number of different personal flying devices in development. Take, for instance, the Martin jetpack. The company is looking to have a version ready for private citizens available in mid-2014. This bad boy looks to cost around 100 grand, which makes it no more expensive than many luxury cars. You can keep your stretch Escalade and Porsche 911; I'll take my joyrides in the sky, thank you very much.

Just as soon as I watch a few other people try it first and make sure they don't meet their fiery demise.

3. Personal Fine Dining Delivery Service

Okay, so this is getting pretty pie-in-the-sky here (literally so, if you like), but that's kind of the point of this list. Hire a pilot whose sole job is to procure you any meal -- from anywhere in the world -- at a moment's notice. Want fresh sushi-grade tuna -- from Tokyo? No problem! The highly trained, experienced pilot that you're turning into the world's best-paid delivery driver can get that for you, no problem! Pastries made in France only hours earlier? You got it! Sure, your bank account will go from Trump to chump in a matter of days, but it'll totally
be worth it!


If money were no object (until you quickly went broke), what absolutely moronic ways would you use to blow your investment earnings? Tell us in the comments!

Image credit: martinjetpack


3 Bits of Strange Real Estate Trivia

Thursday, April 25

People do some weird stuff with real estate.


If you say the words "real estate" around the average person who's not in the market to buy or sell -- someone with no vested interest in the topic -- there's a decent chance you'll see him stifling a yawn. When it comes to hot topics of conversation at a social gathering, real estate doesn't exactly have the same appeal as current cinema offerings or celebrity gossip. 


But not all real estate talk is staid or snore-inducing. Whether it's a personal residence or a commercial property, what people do with real estate -- from how they build it, to what they build it out of, to how they take care of it--can be downright fascinating. Don't believe me? Check out these 3 bits of strange real estate trivia, collected from the ether by your favorite Memphis real estate investing team.


1. The House that Winchester Built...and Built...and Built


What happens when a widow with a nearly unlimited budget becomes convinced that nonstop construction is the answer to warding off evil spirits? 


A **reeeeeally** cool house, that's what.


The story goes that Sarah Winchester was convinced by a spiritualist that the deaths of her infant daughter, Annie, and her husband, William Wirt Winchester (manufacturer of the Winchester repeating rifle), were caused by spirits of those who had been killed by the family's products. Supposedly, the medium told Sarah to move west and appease the spirits by building a house for them. As long as construction was ongoing, Sarah would be safe. By the time she died in 1922 of heart disease, the property boasted 160 rooms; 2,000 doors; 10,000 windows; 47 stairways, 47 fireplaces, 13 bathrooms, and six kitchens. 


Apparently, the ghosts haunting Mrs. Winchester had some seriously expensive tastes. 


2. Death Warmed Over


The words "death" and "warmth" are not generally associated with one another, for obvious reasons. However, some communities in Denmark and Sweden would beg to differ. In one of the more bizarre attempts to be environmentally friendly we've ever heard of, they are sending the excess heat generated by crematoriums to local energy companies. Sure, it would probably take some getting used to, but after you "warm up" to the fact that your toasty home is being heated as a by-product of decedent disposal, it makes a lot of sense.


After all, who says you have to let a pesky thing like death get in the way of being green? 


3. Hope Floats (And So Do Homes)


A Japanese company called Air Danshin Systems has created a kind of levitation system to protect structures from natural disasters. In the event of an earthquake, a sensor would activate a compressor to inflate a sort of giant airbag within one second. This airbag would lift and stabilize the structure until the earthquake was over, at which point it would deflate, bringing the structure gently back down onto the foundation. 


I like it when somebody pulls off a revolutionary idea that surely had innumerable engineering hurdles to overcome. I love it when said idea, at its core, sounds patently ludicrous. I'm convinced that Japan's status as a tech giant is largely due to a culture of innovation that allows for flat-out ridiculous ideas. What if that pitch had taken place in the U.S.? Wouldn't you have loved to have been there for that?


**"Okay, everybody. I think we can all agree on this: Earthquake plus house equals "bad." But picture THIS: Earthquake plus house, plus...FLOATIES! Wait...where is everybody going? Stay with me here!"**


Yeah. That kind of small-mindedness is why we still don't have flying cars.


Do you have any strange real estate trivia to share?


Random Real Estate Investing Glossary

Friday, April 19

Like any field, the field of real estate has its own terminology. And just as in any other field, newcomers can easily become adrift in a sea of wording and acronyms if they haven't learned the lingo.


It's no fun to pore through reams of paper chock-full of black ink detailing the

real estate investing glossary

definitions of these words, so we're just going to go with a sort of "grab bag" approach. You know those words you've heard and told yourself, "Hey self? Remember to look that up!" Well, hopefully you'll see one or two of those words in our funky little real estate investing glossary here. Not to fear if you don't, though -- there are a lot of definitions you need to learn, so there is a very good chance that this first installment of the Memphis Invest real estate investing dictionary won't be the last.


Bird Dog

This is a term that aptly describes a person who "sniffs out" deals for investors. It is the bird dog's job to hunt down properties with strong investment potential, which they then inform an investor about for a fee.


Gift Letter

A gift letter is a letter from a family member of a buyer to a lender stating that the family member is gifting a certain amount of money to be used towards a property's down payment. It's important for it to be made clear that the money in question is truly a gift, as opposed to a loan.


PITI

This is an acronym that stands for principle, interest, tax, and insurance (PITI), which are the four primary parts of a monthly mortgage payment. (And it's also pronounced the same as the feeling one feels for oneself when he sees his mortgage payment for the first time.)

REIT

And the acronyms just keep coming! REIT stands for Real Estate Investment Trust. Want to invest in real estate, but not deal with the hassle of actually directly owning the property? A REIT may be just what you're looking for. Investing in a REIT, simply put, is real estate's equivalent of buying stock. That's the simple definition; for a more complex -- and complete one -- check out this Investopedia article. 


Closing Costs

These are any costs above and beyond the actual purchase price of the property (taxes, insurance, etc.) Think of closing costs as all that stuff you pay when you're buying a car that's not included in the sticker price. Of course, most homes are bigger than a car, so...yep, you guessed it: the costs are significantly more substantial. Who pays what percentage of which closing costs is often a point of negotiation between the buyer and seller.


Hard Money Loan

Hard money loans are backed by the value of the property, as opposed to the credit worthiness of the borrower. Hard money loans carry high interest rates. Hard money loans come not from traditional lenders (banks, etc.), but from entities that see value in a more inherently risky loan. A few situations in which a hard money loan might be seen as a viable option:

- Short-term financing

- Flips

- The buyer has poor credit but substantial equity and is trying to avoid foreclosure.


Home Inspection

Going back to our car analogy from earlier: Think of a home inspection as kicking the tires. Or, more accurately, getting a trained tire-kicker to kick the tires. A home inspection is a thorough inspection performed by a professional to assess the structural and mechanical condition of the home. The buyer wants to make sure that wonderful bargain of a property doesn't have any serious foundation issues, isn't infested by termites, and isn't trying to rid itself of the owners, courtesy of being unfortunately built on an ancient burial ground, so he gets a home inspection done.


Short Sale

This is a real estate sale that generates proceeds that are less than what is owed on the property. While this isn't ideal, it is often preferable to other alternatives--the borrower defaulting on her loan, for instance. With a short sale, the borrower avoids what could be a damaging hit to her credit, and the lender recoups some of his money and avoids costs associated with foreclosure.


See? That wasn't too painful, now was it? It's amazing how much better things stick with you when you learn them in small chunks!


Are there any terms you'd like to see addressed in our next installment of our real estate investing glossary? If so, tell us in the comments!


Image credit: kev_hickey_uk


Highlighting One Of Memphis' Oldest Neighborhoods

Wednesday, April 17

Investing In Memphis Real Estate When There Is So Much Diversity


memphis neighborhoodTrying to pigeonhole a city can be difficult, particularly when that city boasts as much diversity as Memphis does. How can one ascribe an overarching personality to a city made up of so many distinct neighborhoods?  It gets even more difficult when you start looking at investment real estate in such a city.  Not all neighborhoods and areas are created equally and not all areas are good for investment.  That is why knowing a neighborhood and the "vibe" it gives off is so important.


Classifying a neighborhood, in relation to its history, personality and the amenities that attract people -- now that's a different story. A neighborhood can have a "feel" to it, a vitality and a personality that's all its own. So it's fair to say that to truly get to know a city, one has to get to know its neighborhoods, and Cooper-Young is as good a place to start as any.


Cooper-Young -- named for the intersection of Cooper Street and Young Avenue -- is a funky, eclectic neighborhood and historic district in Memphis's midtown. It's home to over 1,600 households, over 200 businesses, two schools, twelve worship communities, and one very kickin' annual party. The Cooper-Young Festival is an annual outdoor event featuring live music, arts and crafts vendors, food, and a whole bunch of fun.


Its historic architecture and hip combination of arts, entertainment, and commerce helped to land Cooper-Young on American Planning Association's 10 Great Neighborhoods in the U.S. in 2012. APA CEO Paul Farmer's statement about Cooper-Young points to the neighborhood's 
ability to keep its identity in changing times: ""Even as reinvestment transforms its commercial corridor into one of the city's top entertainment venues and residences continue to be rehabbed, the neighborhood remains true to itself."


That kind of balancing act is no easy feat, and it's one that Cooper-Young takes very seriously. Creating a neighborhood that's more than just a collection of addresses is not something that happens by accident. The Cooper-Young Community Association focuses its efforts on beautification, safety, code enforcement, and general community-building.


Cooper-Young is the model of what can happen when a group of citizens takes a mindful approach to developing and shaping their neighborhood's destiny.  It does not mean that it will necessarily be a great place to buy investment property, but I have had some success in this area.  Like any place else, the Cooper-Young district is a defined area.  Just being "near" Copper-Young does not mean you are in Cooper-Yong and I have seen investors get burned by purchasing investment property that they thought was the Cooper-young district only to find out that being near it is not like being in it!  These kinds of great neighborhoods are found in every city of America.


Have you spent time in Cooper-Young?  Do you have similar neighborhoods in your city and do you invest there?  What, if anything, do you think other communities can learn from this Memphis neighborhood? 


Image credit: Memphis CVB


Snagging the Superstars...4 Ways To Attract Great Tenants

Monday, April 01

You've done your research. You found an attractive property at a good price. After a bit of haggling, you managed to land said property at a great price. It's in a good location primed for growth, and you have every reason to believe the property is going to show good appreciation over time. There's only one thing left to do:


Find somebody to live there.


But you don't want just anybody to live there. You know that you can prevent a lot of potential problems down the road just by picking the right person to rent from you. You want good tenants. Great tenants would be even better. And if you could find some superstar tenants? Well, that would just be the bee's knees. As the owner of Memphis Invest and Premier Property Management Group in Memphis and Dallas, I am here with a few suggestions on attracting those quality tenants every landlord dreams of. 


We are managing close to 1,700 properties between the two cities, but what we have become known for is not simply managing those properties.  We track so many metrics that we look at property management from several angles and that allows us to constantly work on improving.  These tips come from some of that improvement on our end.  When you have success at not only renting property, but also getting over 50% of your tenants to sign a lease extension, you are doing something right!  


1. Focus Your Advertising


Targeting your advertising so that it appeals to only good tenants is one of the first -- and best -- ways you can draw in the right people. Using words like "well-kept," "immaculate," "good neighborhood," "well-manicured," and "pristine" sends a message about what kind of property you have and how you expect it to be taken care of. It will help to draw the superstar tenants in, while discouraging those who are sloppy and careless.  I would also highly recommend that your advertising match you house!  First impressions are everything so don't just advertise for great tenants.  When they call you, leave an impression that let's them know they are dealing with someone who takes pride in that property.


2. Charge an Application Fee


This weeds out "potential renters" who aren't serious about renting from you. And if their checks bounce? That's a deal-breaker.  An application fee does not have to be a crazy high number, it just needs to be high enough to cover your cost for a quality background check and high enough so only those that really want your property apply.


3. Do a Credit and/or Background Check


Make it clear in your advertising that you're going to check out potential renters. It will discourage those who know they won't be approved because of their financial history or something unsavory in their past.  So much of your success is going to depend on how good you are at judging someones character.  And you have to do it quickly.  The credit and background checks allow you to see a glimpse into their background, but this is only data.  You have to be able to size up the potential renter quickly to get a feel for what the checks can not tell you.


4. Do a Drive-By


Calm down; I'm not advocating violence! Maybe a shade or two of (harmless) stalking, but no violence. Once you have an application in hand, you now have a valuable piece of information: your potential tenant's address. Drive past their current residence to see what kind of shape it's in. Is there junk scattered in the yard? Are there cigarette butts everywhere? Pets not on a leash? (That's assuming you're going to allow pets.) Is there an argument going on in the front yard at a decibel level that would rival that of an aircraft during takeoff? Chances are that the state of a potential renter's property now is a good indication of the state of your property after they move in.


What other ways can you think of to attract great tenants? Tell us about them in the comments!



3 Rental Real Estate "Secrets"

Thursday, March 28

Chances are, if you have registered for a Webinar or a free white paper or some how made your way onto any number of different real estate lists, you get bombarded with email.  Some of them are good emails.  Some of them are not so good.  And sometimes, a little white lie is told when the person sending you the email says they have a real estate investing secret to share.  The truth is, there are no "secrets" in real estate.  Sound fundamentals, great relationships and thorough due diligence will always be the hallmarks of a good investment and a good investor.  However, there are always tips that investors can share with each other and every once in a while they just feel like secrets!


1. Be Prepared for Unexpected Costs

So many people give and receive the following advice:  establishing an emergency fund can make the difference in being hit hard by surprise expenses and taking them in stride. I am not even sure if this can be categorized as advice...this should be a given with every investor.  Having that reserve on hand can help you survive long vacancies in your rental properties and unexpected expenses not covered by insurance. If you're currently receiving monthly income from properties, consider taking a percentage of each property's rent each month to pool into your emergency fund. Again, that sentence seems like such a no-brainer.  Of course you should be setting cash flow payments aside every month, but what about the advice to not purchase real estate without having a fund to begin with?  I am not a big fan of investors purchasing properties and either using every last dime to get started or being in "need" of the cash flow to survive.  Understanding how to and then actually preparing for a time when you will not have an income from the property can reduce the headaches later.


2. Get With the Times

Real estate investors can no longer afford to be technologically illiterate. With the ubiquity of social media and the wealth of opportunities they present, it pays to educate yourself on the tech side of things. Learn how to use YouTube; you can post videos of property you're trying to rent. Learn how to market yourself on Facebook and Twitter. Become an early adopter. As new forms of social media arise, learn how to leverage it for your business before your competitors do.  On the other side of the equation, learn how to use technology to assit you as an investor.  I am not a fan of technology sites that make it look like they have the all the answers.  There are sites such as Zillow and others in many areas of the real estate niche, that give you values or numbers based on algorithms.  This information is useful, but not always accurate and should not be used as a defining number.  The only place you can get truly accurate information on values, renovation costs and even rents is from someone on the ground.  This type of data cannot be outsourced to internet sites.  They are not accurate.  They are only as good as their algorithm and the info. they plug in.


3. Create a Quality-of-Life Checklist

This is a great tip adapted from Bankrate.com. Check out more great advice from them in this article. Although the list is intended more for those selling their primary residences, it's applicable to investors as well. (And don't let the "2012" turn you off; much of the advice is still timely.)

This list accomplishes two things:

1) It can give you indicators of whether or not the property is likely to increase -- or at least maintain -- its value.

2) It forces you to look at the things that potential renters are going to be looking at.


Do you have any rental real estate secrets you would like to share?  Leave them in the comments!



Blog Guidelines

Colleague_thumb_avatar-memphisinvest

Chris Clothier

Memphis Invest, GP
Real Estate Investor
memphis, Tennessee


Website: http://www.memphisinvest.com
Phone: 901-212-9647
Fax:

Twitter

Archive

Recent Posts

Recent Comments

Blog Roll