What You Missed March 2016 General Meeting
by Rob Earhart
The Deals Are Still Here and He's Doing Them!
Presented by: Clyde Wilson
March 1, 2016
“Believe it or not, you can still buy properties in Florida,” proclaimed Clyde. “The real market is that you can buy anything the tenant can afford to pay for.” If you lower the rent below market rents, the tenant will stay longer and tell their friends what a great deal they got.
The marketplace makes the price. “We had a deal in the works that they wanted $185,000 for 3 houses, but it would not carry the rents. So I showed them a couple of bank cd rates at 3 or 4%, so they carried back at 4%. I can rent the houses out for $795 and, with the expenses at half that, I could afford the purchase.”
Clyde then used his financial calculator to show how the sale was a good deal.
Some deals are not so good, like if they are on septic and well water. “Sometimes the sewer leaks into the water table and it will change the color of your eyes…” Clyde commented.
In the last six months, we bought a fourplex in Winter Haven. The lady lived in one of the units and would not sell. But she passed away and the daughter was having it painted. The painter gave me the phone number and I called her. She asked what my name was and, when I told her, she said her mother left a note on her desk to call you when it came time to sell.
You can find good deals if you try and talk to people and make yourself believable. If they believe you will do what you say, they will bargain with you.
Clyde then introduced Ken, who told a story. “We talked to someone who had six lots with a house on it. They wanted $50,000 for everything, but we did not want to pay that. We worked on him for a few months and finally got them to sell them to us for $20,000. Then I sold two lots and the house for $20,000 and kept the four lots to put them in my daughter’s name. Now she has four lots. Then Ken worked on the house for 18 months and it came out really nice. We then decided to sell it and contacted the local realtor to get some comps. She said it should sell for $110,000. In two months, it sold at full price and we paid Clyde off,” explained Ken.
He then added, “After all expenses, I netted about $45,000 for all the work done.”
Clyde told a story about Ken taking him to Auburndale to see a dumpy house. The house was a wreck, but Ken said I should buy the house. For two years the property was for sale, but nothing was happening. Then a FSBO sign showed up, so I called. They wanted $199,000, but I had an accountant check her tax situation and found she would not have any taxes due. We bought it for $800 per month, including interest. We evicted everyone and are rehabbing the properties.
Clyde informed us that ”You can get a license for $350 to allow short term rentals. It allows us to evict immediately. In four years we have only evicted four people. It is the same license that hotel/motels have.”
A friend of mine owned a mobile home with its own lot on city sewer and water and wanted me to check it out. I didn’t like the price, but there was one for sale next door. The realtor said it was $27,000 and was a fully-furnished two-bedroom home, but they had taken out a wall to make one large bedroom.
The kitchen floor was rotten because the refrigerator leaked. I offered them $13,500 cash. The realtor called to say they would not take $13,500, but would sell it for $15,000. I spent about $5,000 to fix it and found a tenant to rent it for $331. That yields 19% interest. Would you rather have this kind of income or put your money in a bank? That’s why I like to buy properties that pay for themselves.
How do you walk a mortgage? CIyde exclaimed, “I went to Jimmy Napier University and learned how to do that. I thought he was crazy until I learned how he did it.” I just explain to the owner, “If I owe you money and I pay on time and get a chance to remortgage your property at a lower rate, can I change the mortgage from the property I bought from you to another property?” That will allow me to remortgage your property at a better rate.
I went to a trailer park in Holly Hill and talked to the manager and owner. She said she would only sell for a million dollars but was not ready to sell. I went back over the course of a few years before she finally wanted to sell. Then she wanted $800,000 and wanted cash. I went to my bank and they wanted me to pay for the appraiser.
I found a trailer park in Lakeland, Fl. And a lady that built it from nothing. She wanted $1,496,000. I asked her where she came up with that and she said they had it appraised. I said I would give them cash, but they would have to pay 40% for income tax and recaptured depreciation. If you carry back a loan, you get $96,000 per year but if you take the cash, then after taxes and the bank paying 3%, you would make only $27,000 per year. I asked her, “which do you think would be better?” She then wanted to talk to their lawyer and he agreed it would be a better deal not to take the cash.
Then we tried to raise the rents by $50, but the homeowner’s association would not agree to that. We ended up raising it $10 per month and are now in a positive cash flow situation.
Clyde then encouraged us to get Jimmy Napiers’ book Invest in Debt and get a financial calculator so you can change your financial world.