I had a question come in about making money using wholesale deals if you are cash strapped:

“I’m thinking that with very little income and savings, I should start with wholesaling, so I need a list of current buyers that I can contact. I am wondering if you can help me with that. Do you have a list of names, phone numbers, and email addresses of current buyers that wouldn’t mind me contacting them when I find a property they might be interested in?”

“Do you agree that wholesaling is what I should focus on? Is the Oklahoma City market still good for wholesaling? Has the OKC market changed much since I was in your class two years ago?”

Dear Cash Strapped:
The times are always good to wholesale properties, or always bad depending upon how you see things.

Real estate prices move up and down with the market. Currently prices are being held down because money is harder to come by for people trying to borrow money to buy a house.

That definitely has an effect on wholesale deals because there are fewer investors trying to buy deals to fix and resell.

However, there are still lots of investors buying properties to fix and rent out. That’s where most of the demand is for people selling wholesale deals right now.

Several years ago when the housing boom was on there was a lot more money available for people trying to buy a home, so that fueled the sale of wholesale deals more so than today.

But in good time and in bad times (depending upon you see it), there is always demand for the right kind of deal. What that means is you have to adjust your buying criteria to the market. In other words, you’ve got to buy wholesale deals cheaper now than you did during the housing boom or you won’t be able to sell that deal to someone else.

So here’s my advice…aggressively look for GREAT deals. If you don’t have a fantastically low price from your seller, you won’t be able to sell it for more than you purchased the property for.

Being cash strapped can be an advantage. For one thing, you won’t be wasting money and/or buying properties you shouldn’t buy.

The number one way I’ve found deals has been through marketing to sellers. When you work directly with a motivated seller, you can put together some great deals. The formula is really quite simple:

Motivated Seller + Your Offer + Your Buyer = Profit

Trust me, the bottle neck in the above formula is the motivated seller. The offer just comes from your mind. The buyers will come out of the woodwork for the right deal.

How do you find motivated sellers? Start asking yourself that very question all the time. Some ways cost money, like sending letters or post cards to lists (I’ve done and still do both), and some ways are FREE, like posting advertisements on craigslist.com. I’ve gotten deals to do wholesale flips both ways.

As far as finding buyers, that part is usually easier. My advice here is to use craigslist.com to advertise deals. Keep the name, email, and phone number of everybody who contacts you about a deal who sounds like a cash buyer. Keep that information so that next time you have a deal, you’ll have a resource. Your list will grow slowly but surely.

And keep this in mind. You only need one buyer for each property to close. You don’t need 1,000 – only one person can buy that house.

If you don’t have enough government in your life, this will make you happy.

If you own rental property in the Oklahoma City metro area, you better pay attention.

The City of Midwest City recently passed a city ordinance that requires property owners who own rental property in Midwest City to register those properties with the city by July 1, 2011.

Starting in 2012, there will be $50 per property registration fee for rental houses, and $10 per unit registration fee for multi-family units. If it was just another tax assessed on landlords that would probably be something we could all grumble about a little bit and go about our business.

However, Midwest City has taken cues from Del City which has it’s own ordinance regarding rental properties. Del City requires code inspections at rental properties, making landlords possibly criminally liable if repairs are not made to properties. Many investors have sold or want to sell their Del City rentals because of this program.

On the City of Midwest City web site it states that the program was established “to protect and promote the health, safety and welfare of the residents of the city, particularly those who live in rental properties or the neighborhoods surrounding them. It is designed to promote the continued maintenance of safe and secure rental properties; to facilitate accurate ownership and local agent information; to preserve the quality of existing housing stock; and, to ensure that rental housing is being operated and maintained in a manner that does not foster blight and deterioration or become a nuisance to its surroundings.”

The city puts some pretty impressive spin on the vision of this ordinance. However, the fact is they already have a pretty effective mechanism to take action against landlords who don’t keep up their properties.

Instead, the city requires landlords to follow the requirements of the most recent version of the International Property Maintenance Code. Until I read the ordinance, I had never even heard of this set of standards. It is a comprehensive code that covers just about every aspect the interior and exterior maintenance of a property, including mechanical, electrical, plumbing, heat and air, fire prevention and suppression, etc.

The least expensive “most recent” addition of this code is the 2009 version which can be purchased on line for $24. I confess I didn’t jump in and immediately buy the thing. But I did download an older (2003) version I found by googling “international property maintenance code”.

What I found were 40 pages of specifications for maintaining property. Tons of nitpicky details.

My concern is that even the best maintained 20-year old or older rental property in Midwest City is going to come up short on at least some of these.

The way the ordinance is written, an owner is out of compliance with this ordinance if they fail to register the property or they are not in strict compliance with the International Property Maintenance Code. The penalty for noncompliance is set NOT LESS THAN $100 and NOT MORE THAN $500 per “non-registered” property (I assume they also mean a registered property that has a violation of the International Property Maintenance Code) EACH DAY OF THE VIOLATION.

Unfortunately, the ordinance does not indicate what type of notice will be make to the owner of the property. Will the city make notice about violations so the owner can address them? It’s just not clear.

In addition, the ordinance allows the city to revoke the rental property registration for just cause, including:

1) including false information on the registration form, or
2) a property has failed to comply with two (2) or more of the requirements, or the owner has two (2) or more violations of the International Property Maintenance Code for any property within a given registration period, or
3) Change in property ownership.

The ordinance makes clear their is no appeal process. Once your registration is revoked, that’s it.

What would be the consequences of revocation? Clearly, that owner would not be able to lease out the property. Suppose their is a legal lease in place with the tenant. How can the city legally force an end to this lease agreement? It seems that the owner would be forced to sell the property if they could not lease it.

Another question is what would happen to an owner of multiple properties if the city revokes their registration. Would the city revoke registration of all properties an owned by an individual or entity?

It would be nice to get some clarification on these issues.

I can just about guarantee that other cities are taking notice of this Midwest City ordinance. What if Oklahoma City adopted a similar ordinance? I for one would not be a happy camper.

The ordinance puts the screws to landlords, the adoption of this ordinance by other cities in the metro area represents a threat to landlords.

There has been some talk of a legal challenge to the Midwest City ordinance. Stay tuned.

I sometimes wear a string on my finger to remember to do certain things…like looking both ways before crossing the street. Or, like taking stories I hear from tenants with a grain of salt.

And then there are the important ones, like remembering to put my family, my health, and my spiritual side before my business.

There are whole litany of “rules of thumb”, “deadly mistakes to avoid”, and “life lessons learned”.

I’ve decided to a series of blogs about the critical mindset factors that contribute to being a successful real estate investor. This article is the first in that series.

One of the most important one of those is the idea of trying to take a very long view into account when making decisions.

As a property manager with more than a decade under my belt, I see much of the opposite behavior – that is, living for today, tomorrow, and the weekend. But rarely do I see tenants thinking about the long-term ramifications of such decisions as:

1) Continuing to rent from me (I’m not that good looking or entertaining – trust me on that one).

2) Drifting through life on the fringes. At some point, it’s time to grow up and start living like an adult.

3) Little regard for the economic well being (other areas as well) of their children. Ouch. Yes, I’ll speak my mind on this one. If you as a legal adult (in name only, I suppose) want to live without utilities in your house, food in your refrigerator, that’s fine. Just don’t have kids. Ever.

Obviously, not every tenant fits this description. But a fair number do.

People call this group the “have nots”.

There is tons of debate on why the have nots have not, but I believe it all comes down to deciding to live for today at the expense of tomorrow.

These decisions actually become habit…a habit of choosing what feels good in the moment instead of building equity in SOMETHING.

Equity builders are at the opposite end of the spectrum.

Farmers are equity builders. If they weren’t, they wouldn’t keep enough seed from the harvest to grow the crop in the coming season.

People who create and drive a business to success are equity builders. If they weren’t, they would rely on someone else to create an opportunity that would bring them a paycheck.

And, people who choose to invest in something like real estate are equity builders. If they weren’t, they would just save their money or spend it as they earned it.

An equity builder doesn’t expect an instant payoff from their investment. I have quite a few farmers in my family. One of the biggest motivators seems to be passing on the farm to someone in the family. We’re not talking a few years for this to take place. We’re talking decades.

As a business owner and real estate investor, one of my biggest motivators is the satisfaction I get from putting together a winning combination of marketing, systems, and management. It takes time and dedication, but it just feels great when it all works out and creates cash flow.

Again, these results don’t appear over night. It takes time…and what it takes to be an equity builders is plenty of patience and persistence.

My six-year old daughter just finished the 1st grade. One of the things the first graders do is they have spelling tests each week. What does this have to do with real estate investing? Stay tuned.

She had kind of a rough start with spelling at the beginning of the years. She was getting B’s and C’s at first. I decided that I need to do work with her to help her to develop the skill of spelling. What I did was work five days a week with her a little bit each day.

At first it was a real struggle to get her to practice with me. But after awhile, she got used to it. We even invented a game based on the TV show “Minute to Win It” to help make the practice more fun. After that rough start, she got straight A’s, week in and week out.

The last week of school was very busy with activities outside of school. In fact, we only got a few chances to practice spelling. The day of test she was stressed out because she felt like she wasn’t well enough prepared for the test. I told her to relax – that she would do just fine. Sure enough, she got an A.

The reason that you got so stressed out is that she now has the identity someone he has a good speller, and someone who is an A student. She she was very uncomfortable with the idea of getting less than than an A.

Why am I telling you this story? It contains one of the most powerful success principals. It’s the same thing with any other area in your life.

For example, when you are successful in finding great deals, you begin to believe that you are great at finding great deals. This helps you find more and more deals as your belief in yourself grows. As you find more and more great deals, your identity shifts from unsure to certain that you can always find great deals.

You begin to expect success all the time, every single time. This is your new standard of excellence. You become uncomfortable when fall below that level of success which is your new standard.

I notice this in myself. I’ll get onto a hot streak, and seem to find great deals all over the place. I’ve also been a cold streak, and wonder when I’m ever going to find my next deal.

When I feel that I’m not living up to my personal standards as a real estate investor, I go into action mode. I’ll put myself onto an action-based program. I’ll keep moving until I’m back to my comfortable level of production.

My mistake is that I slack off once I reach that level of production.

Want to create more for your business? Change your identity for yourself. Set a new standard. As Tony Robbins taught me years ago…”Step up!”

That’s how people become more and more successful in real estate investing.

One of my clients was struggling with getting a with getting and mailer out to a list of motivated sellers. He came to me for help.

I found that the the list he was using was a good list it. It was a list of sellers who have a high likelihood that they would need to sell their house quickly.

The mail piece that he was trying to put together was yellow letter. A yellow letter appears to be a hand written letter sent to the seller. It’s placed in a hand addressed envelope. These letters have a high likelihood of being opened because it looks like personal mail.

The fact that the letter appears to be hand-written means that it gets a good response rate.

The disadvantage with a mail piece like this is that it takes longer to put this type of letter together. My client taking two months or more to get these letters sent out. By that time, most of the people at already sold the properties or they’d listed them with a realtors.

My advice to him was to simply the mailer so he could get out much more quickly.

Yes, don’t start with the most labor intensive mailer. Start with the easiest to get out, a post card.

The specific service that I referred him to is called www.click2mail.com. This site is affiliated with the United States Postal Service. You can upload your mail list and your your mail piece to www.click2mail.com. They will do the printing. They will do the delivery. This automation makes for a lot less work.

To ensure that he actually finished the task, I asked him to send me an email when he got the post cards sent out. When you add accountability to a task like this that is a struggle, you make it all the more likely that you’ll actually get it done.

Late last year my the rental management business was in total disarray. It was chaos! We lost telephone numbers. We lost track of work orders because we didn’t have a work order system. Basically, we had an information nightmare.

Finally one day I’d had enough. I started researching on-line to try to find a solution for that problem. I decided to find a database that would help us to organize the information for our business.

There are two basic types of databases. There are web based database system. The other database systems are software installed on your computer which are used by just a single user.

We decided that we wanted to use a web-based system so that we could have the multiple users. We found a product called Buildium. I’m not trying to sell anything in this article here. If you want to check out Buildium, Google it and go there web site.

I’m just trying to tell you about the experience that we’ve had using a little bit about the difference, but it’s made a big difference.

There are 7 reasons that you should consider using a database for your rental business.

1) All the information is in one place.
The database can store all of your telephone numbers, your finances for the for your properties, information about the properties, property photographs, documents you scan (e.g., leases), and many other types of data. They’re all in one place with the in your database. This is a tremendous advantage.

No more looking through stacks and stacks of papers to find telephone numbers (as long as you save that information in the database).

2) Everybody is on the same page.
If you have an office in which you have staff like me, it makes a big difference to have everyone on the same page. What that means is that everyone is working off the same plan; everyone is marching to the same tune. A database can help get everybody marching in to the same tune.

3) It has a good way of handling work workers.
Once you get past managing about 100 properties, you’re really start to run into issues with staying on top of things like work orders. You need to follow up and make sure that that those small items are being taken care of.

What if you get 10 to 20 small projects going? It’s very easy to forget to follow up and check and make sure that work got done. But if you have a computerized system of handling and tracking work orders it becomes much easier because every every day we’ll verify that the work orders are getting completed.

4) It saves time.
It saves you time because you don’t have to go through stacks and stacks of paper to find that information that you’re missing.

5) It’s inexpensive.
The cost for having the database ranges from about $20 to $150 per month based on the number of units that you have in the database. If you look at different types of databases that are available for a property management, you’ll see the some are quite expensive. Compared to most web-based systems, Buildium was quite inexpensive, especially given the gains in productivity that we’ve realized.

6) It automatically does Craigslist ads.
It has a feature that will generate attractive looking craigslist ads for you. Because the database is able to save four photographs of each unit that you have, it’s able to put that information together with other information in the database to create a really nice looking craigslist at. The other nice thing is that you don’t have to keep retyping the same information over and over again when you want to put up a craigslist ad.

7) It’s web based.
It a web-based application, and that’s a big advantage because it allows you to have multiple users all of whom have access to the database. That means everyone in your office can see the information and put more information into the database as needed.

You can also log onto the database wherever you have an internet connection. That means if you go out of town on vacation, you have access to the database if you need it. If you are just away from your office and you need to get some type of information from that database, you can do so as long as you have an internet connection.

So again, I’m not trying to get you to buy Buildium. I’m just saying that we’ve had positive experiences with that system. And if you’re having trouble organizing your information, I wouldn’t hurt you to check out and start using some type of database system.

Today I got a question from one of my clients who had a property in which the client in which her renter moved out of her property without paying the rent. In addition, her tenant left a whole bunch of stuff in the house.

The question she had for me was what she needed to do in order to lease the property again. My advice to her was that you needed to get legal possession of the property.

It’s important that you play this by the book because if you cut corners and get caught, the punishment may be way worse than the little bit of convenience you gained by cutting corners.

What that means is that she needs to file for eviction with the court even though the tenant was already gone. This is especially important when the tenant has left a bunch of stuff in the house.

The reason she needed to go through the court is because there is always a chance that the tenant could come back and claim that they had some hardship that took them out of town.

Now let’s suppose that my client had gotten rid of all of the items in the house. In that case, the tenant could make a ridiculous claim against the landlord for throwing away their their “valuable” items. If the landlord did not have legal possession of the property when those items were removed, they could be liable for damages. Who knows what the tenant might claim was left in the property.

The nature of the items in the property is also important. Let’s suppose that the landlord gets legal possession of the property. In Oklahoma, if the items in the property can truly be considered trash, they may simply be disposed of. If, however, some of the items have value, the landlord is required to store those items for a period of time before disposing of them so the tenant has an opportunity to settle their debt with the landlord in order to get their property back.