Archive for the ‘risk’ Category

Have you begun to evaluate the performance of your real estate investments this year?

December 22, 2011

This is a great time to do a little homework concerning your investments and whether they are meeting the return guidelines that you have determined are appropriate for them.

Have you taken on some type of unstated risk and previously undisclosed risks?

Have you taken on too much risk in your investments?

Have your investments revealed that they are considerably more risky then you thought?

Are you being properly compensated for the amount of risk that you have taken?

Have the characteristics of the investment changed in such a way as to put at undue risk the total investment?

Is the investment performing in a way that is in line with its stated purpose?

Do you have a stated purpose for your investments?

Has that purpose changed?

Do you still trust the staff managing the investment?

Is the amount of debt appropriate for the investment?

Are the expenses in line with the budget? If so great is not what should be done to bring them in line or is this a reason to divest yourself of this investment?

What is the exit strategy for this investment?

What is the timeline for the exit of this investment?

How does this investment fit into my investment portfolio?

Is the overall market or demographics for this investment a good one or a poor one?

Are there some other evaluation criteria that apply to your investment that are not outlined above?   If so drop me an email so I can add them!

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Eviction Adventures

June 27, 2011

I discovered something new in my land lord adventures last week. Simple evictions can be decided by a jury.

Yes that’s right a Jury!

When I went to court at the appointed time the clerk let me know that our eviction time and date had been changed b/c the resident requested a jury trail. So I went to the legal library and checked out a little info and when back to the clerk and asked if it cost $ for a jury trial. She raised her hand and held up 5 fingers! I said 5 dollars is all it costs for a jury trail! It should cost as much as the initial filing fee!   At least that is how I felt when I realized that requesting a jury trail delayed the court date by 5 days. So after our little delay I show up to court with my family in tow. My family were there for the field trip to see how the legal system works.

There were a few cases before mine. One of the cases involved a tenant who had a dog in his apartment in violation of his lease. He was a young guy and thought that it would be ok to violate his lease in this way. The Judge let him know that in no uncertain terms if his lease says no pets then it means no pets. So he says that he had not paid for this month b/c he did not know how this thing would turn out but that he had the money and he would pay for any carpet cleaning and get rid of the dog and would move. The Judge then asks his landlord if that would be ok if he would do those things within the next week if they could dismiss the case. The landlord says yes the tenant says yes and everyone agrees to work out a solution that could work.

We were next. There were 25 jurors there ready to decide our case but before we begin eliminating some of them to get down to either 12 or six. So the judge says hey lets have a little pretrial meeting to see if we can work some things out. So we both approach the bench. The judge says is there any way we can work this thing out. So the tenant says he is open to working something out and I interrupt him and the Judge and say I am open to settle this and it looks like him paying “Is he prepared to pay today?”

Of course he was not prepared to pay today so I say “lets get ready to rumble!”

The judge then says well I want to take a little break before we get started and maybe you all can work something out. I go back to my wife and she says you could not work something out? I reply

“What! He can’t pay but since you are saying try to do something I will try.”

So the resident and myself go into a little conference room and try to discuss some type of way to work this out. What we come up with is that on monday he will pay 900 and then will get something from the county to help the rest. I reply ok my wife said work out something. We go back into the judge and let him know that we think that we have a settlement. So the judge tells the jurors that he has some good news and some bad news. The bad news is that if they wanted to experience the civic duty of serving on a jury that they would not be able to do so today and the good news is that if they desired to leave here and get back to their lives he was going to be releasing them in a few minutes. After they were released the judge says ok tell me the settlement that you have come up with. So we tell him and says to me that sounds like a good outcome for you Mr Seay as you are able to get something verses getting nothing. This was a Friday so when monday comes along I was very busy and did not have a chance to reach out to the tenant but when Tuesday came I did talk to him and ask him if he had the $900?

 Of course he did NOT!

So very nicely I explained to him that the Judge would only allow me to move his stuff out at the endo of the week, but that I did not want to pay any more money to exercise my rights. I would like for him to move by the following monday and I wished that he could come up with the money an would work with him if he thought that he could but if not then move so that I can move on as well. I wished him nothing but the best and let him know that sometimes thing don’t work out the way we want them too. Did he move out by Monday?

Of course NOT!

However he explained that the self storage place closed earlier on Sunday and all he had was a few things and he would have them gone today. So finally I got my keys and took possession of the property and to his credit he did not leave me any extra furniture, food, clothing, or other accessories.

Do you have some problem tenants and need to know what do next? Are you not sure how the eviction process works? Do you want to what I did wrong in selecting this tenant? Drop me an email ro call me at 512-782-8982.

My first eviction saga…….

May 9, 2011

(Normally evictions are a pain but not a SAGA) It all started when a tenant did not pay and performed what I call a Midnight move out. That is when they move at midnight so no one would see what was happening. Well this tenant did not take everything. So I called her and said hey do you want this stuff?

Yes I will get it in a couple of days.

NO you can come get it from the front porch b/c I am setting it out as we speak.

Well you can’t do that, I say read your lease you already abandoned the unit and you already gave me permission to set out your stuff if you abandoned the unit.

((Tenants never read the lease but always know how things are supposed to happen))

So I instruct my staff to set out the stuff and remind them of the general rule of not disturbing the peace if she shows up just be nice and calm and I leave. Well she comes right over with the police!

Of course my staff calls me and says what do we do? I say well don’t argue with her just leave the stuff and tell the police who you are and what not. So they leave and the tenant wants them to put the stuff back inside to which they don’t have to call me for the answer to whether or not they will do that.

NO! They wont put it back inside!!

The next day when I come back I tell them to do it again and of course the police come back again with the tenant. I think her friends who were the neighbors were calling her to let her know if someone was in the unit. I love the neighbors to be friendly I just don’t want them to team up against me!

So the officer comes and tells me that I cant just put her stuff out even though she has moved most of it and just left some junk. He says I have to evict her and I let him know that I will do just that since she is intent upon having her way.

((She does not realize that an eviction will result in a judgment, which is worse then just a collection account from a landlord for her credit))

So I go to court fully expecting to see her. It turns out that she was trying to cancel her lease but instead of reading it she relied upon the info that she got from the Austin Tenants Council concerning canceling the lease.

((I guess this is one of those you get what you pay for situations))

So she missed the court date but I will come back to that in a little while. But she files an appeal and a pauper’s affidavit to go along with it.

Now she has a little problem with this pauper’s affidavit, the jest of it is that she is no pauper!

She bought a new car ((I supposed with the rent and tax return money)) Additionally she has a job!

In the Great State of Texas if you want to appeal an eviction you have to post a bond in the amount of the judgment. That is unless you are a pauper. What is a pauper? I general terms a poor person who cannot pay. Well why would a pauper want to appeal an eviction? If they could not pay in the first place what makes them think that they could pay later?

Since this was a first for me I had to take out my trusty RED BOOK from the Austin apartment association and see what needed to be done about this! The red book said file a challenge to the pauper’s affidavit immediately!

So that is exactly what I did!

When we get to the court for the hearing she is not there, but at the last minute she shows up! Man I am disappointed I thought I would not have to fight and go thru all of this stuff.

Well when she finally comes in after pausing at the door unsure of whether or not to come in we get started in the roughest, meanest, longest paupers affidavit challenge of the century!

Here is how it went down. The Judge swears us in and then says I am going to ask you a few questions about the appeal and paupers affidavit.

Judge: Did you know that you would have to pay the rent in order to file an appeal?

Tenant: No, but …..

Judge: Did you pay the rent?

Tenant: No, but…..

Judge: I was out when this went to court for the eviction and my substitute was here but why didn’t you come to court on that day if there was a problem?

Tenant: Well I was here but your staff sent me to the wrong courtroom. ((A little background here is good. This is the main court house for the county it has 4 floors and at least 25 court rooms and several floors next door with several court rooms per floor as well.))

Judge: Who sent you to the wrong courtroom?

Tenant: Your clerk… Judge: Bailiff go get all my staff in here this minute I want to know who sent you to the wrong court room!

Tenant: I don’t want to get anyone in trouble…..

Judge: Nonsense I want to know who sent you to the wrong courtroom! Staff comes in and one of the clerks recognizes the tenant.

Clerk: Your honor she looks familiar but you know I see lots of people and this was 2 weeks ago, but did you have a criminal case as well on the same day?

Tenant: Yes I had another case as well and I went to that courtroom and by the time I made it back here this was finished.

Judge: What is the docket number for the other case?

Tenant: I don’t know but have the paper work in the car my boyfriend can go and get it.

Judge: Good go and get it but lets work this thing now. You filed this papers affidavit is all of this info correct?

Tenant: Yes….

Judge: How were you paying the car note and rent before this time b/c I don’t see any income on here?

Tenant: Well I have a job but its only part time? And the car note gets paid..

Judge: The car note just gets paid…. Please take a second and fill this out completely.

Tenant: Ok here you go.

Judge: You don’t make enough money to pay the rent and all of the other expenses that you listed and you already said that you understand that to win an appeal you have to pay the rent but you have not done so. So why do you want to appeal?

 Tenant: Well there were some things that did not get fixed in my unit and I sent the landlord notice.

Judge: Ok well I see….

(( Now here is where I am thinking that I will get a chance to SLAM her)) In the meantime I have been just sitting there looking out the window trying not to the speak when I was not spoken to. My mother raised me right (don’t speak when you are not spoken too) I am ready to ask her when she bought the car I already know that it was after her midnight move out so she cant claim that she is a pauper, b/c paupers don’t go buy new cars? Since it was around tax return time I was also going to ask her about that as well, and her boyfriends income since they were living together. Additionally, about her income since she always had the rent until now and where she was staying since she was not paying rent to me she must be paying someone. Etc etc etc

I was ready for war! So I look at the judge for my queue, but he says……

Judge: I don’t think you are credible and I am denying your paupers affidavit! Mr. Seay you are free to go unless you want to stay to see this other stuff

Ron says: No thank you your honor Can I get a copy of your decision today or will it come in the mail.

The moral of the story is dont use your rent to buy a new car!

FIRE!!!

January 9, 2011

over the holidays I had to deal with a fire in one of the apartments that I own.   I am relieved that the resident was not killed and thankful that the damage was not to the entire building!   Fires can wreck a real estate investment luckily this one is insured so the damage will not be as large as it could have been, but nevertheless it is a big distraction when you want to start the new year on a positive note.  Check out some of the pictures of the fire

after the fire

inside the unit

Buy from pessimists and sell to optimists

December 3, 2010

Ron’s sayings and things # 2,857 to make you a better real estate investor.

This is one of the fundamental real estate investment concepts that most people seem to misunderstand or to miss apply to themselves.   Buy low and sell high plays a part in this concept.    It sounds easy enough but the application of this wisdom contained in the instructions is a complex concept.    To do this you must understand market fundamentals and take your time to study who the pessimists are and who the optimists are.    When the market is ugly and no one wants to be a real estate investor, foreclosures are everywhere, and everyone who has something to sell and there are no buyers or very few who want to buy real estate because of the general state of the economy.    In this market the pessimists are ruling.   The trick is to buy something that you can fix or that is in need of the specific skills that you can easily provide.  

 When the market is great and everyone is making money and going to become the next Donald Trump, the economy is booming and money is easy to get.   TV producers create shows profiling regular people making tons of money being real estate investors.   This is a market dominated by optimists.    In 2007 I owned several older houses in a changing neighborhood.    There were investors tearing down houses and building newer bigger houses on these lots.  I was beginning to get excited about the possibility of either rehabbing these houses for big dollars or tearing them down and building something new and big and beautiful.   Then I began to do my research on the costs, risks, and benefits.   After much analysis I determined that it was not in my best interests to pursue these opportunities.   So I decided to sell the houses to some optimists!

 One of the houses had 2 houses on 1 lot.   I sold it for $125,000.    My analysis looked like this: To turn these houses into something beautiful I would need to probably spend something like 100K each and in turn I could probably sell the houses as a package for between 325-350K.   Those are big sells numbers and appeared to be very enticing.   The problems were that I am not a builder!   I am an investor who specializes in buying problems and solving those problems for a profit.    To me it appeared to be wisdom to not do thing that I am not trained or experienced in doing.   Additionally taking on 200K in debt to work this transformation was also a problem for my cash flow.   The 200K would need to be serviced and I don’t like paying on debts without a tenant’s money to do so.   My cost for these houses was about 25K total and I have pulled out another 50K in cash in the form of a mortgage on the properties.   So here is what the math looked like

200K rehab costs + 25K original costs   = 225K

(Not including cost overruns and mortgage interest expense while holding the property for sale)

Profit from the sale:

325K sales price – 25K commissions and closing costs = 300K

Leaving a 75K profit from this little adventure (300-225K= 75K), this excludes any existing loans on the property.

If I just sold the properties for 125K minus commissions and closing costs 10K leaving me of 115K minus the 25K original cost or 90K profit.   This 90K profit was made be not doing anything except thinking and using discipline to not do things that I do not know how to do.   There was not additional leverage applied to get the 90K profit, no risks associated with building, no headaches with contractors, no nothing just sell the property!   So that is what I opted to do.   I listed the property and an optimist came and found me!

The optimist tore down the houses and began the process of building on the lots.   Unfortunately things did not work out as they had planned and they could not find a lender to loan funds to build and now they have torn down the houses that produced income, have a note on the land then needs to be serviced and are searching for an investor who can borrow enough funds to build or who has the cash to do so.   Finally after many months of paying on the vacant lots the optimist lost the property to foreclosure.   It turns out that the market turned before they could build and now a new investor owns the lots and is waiting for another optimist to come along so that they can do the process again.

Do you need an analysis done on your property or portfolio?   Not sure whether you are an optimist or a pessimist?   Do you need guidance on what path to take in the real estate business?   If you think any of these questions apply to you then you should call me at 512-689-6742 or email me.

how are your returns?

April 23, 2010

Why Many Investors Keep Fooling Themselves
by Jason Zweig
Tuesday, January 19, 2010 of the wall street journal penned a great article about How high most investors returns are. You can check it out at http://finance.yahoo.com/retirement/article/108608/why-many-investors-keep-fooling-themselves?mod=retire-planning

To summarize the article says that most investors cant earn over 5% or so on thier investments. The Stock market has returned 9.8% since 1926 according to Ibbotson Associates. Can you out earn that figure? After fees, taxes, and inflation the return drops down to just 4%. 4% SUCKS! Just in case you were wondering.

So how do you out earn the US stock market? I use real estate that produces cashflow today to spend or invest and normally will not get out of bed to even look at returns under 20% on a cash on cash basis. I hope you read the article and if you have questions about how to make your retirement better give me a call at 512-782-8982

An example of a multi-leg real estate exchange

March 2, 2010

Please see the file entitled multi-leg real estate exchange. This is courtesy of The Society of Exchange Counselors (SEC). You can find thier website at http://www.secounselors.com

Here is the link http://www.slideshare.net/ronseay/multi-leg-transaction-formulas or click the follwing link:

What is a multi leg real estate exchange?

March 2, 2010

What is a mulit-leg real estate exchange? It is a series of exchanges that allow you to take your real estate from where you are to where you want to go. How do you make something like that happen? With lots of flexibility and patience. You need to be able to move into assets that may not exactly fit your needs at this current time. They may not be the best fit for your long term financial plan. They may not even be in this country! They are simply a way to go from where you are to where you want to be. You need to be able to answer the question, “What else can it look like?” Have you heard the story about 1 red paper clip? http://oneredpaperclip.com/ That is a multi-leg exchange taken to the extreme because the exchange started with 1 red paper clip. What he needed was a taker? Are you a taker? What is a taker? It is someone who will take what someone else has and maybe exchange what they have. Do you have a hard to move property? Be a taker and it will soon go away. Do you want to know more? Call me at 512-689-6742 and we can discuss your real estate problem.

What is a dirty ugly?

February 7, 2010

it is a property that is dirty and ugly.   Need an example see below.

Why would someone own this????

Freddie Mac sees rates headed to 6 percent by end of 2010 – CNBC

January 6, 2010

Freddie Mac sees rates headed to 6 percent by end of 2010 – CNBC.
How are higher interest rates going to effect your investment? How will they effect other investors who are in trouble? What opportunities are you going to see if interest rates go up and up and away? Do you have any idea how many properties have financing that is going to blow up those investments? Are you in a situation that if rates go up you will blow up?

Do you have a strategy to deal with higher rates in your investment life and the life of those around you? If not please call me at 512-689-6742 and we can discuss how you can position yourself to survive, thrive, and capitalize on this environment!


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