Did You Have a Good Turkey Day?

Actually the Thanksgiving holiday that just passed is more than a day of over indulging with family and friends. For some, it may be hard to believe, but it is even more than football. It's a time to step back from striving for more and more - what some see as the American dream. To be happy we need step away from the thinking of Edward G Robinson in Key Largo. When Humphrey Bogart asked the gangster what he was after, he couldn't say, then he said “More!”

Don't take this as a criticism of working to make a better life for ourselves and our families. But think about it this way: if what you have doesn't make you happy, getting a nicer house or faster car won't do it either. If the thought goes through your mind that you will be happy when you get this thing or something else happens, you joy will be quickly passing and ongoing happiness will be forever out of your reach.

You may be thinking that I don't know your situation and your reasons for being unthankful this time of year. Obviously I don't. Those are just details. Look at one of the most unhappy people in our country, Colin Kaepernick. He spent his holiday at an “unthankfulness” gathering railing against the country that gave him opportunities few will ever see. Was he appreciative of what his talents on the football field gave him? It's hard to believe he did the way he disrespected the game, his teammates and our country.

I won't get into a discussion of the validity of his cause, but in the way he let it define his life and his actions. For those of us in the USA, a spirit of unthankfulness causes us to overlook the freedoms we have and the prosperity these freedoms have given us. Sure not everything is right, but then, when and where has it ever been otherwise?

I don't often often go out to movies – there are far too many available at home and I don't have to wait in line to spend nine dollars for a bucket of popcorn. However in the past few days I broke my usual habits and saw a couple of movies that emphasized how powerful the American experiment in individual freedom impacts the people privileged to experience it.

The first film, Midway, showed what free men will do to protect their country and families. For the cynics who say there is little to be thankful for, we really need to appreciate the cost to the airmen and their families who sacrificed during this battle that was the first major American victory in the Pacific and turned the tide against the Japanese Imperial Navy. They gave their lives so we and their loved ones could live in freedom.

The second film showed what free men and do with the opportunities we have before us. Ford vs Ferrari showed how a major corporation needed to come to individual entrepreneurs to help them defeat entrenched auto racing champions. Of course, the bureaucratic interference made the job more difficult, but it was still the efforts of free individuals like Carroll Shelby and Ken Myles that got the job done.

But, you say you haven't been given the resources that Shelby had or you haven't faced an enemy as big as the Navy flyers did. So what? Neither have I. Most people haven't. Perhaps that, in itself, is something to the thankful for.

So what does this mean for us? It's easy to be bummed out because of things or resources we don't have. We can look around in the real estate business and see other investors who have more money available to them or have access to better deals. Often we don't see what they had to go through to get to their current situation. Some even had less the we do when they started.

One thing we all have is opportunity. Some will say they don't have the same opportunities. As Werner Erhard would tell you “So what?” (No, I am not promoting EST, just using an illustration.) Each of us has opportunities unique to our situation – sometimes we just have to look a little harder to find them. When we do, this is something to be thankful for. It is these opportunities that make or break us. The opportunities we don't have don't matter and there is no point in dwelling on them.

As an illustration, let me tell you about a trip I made with my grandson to the Tampa New Car and Truck Show. Pretty much, unless you have Jay Leno's garage, there was something there to make you unhappy and discontent with the vehicle you are driving, even if you just got it. Perhaps especially if you just got it. You would see something better you could have gotten. You just may not appreciate the car or truck you drive and are not quite as thankful for having it. You may say: why should I be thankful for it. I worked for it . I earned it. Hey, you had the ability to work, some people don't.

There were all kinds of things that caught my eye, the mid-engine Corvette, the Cobra Mustang, the supercharged hemi Challenger, especially the '68 454 Chevelle convertible with cowl induction. Younger people won't understand the last one, millennials might not even get the first three. Did the existance of these vehicles diminish the utility and benefit of the car I drove to the show? No, but I could have let them destroy my appreciation for it and desire to take care of it since it wasn't a great as the ones I saw.

The point of all this is that you cannot drive vehicles you don't have and you can't take advantage of opportunities you don't have. BUT... you can take advantage off opportunities you do have... and because of this consider them as the path to get you where you want to be. Because of this we can appreciate whatever is before us – and we can step forward into them. And... be thankful for them.

Now about the people in our lives. They have helped make us what we are, especially our families. If they have been difficult, they have developed patience and strength in us – something to be thankful for. If we have learned something from them – that, too, is something to be thankful for.

Even if that doesn't move you to a spirit of thankfulness. Take a deep breath. You are alive. You can think. You can dream. You can take steps toward your dream. As long as you live there is purpose to your life. Don't see it? Look again, harder. The funny thing about human nature we often miss some important things in life unless we are looking for them.

So start looking – IF you even want to be thankful. There are reasons for everyone to be happy even if it a chance for a better tomorrow. An attitude of gratitude will carry you much further than living in a perpetual pity party.

Ever Consider Mobile or Manufactured Homes?

Here in Florida mobile / manufactured homes have risen far above the image the cynical James Carville referenced with his comment about dragging a hundered dollar bill through a trailer park. Trailer parks as the political adviser pictured them may still exist somewhere but they are few and far between in Pinellas County. On the contrary, many are active communities where there is much more of a sense of neighborhood than in high dollar gated fortresses.

There are quite a few different types of parks designed to meet various needs and demographics. The first and most obvious breakdown is the difference between 55+ and family parks. The 55+ parks are popular with retired folks looking for a place with minimum work among people with similar situations and interests. While there is a legal definition it does not look to a zero tolerance approach to maintaining this status. Many such parks permit a small number of slightly younger people to reside in them, but there is a fixed percentage that they cannot violate to maintain the designation. So if you are pushing the advertised age and are interested, it doesn't hurt to check with the park management.

Family parks don't have the age restrictions. That does not mean older folks are not welcome, just that there will be people of all ages. There are people that may like that. Some of the nicer parks of both kinds have amenities like swimming pools and playgrounds for the younger set. Either type of park can be an excellent choice for snow birds looking for a part year residence at a minimum cost compared to a single family house. Add to that the advantage of the outside chores and some utilities are included in the monthly lot rental fee.

Beyond all that you have the benefit of people keeping an eye on your property when you return to the frozen north for the summer. Like I said, many parks have a well developed sense of community. There often are activities like Saturday morning pancake breakfasts in the club house as well as other social gatherings.

You can even rent a home in some of the parks. Most of the time homes are owned by their occupants even if it is only partial year. In some cases the parks are resident owned in that they buy shares in the park which can be sold when they leave. These parks often have significantly lower monthly fees. I have a friend who paid $20,000 for his share of the park some years back and now people are paying around $30,000 for their shares – so it can be a good investment that makes money while keeping expenses lower.

The point of all this is that each park is different and for those looking into such a home it would be a good idea to check with the management of several parks to see which one best fits their needs and lifestyle. I have looked at one park that was really nice and had a montly lot rental to go along with it AND a half inch thick book of rules for residents. As with condos, check it out before you make the commitment so you don't end up like one buyer with many biker friends who found out that motorcycles were not permitted in the development only after moving in. Here in Pinellas County you can hardly go more than a few blocks without passing a mobile home community, so you don't have to settle for one that doesn't meet your needs.

Some are concerned about the structural integrity of mobile homes located in hurricane alley. There are two things to keep in mind when looking at this question. First is that there are many homes occupied that were build in the mid sixties and they are still provided comfortable shelter for many people at very reasonable prices. For example I recently purchased a home and had to replace just two screen panels in the screened in porch that had been damaged by flying debris during last year's brush with one such storm. The home made it through just fine. That said, if a cat 4 or 5 storm is coming, it would behoove everyone to get out of the way no matter what you live in.

The second point it that as of July 16, 1976 new HUD rules went into effect and now these homes are manufactured homes, even if there are wheels underneath. The change was greater than merely nomenclature. There were new contruction standards where some of the material specifications actually exceed those of traditional stick built houses, including fire prevention and resistance.

If you are interested, a brief history of mobile homes can be found at https://mobilehomeliving.org/the-history-of-mobile-homes/. Like I said at the beginning most a far cry from Carville's disparaging description. However with such a great selection of parks and units it may take a little research to find just the right one. For the investor, they often feature a lower financial threshhold and some of the traditional chores of rental ownership are handled by the park. You just have to find a good one that does the job well and keeps the residents happy.

Inspectors: A Necessary Evil?

If you are buying and/or selling real estate you will come in contact with building inspectors. I'm not talking about the ones from the local government that tell you what you can and cannot do with your own property along who can do it. That is a discussion for another day. We are looking at the inspectors buyers hire to check out a piece or real estate before they commit to closing.

They can be somewhat annoying even when checking out a property you wish to buy but they can be extremelhy helpful. They are the ones who squeeze into crawl spaces under the house and skulk about in attics so I don't have to. In fact, you will not find me creeping around two foot high caverns dodging sewer pipes, air ducts and the usual assortment of critters that populate such environments.

I say annoying because most have a fetish about finding every real and imagined flaw in the property down to cracked swith plates and missing screws that are scheduled to be replaced anyway. I must say that I somewhat solved this problem with an arrangement with an inspector friend of mine when we agreed that he would not give me the book, but would just hit the things I really had to fix. It worked out great. I saved a bit of money and he did not have to document every unimportant detail many of his colleagues thrive on. 

You may wonder why I deal with inspectors when I buy since I seem to have an aversion to their work. The fact is, if I plan to sell the property, I want to know what the next guy is going to ding me for. Which brings us to the question of them being a necessary evil, Here we get a little more philosophical. Nothing that is necessary is evil and nothing evil is necessary... ever!

These guys have saved me some money and they have saved me from buying a money pit. This is why I like to be present when the inspectors are going through a house I am looking to buy. A couple hundred dollars is not a bad price for this and I want to get my money's worth.

When I sell, it is another story. I don't want to be around when my buyer's inspector comes around. I don't want to give the impression that I am colluding with him or intimidating him. (I wouldn't want Adam Schiff or Robert Mueller wasting my time coming after me.) Beyond that, the practice may well keep me out of trouble and preserve the physical well being of the the guy picking apart our completed work... even though, knowing they will be around helps us do better work.

So, like them or not, they are part of the real estate business and since we must deal with them, we may as well understand how the game is played and use them to our best advantage. 

So... You're not a Salesman

So you are not a salesman (or saleswoman). You buy houses. You fix them up. You rent them. You sell them. Oops, there is that word. You may list them with a realtor or have someone in your organization that handles that part of the business. Business? No, you are an investor or a rehabber or an acquistionist or whatever, BUT you are not a salesman. You don't wear a plaid sport coat and wear a pork pie hat. These days you may not even own a sport coat or a business suit – especially here on Florida's west coast.

Are you sure? If you ever went on a date, how did you get the girl or guy to go out with you? If you ever, heaven forbid, had a job, how did you get the boss to hire you? Did you ever get a car salesman, they guy in the plaid sport coat and pork pie hat, to give you a little more for your trade in or lower the price a little? If you are too young to know what a pork pie hat is, you can see them here. More to the point of what we are discussing here, did you ever get someone to sell you their house, land or mobile home at a price where you could make some money? If the answer to this last question is 'no”, then you really need to pal close attention here.

Think about it. If you ever went on a date, you sold the fellow or girl on the idea of going out with you. If you had a job, you sold the company on the idea that you could do valuable work for the company. If you got a good deal on a car, you had to do some selling to the dealer – or perhaps he just did an excellent job on you. If you ever bought a distressed house you sold the owner on the idea that they should deal with you rather than the flock of other vultures circling their property – true or not, that is the way many seller see investors.

So now that we've knocked the pride out of the high horse position of looking down at mere salesmen you might expect that I have all the answers and techniques to turn you into super salesman or super investor. In the interest of truth, justice and the American way I have to confess that I am not the one to convey the intricacies of the sales process to the experienced investor or even the novice. However I'm better than I once was but not as good as I am going to be.

With practice I got better but instead of practice making perfect, practice makes habits permanent. So practicing doing the right things is the key. Persistence is good, but persisting in things that don't work leads to the very definition of insanity – that is doing the same thing over and over while expecting different results.

So where to you go to get better at this trade? The first thing to do is to get to know people that are doing what you want to do. Start hanging out with them, watch what they do and ask questions. Don't be obnoxious or they won't be much help. You can also pay thousands of dollars and sometimes you will get mentoring well worth the cost. Other times you will spend thousands of dollars. If you can, find local investor groups to get to know what is actually happening in your area.

Beyond this, reading a book or two now and then can be very helpful. I have several that I like. You may find others but here are a few to consider.

Many years ago I came across a book by Tom Hopkins called How to Master the Art of Selling. I'm not sure if that book is still available, but he has others that help to understand the process of moving a person from the interest in a product or service to talking action on that interest. He also talks about patience and maintaining a positive attitude.

While we work with houses, condos and land, we are always dealing with people. In that area, almost anything by John Maxwell will help with personal growth and relationships. Along with his books, John does regular seminars that are well worth the time and effort to attend. As it happens the more capable and confident you are as a person, the more capable and confident you will be as an investor.

Most recently I have come across a book titled Never Split the Difference by Chris Voss. As we move forward in our knowledge and methods of analysis, our sales and negotiating techniques evolve as well. Chis is a former FBI hostage negotiator who worked with stakes much higher than getting a good deal on that nice 3/2/2 on the corner lot. Among his more interesting concepts is that we should set aside the “golden rule” idea of treating people like we would like to be treated. Everyone is not like you or me. We need to treat people the way they want to be treated... and he describes how figure it out. He talks about high anchors and low anchors and how something as simple as splitting the difference can mean giving away the store.

And last, whatever you believe politically, you can learn an awful lot about the mindset for real estate and life from the Art of the Deal by Donald Trump.

So work your business, and associate with people doing what you want to be doing – whether in person or on the pages of a good book.

The Diminutive Giant

Last night I watched a beautiful exercise in determination as the Astro's second baseman, Jose Altuve... all 5 ft 6 in Jose Altuve faced Yankee closer Aroldis Chapman. When Chapman takes the mound, it is usually the end for the opposing team. I won't go into the endless statistics available in modern day baseball, but when this man finishes the game, the Yankees usually win.

 

But this was not to be the case in Houston last night. Altuve was not intimidated by the size and reputation of the New York pitcher. He stood his ground in the batters box and when the ball came toward him, his bat cracked and the ball sailed over the outfield wall – and the Astro's were on their way to the World Series – and the Yankees were on their way home. Sorry to the loyal Yankees fans. NO... I can't do it. I'm not sorry.

How does this apply to real estate investing and what can we learn from this? Real estate investors are facing more competition from well financed hedge funds, realtors are advertising that they buy houses, and now even Zillow is getting into the act. Sure most of us still have our sources of funds and have our ways of contacting home owners who want to or need to sell their property.

We just have to find ways to relate to the sellers that the big money guys – even the better financed local boys – can't do. For example I bought one house for fifteen thousand less than a well known local investor because I listened to the seller. She needed to have money to move and could not wait until the house was rehabbed and sold even though it would have put more dollars in her pocket. Another time a lady sold me her home because I sat down and listened to her – instead of the self absorbed and self appointed big deal came in with his son and all he could talk about was what they were going to do to her home. Tear this out, move that and change the other thing. She felt like they rejecting everything she had done over the years and belittling her. 

A distressed house is still a distressed house, but there are real live human beings with feelings of their own living inside. Many are going through difficult times and are talking to us out of necessity. A little respect goes along way. We don't need to be intimidated by the big out of town investors. But we may have to work a little harder to be heard above the noise of TV commercials and ugly house bill boads.

We buy houses, but we also listen.

 

 

Cash or Terms – Thoughts to be Considered

If you are selling your house, especially to an investor, cash may seem like the best deal as you can take the money and run. Sometimes, depending your needs at the time, this would be the best choice for you. However, you have a silent partner that already has his hand in your pocket or bank account. Sometime he is not so silent if you haven't paid him. He can get downright cranky and vengeful. His name is the IRS. 

Even at today's lower capital gains tax rates, taxes can be a significant expense. Although if you are married filing a joint return, the first $78,750 profit is not taxed but it goes up from there. But who knows what may happen if the levers of power are turned over to some of the crazy politicians who view your money as their money. Like I said before you may just have to eat the taxes if you need the cash right now. If you don't there may be better ways.

If you've owned the property for a while – it may even be free and clear - or have made significant improvements to it, you may have considerable equity, particularly if this is a rental property you have been depreciating over the years. Your basis, that is an amount you deduct from the sales price in determining your profit, is going to be smaller that you may like and the tax bill larger than you would like.

If you have something specific you need the money for this may be acceptable, but you are going to put the money in a bank at what amounts to a negative interest rate when inflation is taken into account, you may want to consider taking back a note and accepting payments over a period of time.

It's often been said that it doesn't matter what you make, what matters is what you keep. Taking payments over time will definitely let you keep more. But that's not all! There will be more to keep.

For instance, if you sell a property for $100,000 cash, you will get $100,000. Simple. However if you take the money in 180 payments at 6% you will realize about $151,800. More than 50% more. If you need a little cash you could receive a $10,000 and finance under the same terms and realize about $146,700. And you only report the capital gains as you receive them, so the liability is spread out over several years.

 

 

If you are selling to an investor it's pretty much as simple as that. Of course you need to do your due diligence to make sure your buyer is on the up and up. If you are selling to an owner occupant, Big Brother in Washington gets involved. There are regulations that came from two distinguished gentlemen named Mr Dodd and Mr Frank. There are terms like TRID, etc. that describe just how you disclose everything to the buyer. That may be the subject of another article for another day. Suffice it to say that you may want to find a mortgage broker or loan servicing company to handle the paperwork to dot all your i's and cross all your t's. Courts have ruled that if the information is not properly handled, the note is invalid, the buyer can keep the property and the seller is out of luck. It's not worth the risk, and worth a few hundred dollars.

What if things go wrong and the payments stop coming to your mailbox. Foreclosing on the property is always an option – and you keep the money you already received. However this risk is mitigated by doing the due diligence of thoroughly checking out the people you are dealing with. There are several services that do this very reasonably.

If this sounds like more effort than you care to exert, here are a couple of numbers to keep in mind. As this is written, the best CDs will yield about 2.5%. It's better than a few years ago but your local bankster may not be able to go quite that high as many of these rates are quoted by internet banks and brokerage houses. That may not sound too bad until you consider that government inflation statistics show a current rate of around 2.9%. This number never includes food or energy. We are told because these areas are too volatile. So the best CDs aren't just losing .4% but that number, plus price increases in food, fuel, electricity, etc. What a deal!

It's a lot to digest, but take some time to look at your options. The friendly investor or hedge fund buyer offering you a quick cash price may not always be the best deal for you. It's usually a pretty good deal for him (or her) though.

If you find yourself with substantial funds in less than optimal investments, you could even become the bank for real estate investors. Many have more deals available then they have funds to make them work – and they pay much better rates than regular home buyers. Just a thought to kick around.

 

When the Roof Over Keeps Out the Rain But Lets the Critters In

I sold a mobile home to a nice lady in a nice park. For a while everything was... nice. However after a while she began hearing squirrels scampering above her living room and driving her little dog crazy. She failed to see the humor in my observation that instead of a drive it was more like a short put.

Wanting to help return piece of mind to her place of abode we discussed various options. I called a local exterminator that I had worked with in the past. He looked the place over and recommended sealing off all the openings along the edge of the roof for a mere several thousand dollars. 

This was not in her budget and I was not about to write the check. We kicked around some ideas – remembering the exterminator's recommendation that the barriers installed be metal as the squirrels have sharp teeth and will chew through pretty much everything else.

I looked at different ways of getting the job done. My first thought getting some pieces made up at a local aluminum shop. But that would be more money than I thought would be appropriate considering the lady's financial situation. I considered getting pre-made flashing at the building supply house and cutting it to size.

While browsing through my local blue store I came across some pieces of step flashing. Individually they were not large enough to fill the space, but when pieced together would fill the void nicely and have enough flexibility accommodate the variations in size. Ah but how to fasten them – some more investigation brought me to self piercing roofing screws. And they worked beautifully to fasten the flashing to the aluminum pans that made up the lower roof.

However they could not penetrate the metal strip along the edge of the roof. A titanium drill bit did the job of providing a pilot hole for my roofing screws. And this is what we got... not particularly beautiful, but effective. I challenge any squirrel to gnaw his way though that!

There may be 27 other ways to do the job, and we probably considered half of them. Once we had the process figured out, all it took was filling one hole, then the next a hundred plus times.

So what did it take? Stacks of flashing, boxes of screws, a drill with titanium bit for pilot holes and one for the screws and a tin ships to fit pieces into place.

The operation is farely simple and repetitive. But it works.

 Oh yes, and one more essential item... Wasp spray. Not for the WASPs that give SJWs agita, but the kind that fly around and sting when you start messing with their home. Squirrels aren't the only critters that become squatters in available spaces.