All Forum Posts by: Jay DeCima

Eric

I posted this recently to a newbie.

For the last 40 years I invested in Northern Calif, primarily in groups of homes situated on a single parcel. This has worked well for me and at my high point I had 200+ simple rental homes. Since banks won't finance ugly (when purchased) groups over 4, then 80-90% of the time I got seller financing, with about 10% down. My fix up costs were about 10% of purchase price for a light fixer and 20% for a heavy fixer.

One of the things that I have taught my students over the last 30 years is HIGHEST AND BEST USE (of real estate) IS INCOME:

When I began buying investment properties, there was no question in my mind whatsoever about where I might find some extra money if my properties didn’t provide enough cash flow. The answer was clear to me the day I started — I couldn’t! Even though my cash down payments were quite small, it was all the money I had. I knew very well there was nothing left in my bank account to make up for monthly cash flow shortages. The only funds I would have to pay my mortgages and expenses would be the money I took in each month from my renters. Obviously, buying properties this close to the belt is both challenging and exciting. There is little room for buying errors as you might well imagine. You definitely need your cash flow plan worked out before you sign the deal!

What I’m suggesting here — 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 — Don’t get me wrong, 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 must fall in behind.

Almost every investor I know has paid too much for income property. It happens more frequently when we first start out. There is almost no defense against paying “too much” at least once or twice. I’ve done it more times than I care to admit. However, in my case, buying multiple units fix-up properties allowed me to add value and improve the income stream more quickly than if I had overpaid for non-fixer type properties. By fixing up properties I was able to recover from my buying errors much faster because I could raise rents. The best education in the world for understanding real values and what the true expenses are – is learned very quickly buying and operating you own properties. I’m not talking about a single house here. That’s not quite enough action for me. I’ve found that multiple fixer-uppers often don’t require any higher down payments than a single house – yet the cash flow potential is many times greater. Often they come with seller financing to boot!

Hope this helps.

Fixer Jay DeCima

Jay

Many people like the idea of investing in real estate but can’t seem to decide how or where to start. They attend seminars featuring a variety of investment options offered by many different lecturers. Quite often, they leave not knowing exactly whose advice to follow.

Rundown houses that need work are ideal candidates because they’re inexpensive and because perfection is not important. Most any work you do is likely to improve the property, even if it lacks professional quality. Remember, we all get better with experience. But we can only get experience by doing.

When you buy right, fixers are cheap. You should expect to pay 20 -50 percent below regular market prices. The largest discounts will be earned when you buy the ugliest properties. Ugly rundown properties combine with people problems such as divorcing owner and non-paying tenants, who kick in walls, offer even larger discounts. Quite often beginners buy properties based mostly on looks. Invariably they pay too much. Paying too much coupled with having little or no experience can turn the American dream into a nightmare. Remember, ugly is only temporary. Learn to fix that for some big paydays for YOU.

Good luck

Fixer Jay

Aaron

I posted this recently to a newbie.

For the last 40 years I invested in Northern Calif, primarily in groups of homes situated on a single parcel. This has worked well for me and at my high point I had 200+ simple rental homes.  Since banks won't finance ugly (when purchased) groups over 4, then 80-90% of the time I got seller financing, with about 10% down.

One of the things that I have taught my students over the last 30 years is HIGHEST AND BEST USE (of real estate) IS INCOME:

When I began buying investment properties, there was no question in my mind whatsoever about where I might find some extra money if my properties didn’t provide enough cash flow. The answer was clear to me the day I started — I couldn’t! Even though my cash down payments were quite small, it was all the money I had. I knew very well there was nothing left in my bank account to make up for monthly cash flow shortages. The only funds I would have to pay my mortgages and expenses would be the money I took in each month from my renters. Obviously, buying properties this close to the belt is both challenging and exciting. There is little room for buying errors as you might well imagine. You definitely need your cash flow plan worked out before you sign the deal!

What I’m suggesting here — 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 — Don’t get me wrong, 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 must fall in behind.

Almost every investor I know has paid too much for income property. It happens more frequently when we first start out. There is almost no defense against paying “too much” at least once or twice. I’ve done it more times than I care to admit. However, in my case, buying multiple units fix-up properties allowed me to add value and improve the income stream more quickly than if I had overpaid for non-fixer type properties. By fixing up properties I was able to recover from my buying errors much faster because I could raise rents. The best education in the world for understanding real values and what the true expenses are – is learned very quickly buying and operating you own properties. I’m not talking about a single house here. That’s not quite enough action for me. I’ve found that multiple fixer-uppers often don’t require any higher down payments than a single house – yet the cash flow potential is many times greater. Often they come with seller financing to boot!

Hope this helps.

Fixer Jay DeCima

Harold

I have done no downs in certain specific situation but here are my thoughts on it:  

NO DOWN OFTEN MEANS OVERPAYING

The important thing to remember is you can purchase properties with dollars or pay with your personal skills, but you must always pay. When you are negotiating to buy a property, stop and think about the deal as if you were the seller. Would you sell your real estate for nothing down if you thought someone would pay a normal down payment? I don’t think I need to ask what your answer is, and neither would I, inmost cases, acquiring proper­ties for no money down means you’re paying too much to start with! That’s the wrong way to make profits in this business.

Many neophyte investors have made the mistake of buying marked-up houses for no money down. They automatically assumed they could earn a profit because no cash was invested. With high mortgage payments and short-term balloon notes, their dreams of becoming rich tycoons quickly turned to nightmares instead. The “free lunch” strategy may work well for selling slick-covered books on cable TV, but in the real world, you won’t buy much value for nothing!

If you’re not quite ready to pay cash just yet, then it’s absolutely necessary that you learn. Look for sellers who are willing to ‘tailor-make’ the financing to make the deal pencil out.

Good luck.

Fixer Jay DeCima

Tyler

I posted this recently to a newbie.

One of the things that I have taught my students over the last 30 years is HIGHEST AND BEST USE (of real estate) IS INCOME:

When I began buying investment properties, there was no question in my mind whatsoever about where I might find some extra money if my properties didn’t provide enough cash flow. The answer was clear to me the day I started — I couldn’t! Even though my cash down payments were quite small, it was all the money I had. I knew very well there was nothing left in my bank account to make up for monthly cash flow shortages. The only funds I would have to pay my mortgages and expenses would be the money I took in each month from my renters. Obviously, buying properties this close to the belt is both challenging and exciting. There is little room for buying errors as you might well imagine. You definitely need your cash flow plan worked out before you sign the deal!

What I’m suggesting here — 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 — Don’t get me wrong, 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 must fall in behind.

Almost every investor I know has paid too much for income property. It happens more frequently when we first start out. There is almost no defense against paying “too much” at least once or twice. I’ve done it more times than I care to admit. However, in my case, buying multiple units fix-up properties allowed me to add value and improve the income stream more quickly than if I had overpaid for non-fixer type properties. By fixing up properties I was able to recover from my buying errors much faster because I could raise rents. The best education in the world for understanding real values and what the true expenses are – is learned very quickly buying and operating you own properties. I’m not talking about a single house here. That’s not quite enough action for me. I’ve found that multiple fixer-uppers often don’t require any higher down payments than a single house – yet the cash flow potential is many times greater. Often they come with seller financing to boot!

Hope this helps.

Fixer Jay DeCima

Alex

Holden

I just posted this to a recent newbie.

My philosophy for investing over last 40+ years in Norther Ca.

I teach my newer students to focus on one thing.........CASH FLOW. Most of the time that come from buy and hold. I have done many other kinds of investing, but not when I stated.

Here was my thinking when I started?

I decided to buy older houses and small apartments that needed fixing up. My rea­soning was: I can do much of the work myself. Plus, I can buy them for much less cash down because there are fewer serious buyers for unsightly distress-type properties. I also thought that once fixed and cleaned up with a new paint job, older rental houses would command about the same rents as equivalent-sized newer houses

According to HUD (Housing and Urban Development), about 500,000, lower income rental units are disappearing in this country annually. They are being torn down for urban expansion, condomized and some, like the ones I buy, just fall down. The reasons they’re disappearing don’t matter much. The point is they’re becoming scare. In some cases the federal government is already subsidizing landlords who own what’s left.

Because they are scarce and in such high demand, the risk of owning and operating inexpensive rental houses is almost non­existent. That’s exactly what new investors need-non-existent risk. There are plenty of other things to worry about.

Good Luck.

Fixer Jay DeCima

Jolene

One of the things that I have taught my students over the last 30 years is HIGHEST AND BEST USE (of real estate) IS INCOME:

When I began buying investment properties, there was no question in my mind whatsoever about where I might find some extra money if my properties didn’t provide enough cash flow. The answer was clear to me the day I started — I couldn’t! Even though my cash down payments were quite small, it was all the money I had. I knew very well there was nothing left in my bank account to make up for monthly cash flow shortages. The only funds I would have to pay my mortgages and expenses would be the money I took in each month from my renters. Obviously, buying properties this close to the belt is both challenging and exciting. There is little room for buying errors as you might well imagine. You definitely need your cash flow plan worked out before you sign the deal!

What I’m suggesting here — 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 — Don’t get me wrong, 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 must fall in behind.

Almost every investor I know has paid too much for income property. It happens more frequently when we first start out. There is almost no defense against paying “too much” at least once or twice. I’ve done it more times than I care to admit. However, in my case, buying multiple units fix-up properties allowed me to add value and improve the income stream more quickly than if I had overpaid for non-fixer type properties. By fixing up properties I was able to recover from my buying errors much faster because I could raise rents. The best education in the world for understanding real values and what the true expenses are – is learned very quickly buying and operating you own properties. I’m not talking about a single house here. That’s not quite enough action for me. I’ve found that multiple fixer-uppers often don’t require any higher down payments than a single house – yet the cash flow potential is many times greater. Often they come with seller financing to boot!

Hope this helps.

Fixer Jay DeCima

Holden

My philosophy for investing over last 40+ years in Norther Ca.

I teach my newer students to focus on one thing.........CASH FLOW.  Most of the time that come from buy and hold.  I have done many other kinds of investing, but not when I stated.

Here was my thinking when I started?

I decided to buy older houses and small apartments that needed fixing up. My rea­soning was: I can do much of the work myself. Plus, I can buy them for much less cash down because there are fewer serious buyers for unsightly distress-type properties. I also thought that once fixed and cleaned up with a new paint job, older rental houses would command about the same rents as equivalent-sized newer houses

According to HUD (Housing and Urban Development), about 500,000, lower income rental units are disappearing in this country annually. They are being torn down for urban expansion, condomized and some, like the ones I buy, just fall down. The reasons they're disappearing don't matter much. The point is they're becoming scare. In some cases the federal government is already subsidizing landlords who own what's left.

Because they are scarce and in such high demand, the risk of owning and operating inexpensive rental houses is almost non­existent. That’s exactly what new investors need-non-existent risk. There are plenty of other things to worry about.

Good Luck.

Fixer Jay DeCima

Bobby

The most frequent question I’m asked by wanabee investor students is: “How much money do I need to get started?” Most figure it will take from $10,000 to $20,000 and almost 75 per­cent of them tell me they’ll have to borrow the money or at least part of it. I’m not talking about deadbeats here. I’m talking to folks who have jobs and for the most part are out working every day making a living, raising families and sending their kids to school. If they have a retirement plan with their em­ployer, it’s likely to be the only savings they have. So as far as extra money set aside or saved for investing…forget it! These folks are simply trying to earn a decent living and there’s nothing left over.

In my opinion, $10,000 to $20,000 is a very reasonable amount for starting out, however throwing the money at whatever pops up won’t get the job done either. You must first set up a few goals, including a reasonable timetable. For example, do you plan to invest part time or full time? Perhaps you wish to supplement your retirement earnings for some future date. You also need some idea about when you’ll be needing the benefits from the investments. These are very basic questions you must answer for yourself before you even think about investing a single dime of your nest egg. If you don’t have a reasonable understanding of leverage and basic financing, you’d be well advised to discuss your plans with someone who can help you.

Pick the type of investing you think you want.  I advise buy and hold for a newbie.  Do other kinds later.  Pick the best expert in that type of investing.........someone that has been hugely successful. Check that person thoroughly, google them (how many pages pop up).  What are their credentials of AUTHORITY? Then follow that person's proven type of investing.

You will save so much time and energy if you can find that type of person.

Good luck.

Fixer Jay DeCima

John

I am not an agent or broker. Try to find ONE agent in an area to work with.  Think long term if you are investing in a certain area.  Here is what I often teach my students

I pay real estate commissions if agents bring me good deals. Real estate wealth has nothing to do with stiffing agents. If you get the reputation for being a "tightwad," you could lose out on valuable tips and good deals simply because the sales people don't want to deal with you. How much time would you spend with a client who thinks you don't deserve to be paid?

Real estate agents account for 95 percent of all the real estate sales. Therefore, anyone who thinks going around agents is good business, needs to rethink the issue. In my own case, I would have nowhere near the real estate holdings if it weren't for my professional real estate helpers. My two agent-brokers have been involved in 60 percent of all my activity, both buying and selling. Believe me, in this business you will need help if you expect to make any serious money any time soon.

Don’t send agents on a wild goose chases. Agents won't hang around you if you're a looky-loo. No agent worth his salt can afford that nonsense. My agent's job is to know exactly what I will buy. He doesn't call me about every property for sale in my area. A good agent will immediately qualify the property to determine if it has potential. My agent knows I don't normally want deals where new bank financing is required. He also knows I want sellers who will carry paper. He knows I rank small multiple unit properties, like four to six houses on a single lot or a bunch of ugly rundown duplexes. At the top of my buying list. When he hears about those kinds of properties, he acts quickly. Finding a good agent is not a lot different than finding a good wife or husband. It's simply a matter of weeding out until you find one that seems to like you more than the rest.

Good luck.

Fixer Jay DeCima