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2. Americans Think Homeownership is a Sound Investment

3. 9 Tips for Getting Started in Real Estate Investing

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continued on page 2continued on page 7

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5. Selecting a Contractor

Long-term Hold InvestingFor Owner/Managers

The rental property investing strat-egy for a hold time of 15+ years is signifi cantly diff erent, than a

short term real estate investment strate-gy. Th is is even more critical for owners who plan to do their own property man-agement. Owning and managing a prop-erty for 15-20 years is similar to raising a child, from birth through high school. Price is always important when buying any property. If you are planning to own a property for decades, do not consider purchasing a potential “problem child”, because it is cheap. Bad purchases are of-ten made when investors feel they must purchase quickly. Adapt the motto that “I can always spend my money” and keep shopping to you fi nd the “right” deal. Investors need to seriously consider the location, quality of construction, target tenants and fi nancing for a long term hold rental property:

Location Properties should be located within 30

minutes of where you reside. Anything

longer than an hour round trip drive will become cumbersome over time. It is always a wise idea to geographically di-versify your rental portfolio. Th erefore, owning properties in diff erent neighbor-hoods. Within 30 minutes of your home, is preferable to owning all your proper-ties, in one neighborhood.

Target property purchases in desir-able residential neighborhoods with a low percentage of rental properties. Ini-tially, the annual cash and cash return will probably be less, than what could be

bought in less desirable locations. Rent-al properties in more desirable locations usually are priced at a lower capitaliza-tion rate, than rental properties in less desirable areas. Over time, the quality of tenant, ease of leasing, and appreciation potential will compensate for the ini-tial lower return. Buying in a neighbor-hood, that you feel may decline, is a big mistake. You can change many things about a property, but you cannot change its location.

Five Real Estate

Investing FundamentalsBy – Jeff Watson, Th e Jeff ery S. Wat-son Law Firm LTD, General Counsel National REIA

One of my favorite movie mo-ments is when Ernest Borgnine, portraying the legendary foot-

ball coach Vince Lombardi, stood in front of the world champion Green Bay Packers at the beginning of training camp and held aloft an oblong object proclaiming, “Gentlemen, this is a foot-ball.” What Vince Lombardi taught the Green Bay Packers then applies to real estate investing today.

Master The BasicsPractice them over and over again.

Consistently do the fundamental things that make you a successful real estate investor.

Repeat Your Successes And Keep Repeating Them

Th e vast majority of “investors” to-day suff er from what I call “squirrel or shiny-object syndrome.” Th ey have a lit-tle success in one area, but then they are suddenly distracted by something else and go to another area, and then anoth-er, and then another. Th e bottom line is they lose their focus and intensity, and they don’t continue to practice the same thing over and over again. Let me re-mind you, slow and steady wins the race!

Establish Your ParametersIn addition to becoming good at the

basics, I urge real estate investors to es-tablish their investment parameters.

• What kind of investments or deals do you want to do? Are you going to do loans? Are you going to use options? Are you going to buy rentals or tax liens? Are you going to invest in com-mercial properties? Pick two or three (no more than that) of these things and get very good at doing them. Do them over and over again.

Are You Leaving Money on the Table?

By Cliff Hockley CCIMPresident, Bluestone & Hockley Real Estate Services

Most real estate investors tend to operate their properties with a simple rule in mind: If

money appears in their checking account by the end of the month, their property is healthy. As long as they see the same amount every month they’re happy.

However this rule inevitably leaves money on the table. Sophisticated inves-tors know that they need to plan for their properties to be successfully operated. Th ey need to buy the right property and operate it with a vision in mind. Th at vi-sion should include an annual focus on rent increases and tenant relations.

Rent IncreasesResidential: Multifamily or single

family investors have the opportunity to increase rental income at least once a year through the annual budgeting process. Th is process starts with an an-nual inspection, followed by a local area renewal rate review (rental comparison survey). Keeping your property well maintained is the key to managing long

term rental increases. Tenants will not be as hesitant to pay more if you treat them with respect and keep the property looking well maintained. A clean prop-erty with great looking landscaping, a current paint job without any mold or a refi nished roof will net you more rent. Yes, it will cost more to maintain, but in my opinion the payback will be in the

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Rental Housing Journal Valley · November 2015

form of higher rent, longer tenancies and lower turnover costs. Don’t forget, tenants want to be appreciated just like you do. If you have a property manager you work with, have them help you draft an annual budget and forecast the annu-al increases. Th ink into the future; plan your rent increases and capital expenses two to three years ahead so you can bet-ter control your long term destiny.

Commercial: Owners of offi ce, retail or industrial buildings need to think through the same process. Th ey need to develop a plan that lasts through the initial lease term and includes details regarding the tenant’s options to renew, (since commercial tenants tends to stay for 3-10 years, even more planning is in-volved in controlling the costs and the rental increases). Annually, property owners need to review the comparative position of their property. Th ey need to be realistic regarding the value of their real estate. Just as with residential in-vestments, they must consider the con-dition and location of their investment. Commercial landlords need to have a long term plan in place that keeps rent increasing on an annual basis

If you make a concession regarding a starting rent to get a tenant in, plan to step it up to market value within three years. Aim for a minimum of 21/2

% to 3% in annual increases based off the pre-negotiated step increase or per-centages that increase on the basis of a business’ success (typically used by re-tail businesses). I am not a huge fan of CPI (consumer price index) increases because the government has too much control of those numbers. Don’t permit expense caps unless you can stay ahead of the expenses, regardless of the caps.

Landlords and their property manag-ers should not automatically cave into very low or zero rent increases at lease renewal time, even if the tenant threat-ens to move out. Run realistic scenarios regarding the cost of re-tenanting. In-clude vacancy rates, leasing commis-sions and tenant improvements in these

calculated scenarios. Consider also, the moving costs an existing tenant will face. Understand their business and business goals, their staffi ng and their success at your location.

Most importantly while they are rent-ing from you, fi x repairs that are required by your lease, and fi x them quickly. Show your tenants you appreciate them by treating them how you would want to be treated, otherwise they will blame you and possibly hold back rental payments, do the repairs themselves or, worse yet, move out.

We once had a client who took two months to repair the air conditioning units on a newly leased space. It was win-tertime and it was raining; the tenant

was livid and hired an attorney to pre-serve their rights under their lease. Th e landlord wanted absolutely the lowest price for the repairs and getting the low-est price took over 30 days of negotiating with vendors. Th e tenant almost moved out because it took so long, and alterna-tive cooling systems needed to be pro-vided. Th e experience drove them to be-come a hostile tenant. Th ese bad feelings could have been prevented and we could have agreed on rent increases and lease renewals with this tenant if the landlord would have allowed the property manag-er to be more proactive. Note: Typically property managers have vendors they work with that are reasonably priced who respond quickly, but they may not be the absolute – lowest, period.

ConclusionInevitably, attention to detail, future

planning, a current understanding of the marketplace, and a fair and realistic approach to taking care of your proper-ties will yield higher returns for real es-tate investors. A key component to prof-itability is a focus on current and future rental incomes. Sticking to the basics with an annual planning process and taking care of your tenants will increase your annual yield and keep reliable ten-ants in your properties.

Leaving Money on the Table ...continued from page 1

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9 Tips for Getting Started in Real Estate Investing

By JC Underwood, Crown Properties

Treat Th is As A BusinessOne of the biggest mistakes I

see new investors make is to treat real estate investing as a hobby instead of a profession. If you’re counting on real estate investing to provide income now and retirement income later you must treat it like a business. Real estate investing is now your profession. Treat it like one.

By that I mean you have to advertise, devote time to it, show up for appoint-ments on time, act professionally, do your paperwork properly and treat your clients professionally.

Most real estate investing isn’t passive. Unless you are a private lender most in-vesting takes real work. Even a landlord using a property manager has work at the outset and should continue to re-main active in oversight.

Th is is not a get-rich-quick scheme. It takes time to build client lists, cred-ibility, partnerships and associations. A well-grounded business is built over time unlike “overnight sensations.” It will take you 3 to 5 years to become a real success in this fi eld.

Learn About The Business and Stay Informed

“If you think education is expensive, try ignorance.” Derek Bok

You can lose more money with a mis-take than you can learning how to avoid one. Even if you have been at this busi-ness for years, you need to keep up with current trends and laws. You never get to the point where you know it all or even know “enough”. Some investors honestly believe that there is nothing else that they really need to know to be successful, then a law changes, the mar-ket turns, or a new strategy begins to be used. Th ey either miss changes coming in their community that will majorly eff ect their profi ts, put themselves in a position of huge liability, or miss out on time and money saving tips because they just didn’t take time to stay informed.

In the real estate business, like every-

where else, knowledge is power and for investors it’s profi t too.

There Are Many Profi table Strate-gies In Real Estate

Most new investors get into real estate investing aft er hearing about one specif-ic strategy. Th ey have a friend or family member that has participated in real es-tate, they saw a TV show or infomercial or they went to their fi rst REIA meeting and heard a charismatic speaker that made them want to pursue a specifi c in-vesting strategy. Th ey begin to invest us-ing that strategy because they are drawn to the certainty and proven success of the individual that is in front of them. Aft er the new investor has any success

with one strategy they oft en develop the idea that other strategies are less profi t-able, more diffi cult to execute, and gen-erally inferior to the one they are using. Suddenly they develop a certainty that their particular strategy is the supreme strategy so there is no earthly reason to even consider anything else.

Following a one particular strategy as a beginning investor can be extremely valuable for the overwhelmed new in-vestor since it allows him to really, really learn how a particular technique works. Th e downside of being so narrowly fo-cused is that it limits the new investor’s opportunities. If you believe that your investing strategy is the only strategy worth pursing, to the exclusion of all others, you will have a narrow viewpoint of what a “good” deal is, and pass up a lot of opportunities to profi t with anoth-er strategy.

Don’t get so stuck in a mindset that you can’t even see good deals if they are out of your comfort zone. Th at being said. You can’t try to participate in a doz-en strategies at once…see number 4.

Have A PlanAll businesses need a game plan. You

can’t just wander aimlessly hoping to fi nd a deal. You also can’t rent an of-fi ce, decorate it and then sit behind your desk waiting for the phone to ring. It just

...continued on page 4

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9 Tips for Getting Started ...continued from page 1

doesn’t happen that way. You need to de-cide upon a strategy, learn what you need to do, set your goals and make it happen! Have a plan. Pass out 50 business card a week (or whatever goal you decide is appropriate for the amount of business you want to generate). Talk to 50 people by phone. Make 10 offers a week, spend $100 a month on advertising – whatever your goal is, make it happen every sin-gle week – day in and day out – work the market. Eventually you will start to see results.

Surround Yourself With Like-Mind-ed People

Real estate investing can be “creative” and a bit non-traditional, which means that this profession won’t appear on the Forbes top 100 professions. Because those participating in real estate often do so by working for a corporation or as a realtor, investing as an independent isn’t a main stream career choice. Thus, most people you speak with will tell you it won’t work. Some of your friends might even ask if you bought a course from a late-night television “guru.” They may even laugh and call you “gullible.” Attorneys and other professionals may denounce it because it sounds unusual. Keep in mind that these people are either threatened by their own lack of success or are looking to protect their own butts.

The first thing you should do is join a local real estate association connected to National REIA. These associations will help you keep your thoughts in the right place and prove to you that invest-ing with a plan really does work. You will be connected to investors that have had great successes, those that can share what they learned from their not so suc-cessful deals, and to those who are just starting in the business just like you.

Be PersistentAnyone who’s ever been in sales will

tell you that being persistent is the key to success. Just because a person says “No” to an offer the first time doesn’t mean that’s the final answer. Waiting a couple of weeks and checking back to see if the situation has changed can make all the difference, or changing the terms of the offer slightly to accommodate the seller can jump start negotiations.

Have a good follow-up system for tracking contacts, leads and conversa-tions you’ve had with both buyers and sellers. You’ll get to the point where you’re so busy you can’t possibly remem-ber all the conversations you’ve had with everyone – it’s important to be able to pull up that information so you know where you are in the negotiation process. Anyone who has ever been in sales will tell you that few deals are ever made on the first try. Use a system that allows you to schedule follow ups and keep a run-ning history of calls and conversations. One of the National REIA benefits is a huge discount on Realeflow, but you could also use ACT by Sage, an Outlook or Gmail plug-in or one of hundreds of apps for your phone or iPad. It doesn’t matter what software you use as long as you actually use it.

Have a Team On Your SideDon’t wait until you have a big deal

pending and need to ask questions be-fore assembling a team you can turn to. You need to go out and cultivate rela-tionships with reliable professionals you can depend on. Here’s who you need on your team:

• Attorney – preferably someone who’s familiar with the needs of a real estate professional. Make sure they under-stand the specific real estate strategy that you are using and that they’ve had some experience in that specific strategy. You don’t need to know all of the real estate laws that will affect your business but you need an advisor who does.

• Insurance Agent – you need one that also understands your strategy and investors in general. Make sure the insurance products they sell are right for investors. We have needs that are far different than your average home owner.

• CPA or Accountant – find one that’s a real estate investor – they’ll know the ins and outs of the business and when to be aggressive. You can lose $1,000s in deductions and tax breaks without a professional that knows the most up to date tax law as it applies specifically for investors.

• Contractor – you need a reliable pro-fessional that shows up on time, com-pletes the job within budget and knows how to make suggestions that will save you money. Free estimates don’t hurt either.

• Mortgage broker, private money lender, hard money lender or other money professional – find one that’s

experienced with investors, knowl-edgeable and creative. You can never have too many people who are willing to fund your deals.

• Mentor – someone who’s been there and done that.

• Title or Escrow Company – find one that caters to investors. Make sure they understand double closings, land con-tracts, etc.

Your local REIA group has local and national providers to use to build your team. These professionals work dai-ly with investors and understand their special needs and requirements. It is a

...continued on page 6

48-HOUR NOTICE OF ENTRYTENANT(S): ____________________________________________________ DATE:________ADDRESS: ____________________________________________________ UNIT: _________CITY: _________________________________________ STATE: __________ ZIP: _________48-HOUR NOTICE OF ENTRYPursuant to RCW 59.18.150, this is your 48 hour notice that your landlord or their agents will be

entering the dwelling unit and premises located at (Address)______________________________________________________________________________on between the hours of and . (Date) (Time) (Time)The entry will occur for the following purpose:______________________________________________________________________________

______________________________________________________________________________ Landlord Phone

Method of Service: Personal Service: Post and Mail: ** Add one additional day for compliance if served by post and mail.

WA-RTG-40 Washington

©2009 NO PORTION of this form may be reproduced without written permission.

48-HOUR NOTICE OTENANT(S): ____________________________________________________ DADDRESS: ____________________________________________________ UNI

: _________________________________________ S

48-HOUR NOTICE OTENANT(S): ____________________________________________________ DADDRESS: ____________________________________________________ UNI

: _________________________________________ S

CHECK-IN/CHECK-OUT CONDITION REPORTTENANT(S): __________________________________________________________________ADDRESS: ________________________________________________UNIT: ______________CITY: ___________________________________ STATE: ________ ZIP: _________________Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor IN Out Out In OutLIVING AREAS

BEDROOM 3WallsWalls

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Smoke Detectors

OR-RTG-20 Oregon

TENANT(S): __________________________________________________________________ADDRESS: ________________________________________________UNITE: ________ ZIP: ____________

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BEDROOM 3

TENANT(S): __________________________________________________________________ADDRESS: ________________________________________________UNITE: ________ ZIP: ____________

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PET AGREEMENTTENANT INFORMATION

TENANT(S): ____________________________________________________ DADDRESS: ____________________________________________________ UNICITY: _________________________________________ STATE: __________ ZIP: _________

DESCRIPTION OF PET(S)

1) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ License Number: ______________



Additional Security Deposit Required:$

AGREEMENTTenant(s) certify that the above pet(s) are the only pet(s) on the premises. Tenant(s) understands that the additional pet(s) are not permitted unless the landlord gives tenant(s) written permission. Tenant(s) agree to keep the above-listed pets in the premises subject to the following terms and conditions:

1) The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the tenant’s dwelling unit. 2) Tenant(s) shall promptly pick up all pet waste from the premises promptly. 3) Tenant(s) are responsible for the conduct of their pet(s) at all times. 4) Tenant(s) are liable for all damages caused by their pet(s). 5) Tenant(s) shall pay the additional security deposit listed above and/or their rental agreement as a condition to keeping the pet(s) listed above. 6) Tenant(s) shall not allow their pets to cause any sort of disturbance or injury to the other tenants, guests, landlord or any other persons lawfully on the premises. 7) Tenant(s) shall immediately report to landlord any type of damage or injury caused by their pet. 8) This agreement is incorporated into and shall become part of the rental agreement exe -cuted between the parties. Failure by tenant to comply with any part of this agreement shall constitute a material breach of the rental agreement.

_____________________________ ______________________________Landlord Tenant ______________________________ Tenant

nogerO 42-GTR-RO

©2011 NO PORTION of this form may be reproduced without written permission.

TE: __________ ZIP: _________48-HOUR NOTICE OF ENTF ENTF RYRYR 59.18.150, this is your 48 hour notice that your landlord or their agents will be

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______________________________________________________________________________

___________________________________________________________________________ between the hours of and .ime) (Time)

____________________________________________________________________________________________________________________________________________________________

______________________________________________________________________________

___________________________________________________________________________

Phone

Post and Mail: * compliance if served by post and mail.

48-HOUR NOTICE O 59.18.150, this is your 48 hour notice that your landlord or their agents will be

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The entry will occur for the following purpose:_________________________________________________________________________________________________________________________________________________________

Post and Mail: compliance if served by post and mail

BEDROOM 3alls

Windows

Blinds/Drapes

Rods

Floor

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Doors/WDoors/WDoors/ oodwork

Locks

Ceilings

Electric Outlets

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Sink & VanityVanityV

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Essential ServicesEssential ServicesPlumbing

48-HOUR NOTICE O 59.18.150, this is your 48 hour notice that your landlord or their agents will be

entering the dwelling unit and premises located at (Address)___________________________________________________________________________ between the hours of

The entry will occur for the following purpose:_________________________________________________________________________________________________________________________________________________________

compliance if served by post and mail

BEDROOM 3Walls

Windows

Blinds/Drapes

Rods

Floor

Light Fixtures

Doors/

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Ceilings

Electric Outlets

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Weight ___ Color ____ Name ________Weight ___ Color ____ Name ________W



enant(s) certify that the above pet(s) are the only pet(s) on the premises. Tenant(s) Tenant(s) Tunderstands that the additional pet(s) are not permitted unless the landlord gives ten

enant(s) agree to keep the above-listed pets in the premises

The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the

enant(s) shall promptly pick up all pet waste from the premises promptly.enant(s) are responsible for the conduct of their pet(s) at all times.enant(s) are liable for all damages caused by their pet(s).enant(s) shall pay the additional security deposit listed above and/or their rental

agreement as a condition to keeping the pet(s) listed above.enant(s) shall not allow their pets to cause any sort of disturbance or injury to the

other tenants, guests, landlord or any other persons lawfully on the premises.enant(s) shall immediately report to landlord any type of damage or injury caused by

This agreement is incorporated into and shall become part of the rental agreement exe -cuted between the parties. Failure by tenant to comply with any part of this agreement shall constitute a material breach of the rental agreement.

______________________________enant

______________________________enant

TION of this form may be reproduced without written permission.

CHECK-IN/CHECK-OUT CONDITION REPORTTENANT(S): __________________________________________________________________ADDRESS: ________________________________________________UNIT: ______________CITY: ___________________________________ STATE: ________ ZIP: _________________Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor

Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor







Rating Scale = (E)Excellent (VG) Very Good (G)Good (F)Fair (P)Poor IN Out In Out In OutLIVING AREAS

KITCHENBEDROOM 3

WallsWalls

WallsWindowsStove/Racks

WindowsBlinds/Drapes

RefrigeratorBlinds/Drapes

RodsIce Trays

RodsFloorShelves/Drawer

FloorCarpet/Vinyl/WoodDisposal

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DishwasherDoors/Woodwork

Doors/WoodworkCounter Tops

LocksLocksCabinets

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SinkElectric Outlets

Electrical OutletsFloor

Smoke DetectorsGarbage Cans

WindowsTV Antenna/CableBlinds/Drapes

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Towel BarsCleanliness

Sink & Vanity

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WA-RTG-20 Washington

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Selecting a ContractorTia Politi, is the Lead Property Manager for Acorn Property Management, ROA

Board Member, and the co-owner of fi ve rental properties.

As renovation season approaches, you may be planning projects for your rental properties. How

can you know you’re hiring an honest, competent person who is capable of performing an eff ective repair or up-grade at a reasonable price in a timely manner? Many people hire contractors without fully screening them and pay the price in poor quality work, high prices, and projects that go on far beyond the promised end date.

One of the best ways to locate a good contractor is a referral from someone you know and trust. Ask around, and read the endorsements in the ROA bul-letin. Of course, you can always ask pro-spective contractors for referrals from past clients. Even though they will only give you the good ones, you can gain useful information if you ask the right questions. Did the contractor begin the job when promised, or were there excus-es? Was their bid accurate, or did costs get added on and if so, were they reason-able? Did they clean up aft er themselves daily and when the job was complete? Was the job completed to their satisfac-tion? Did they fi nish on time?

When you seek bids from contractors, the more detailed the bid, the better. Th is is the preliminary outline of your con-tract for services and will become very important if there ends up being a dis-pute about the job. Bids should include everything you can think of, including specifi cs about exactly what materials will be used, down to the thickness and

brand of plywood, to the size of nails, screws, etc. Remember the Chinese sheetrock used in many construction projects a while back? Turns out it was toxic. Th ese details are very important, and if they aren’t spelled out can result in problems for you with no recourse against them, so get it all in writing. Also, who will actually be doing the work? Who will be supervising? Who will be obtaining permits and paying the costs of those?

Timelines are one of the biggest sourc-es of confl ict between contractors and their customers. To be a successful con-tractor requires juggling multiple cli-ents and multiple jobs. You are just one client and while they are trying to keep you happy, they are also working to keep their other clients happy. You will likely maintain a good relationship with your contractor if you accept some fl exibility in the timeline, but hold them to their commitment. Th e squeaky wheel does get the grease.

A more positive way to hold contrac-tors accountable (and keep you from having to nag them) is by adding time incentives or penalties. Th at’s what gov-ernment agencies do and it can help keep a project on track. For instance, the con-tractor may get a bonus of X number of dollars for fi nishing on time, but the bill is reduced by X number of dollars for each day the project runs over the con-tracted end date. Another useful tool in this regard is to divide their payments into thirds. One third at the beginning

of the job so that they can purchase ma-terials and get going; another third at some specifi ed mid-point of completion; and the fi nal third only when every sin-gle part of the entire job is complete.

When my daughter accidentally set her bedroom on fi re, that’s the deal I struck with the restoration company and it came in very handy when they delayed completion, but still wanted to get paid in full. I received a bill that had late fees on it and I very politely called the con-tractor to inquire (and then his super-visor, when he failed to return my three phone calls). I reiterated the agreement and made it clear once again, that they would not get any part of the fi nal pay-ment until every last part of the job was done and they had failed to fi nish the trim work on the siding. Gosh darn, they fi nished up right away! Always keep that fi nal payment on hold, or you will lose your leverage.

A word of caution: While you as an owner are allowed to be an unlicensed individual while performing most re-pairs on your properties, this is not the case with hired help, nor is it the case when dealing with hazardous materi-als such as asbestos or lead-based paint. And ignorance of the law is no excuse! Make sure that if you are dealing with hazardous materials that your contrac-tor has the proper certifi cations, such as lead-based paint certifi cation if they are disturbing more than two square feet of paint on a property built before 1978, or are hiring a qualifi ed company to dis-

pose of asbestos. Because in the end it’s not only the contractor can be held lia-ble, but you as well. Fines can run into the tens of thousands of dollars. Th ink hiring a contractor with the proper certifi cations is expensive? Not hiring one can cost even more. Please refer to the Environmental Protection Agency website for more complete information about hazardous materials in renova-tions. www.epa.gov

Th e Construction Contractors Board is the agency that oversees licensed con-tractors. On their website, you can fi nd information on all licensed contractors in the state of Oregon, including wheth-er or not they are licensed (Go fi gure, but some folks actually lie about this.); the kind of license they hold; how long they have operated under a specifi c li-cense; and whether there have ever been complaints lodged against them and/or any punitive damage awards against their company or their bond. Take a few moments and save yourself a lot of time, trouble, and money.

https://ccbed.ccb.state.or.us/ccb_frames/consumer_info/ccb_index.htm

Th is column off ers general suggestions only and is no substitute for profession-al legal advice. Please consult an attor-ney for advice related to your specifi c situation.

PublisherWill Johnson – [email protected]

Designer/EditorKristin Flores – [email protected]

Advertising SalesWill Johnson – [email protected]

Terry Hokenson – [email protected] Surratt – [email protected]

Rental Housing Journal Valley is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in

Investing & Real Estate Investor Quarterly

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beautiful day when you realize that you can fi nd people to add to your team that can do all of the things in your busi-ness that you hate.

Don’t Waste Time With Unmotivated Sellers

Th is is possibly the most common mistake new investors make. Some be-ginning investors waste time talking to sellers who are only marginally motivat-ed. Even worse, they drive by the house and look for comps without even talking to the seller fi rst. Th ere’s a diff erence be-tween being persistent with a seller or buyer who hasn’t yet made up their mind about what they want to do and dealing with a seller who really has no intention of selling anytime in the near future. Don’t waste your time if the seller falls into the latter group.

Never Forget Th at Real Estate Is Re-ally About People

In the end real estate isn’t about the land, the house, or even the money. On a practical note and an altruistic note, it really is all about the people.

Many people go through their fi rst years of real estate investing making all their off ers based on the properties. Th is is a huge mistake. Th ese investors worry about making really low off ers because they are concerned that it will make them a “bad” person to “take advantage” of a seller, especially one in a tough situa-tion. What they don’t understand is that many people will happily forgo profi ts if other benefi ts are more important to them. Some people need speed, some need ease of exit, some need someone else to blame. I’ve heard more than one

investor tell a story about a seller who happily sold below market because their son, sister, nephew – pick a relation – wouldn’t pay rent or move and they hon-estly just wanted to sell the house and let you deal with the situation!

Th ere is a scale of client motivations, the Hustead Scale, that concisely de-scribes the level of motivation a seller has. Th e most motivated sellers will pay to get out of a house. Something in their life makes being out of that property so important that they will pay you to take the property.

Many investors make off er aft er of-fer, receiving rejection aft er rejection, never bothering to ask the seller what they want, assuming they already know. Making off ers on the properties because you think you understand the value is far less eff ective and far less profi table than making an off er that provides the seller an option they didn’t know exist-ed, a solution to their problem.

Th e moral of the story here is that if you listen, and I mean REALLY listen, and try to solve the seller’s problem you will always make more money than if you try to just apply your cookie cutter approach. Zig Ziglar used to say “You will get all you want in life, if you help enough other people get what they want.” He’s right. Th is business, at its core, is about people. We provide housing, we provide solutions, and sometimes most importantly, we provide options they didn’t know were available.

Th ere you have it. Follow these nine simple steps and before you know it, you’ll be an outstanding real estate investor.

9 Tips for Getting Started ...continued from page 1Long-term Hold Investing ...continued from page 1

Quality of ConstructionProperties that are built in quality

materials and workmanship tolerate the abuse of tenants, time and the elements much better, than marginally construct-ed properties. Tile, metal or shingle roofs last longer and require less main-tenance than fl at roofs. Copper plumb-ing is preferred to galvanized plumbing. Tenants damage themselves, rather than interior walls, when they punch a plas-ter wall. Solid wood cabinets will last decades longer than press-board or ve-neer cabinets. Even if you intend to re-model a property, choose one that has good “bones”.

Target TenantWhen you preview properties, form a

realistic mental picture of who would be a potential tenant(s) for that property. Is it located near a college or a senior cen-ter? Is there a major employer or a hos-pital nearby? Does the rental have a pri-vate outdoor patio? Covered or enclosed parking for a newer car?

With the number and size of bed-rooms, how many people could realisti-cally live in the space long term? What does the property lack, that the potential tenant might desire?

Now that you have formulated a men-tal picture of your tenant(s), think how it would be interacting with that tenant(s), or a succession or variation of that ten-ant(s), for the next 18 years. If the mental picture you are formulating is not pleas-ant, keep shopping for the right property.

FinancingInvestor loans are fi xed rate amor-

tized loans, up to 30 years, for 1-4 family

properties. When you purchase 5 unit or larger properties, it is considered a com-mercial loan. Institutional lenders fi x the interest rate for 3-10 years, and then it is variable or renegotiable, on commercial loans. Sometimes you can fi nd a fi xed 15 year fully amortized commercial loan. If you are going to hold a property long term with a commercial loan, de-velop a game plan for dealing with in-terest rate adjustments or renegotiation, before purchasing.

Formulating a long term rental prop-erty real estate investment strategy in-volves more than analyzing the numbers on paper. Location will be a huge factor in future appreciation and convenience of management. Quality of construction will determine long term maintenance and capital expenditures. If you self manage your properties, the tenants you choose and your relationship with those tenants, will contribute or detract from your quality of life, for decades. Securing stable long term fi nancing, while inter-est rates are historically low, will insure strong cash fl ows until the properties are paid off . Incorporate the importance of location, quality of construction, target tenants and fi nancing strategy into your long term invest portfolio strategy.

Jade Bossert is a licensed Real Estate Broker in Tucson, Arizona that special-izes in multifamily property sales. She has been successfully selling real estate in Arizona for over 35 years. She can be contacted at 520-797-6900 or [email protected].

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5 Real Estate Investing ...continued from page 1

• Determine what you are looking for in each of your potential investments.

• How much capital per investment are you willing to put at risk?

• How much time will you put into this investment?

• What is the length of time you want your capital to be out working?

• What is the projected rate of return you are seeking?

• What is the minimum rate of return you want from your cash and/or time in each of your investments? When I say “rate of return,” I’m not just talking about an interest rate.

• Do you want your investments to re-sult in your receiving monthly income payments, either interest only or some-thing else, so each investment is gener-ating a monthly cash fl ow to you?

Th ese are just some of the parameters you need to establish for yourself. Th ere is no one book, manual or class where you can learn all this information. No, it requires your spending some time work-ing on what you think is best for you. Th at means you may have to do one of those activities in which investors should engage on a regular basis but oft en don’t – think and plan. As you think and plan, you will be able to clearly defi ne your in-vestment parameters in a way that you can clearly communicate with others who may want to do business with you.

Do Your Essential Due DiligenceAnother key component of real estate

investing involves your due diligence process. Th ere are two very crucial ques-tions to be asked at the beginning:

• Who is involved?

• How are they involved?

Allow me to explain why these ques-tions are so important. It doesn’t mat-ter how papered-up or how careful your lawyer is when draft ing the agreements. If the person on the other side is a per-son of weak or poor character whom you know has a tendency not to honor their word, it will not be a good deal.

You want to be in a situation where someone you know who has very high character and is a capable investor is involved in the transaction. You still need to know HOW they are involved. Are they going to be involved in a way that will make sure the deal goes well, or are they just on the periphery and their name is just being “borrowed” for mar-keting or window-dressing purposes?

Once those key questions have been answered and you understand who is involved and how, and you have done some basic due diligence on them, then you are able to determine if you want to proceed with further due diligence on the deal or investment.

Even though you may have a long, suc-cessful track record of doing multiple deals with individuals, it never hurts to check up on them again to see if things have been going well in other aspects of their lives. Allow me to share a brief sto-ry to illustrate this point.

A client of mine indicated that he had made a series of large-dollar, hard-mon-ey loans to a rehabber who always got the properties fi nished in great condi-tion, and they sold for top dollar. Aft er doing several of these deals, he began to feel very comfortable with this borrower.

Unbeknownst to him, this borrow-er was having marital problems. Once those problems grew to the point where domestic relations court and lawyers be-came involved, this individual’s rehab-bing business fell apart, and one of my client’s loans was put in a great deal of jeopardy. Fortunately, things worked out and full payment was made, but it was late and destroyed my client’s belief that this rehabber could be counted on to perform and pay on time.

Make sure you develop the type of relationship with the individual with whom you are doing business that al-lows you to look them in the eye and ask them how they are doing and what else is going on in their life so you can pick up on what issues may be on the horizon that could aff ect the way you are doing business with them.

Organize Your Deal PaperworkTh ere is one last fundamental prin-

ciple that investors need to understand that I want to share with you. You need to organize your paperwork. You need to have all your baseline transactional documents saved in Word format so you can easily do your own word processing and create nearly-completed draft s of your documents to be reviewed by the appropriate outside professionals and other parties to the transaction (yes, get a professional review each time).

By always working from a baseline document, you have a template in place so you aren’t reinventing the wheel ev-ery time. You are also able to maintain a greater degree of privacy and security over what you’ve done with other deals. I oft en see individuals who grab the last document they used (last lease, last trust agreement, last operating agreement, etc.), and they begin making edits to that one for the next deal, not realizing that there may be holdovers, both dig-itally and facially, in tvhat document. Has that ever happened to me? Embar-rassingly, yes. I have taken steps, how-ever, to prevent it from happening again in the future. Th at’s why I’m sharing this concept with you.

Whatever the type of document, whether promissory note, mortgage, deed of trust, option agreement, due dil-igence checklist, or borrower question-naire and loan application, have them saved in a baseline format that you can quickly modify it for the particular deal on which you are working. Th is will al-low you to be much more organized as you prepare these documents on your own to be sent to your lawyer or other licensed professional for review and then used in the transaction.

Remember, it’s all about getting good at the basics. Make sure you master the basics of real estate investing, establish your parameters, do thorough due dil-igence regarding those with whom you are working, and work from the same, consistent set of documents so you can continue to repeat your successes.

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rental housing journal valley november 2015

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