Bank REOs

With the end of the year approaching, my new angle is to work the bank REOs in addition to working with individual sellers. Surprisingly, the banks have been more than helpful. Personally, I was a little apprehensive working with the banks as I've heard they are hard to deal with and have been unresponsive to most people. I don't know if it's just me and my personality, but the banks have been pretty cool to deal with. Maybe my studies with Gitomer had something to do with it. Go figure!

So, today I checked out another bank REO located in one of the parks I work with. Guess what? As soon as I drove up to the house, I could tell the home had some issues. I didn't even have to set foot in the house. What tipped me off? Check this out:



Hmmmm....What's wrong with this picture? Can somebody say roof damage? And, let's not forget about those lovely wood panels with the moisture issues. Can you see the wood breaking up? Here's a closer look:





Ok, so is it just the outside with issues? Here's what I found when I went inside:

Water damaged wall



Mold



Water damage ceiling



Door entryway water damage



Clearly, the house had some issues. As soon as I walked into the house, I could smell the mold. Surprisingly, the park manager didn't think it was that bad...until I came and pointed out these issues. But, what really confirmed my feeling about the house was not the house itself but the neighbor who lived next door.

The neighbor was a friend of the prior owners. Let's just say people talk...And, they talk a lot. Most people want to talk, talk, talk. But, I've found out that if you listen to what people say, you'll learn a heck of a lot especially in this business.

I start talking to the neighbor and asked her a couple of questions about the house. The park manager was with me and really didn't think the neighbor really had that much insight into the situation. Little did she know what the neighbor knew. The neighbor told me about all the water and moisture issues with the house. How did she know? Well, she was the prior owner's neighbor and friend, and regularly came to the house to visit. Whenever people have problems, they talk about them to their friends and people they know. Pretty logical stuff.

So, the neighbor goes on about the house and tells me how the house was always leaking, moisture was getting into the walls, how one of the water pipes burst, how the prior owners would complain water kept getting into the house, etc, etc. Wow, the list goes on and on! Then she goes on to tell me the a/c unit outside is gone - someone stole it. And, there's always been a major leak in the bathroom. Plus, the commode in one of the bathrooms doesen't work anymore. Honestly, this is very important information to know.

What I deduced from the situation was that the roof probably has not been sealed for quite some time. Somehow moisture has made its way into the house and will continue until the problem has been found. However, it's already been to the point where mold is growing and moisture has seeped into the walls. The insulation is going to need to be torn out and replaced with new insulation. Probably the roof will need to be sealed again. All of the walls with the moisture will need to be replaced. Plus, the wood paneling outside will also need to be replaced. Clearly, this house is a much bigger project than what I'm looking for. It will take more time and work to get the home ready and safely habitable. So, I decided to pass.

Lesson learned. I have learned to be humble and listen more to people when it comes to this business. Most people want to talk and think they know what they are doing even though they don't - a big mistake. I learned the hard way. Let's just say my mistakes in the past have cost me a lot of time and lot of money. Now, I have learned to listen when it comes to matters of the unknown.

3 Plans

I've been re-reading pretty much all of Kiyosaki's books lately. I just finished "Cash Flow Quadrant" and now I'm on to "Guide to Investing."

It's made me re-think the 3 plans for financial core value choices rich dad and Kiyosaki mention. The plans are:

1. To be secure.
2. To be comfortable.
3. To be rich.

Every person has their own definition of what it means to be #1, #2, and #3. This is very important because it examines your financial core values and just what kind of life you want to live.

I thought it was interesting that rich dad advised Kiyosaki that all 3 plans are important, and you first have to accomplish #1 and #2 before #3. Each one relies on the prior. If you want to have a life of the rich (#3), you have to have a plan for security (#1), comfort (#2) and being rich (#3). And, if you want to have a life of comfort (#2) you have to have a plan for security (#1)and comfort (#2). If you just want a life of security (#1), then you just have to have a plan for security (#1).

Kiyosaki's initial goal was #3. But, when he got to #3 and became a millionaire he lost it all. He then goes on to state that after this experience he revised his plan to include being rich and also being financial free, thus #1 and #2.

So, I've been thinking about my 3 plans and what they mean to me. Here's what I came up with:

1. To be secure.

For me being secure means having enough passive income to cover my expenses. This is my first goal. I am almost halfway there and should be half through with this goal by the end of the year. By the middle of next year, I will have completed this goal.

2. To be comfortable.

For me being comfortable means doubling the passive income coming in from #1. Being comfortable means being able to live a nice life with nice things. This is what most people strive for.

3. To be rich.

Being rich to me is having unlimited passive income coming in and having freedom to do anything I want at any time. Of course, within legal means ;) I don't really want to put a # or price tag on being rich because that is limiting to me.

Being financially free is not just about money to me. It's about having the freedom and the time to do other things I want in life besides just working for someone else. It's sad that we work 80% of our lives and only enjoy 20%. (aka Pareto's 80/20 principle).

Working for someone else is making someone else rich. People think what I'm doing is too hard. Just like Kiyosaki, I've gotten the "...why don't you just get a high paying job OR go get your MBA? Or, "...your making life so hard on yourself, it'll be easier to just go get a job."

Yes, the above statements is what everyone else does and considered the easier road to take. But, I believe everyone has their own path in life. Just because everyone else is taking the same path does not mean I have to. Mine just happens to be different.

Though it's been a lot of hard work and taken up a lot of my time, I know what I am working for will pay off in the end.I always come back to the statement,

"Success is a journey, not a destination."

It is the journey and the experiences and lessons I learn along the way that are invaluable. And, that is priceless.

Pacific Heights

I saw the movie, "Pacific Heights," again. This is known as the movie to watch if you ever decide to be a landlord. Basically, it's a landlord's worst nightmare - having the worst possible tenant. Landlord beware. It's funny b/c some people think the things that happen in the movie are ridiculous but being in the business some of this stuff has happened in real life. Seriously. I've heard the craziest horror stories from people who've had tenants from hell. The hardest part is getting them out. Once they're out, the worst is over. But, most people don't know how to get them out - that's the trick to it ;) (In all honesty, the secret is screening and knowing the laws and your rights).

This is a must watch movie for anyone wanting to get into landlording. Probably what this film has taught me is:

1. Don't overleverage yourself. You must be cashflowing from the start. (These people were negative cash flow from the beginning. Thus, the desperation in having to find tenants to make the mortgage).

2. Always know the laws and your rights.

3. Screen, screen, screen because "...a vacant house is better than having a problem tenant."

Rich Dad, Poor Dad

After years of investing, I decided to read "Rich Dad, Poor Dad" once again. It's always interesting reading something again. This time around, a lot of what was said made more sense to me than the first time around. Here are a few things that stuck out:

"The rich buy assets. The poor only have expenses. The middle class buys liabilities they think are assets."

So, in order to be rich, then all we need to do is buy assets? Wow! It sounds so easy. If it's so easy, why aren't we doing it?

It stems from the fact that people lack financial education. People do not know the difference between an asset and a liability. Most people think assets are "things" that have value. If we learn to see an asset as something that puts $ in our pocket and a liability as something that takes $ out of our pocket (as the book says), it would make things so much easier.

But, it's hard to change people. The most important thing people can do to change their situation is to put time to improve their financial education. Most people do not. Knowledge is power.

That is why I am dedicating my time into my financial education and building up my asset column. Over time, I know it will pay off. Most people my age think that I am working too hard and that I should enjoy my youth. I keep hearing the phrase, "You might die tomorrow!"

Many people do not see the problem we are facing - our financial futures are in danger. Why? We live in a society that expects too much from others and when our expectations are not met, we find someone to blame. So, what happens when someone is laid off from a company after almost 20 years of service? That person gets angry and is left with no income coming in. They either have to find another job or live with what they have saved up in the bank. And most cases, people do not have much saved.

The reality is that we are poorly educated financially because of the archaic school system. The adage of "go to school, get good grades and get a good job with a good pension are long gone". It's not going to happen anymore - people are living longer, costs are rising and companies can no longer afford to pay people who are no longer working for them. The numbers simply do not work.

Most people I talk with will give me every excuse in the book not to invest. Most will say they do not know where to start, they do not have $ to invest, their too young, or they plan to work.

Usually, I tell them the best thing they can do is to start putting in the time into their financial education and start reading books and/or attending seminars. Most times nothing happens. Why? Fear and greed. The problem is everyone wants to make $ and they want to make $ fast but they are afraid to make mistakes. If people cannot make $ fast and not make any mistakes, then they shut themselves off. Honestly, I've never met anyone successful who has never made a mistake. I've made plenty. We all learn from our mistakes.

As it says in the book, this is the problem we have and it plays on the two emotions of fear and greed. People are so fearful of losing $ investing or not having a secure job. So, they end up working and in working the greed sets in. People buy things on credit they cannot afford. In order to pay for these things, they have to work. Thus, the cycle begins.

After reading the book again, it's amazing to see how fear and greed take over people's lives. Sometimes it irks me when people ask me how they can be rich fast. I tell them there is no "get rich quick" way to make $. Everything takes time and work. But, over time the work will pay off. Usually, I get blank stares. And, most people go back to their usual life and end up in the "rat race" for the rest of their lives.

Estates & Foreclosures

Just recently, I was very close to buying a mobile home in an estate. So, what was the problem? Too many people involved. I remember an old saying, "The more people involved in a transaction, the longer it takes." This phrase rings so true.

In this situation, there were 3 sisters involved each of them living in a different state. The sister I was dealing with in my area had showed me the home. We walked through it together. It had been vacant. But, I noticed she was more concerned about telling me about her personal life - her divorce, financial situation, etc. This raised a red flag and reminded me of people that I've worked with who have financial problems and most likely are in foreclosure.

Personally, I have not had much success working with people who are in foreclosure. It's very difficult to work with people who are so emotional and most times can be financially irresponsible. It has never worked out for me.

So, I had to negotiate a deal with all 3 sisters for the home. Mainly, I was talking to the sister in my area and another sister in another state. Turns out, the sister in the other state was very financially responsible since she was covering the majority of the costs for the home. Let's not forget - a vacant home is a problem home.

In any case, I was about to buy the home and get the deal closed. The sister in the other state was ready to get this done since she had put so much money into it. Low and behold, the sister in my area calls me up and tells me she has just moved into the home because she had been asked to leave her current rental place. She tells me she's going through some hard times and this will be easier for her financially.

Most times, the only reason someone is asked to leave where they are currently renting is because they cannot pay the rent. This could be the case in this situation. So, I call the sister in the other state and leave her a message regarding the change in the situation. (I did not think the sister out of state was aware). Then, I call the park manager of the park to let her know of the sister who had already moved into the park. She will need to go through an application approval process just like everyone else in the park. It will be up to management whether or not to approve the application. If the application is not approved, she cannot live in the park.

What is the outcome of the situation? Only time will tell. I suspect this may land back onto my plate in a couple months. With lot rent, taxes, insurance, energy and other costs associated with the home, this may be more than what the sister in the area can handle with her current financial situation.

It's turned out to be quite a messy situation. It may get even worse. This may be a good thing in disguise.

Just Do It

"Just do it."

Ever heard this slogan made famous by Nike? It rings so true.

When it comes down to it, what differentiates successful people from everyone else is taking action. Yes, mistakes will be made. But, we should not be so afraid to make mistakes that it will stop us. Taking action and doing something is better than doing nothing at all.

One of my fellow investors always brings this question to people who are thinking about getting into investing,

"If you continued to do the same thing you did this year, where would you be next year? Would you be where you want to be?"

If you continue to do nothing, you can never change your situation. If you want to change your situation, you must take action. Now, I'm not advocating going full force into investing and quitting your job. Quite honestly, that is not the best thing to do.

Get educated first. Figure out where you want to be financially and how you will get there. This will depend on your experience level and financial situation. Do you need to build up some cash first? Or, are you ready to invest into income producing assets and have the necessary cash reserves?

If you are just starting out, the best and safest way to go is to find a local investor in your area who is doing what you want to do. You may have to go through a few people to find the "right fit." What you want to do is find someone you can learn from locally who also wants you to grow as a person. It needs to be a mutually beneficial relationship for both of you. Remember, nothing is free and it is ALWAYS a two way street.

Take a couple people out to lunch and find one person you can connect with and feel you can learn from. So, what does the other person get in return? Well, I would say that you would need to figure out a way so that both parties can help each other. I highly recommend finding deals for other investors to start out. You can highly leverage yourself learning from a local investor who can also tell you what to look for and their investment criteria.

Most times investors are open to this and will gladly pay a finders fee to you if a deal is done as a result of your work. Be sure to check the local laws of your state to see how this can be done legally. Some investors decide to contract this work out as independent contractors, or some even may offer to put you on payroll. It all depends on who you are working with.

When you're first starting out, always remember the goal is to learn. Do not, I repeat, do not get greedy and think you know everything. No one knows everything. Most times, you learn on the job - learn by doing. Yes, you can read about the experiences of others. But, you will learn through your own experience. Personally, I didn't understand this concept when I first started out. Now, I do.

All in all, have fun with it. If you can take action by at least finding deals either for someone else or for yourself, the battle is halfway done. Once you get good at finding deals and putting deals together, then you are well on your way.

Sea Container Homes!

Wow, check this video out - it's crazy. They are making homes and buildings out of the sea containers that are used for storage when shipping things. Pretty fancy stuff!