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Sunday, May 9, 2010

And The Winner Is...

No matter how good your tenants are, one of them has to be the worst. Just like a race, only 1 person can be first and only 1 person can be last. While I would like to think of most of my tenants tied for 1st place, I definitely know who is in last place.

Late again for the month of May, I posted a 3-Day on his door on the 4th. I give my tenants 3 days to get the rent in. Actually, I give my tenants up to 33 days to get the rent in. The month they move in, the rent is due BEFORE they get keys. After that point, they can pay the next month's rent (30 days early), they can wait and pay it on the 1st every month like most of them, OR they can pay me any portion of future rent up to and including all of it up front for the whole term of the lease. The lease stipulates at what point it is late. I tell them at the lease signing they have 33 days to get the next rent check to me; on the 1st they are more than welcome to pay next month's rent at any time over the course of the month. They can pay it today, tomorrow, next week, two weeks from now, the 25th, 28th, or procrastinate until the very last possible moment on the 3rd. However, on the 4th it is late. I give them 3 days or as my partner likes to say "you have a 33 day grace period," because the 1st may occur on a Sunday and they might not get paid until the 2nd, they might not be able to make it on the 1st for a particular reason, or they might be excited for the weekend (if the 1st occurs then) and just forget. At any rate, they have a 3 day grace period to get the rent to me or at least notify me why it will be late.

My worst tenant again didn't pay his rent. It is ALWAYS a payroll excuse with him. No need to quote any here. I am sure you can make up your own that will be better than his lame attempts. I have another payroll excuse user, but I am informed well in advance of all her situations. She always tell me why she is going to be late, on what exact date the rent will be in, and then emails me to let me know she deposited it. She is very well trained.

I am now in the training wheel stage with this tenant, but diapers would be more appropriate of a description. I posted a 3-Day Notice on the 4th. Today, I followed up with a strongly worded text message; if that is even possible, and let him know, well, here is what I sent him: "Today is your last opportunity to pay the rent. The 3-Day expired on Friday at midnight and tomorrow I am filing at the court house. It is your choice, but if I have to file I am going for breach and possession."

I thought for sure my strongly worded text would elicit a response from him, but I didn't hear from my last place tenant all day. I pulled out my Eviction Book for California and started to get to work on my Summons and Complaint. Good stuff! Luckily, California has some great legal sites online and a very easy to use online document preparer through Turbo Court.

At about 9:30 tonight, I sent his roommate the following text: "Sorry, Tenant, but since you are listed on the lease as a guest and staying in the property I have no choice but to sue you as well when I file tomorrow AM." Within seconds, I received a text from my last placer stating the rent would be in tomorrow by noon. He followed this up with a very defeated sounding phone call with, you guess it, another excuse about payroll and how he would have to go to a check cashing place to get the money. Like I care?

Do I feel like the hours I spent studying my docs and preparing for my big legal battle was a waste of time? Hmmm, not really. I like being a landlord and I like opportunities to fine tune my craft. While I am both happy that he is now aware he will actually be dragged to court and then thrown out if he doesn't pay, I am also saddened that I cannot do the dragging. The punishment is the fun of the crime for the law abiders. I also planned on renting the unit for more than I am currently getting so I am missing an opportunity to create more income.

If you don't have a book like Leigh Robinson's pertaining to the eviction process in your locale, I highly recommend you obtain one. I have manuals for all the states I own properties. It just makes good sense to be aware of the laws where you are doing business.

As for the investing side, my partner started a challenge. He didn't really bother to tell me about it until we were a few days into it. He has set a goal to achieve a certain income over the next 90 days. It was a little shocking to hear the amount, but not unrealistic. I just know it won't be easy. We currently have 4 properties in escrow. We are wholesaling three and we bought those from the same seller of which 30% of the challenge goal will be produced. The fourth is one for our EPP. Still haven't found a tenant for the 1st property in our EPP, but we also don't have the electric meter back from SoCal Edison. Hopefully, we will have a resolution to this ongoing dilemma this week.

So far, May is turning into a very good month.

Tuesday, May 4, 2010

I'm Not Successful Because.... A Fisherman's Tale

I'm not from here and I don't know the people you know.
- I'm not from here either. I have lived here less than ten years. I had to network and meet the people I needed to know which I didn't even start doing up until about five years ago.

I don't have the same professional contacts you have.
- I didn't have them at one time either. I asked other investors who they used.

You go to a lot more meetings than I do.
- Because meetings are where I meet (hence the name meeting!) the people I need to know and get in touch with or find out about the professional contacts I should be using.

You go to a lot more seminars than I do.
- This business cannot be learned any other way.

I can't afford to go to as many seminars as you.
- You can't afford NOT to go to as many if not more seminars than me. The problem might be the type of seminars you are going to and speakers you are listening to. There are plenty of good quality local club meetings you can start with that cost about the same as a night out to dinner. You will get so much more out of the meeting than eating another restaurant cooked dinner. Leave home early and bring a sandwich.

You have been doing this a lot longer than I have.
- Actually, I haven't been doing this that long at all. Less than 5 years. However, at one time I was just getting started too and there are plenty of investors who have been working less time than me and are way ahead of where I am at.

The lending rules and laws have changed since you started.
- Yes, but I also have to conform to them just like you. As for lending, I find it is best to avoid institutional lending all together. It will only get you in trouble.

I don't have the money to invest.
- I still don't have any money to invest. At least, I try to never us my own money. My money is not for investing in real estate. There are plenty of people out there with money who don't know how to invest in anything. Help them out and put their money to work.

There aren't any good deals in my area.
- Look in a different area or stop looking for deals. I have never found a deal in my area either. I have created a few though by getting out and talking to people. This is a people business so if you don't like talking to people you might want to take a public speaking class at the local community college and/or do some volunteer work to get more comfortable speaking to people you don't know.

Other investors are getting all the deals before I can get to them.
- No, they are creating deals out of the opportunities you are driving by and passing up every day while you are looking for deals. Look for something different than what you are currently looking for.

I don't have the crew to rehab a house even if I did get a great deal.
- I didn't have a crew either on my first rehab. I asked other investors who they were using and if they knew any body that might be free.

I hear all kinds of excuses every week from investors who are facing challenges in their chosen markets. The only people who say this business is easy are the ones on late night TV. The problem with most struggling investors is that they treat the business like a hobby or only work it part time and expect to have the same success as their full time peers. While they might land a nice deal once in a while, more often than not, they continue to wander blindly throughout the day confused and frustrated. One way to quickly solve this is to figure out exactly what type of property you want to buy and only look at those properties. Diluting your vision with "anything that makes sense" is a fool's business model or reserved for the few with enough money that it gives them the freedom to sit around doing nothing waiting for something to excite them enough to get back in the game.

When I head out in the morning, I know exactly what it is that I am fishing for. I use the appropriate gear, the right lure, the right pole, test line, I go to the right type of water at the right time of day, I fish at the correct depths and I only keep the fish I am hunting for. Everything else goes back in the water without a second thought. Sometimes, I catch the right species, but it is not the right size, it is unhealthy, or it is too big so I let it go. Again, without a second thought.

If you are struggling with your business, I challenge you to go out fishing for big mouth bass this weekend and try to catch one. Take a picture and send it to me if you do! Think about all the necessary steps you had to take to catch that particular fish. The next weekend go out and fish for something different. Maybe a trout using a fly pole or deep sea species and again, think about all the different steps involved in catching this different fish. How are the processes similar and how are they different?

Now, compare catching your target fish to your real estate business. Are you taking the necessary steps, in the right order, doing the things you are supposed to do in order to land your next deal or are you just casting any old thing at any old pool of water hoping something will bite? Then, on the rare occasion you do hook something, reeling like hell to see what it is only to end up disappointed again?