Nancy Braam

3 Things You Better Tell Your Renters If You Want To Be A Successful Landlord

I admit it. I scare renters. What’s more, I actually enjoy it.

You’ve heard the saying, “You train people how to treat you.” I believe this wholeheartedly when it comes to tenants.

When I rent one of my properties, I always meet the prospective tenant face-to-face and give them The Talk. Look them straight in the eye, don’t smile and say something like this:

I will be the best landlord you have ever had, provided you do 3 things.

1. You must pay the rent on time. I have no sympathy whatsoever about late rent. If you are short, borrow from family and friends, not from me. Don’t even try an excuse on me – it won’t work. This is my investment, it’s not a charity. If you don’t pay I have no problem at all making you leave. 

Of course, you have to follow this up with action. Do Not tolerate late rent. Period. You are better off getting a new renter then to train them that it is okay to be late. I’ve had people that were deadbeats for other landlords who pay on time every month.

2. You must take care of my property. I am not a rich person, I can’t afford to have someone destroy my property. I do drive-bys, and I will inspect it from time to time.

3. You must be a good neighbor. I know all the neighbors. They have my phone number. They are not afraid to call me. I will not inflict a bad neighbor on them. It would just take you a few minutes to drop the neighbors a line and give them your phone number, just in case. Neighbors make great watchdogs.

Ask them point blank – Can you agree to these 3 things?

Watch their eyes. Trust your gut. Don’t be so desparate that you’ll take anyone. Train them right up front and you’ll save tons of time and money down the road.

Under $300,000 Sales For October 2010 in Bellingham Wa

There were 34 residential sales in Bellingham under $300,000 in October.

Lowest priced sale in Bellingham in October

Here’s the lowest:

510 W. Illinois

• 1208 square feet
• 3 bd, 1 bath
• Fixer-upper
• Central location on arterial
• Asking – $125,000
• Sold for $100,000
• 66 days on the market

Even in this slow market, we have sales that happen as soon as we put the house on the market. Sometimes we even have multiple offers. This month these homes sold in less than 10 days.

From the left:

1715 Woburn – 4 bd/2 ba, 2000 sf, built in 1979, fixer, sold for $131,000.

2410 Ellis – 3 bd/1 ba, 1363 sf, built in 1900, lots of new stuff, sold for $190,000.

3813 Ohio – 2 bd/1 ba, 864 sf, built in 1975, good area, sold for $195,000

For homes under $300,000 the average market time in October was 75 days. Average size was 1633 sq with 3 bdrms, 1.75 baths.

They sold for 94% of their asking price on average and 88% of their original asking price – so in other words the average house started at $252,159, lower their price to $235,041 and then sold for $220,735.

There were a total of 64 sales in Bellingham for the month of October. So the bulk of all residential sales were under $300,000 – 53% to be exact. 

To put this in a little perspective, there were 9 sales over $500,000 with the top sale at $1,040,000 for a Chuckanut waterfront home that was a short sale.

If you’d like information about a sale in your neighborhood or a specific home you’ve been watching, contact me - I am happy to get that information for you.

The Miracle of Compound Interest

Albert Einstein said compound interest is “the greatest mathematical discovery of all time”. Benjanim Franklin said, “Compound interest is the eighth wonder of the world.”

It’s easy to understand: 

 When you invest money you earn interest. Let’s say you invest $1000 at 10% interest to keep it simple. The first year you earn 10% so now you have $1100. The next year you earn interest on both your original capital and the interest from the first year. $1100 x 10% In the third year you earn interest on your capital and the first two years’ interest. You get the picture. The concept of earning interest on your interest is the miracle of compounding.

In the first few years compound interest may not seem so miraculous but over time it truly is. With simple interest if you earned 10% a year on your $1000 at the end of 10 years you will have doubled your money and now have $2000. With compounded interest at the end of 10 years you have $2576. That’s nearly 25% more!

Compound interest works best with TIME. If you start young the results mean the difference between worrisome golden years or a happy retirement. 

Consider this: Amy, a 22-year-old college graduate, saves $300 per month into an account earning 10% per year for six years.  Then at age 28, she starts a family and decides to stay home with the children full time. By then, Amy had kicked in $21,600 of her own money. But even if she doesn’t contribute another cent ever, her money would grow to a million bucks by the time she turned 65.

Compare that to Jason, who put off saving until he was 31. He’s still young enough that becoming a millionaire is within reach, but it will be tougher. Jason would have to contribute the same $300 a month for the next 34 years to earn $1 million by age 65. Although Amy invested less money out-of-pocket — $21,600 over six years vs. Jason’s $126,000 over 34 years — her money had more time to grow, or compound. (Example provided by Kiplinger newsletter)

You aren’t 20, or even 31 you say. If you can’t start earlier then, start today.

Grandparents: One of the greatest gifts you can give a grandchild is to invest $1000 at their birth and let it compound for 65 years – just take care of their retirement for them as a surprise.

The Top 3 Questions You Need To Ask Your Prospective Listing Agent

A lot of people ask, “How many agents do I need to interview?

I don’t care if you interview one or twenty, the key word here is interview.

Maybe the agent you met at the open house is fine – interview them. Maybe your nephew, the realtor you go to church with, your neighbor, the one with the nicest smile is the best match. Just interview!

Selling your house represents liquidating your biggest asset for most Bellingham folks. My point is don’t pick the person who will be your advisor, advocate and negotiator lightly.

What do you ask? There are a ton of possible questions, here are 3 that are imperative: Read the rest of this entry »

3 Examples Of How To Make Real Estate In Bellingham Pay

I admit I “called the bottom” in the winter last year. All the indicators seemed to point to it but, alas, I was wrong.

Now that we are 3 years past the bursting, most of us have resigned ourselves to the fact that we are not just snapping back.

It’s probably not news to you that until we can stem the flow of foreclosures, there is no hope of recovery. And foreclosures are tied to unemployment. And on and on.

But, hey, enough of that – you’ve heard it – let’s talk about something more pleasant. Opportunity. I’m not saying run out and buy something. I’m saying, pay attention, this is a time of change and that means opportunity. Forget about hitting the exact bottom of the market. You can only ever tell the bottom or top afterwards, not during.

Think of it as a range, and in the Buy Low, Sell High proven way to make money, this would qualify for the Low Range.

So should you buy? Well if you accept that we are in the Low range, then you should look around, gather some information. Determine a strategy (Equity, Cashflow, Cash) and see if something fits. Here is an example of each and how they might work now.

Equity: Find an under-valued property in a great neghborhood. Buy it with 30% or more down, ideally. Good neighborhoods would be South Hill, maybe Edgemoor, many parts of Fairhaven, Columbia and Cornwall for a start. The advantages in this market are good rents in good areas and low interest rates therefore low payments. You are focusing on a quality, under-valued home. And you’re not the only one, so once you decide to go this route, be decisive when the right property presents itself.

Cashflow:  Decide what return on investment you want. I like straight cash on cash return. I put in $100,000 I want to make $10,000 a year on it. 10% return. It was an example, but I like 10%, I actually like 12% better than that. Can I do it? It’s hard, you have to look at a lot of properties and stick to your rules. Now granted, when you factor in the added perks, depreciation and (future) appreciation, your return is even greater.

Cash: Buy on the courthouse steps. That’s where the banks officially take the home through foreclosure. It’s right in the courthouse lobby. If you’ve never attended one, you should. It used to be that the bank always bought the property back for the value of the note, if you wanted to buy it you just had to pay more than the bank was going to go. Not any more. Now the trustees holding the sale can bargain. They are authorized to a certain amount.

This is where, hypothetically, you can get the best deals. I say hypothetically because you are not always able to get in the property, let alone have an inspection. So it’s tricky. The foreclosed upon owners could still be living there and you have no idea in what condition they will leave it or when or how.  What looks on the surface to be a good deal may be a nightmare. And did I mention, you pay cash, due in 48 hrs? But is there opportunity?  You bet.

Start taking a look – see if you like the market from an investor’s standpoint. There’s the contrarian principle that says when the majority of people are on board, if you go the opposite way, things generally will turn out better for you. It’s resisting our inherent “mobness” and going against the crowd. Refuse to buy into the doom and gloom. Think for yourself and see the perfect storm of elements that have come together right in front of us: Super low interest rates, affordable properties & good rents.

All the strategies have a learning curve involved. This is where it pays to have help. If you’d like to talk, contact me.

Think Of It As The Job You Don’t Have To Go To

Here’s the second way to make money in real estate . The first was through building equity by way of the Equity Play.

This one, I call:

The Cashflow Play

You buy a property where you can generate more monthly income than the mortgage payment. The pure Cashflow Play would be to buy a property for cash and bank the entire rent.

When you  have a mortgage, you are always simutaneously enjoying the Equity Play since your tenant is buying the property for you again. This is an example where using Other People’s Money works nicely.

If you pay cash you can only build more equity with appreciation. Still, it is a nice place to park money, especially for retirees. It’s such a safe bet, since once again, having a roof over our heads is our basic need right after food. The worst thing that can happen is they don’t pay rent so you don’t get income – if you had a mortgage, when they don’t pay rent, you still pay. Do you suffer from Tenantphobia? Don’t worry, we’ll deal with that later.

If you go with a mortgage, my favorite long term, conservative plan, is to put a third down. You can’t get in a lot of trouble with a house when you have a third down. The other part of my conservative plan is to buy two or three and then you are further protected when there is a vacancy, since the cashflow on the rented ones will cover the vacancy keeping you from being drained.

I have a less conservative plan too. If you are still working and don’t need the cashflow, you can use it to either pay down the mortgage or build for the next down payment. Add some regular monthly savings and you can make huge progress to a secure future. If you don’t understand the magic of compounded interest, you have to read about it.

I have a hair-on-fire plan too, but it only works when the market is moving briskly. It’s a lot of fun and fast when it goes well. Unfortunately when it doesn’t go well it’s an experience you don’t want. So we’ll talk about that next time the market is brisk.

I think because of the volality in the market, a lot of people think real estate isn’t a good investment right now. An attitude like that blinds a person to some incredible opportunities. When society gets nervous like it is now, it’s difficult  not to get caught up in it. Opportunities are for the people that can step back a little and get some perspective. We are certainly at a low so remember the addage Buy Low, Sell High? We are at the Buy Low part.

How To Get Someone To Buy A House For You

What a nice thought. Could it be?

Absolutely, this is really what real estate investing is all about. Getting others to buy property for you. It happens all the time. I call it…

The Equity Play

You buy a house where the rent you collect covers the mortgage payments and expenses.

Pros: Someone not only pays all your expenses but takes care of the place and makes a number of repairs for the cost of materials only.

Cons: In it’s pure form…it takes 30 years. The time it takes to pay off the mortgage. Not that many people do that, though. Most will hold until the profit can move you into a larger property or multiple properties. Also there’s the down payment needed.

The biggest ace in the hole and how you can really make The Equity Play pay, is Appreciation. Just because we are not enjoying property appreciation now, doesn’t mean we can’t talk about it. When markets start moving again you’ll be in place and ready.

In the Equity Play, if you buy a house for $200,000 and someone else (the tenant) pays the payments and expenses for 10 years, and if it appreciated at a compounded 4% a year (historic average), that would about double the value of your house. Not quite, but close. Now you’ve got some real Equity.

The Equity Play is long-term. At least 10 years. Because real estate markets are cyclical, you have to ride out the lows. If, for instance, you bought now, it might take a few years before you start seeing some appreciation, in the meantime you are on the pure form and just letting someone buy a house for you.

It’s not a bad plan.

Previous post, See: There are only 3 reasons to buy real estate in Bellingham or Anywhere Else.

Next: Cashflow – Think Of It As The Job You Don’t Have To Go To.

There Are Only 3 Reasons To Buy Real Estate in Bellingham OR Elsewhere

This is the start of a series on basic real estate investing. Even if you’re a pro, it doesn’t hurt to review.

There are 3 and only 3 ways to make money buying real estate as an investment medium.

 1. Equity – Buy and hold. Rent pays mortgage and expenses. Property appreciates over time.

2. Cash Flow – Have an income stream in the form of rental income.

3. Cash – Buy short term and flip for cash.

Any opportunity you’ve seen or thought about, fits into one of these categories. Those are your options.

Sometimes you can get two of them to work at the same time like building equity and collecting more rent then the mortgage payment. But it’s pretty much impossible to have all three outcomes at once.

It’s best to pick one: Equity, Cash-flow or Cash and learn the rules of that plan. No need to re-invent the wheel. Like most things in life, it takes some effort and some time for you to work out the kinks. You are not usually perfect your first time out. I’ve seen people try one real estate investment transaction and it didn’t work out and now they are afraid to try again. Not every real estate investor has a perfect score. Keep that in mind.

Let’s define what each plan is, starting with The Equity Plan.

 Part 2: How To Get Someone To Buy A House For You.