Sunday, January 19, 2020

Options are Optional

You may think you know real estate options but until you've heard their nuances explained by Pete Fortunato you probably are not aware of the full range of their usefulness. Yesterday I and the pleasure of attending a lunch time seminar hosted by the good folks at self directed IRA servicer Advanta IRA. Pete is one of the real estate wizards residing in the Tampa Bay area. While he has spoken to groups of various sizes around the country he is not one of the gurus that spends his time on self promotion and course sales. He just quietly buys up more of St Petersburg every year.

First of all, neither Pete nor myself are lawyers. To my knowledge neither one of us has ever played one on TV. He regards them as soul stealers and I have found very little reason to argue with the exception of Ken Cuccinelli who once was my counsel and has gone on to bigger and better things. But before you go too far down the road of using options it would be a good to check with a real estate attorney who understands investors – especially if you are not working in the Sunshine State.

Let's start by defining a real estate option. It is the right to purchase a property at some time in the future for an agreed upon price. It an be a specific dollar amount or some other figure such as a percentage of appraised value or some other readily determined price. Being a legal agreement, the one who receives the option (the optionee) must give some sort of consideration to the property owner (the optionor). This can be dollars, personal property such as a car, or something else of value.

In the stock market you would buy an option on a stock if you anticipated that the price would increase and the seller would sell the option if they anticipate the stock holding is price or decreasing. While this is a perspective, real estate options are not quite so simple and the reasons people use them are far more diverse.

Some of the uses can best be understood through examples.

There may be a property you wish to purchase and the owner may wish to sell, just not yet. They may be induced to give you an option that can be executed anytime after a certain number of years have passed or after a particular event has taken place such as a resident no longer lives in the property. The purpose of this would be to give the optionee the right of first refusal when the property is no longer needed for its current purpose.

Options can be used to finance the repair or rehab of an income producing property. For example you own a rental property worth $120,000 and it needs a roof because the tenant is getting cranky about the raindrops that keep falling on his head. The problem is you don't have the $10,000 to pay the roofer. You could offer an investor an option to buy the property for $125,000 sometime in the next 10 years – perhaps after 5 years so you retain a suitable benefit.

What would this do. Your roof gets fixed. You keep the income and amortization, the tenant has a dry home and the optionee participates in the appreciation of the property value. What happens if the values don't increase as anticipated? That is the risk one takes when one buys an option, but the time period can be extended – for a fee – to help protect his investment.

The same can be done for someone in the neighborhood who has a roof, septic or other high dollar repair. In this case they would receive the fix and continue to enjoy the use of the home for the period agreed upon, such as while the kids are still in school.

In either case it would not be a greedy investor taking advantage of someone in a bind as some of our socialist politicians would want us to believe. It would be an investor solving someone's problem that they could not solve themselves.

Options can be used tactically as well. Pete told a story of this first real estate deal after he got his license. The house was sold for $20,000. Yes that's right. It's been a long time. The buyers came to the closing several hundred dollars short. This could have put the kabosh on the whole deal. They looked to the sellers who needed every penny to take to the next closing where they were buying their next home. They looked around the room and asked if anyone could lend them the money.

The attorney said that would not be possible since in their agreement with the banksters they said they would not be borrowing any down payment money. The speaker asked if they could sell something to raise the money. The attorney nodded. He offered to buy an option to purchase their house for $21,000 for the amount they needed to close. That was pretty much all of his commission, but the deal was completed. A few weeks later the buyers paid him they amount he offered and bought out the option.

The point here was that there was never an intention of taking over the property. The option was primarily security should things not go well. It was a tactic to accomplish a goal.

So what do options do? The things mentioned and so much more. It takes a little thinking and imagination. They give control and/or benefits of owning a property without the responsibility and expenses of ownership. They can be used to provide security in joint ventures. They can be used to solve problems. They can be used to provide financing when institutions don't see the benefit or understand the dynamics of an investment.

The thing is don't get so creative you go beyond what the law sanctions or protects. Speaking of protection, you may be wondering what keeps the optionor from ignoring the agreement and selling the property without your knowledge, consent or payment? Recording the option with the county clerk along with a mortgage will cause it to show up in title search. Title companies should do the job of keeping you covered. Be sure to record it again if they owners should refinance as they will most likely stop searching when they find the new loan in the first position.

Just a quick note if that last two sentences don't quite make sense. When you buy a house, you sign a note with the lender AND a mortgage agreement. Unlike popular terminology, the bank does not give you a mortgage. They give you a loan and you give them a mortgage which is the lien that is recorded in the public record along with the note. It's just a detail but recording the option and the mortgage puts a lien on the property. For non-lien states the terminology will be different but the principle is the same. That is why I suggested consulting a real estate attorney... a competent real estate attorney.


PeopleFinders

Sunday, January 12, 2020

Using a Web Site to Promote Your Business

As a real estate investor, it sometimes makes a difference whether you look to buy and hold, fix and flip, wholesale or do some sort of a combination of these activities. If you are accumulating rental properties over a period of time you may not need much in the way of promotion – just good relations with a realtor or two who will feed you deals that come along.. However if you are actively buying and selling property you efforts to reach potential buyers and sellers may need to be a little more punch in their program.


If you are looking to buy property, you may be using direct mail, out going phone calls, or recently added text messaging along with various other forms of communication to find off market deals. Selling, you may use Craigslist, realtors, REIA meetings, and that sort of thing.

All these are valid ways of reaching potential clients. This is not meant to evaluate, recommend or disparage any of the methods taught by investment gurus. However this is meant to open your thinking to a complementary method of getting your story in front of the people who need to see it.

The personal touch is always the best way of dealing with people. However, if you are like most of us, you are working with a 24 hour day... no more, no less. That is the same number of hours that Ron LeGrand, Dean Graziosi or whoever your favorite guru has. The last I checked, even Warren Buffet and Bill Gates are unable to buy more hours in their days. Because of this,we have found having a web site useful for expanding the number of people we can reach every day with our consistent message.

The other forms of communication can direct the recipient to the details of your properties, collect the information from sellers, tell lenders why they should invest with you or any number of other offers you would like to make.

A web site tells your story 24 yours a day, 7 days a week – while you are doing other things, like sleeping, working on other projects, or vacationing, even in Tanzania – wherever that is. It doesn't have to be elaborate or extensive. It can fairly simple and still get the job done.

If you are internet savvy, you can probably put something together yourself, There are various hosts that make this relatively easy, if you are so inclined. If they last few lines didn't make sense to you, it might be best to find someone to do the job for you. There are shops that can do it for the price of one of the new mid engine Corvettes, but you don't have to pay that much unless spending unreasonably large amounts is a symbol of status in your circle.

You may find someone at fiverr. The kid next door might be a possible choice but make sure you have copies of everything so you are covered when he or she goes off gto school, the army, Canada or any where else they may choose to wander. We might even be able to help. Watch the video and give it some thought.If you are looking to buy property, you may be using direct mail, out going phone calls, or recently added text messaging along with various other forms of communication to find off market deals. Selling, you may use Craigslist, realtors, REIA meetings, and that sort of thing.

All these are valid ways of reaching potential clients. This is not meant to evaluate, recommend or disparage any of the methods taught by investment gurus. However this is meant to open your thinking to a complementary method of getting your story in front of the people who need to see it.

The personal touch is always the best way of dealing with people. However, if you are like most of us, you are working with a 24 hour day... no more, no less. That is the same number of hours that Ron LeGrand, Dean Graziosi or whoever your favorite guru has. The last I checked, even Warren Buffet and Bill Gates are unable to buy more hours in their days. Because of this,we have found having a web site useful for expanding the number of people we can reach every day with our consistent message.

The other forms of communication can direct the recipient to the details of your properties, collect the information from sellers, tell lenders why they should invest with you or any number of other offers you would like to make.

A web site tells your story 24 yours a day, 7 days a week – while you are doing other things, like sleeping, working on other projects, or vacationing, even in Tanzania – wherever that is. It doesn't have to be elaborate or extensive. It can fairly simple and still get the job done.

If you are internet savvy, you can probably put something together yourself, There are various hosts that make this relatively easy, if you are so inclined. If they last few lines didn't make sense to you, it might be best to find someone to do the job for you. There are shops that can do it for the price of one of the new mid engine Corvettes, but you don't have to pay that much unless spending unreasonably large amounts is a symbol of status in your circle.

You may find someone at fiverr (see below). The kid next door might be a possible choice but make sure you have copies of everything so you are covered when he or she goes off gto school, the army, Canada or any where else they may choose to wander. We might even be able to help. Watch the video and give it some thought.

Saturday, December 28, 2019

Measuring With Light -

Laser Measuring for Speed and Accuracy

Years ago when I was a kid helping my father with projects around the house we used a wooden rule that unfolded to the desired length and broke when I bent it the wrong way. It was fragile and sometimes awkward, but in the hands of a skilled workman got the job done nicely. Later, when I began my own projects I started using the ubiquitous tape measure. I still use my FatMax most of the time and still manage to mangle one now and then. But, it gets the job done.

I know lasers have been around for a number of years and for some readers this is old news. However I don't see too many in actual use. Of course they are very good at some tasks and as useful on others as eating soup with a fork. I, like most, use the tape for cutting boards, but using a saw with a laser guide helps you hit your mark.

When I put granite counter tops in my home about seven years ago, the tradesman came out and made a template out of foamcore... and the tops fit very nicely. About three years ago I put those tops on a nice rental I was preparing and the same guy came out with a laser device connected to a laptop computer, He was done in a quarter of the time – and the results were just as accurate. Not having been there during the production of the tops I must assume similar time savings were realized in the layout of the pieces.

So what benefit do lasers bring to the investors, rehabbers and realtors? They really come into their own in measuring room sizes and other distances around a property – all without wrestling with a tape that may not be long enough and may kink along the way. All it takes is a couple of clicks of a button and you have the length and width of a room. “Pro” models even calculate the square footage for you. How's that for figuring carpet or vinyl plank flooring?

These handy gadgets run from around $25 to several hundred dollars... depends on the company, quality and the bells and whistles. Amazon lists them from thirteen companies. Some come from well known optical houses like Leica and Bosch and tool people like DeWalt. So there are plenty of options and price points to meet most any budget and task.

The DeWalt DW030PL Lightweight Laser Distance Measurer is a nice low price unit from a favorite tool maker. It is a compact, light weight unit with the primary limitation is the 30 foot range.




The Bosch Blaze Pro is a good step up with a 165 foot range accurate to with 1/16 of an inch. and square foot calculator. It has the auto square function for calculating square feet at the touch of a button.

Then there is the Huepar 3D Green Beam Self-Leveling Laser Level 3x360 Cross Line Laser Three-Plane Leveling and Alignment Line Laser Level -Two 360° Vertical and One 360° Horizontal Line -Magnetic Pivoting Base 603CG Even the name is a mouthful. It has one 360° horizontal and two 360° vertical laser lines can be selected individually depending on job site requirements. Oh yes, this one is a bit more expensive, but it does more.

As you consider these three members of the laser measurement universe, you will see bigger, better and more expensive units. You can even find some laser units attached regular tape measures. I still use my FatMax but also have the handy Bosch unit my wife got me for Christmas a couple of years back. It's a great piece of equipment. Which one would you choose?

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Friday, December 20, 2019

Keep Those Gutters Flowing!

One of the ways to increase the profitability of rental properties is to keep your costs down. Often this means not doing things on rental houses that you would do on your own home. This is usually seen in the difference in rehab estimates between preparing a property for rental as opposed to sale to an owner occupant. Of course, this is understandable as renters are not quite as particular about some of the details since many do not look at the rental situation as long term and buyers usually have the mindset of staying put for a while.

As property owners, most of us would like to have the tenants look at their stay as a longer term situation as well. While new tenants present the opportunity to bump the rent up – in most markets – they also lead to gaps in rental income as well as clean up, paint up and fix up costs. On balance, it is generally better to have longer term tenants than to have frequent turnover.


An evidence of the shorter term thinking of tenants is the way the property is maintained. Usually they are not quite as conscientious as the home owning counterparts. Most don't trash the place but neither do they go out and perform periodic maintenance around the house.

One of the neglected tasks is keeping the gutters free from leaves. It is not necessarily a bad thing if Joe Tenant does not get up on a ladder to scoop out the leaves. You can't fall off a ladder if you don't get up on a ladder. Falling off a ladder is one way to hinder Joe Tenent's quiet enjoyment of the property and most assuredly some litigation happy shyster lawyer will find some way to put the financial blame on the property owner. This is particularly bad if that property owner happens to be me.

Injured tenents are not the only bad things that come about from unmaintained gutters. They can overflow and direct the water into roofing supports. rotting the wood that keeps the tentant and your property protected from the rain, wind, sleet and hail. Although here in the Tampa Bay area of Florida, sleet and hale are not major concerns – but rain is.

All this can be avoided with some sort of cover or screen over the gutters. You do have gutters, don't you? They protect the foundation and landscaping, help keep water from penetrating gaps on the siding, and direct water away from sidewalks and driveways. This last item is especially important in the frozen north where the rain can freeze and give the tenants an additional opportunity to fall and hit the jackpot with the help of the aforementioned shyster lawyer.

Trees are great to have on your property. They are nice to look at while they provide shade... and leaves that clog your gutters. There are many approaches to keeping these leaves out of the gutters and downspouts. Just as there is a variety of methods there is a corresponding variety of prices – ranging from simple styrofoam wedges to sophisticated held in place with screws. Let's look at a few of them.

Click for more info

These units are made of premium domestic aluminum and come in a variety of colors although they cannot be seen from the ground. They are held in place by stainless steel fasteners to help them stand up to the tropical storms we are too familiar with. They are easy to install and feature contractor pricing.

Click for more info

Easier to install, these covers simply snap into place – and just as easily snap out for maintenance. They are made of heavy-duty expanded aluminum that won't rust or rot. The tight mesh keep out debris but very small pieces like pine needles may pass through. The spring tensions keep them in place through most of what mother nature can dish out. Oh yes, they are also made in the USA.

Click for more info

Then there is the ultimate in simplicity in keeping the gunk from clogging your gutters. This style foam wedge slides into place and seals out leaves and debris while permitting water to flows smoothly. Like the others this cannot be seen from the ground as it sets down in the gutter. It is about the simplest and easiest way to get the job done.

Whichever way you go, keeping the gutters working without periodically paying your handyman to do the job or risking the neck of a rent paying tenant is a worthwhile project. For me, I chose the spring loaded covers as a good combination of quick installation, function and expected life span. You may make another choice. That is why we have so many choices in the land of the free.

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Gunga7, LLC is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.com