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Note investing, Dealing with tenants, investing in raw land and more

Note investing, Dealing with tenants, investing in raw land and more

 

Newsletter material

As always the Pittsburgh Real Estate Investors Association is dedicated to bringing you the best education possible so that you can make the most money possible.

 

A note on notes

In the coming weeks we will be talking about note investing a bit.  At the most basic lever, a note is a debt obligation.  A note is created whenever a mortgage is created.  It is the note that controls the property.

Now imagine that I borrow $100,000 to buy a house at 6% interest.  The note that is created in this transaction obligates me to pay the owner of the note all of that interest.  Compounded interest over a 30 year period can be a lot of money.  So if you happened to buy the note at a small discount of $4,000. Then for $96,000 you now own the right to foreclose on me if I don’t pay you back $100,000 at 6% interest.  In a case where the borrower is making the payments, the note is called a performing note.  Can you see the relative safety of this sort of deal?

Now imagine if I am not making my payments, then you can also buy the note, but at a steep discount.  How steep depends on the individual deal. In some cases you can buy a note for a lot less than the face value.  I don’t want to get too far down the rabbit hole in this first article, but imagine if you can verify that the house is really worth $100,000 and the note will only cost you $50,000 to buy.  You will most likely have to evict the current occupant, and make some repairs, but can you see the profit potential of this sort of deal?

We will be talking about note investing at our July monthly meeting.  So if this sort of investing excites you, then you need to be at the July Pittsburgh REIA meeting.

To your success

Josh

 

 

 

Landlord Tip of the Day

 

The art of landlording is a strange game.  It is part psychologist, part adult baby sitter, part legal scholar, and part mad scientist.

You have to start with the basic assumption that your tenants are not your friends.  They may not be your enemies, but they surely are not your friends.  You need to maintain a professional distance between them and your business.   It’s all about business and they are just people who pay you to provide them with clean safe housing, nothing more.  They trade dollars for a place to sleep and keep their stuff.  The problems occur when they start to bring their personal problems to you.  Do not let their problems become your problems.  If they have problems paying rent, their replacement will not have the same problem it is that simple.

As investors we are also humans, and we want to believe that people are nice, friendly, and honest. In general those are all true statements.  Tenants however do not look at landlords as people.  Some of the worst tenants look at landlords as unfairly wealthy people who should be ripped off at any opportunity.  Some of the really bad ones know the laws inside and out.  You job as a landlord is to learn as much about the landlord tenant laws as your tenants do.  That is why we spend time each month going over legal issues in the REIA meetings.

Don’t get me wrong, I firmly believe that there is no better way to build long term wealth than to be a landlord.   What I want each of you to do is to learn how to be a really good landlord so that you can control the amount of damage that a tenant can cause in your life.

To your success

Josh

 

Thoughts on buying farm land as an investment

Below is an email that I sent to a student who was looking to buy a farm as an investment.  I hope it helps someone.

One of the odd catagories of land investing is a farm or farm land.  Will it rent for more than it will cost your per month to own it?  You can check rentometer.com to find rent comps.   That takes care of the physical building rent numbers.   You can also talk to other local farmers or the current owner to see if any other farmer in the area will rent the land from you to grow crops.  Farmers are usually pretty poor so they cant buy extra land to expand but will gladly rent it. Be careful on the renting the house part, rurual houses are hard t rent because not many people want to live out the country

 

Now let’s talk about the land development part of this equation.  You can start by emailing a bunch of local builders and see if any of them would joint venture with you to develop the land. You put up the land and they do all of the work and then you split the profits

 

Lastly, is the land on gas or oil, can you sell the timber for money?

 

There are a lot of things to think about with farm land

 

 

 

NOT QUITTING

 

Quotes on Not Quitting

 

Many of life’s failures are people who did not realize how close they were to success when they gave up.

 

–Thomas Edison

 

What if I told you that 10 years from now, your life would be exactly the same? I doubt you’d be happy. So, why are you so afraid of change?

 

–Karen Salmansohn

 

Perseverance is the hard work you do after you get tired of doing the hard work you already did.

 

–Newt Gingrich

 

Success seems to be largely a matter of hanging on after others have let go.

 

–William Feather

 

00751565.jpgDevelop success from failures. Discouragement and failure are two of the surest stepping stones to success.

 

–Dale Carnegie

 

The best way out is always through.

 

–Robert Frost

 

When you get into a tight place and everything goes against you … never give up then, for that is just the place and time that the tide will turn.

 

–Harriet Beecher Stowe

 

Courage is not having the strength to go on; it is going on when you don’t have the strength.

 

–Theodore Roosevelt

 

 

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