All Forum Posts by: Jay DeCima

Jason

Here is an article I wrote for a student of mine:

SELLER FINANCING IS SAFE AND PROFITABLE

When you borrow money from banks to finance real estate, you’ll quickly discover that a group of rental houses and small apartments, properties with more than four units are a whole different kettle of fish than financing the home you live in! Mortgage money for investment properties is generally classified as commercial lending and most always comes at a much higher cost than residential loans. The reason is because bankers feel commercial loans are much more risky than a homeowner’s personal residence.

Seller financing happens when a property owner sells his property and agrees to carry back or finance the amount of the sale, less the amount received for a down payment. Say for example; he selling price is $100,000 and the down payment is $10,000. In this case, the seller would agree to finance the balance of the sale price, which equals $90,000. In other words, the seller substitutes himself in the place of a bank or some other institutional lender.

When you develop the skills to negotiate and purchase properties using this type of financing, you’ll be setting the stage for some very lucrative profits that the average investor doesn’t even know about. Not only will you place yourself in a position to earn future profits, but you’ll also enjoy a much safer investment strategy without any personal risk. That’s because seller financing is not really a loan! Not one penny of cash money is actually disbursed from the seller to you, the buyer. It’s really an extension of credit granted by the seller to facilitate his sale!

Should something go haywire and you find yourself unable to make the payments, and you default, the seller (lender) can take his property back, but that’s all! He cannot take other assets you own to satisfy the unpaid balance or deficiency.f Most bank lenders can come after everything you own to satisfy their mortgage debt because you are personally liable until it’s paid in full.

About the lucrative profits I mentioned above! Let’s take the $100,000 sale where the seller accepted $10,000 down and agreed to carry-back or finance $90,000. I would bet within 3 or 4 years after the sale when the balance is still close to $90,000…if you were to dangle $60,000 cash in front of the sellers nose, he would take this discounted amount in a New York minute. When he does, you’ve just made 30 grand. Believe me… you want seller financing!

Good luck.

Fixer Jay DeCima

Richard

Web sigt  http://www.gosection8.cbuom/

Good luck.

I can tell you over last 40+ years and 200+ rental homes, my section 8 customer have brought me lots of money.

My specialty is not buying them one at a time but in groups on a single parcel. I buy with seller financing because banks won't finance ugly properties over 4 units.  Because of this 85% of my buys have been with seller financing and about 10% down.

Here is a little sketch i have used to teach my students over the last 30 years:

Take care.

Fixer Jay DeCima

Depends on rental.  High end or more simple and affordable?

Let me know.

Fixer Jay DeCima

Arron

From a 40 year buy and hold investor from Norther Ca.  I had 200+ units at my my high point.

What I did and teach my students to do is:

1. Pretend you are look if that rental for yourself.  Craigslist.  You can even tell some folks you call that you are a newbie and trying to find the going rents in area.

2. Most of mine and my students rental homes are simple, clean, affordable homes in older parts fo town (not slums). We do well to rent to Section 8 tenants. The following link to HUD will show you what HUD will pay for homes 0-5 bedrooms and in every county in the US.

https://www.huduser.gov/portal/datasets/fmr/fmrs/d...

Good luck.

Jay DeCima

Joe

Some advice from a 40 year veteran of buy and hold property.

Most investors and wannabees are far better off to stay away from strategies that sound slick. Slick is another word for slip­pery, which means hard to hang on to. Over the past 20 years I can recall the names of at least a dozen so-called investment gurus who expounded the virtues of a wide as­sortment of “get rich” techniques. Most of these pitchmen are bankrupt or working at a filling station today.

When you own the house, you have your own personal money machine. You must maintain the property and provide the nec­essary management, but, in exchange for doing that, you control the money. It’s yours to spend any way you choose. Owning your own widgets is the surest path to financial independence. The basis for wealth behind nearly every rich person can be traced back to the ownership of a patent, a copyright or a deed. Owning income real estate puts you in with the right crowd. 

For beginners, without a boatload of cash I recommend buy and hold older groups of houses in older parts of town (not slums).

Google some names.  See what pops up.  Find a kind of investing you think you like and can afford, google an expert in that area and check that person out, then follow that advice.

Good luck

Fixer Jay DeCima

Karena

Some houses are excellent long-term Investments. But don’t try to outguess the future. Don’t bet the ranch on your long term (10 years or more) predictions. It’s still Just a guess. With long-term investments in top locations, you can expect to pay more to acquire them. Even if the property looks terrible the competition will keep the price higher because of location.

I’m always concerned with location. I want good location for a specific plan I have in mind. However, all my plans are not the same. They all have the same objective…to make profit, but the way I do it can vary with different properties.

I like to think about locations as A, B and C. A locations are the best. B will be the local average and is a stone's throw from the county dump. With some study and driving around, you can easily determine these locations in your own investment area. Investing in A locations is fine, but it generally takes more cash. My choice is B locations, but I always look at a C to make sure I don't miss anything exciting. I stay away from HUD projects, high crime areas and places where I (or my workers) don't feel safe being there.

Good luck

Fixer Jay DeCima

Great conversation here Gang.

Let me give my spin of something that has been hugely successful for myself and my students. I have used it for over 30 years with 200+ house rentals and thousands of tenants over those years.

I call it: MANAGING YOUR TENANTS BY MAIL.

I don’t know about you folks but I’ve stayed mad at my obnoxious tenant for as long as 10 days in a row! I still remember not being able to get some emotional battles outta my head! It’s been quite a few years now – but I still remember how upset I used to get from arguing with a tenant. Naturally, my tenant didn’t occupy my thoughts every single minute of every single day, but it boils down to this — My tenant stole my valuable time! You simply cannot be a productive investor and get things accomplished when you are constantly upset with your tenants.

This is how my MEMOS got their start! I was extremely desperate to find a way to free my mind of tenant problems. We human types can only process one thought in our brain at one time. It’s nearly impossible to have constructive, moneymaking thoughts if you allow your tenants to constantly keep you upset! Believe me when I tell you, the time and money you can lose over emotional tenant confrontations staggers the imagination.

THE LANDLORD’S MIND – IT’S A TERRIBLE THING TO WASTE

Doing business with tenants is what us landlords do. Needless to say, it’s where our money comes from! However, nothin’ says we have to personally go see them for every little issue that pops up! For example; too many guests showing up at their duplex, cars parked on the lawn, habitual late rent payments. Most of these matters involving their tenancy can easily be handled much more efficiently and emotionlesswith short hand-written memos.

In order to say the right thing – it helps to pretend you are the tenant receiving the memo! How would this memo set with me, you should ask yourself!When I can say to myself, this is a reasonable request and it sounds quite fair, I feel I’m ready to send it to my tenant. I rarely need to waste any time thinking about what I want; I already know what I want! My challenge is to write a memo that my tenant will likely respond favorable to! You must always remember, threatening memos seldom change anything. Your goal is to present a written argument to your tenant making him understand that – he’s much better off to comply with your proposal than if he doesn’t. You must clearly spell out or paint a visual picture of what will likely happen if the tenant ignores your memo. Obviously, tenants are very sensitive to any words that sound like a rent increase might be in their future. We call this “The Hook”.

Allow me to share one of my favorite memos I use for my late paying tenants – I’m trying to convince them to pony up their late fees. This memo enjoys about an 85% success rate.

DEAR TERRY TARDY:

WE NEED YOU HELP! 

During the past six months or so, our records show your rents are coming in later and later! This month (Sept.), we didn’t receive your payment (check 9171) until the 13th. Apparently you forgot to add the late fee to your payment! As you know, we allow 5 extra days as a grace period after your official rent due date. Our rental contract shows your rent date is the 1st of each month, but it’s always mailed much later.

Starting immediately, please include the $40 late fee with your rent payment when it’s mailed after the 5th of the month. We use the postmark on the envelope to determine late rents. I hope this sounds fair to you! We’ve found that most of our tenants prefer paying a one time late fee rather than having their regular monthly rent increased! Thanks so much for your help
– Bob, Manager

In this memo, my hook is in the last sentence, which I’m sure you can pick out! Tenants can spot it in a split second – and I will tell you, this is an extremely effective memo for beefing up late fee collections. I might also point out – no tenant has ever called me with questions about this particular memo – it seems, they all understand it perfectly well!
Students who have learned to use my memos wouldn’t trade them for anything. Most claim, once they learn how to design – or create a convincing hook – they work like magic!

Hope this helps to save your sanity. :)

Good luck.

Fixer Jay DeCima

Ashley

After 40+ years and 200+ of my own rental homes in Northern California, and teaching on this subject for 30+ years here are some things I did and recommend:

1. I buy groups of older houses on a single parcel. Maybe 5-12 small homes, duplexes, etc on a single lot. It would have taken me lots of time if I bought my 200+ homes, one at a time. Because the banks won't finance them, 80-90% of my buys are with seller financing and average down of 10% (about the amount of cash you would put down on a single family home).

Here is a sketch of what I do:

2. I do not recommend going out of state, especially IF YOU ARE A NEWBIE. You give up almost all your control. I like to control all aspects of MY business.

3. I like all kinds of real estate and have bought most kinds, like flips, wholesale, etc. I bought different kinds at different times in my career. But keep in mind that flipping and wholesaling are jobs. You are buying and marking up and reselling things like a retail store would. You pay ordinary income taxes, get really no tax benefits, pay social security tax and have to start over again after you sell.

4. I teach my students to EXPAND THEIR VISIONS FOR PROFITS.....like the following:

One question that I’m asked constantly: “Where can we find the kind of properties you talk about?”

The most common alibi I hear is, “There’s no property in my home town like the ones you write about.” With very few exceptions, I must disagree. The proper­ties are there! You simply haven’t found them yet. There are several different reasons why you haven’t, however, I’ve found most folks simply haven’t been looking for them.

Most investors I know tend to do the traditional kind of prop­erty searching. If they decide to be apartment owners, they look mostly at tradition apartment buildings. Single house investors generally drive through the ‘burbs’ in search of prey. Hardly anyone is goofy enough to buy 5 house on one lot or an old motor lodge. I’m going to suggest that you broaden your vision a bit. After all, non-traditional properties can be lots more fun-as well as more profitable.

First of all, don’t panic. My kind of properties are almost always avail­able; you just haven’t found them yet. Finding the right properties,meaning the kind that will produce monthly cash flow and long-term profits, is one of the most important skills you must develop to enjoy any success in this business.

You must always keep in mind that finding profitable deals is our goal, not just finding lots of deals!

Good luck.

Fixer Jay DeCima

Jay

Gregory

People often say to me, “Jay, it makes good sense what you say about determining cash flow up front before buying a property, but we can’t find decent investment properties that show any profits until some time in the future. We need a little appreciation to help us turn a profit.” When someone mentions decent property, I ask them what they mean. Exactly what is a decent property? My definition is an income property, that produce income. I’ve never had much use for houses that cost me money for the privilege of owning them regardless of their potential.

When I began buying investment proper­ties, there was no question whatsoever about where I could find a little extra money if my properties didn’t provide enough cash flow. The answer was clear the day I started…I couldn’t! Even though my cash down pay­ments were small, it was all the money I had.

For most of us it makes more sense to buy cash flow properties with uncertain futures than to acquire high potential properties without enough cash flow to operate them today. Future potential is great, but it’s still pie in the sky. In my view, the top three reasons for owning and operating income properties are income, income and income. Everything else starts after that.

Good Luck

Fixer Jay DeCima

Kathy

Here is my idea of multi-unit investing.  NOT buying 40 houses one at a time (too much work).  For 40 years I have bought and taught about groups of older houses on a single parcel.  My model only has about 6 properties with 40 units.

The key here is banks will not finance ugly (at purchase) properties of more than 4 units.  Therefore the investor seller knows he/she will be carrying the financing (seller financing), with 10% down ...usually.  The seller is your bank, not Wells Fargo, with all their limitations.

Good luck.

Fixer Jay DeCima