Real Estate Q and A with Wendy Sweet
Wendy Sweet (00:00:04):
Hi, this is Wendy Sweet. Welcome to our show today. And I say our, but it’s just me, my brother and partner Bill is off gallivanting around the country. Actually, he’s doing a mission trip. And so I thought I’d come up with some things. You know, I get a lot of questions. Everything you hear about real estate is another little nugget that you can put into your toolbox to make a better deal, to make a better loan, to just make a better decision on what you’re doing. So I’m going to start off with the first one. So the first question is, in real estate investing, is owning real estate property worth the headache? My first answer would be, Oh gosh, no. But in reality, yes, absolutely it is. And there’s so many reasons for that. Yes. If you’re cash flowing, if you’re not cash flowing, then you’re in the wrong deal.
Wendy Sweet (00:00:55):
And that’s where people really, really make make the biggest mistake I, and I wrote here, if you are in a deal for the appreciation or even breaking even, it’s not a deal. You never buy a deal for the cherry on top. It needs to work standing on its own. I do a lot of short term vacation rentals. I would never buy a property just to short term rent it. I want to buy a property and make sure that it’s going to cashflow on a regular longterm tenant and then being able to rent it out on short term rental. That is the cherry on top. That’s not why I bought the house. No rentals should be a headache. If you’re using a good property manager, training your tenants from the start using the correct documents for leases like a move in checklist and setting expectations. So that’s the other thing.
Wendy Sweet (00:01:51):
So many people think that they have to be the ones that are responsible for managing the property and you don’t. Don’t be so cheap that you’re not going to pay somebody 10% to manage your property. Is 10% of your income worth letting somebody else have all the headaches? Absolutely. Yes. Is that the best use of your time to manage a property? No. Don’t be cheap. Let somebody who does it as a professional taking over and take all of those issues away from you, it’s really, really worth it. The other thing too is the more pride that you give to your tenants, we actually call them residences. We don’t even call them or residents. We don’t call them tenants. We call them residents because that’s what they are. They’re not just tenants, they’re residents. They’re living in there as their home, so you want to give them a sense of pride of why they’re even there.
Wendy Sweet (00:02:42):
Walk through the house with a checklist, showing them how everything works. Yeah, don’t put rice down a garbage disposal. Here’s what’s going to happen. Here’s what, where you go to change the air filters. You’ll want to make sure I’ve left you extra batteries for your smoke detector and your carbon monoxide detector. Show them where all those things are and here’s the list that I left take to the back of the cabinet door on the sink that will let you know the next date that you need to change out the air filters or the batteries. Here’s where the water turn-off is in case there’s some sort of a leak. There’s all kinds of things that you need to walk through the house, show that person and give them the pride of being the resident in that home. You might even be training up a homeowner, homeowner, you never know.
Wendy Sweet (00:03:33):
There’s a great place to get the right documents and that’s probably, I always like to say that if you really want to buy good rental property, you go to eviction court. Cause that’s where all the fed up landlords are. That’s a great way to buy a house. So keep that one too. But the reason why those people are so fed up is because they didn’t have the proper documents in place to begin with. Having those documents in place that spell out every thing you’re agreeing to is a protection for you and you need to go by what those documents say. I can tell you that, um, Jeffrey Taylor, mr landlord has some great documents on his website that you can get ahold of, but it’s also worth in your state, even in your County, going to a local, attorney that would be an eviction attorney attorney that can produce some documents for you.
Wendy Sweet (00:04:29):
Most of them already have, have a document or two that they use because as soon as something happens that they haven’t run into before, they go ahead and they add that to the lease too. It’s really, really important that you get good documents so that when it is time for you to take somebody to court to get them out, that you’re not having to come back in another 10 days or in another 30 days, or they’re able to put you off. So you really need to have everything in order for that. It makes a really, really big difference. So if you have a problem owning property and being a landlord, you need to look in the mirror because the problem may be you and not your tenants. So be really careful about that. What are some of the rookie mistakes that people make in their first investment deal?
Wendy Sweet (00:05:18):
My first one is paying too much for the house and people, not only rookies make that people who’ve been in the business for a long time do that. Sometimes you forget the basics and the bottom line is paying too much for the house. You need to back your way into the price. Knowing what the house will sell for fixed up should be the number one number that you know, I am always shocked at the amount of people that call me for a loan that are already down the pathway. They’re already have an under contract and I’ll my question to them, my first question is what do you think the house sell for? And their answer to me is, I’m not sure or you know what I really don’t know. Or they’ll give me a range of between one 40 and one 65 well that’s a crazy range.
Wendy Sweet (00:06:10):
You need to, if you said between 140-145 yeah, that’s easier to swallow. But when you have a range that wide, that means you really don’t know what it’s going to sell for and you need to know what it’s going to sell for because that’s what your profit is based on. Whether or not your plan is to sell the house, that doesn’t matter. You need to be in a house at least 70% of the after repaired value or lower for it to truly be a deal. Whether it’s a buy and hold or whether it’s a property you’re going to fix and flip, you need to be in that deal at 70% or less. That’s what you’re looking for. So when I’m looking at a property or somebody asking me about a property, I want to take that after repaired value. What does it really gonna sell for?
Wendy Sweet (00:06:58):
Not what am I going to list it for. But what do you think it will really sell for? So once you take that after repaired, value that true, what’s it going to sale for price? I take that number, I multiply it by 70% and what I have left over is the amount of money that I can put into it to fix it up and the purchase price. So I’m going to have that 70% value. I’m going to subtract the repair costs and then what’s left over is the most that I can pay for that house. That’s the bottom line. If you’re paying more, then that house isn’t a deal and you need to walk away and look for another one or where you really need to negotiate, renegotiate what you’re doing. A lot of the best ways to renegotiate that of course is once you have an inspection on it and you can go to that person that’s selling that house.
Wendy Sweet (00:07:48):
Now it’s more like a lane too and not the castle that they think it is and you’re in a much better position to be able to negotiate that. So again, I’m going to do that formula for you one more time. You’re going to take the after repaired value. You’re going to multiply it by 70% that number that you have left over that equals at 70% the next thing you’re going to do is subtract the repair costs and what you have leftover is what you’re going to pay for the house. Now the next question is, well, how do I know what the repair costs are? You can’t look in the window and figure it out. You really need to walk into the house. You need to look in the attic and you need to look underneath the crawl space because what’s underneath that crawl space and what’s up in the attic.
Wendy Sweet (00:08:33):
That’s where your big ticket items are. That’s where your joists are messed up. That’s where your trusts are messed up or there might be a roof leak that you don’t know about or if your air conditioner is up there, it might be about ready to leak. Your duct work maybe messed up. There’s all kinds of things. Water may be sitting up underneath the crawl space. It could be like a pool in there. Those are all things you really need to look at. Just this morning I was looking at a property with one of my best friends and she’s buying this house for herself and it was discovered that up underneath the house is standing water and it’s not only standing water, it’s standing water that’s sewage because there’s a cast iron pipe that has broken and the entire underneath of the house is full of sewage. Now you want to run away and go, Ooh, I don’t want to do that.
Wendy Sweet (00:09:24):
My first thought is I’m running to it because now I’m getting a much lower price and I know it can be fixed cause I see it fixed all the time. So things like that don’t scare you, but you need to know what they are, what it costs to fix it up. That’s an important number for you to know. So now that you understand that formula, stick with it, make sure you don’t pay too much for the house. I have my third question here that was asked of me and it says, what is the saddest slash weirdest thing that you have ever seen in a vacant home? Well that’s kind of is twofold. There are sad things and there were weird things. Sad things would be, gosh, when you see a bunch of family photos and the awards that the kids won growing up and toys, the kids toys, you know the marks on the doorframes when they’re measuring their kids growing up through the years, you know that there was a family that once lived here and you know, for whatever reason they had to leave.
Wendy Sweet (00:10:29):
And a lot of times when we walk into a house, they had to leave. It wasn’t, you know, by choice that they left. And that’s kinda sad to go through. I used to spend a lot of time going through all of those things. Now if I know who the person was that was there, I’d try to pack them up and send it to them just so they have those photos and things in it. It amazes me too, the grown children that inherit, you know, grandma and grandpa’s house that don’t go back through the house and try to take those old family photos. Those are things you’ll, you’ll never be able to replace. And it’s kinda sad to see that. So I do try to box those up and send it to them whether they want them or not, they’re going to get them in the mail.
Wendy Sweet (00:11:08):
We all of course salivate when a good deal comes along and actually we take time to pray over the house and reflect on what’s been there. And we also for what that pray for, what’s about to happen, cause you know houses are lost for a reason. Seasons come along and they change and are expected to change. One of the weirdest things that I think I’ve seen is, and I’ve seen this more than once, in fact I’ve seen it several times, is I walk into a house that’s been foreclosed on and there will be real estate investment help books in there like Carlton sheets or Larry Goalwin’s or all of these great opportunities for people to learn about how real estate works and how they can get into investing and they’ve never opened them. The cellophane is still wrapped around it. So we call that shelf help, not self-help. I see that all the time. It just amazes me the amount of people that are induced in real estate, and then they sit there and lose their own house. It’s kind, kinda crazy, but those are sad things. Those are weird things. But it happens.
Wendy Sweet (00:12:23):
I have another question. It says, in your opinion, what are the no-nos of real estate investing? I’m not sure that we have four or five, 10 hours to discuss this, but I’ll just try to try to come up with probably my, my biggest pet peeve on a no-no. So here’s what I wrote. Never force a deal. Good deals come along every day. I say that a million times a day where people are calling me restaurant fresh, want to get this deal closed, or they’re newer investors and they’re trying to force a deal and make it work and it’s just not gonna work. And they’re saying, well, well, I’ve been trying to get into this business for so long. I want to do something, I need to jump, I need to make a move. Yeah, all those things are true, but you have to wait for the right deal.
Wendy Sweet (00:13:12):
I’ve been in this business for 20 years and I have seen good deals come along every single day. When times were good and when times were bad. It comes across every single day. Good deals come across my desk, so never force a deal. The other thing is always make sure the deal is a win win for everyone. I can tell you that I am really grateful for some of the people that aren’t in the win-win mentality because one person in particular that was not in a win-win mentality. That was more of a greedy mentality. Gave me an opportunity to start an investor group called Sonrisers. It’s S, O. N. it’s a Sonrisers investor group. We meet every Friday. We’ve been meeting for 17 years and we meet for breakfast at 7:00 AM. We bring in a speaker that does a, the little five minute devotional and then I’ll bring in different speakers that talk about all kinds of real estate topics or anybody in the room could run the meeting because the people that have been there have been coming for so long.
Wendy Sweet (00:14:25):
I’ll have 50 or 60 people in that meeting and it’s so awesome. It’s a, it’s a great way to learn. It’s a great way to connect. You know, when you break bread across the table with somebody, you really get to know them. They know what you do, you know what they do, and you get to share deals and network and help each other and and be each other’s board of trustees. It’s, it’s just a great way to get going. So I can thank somebody who didn’t have that win-win mentality to get me to start that. I’m really grateful for that. So if, if you know of any subgroups around you, you need to check, check them out because it’s a great way to network. But the other thing is, when I say win-win, let me, let me make sure I kind of cover that. It needs to be a win win for the buyer, a win-win for the seller and a win win for the person that you’re going to sell it to.
Wendy Sweet (00:15:15):
So there’s really three parties that you’re trying to please, you need to take care of yourself or you won’t be doing deals. You need to make sure that the person that’s selling that property, that you’re meeting their pain points, that you’re making sure that whatever it is that they desire is met in that deal or darn close to it, and then the people that you’re selling it to, you want to make sure that that person or if it’s a buy and hold, you want to make sure that that person is in a safe, well maintained, repaired, correctly, kind of home. You know, you don’t want to cut corners and leave that broken sewage pipe underneath the house. You want to, you want to make sure that everything is fixed in a, in a manner that you would be happy to live in. That’s a win win for everyone and that it’s affordable for her for whoever’s buying it.
Wendy Sweet (00:16:09):
So you’ve met everybody’s pain point, including your own. The other one is you want to be really transparent with the parties involved. I run into a lot of people who are wholesalers. They assign properties and that’s great. It’s a great way to make money. It’s an honest way, a good honest way to make money. The wholesalers do a really tough job. They’re the ones that are going out there and digging up those deals and negotiating them and they deserve to get paid. So when I’m looking at a deal or if somebody brings a deal to me that I would want to buy, I really don’t care what the wholesaler is making off of it. If they’re bringing me a deal and that deal works and my numbers, I don’t care what that wholesaler’s making on it. They did their job and they deserve to get paid what they asked for.
Wendy Sweet (00:16:59):
If the numbers work, as long as I’ve got meat on the bone for my property to make money, then I don’t care what they paid for it and you shouldn’t either. Everybody deserves to get paid. I don’t ask my attorneys for discounts that I use over and over again. I don’t even ask for the cleaning people that come into my Airbnb and clean those. I don’t ask them for discounts. I want to pay people what they’re worth. I want to pay them for the work that they do. And I want to make sure that when I do need a favor, I know I can pick up the phone and say, Hey, can you take care of this? And they are more than happy to do it because they know that I’m fair and they’re fair with me. It’s an awesome way to really build good relationships with people.
Wendy Sweet (00:17:43):
There’s just no, no need to hide anything. So remember, your goal is to take care of everybody’s pain, pain points, and pay them what they’re worth. Let’s see. I have one more question here. It says, in your opinion, what are some of the absolute no-nos while buying an investment property and what is it that would make you walk away? So of course I would walk away if the numbers don’t work or if I see any kind of fraud or dishonesty with the person that’s trying to sell me the house. I can promise you that if someone’s trying to pull the wool over your eyes or if you see that they’re trying to pull the wool over someone else’s eyes, but you’re in on it, they’re letting you in on it so that you know that’s not a person you want to do business with. That’s not a person you want to be associated with and that’s not a person that you want to help be successful because that’s not the right way to do business.
Wendy Sweet (00:18:43):
You want to make sure that the person that you’re doing business with is equally out, that they have the same character and values that you have, and there’s a lot of people out there that have those values, so be on the lookout because they are out there. I will walk away if I have seen really good deals come across my desk, but the parties involved were going around a wholesaler. That’s another thing that’s really wrong. Wholesalers work hard for what they do. And I’ve had a couple people call me that say, you know, a wholesaler has burn them onto this property, but the numbers don’t work going through the wholesaler, so they’re just going to go right direct to the, to the seller. Well, you know what, it’s not right. It’s not right for the seller to do that. And it’s not right for the buyer to do that, that, that wholesaler deserves to get something out of that deal.
Wendy Sweet (00:19:36):
That’s just not the right way to do business. The other thing, working down the seller even more when they’re already in a really tight position and they’re losing. Remember I spoke earlier about how important it is for a win-win. You know, you want to get the best deal that you possibly can, but you don’t want to not have meat on the bone for the next guy or not have meat on the bone for the guy that you’re buying it from. Everybody deserves to get something out of the deal, something positive out of the deal, and it needs to be profitable for everybody. So that’s kind of a no, no. When I’m dealing with people that are, that are look like they’re committing fraud or being dishonest, I’m not going to work with them. Be on the lookout for that.
Wendy Sweet (00:20:24):
Let’s see, I’m working on question number six. At this point it says, is rental property investing the most efficient way to build wealth? Why or why not? So personally, I really do believe that buy and hold is the best mode of building wealth because it meets several money saving and cash building options, and I’m just going to read these to you and then I’ll expound on them. So first of all, you should cash flow, meaning that your mortgage payment is lower than 75% of the monthly income. So your monthly income, like if a bank is going to underwrite you to finance that house, they’re going to take, if it’s $1,000 a month payment that you’re getting on it, they’re only going to credit you $750 off of that $1,000 they’re going to assume that 25% go into vacancy maintenance and property management. And then that 75% that’s left over, that $750 needs to go to pay your debt.
Wendy Sweet (00:21:28):
That’s going to be your mortgage debt and your insurance payments and your taxes that’s going to be in there. So if your entire $750 is covering that and you don’t have anything leftover, you’re not really cashflow went on the property cause that 25% is going on expenses. Now all that stuff is deductible so that’s a good thing but you’re not really cashflowing on it. You want it to be a little bit better than that at least so you can deduct the expenses, saving on taxes. Third, you can depreciate the house and everything in it and you know, especially where they’re doing the cost segregation these days, the government’s really changed up some things so you can go in there and do some pretty cool things. Fourth. The interest payments are still deductible as a business expense. A lot of people want to pay cash for their properties cause they want to cash flow more.
Wendy Sweet (00:22:23):
You might want to rethink that and keep those properties leveraged because that mortgage interest today, it could change tomorrow, but that mortgage interest is a deductible business expense, so I understand that and letting somebody else pay your mortgage allows you to be able to go and buy more properties because your cash is important to have it in your pocket so that you can purchase more. Fifth and it says these are in order, the house should appreciate over time. You’re never going to buy a property because of appreciation. You’re never going to buy a property because of you’re going to put it on short term rental and get a higher income. You buy a property that stands alone as a good investment property with cashflow on a longterm rental. Appreciation is the cherry on top. That’s a cherry on top. You want to take advantage of it. You want to be able to have that there, but you never buy a property because of appreciation. I’ve talked to people several times, even recently that we’re buying rental property. They were actually not even breaking even little bit losing money, but kept saying, I know that property value is going to go up. That’s great. That’s wonderful. That’s not a reason to buy the house. Don’t do it. You’ll be sorry I have that one last because you should never buy a house based on appreciation. That’s the cherry on top. Just like I was saying.
Wendy Sweet (00:24:01):
I have another question and this is question number seven. Why do you give away 60 minutes of your time to do the Wednesday with Wendy sessions? Will there eventually be an upsell you’re thinking when the world is at? So I had a challenge from a really good friend of mine who I highly respect and he loves to share what he knows with people and he was telling me that he had so many people that kept calling him and ask him, Hey, you want to have a cup of coffee? You want to go have lunch? I just want to pick your brain. And we were actually kind of laughing about it cause he said he was amazed at the amount of people that would say, let’s go have a cup of coffee or so I can pick your brain. And then they wouldn’t even buy him the cup of coffee.
Wendy Sweet (00:24:43):
But, but he decided to to go to a local Panera bread I think is where he was going to. And that’s where he would stay on Tuesdays and make appointments to meet people, people who wanted to come meet with them. He’d say, I’ll be there if you want to come in, come on in. And I thought wow, that’s, that’s pretty neat. So it kinda challenged me. I thought I want to do that because I get people that ask me that all the time and I feel bad saying no I can, I don’t have the time cause I wanna I want to help people. I love sharing what I know. I love seeing people become successful. I love seeing that light bulb go on or the excitement happened when they buy their first property and just watching their, their businesses grow. It’s really, really neat. It’s, it fills me up to watch people do that.
Wendy Sweet (00:25:32):
So I do what’s called a Wednesday with Wendy. Every Wednesday I go over to this little French bakery that’s about a block from our office and I set up shop there from 10:00 AM to 3:00 PM and at the end of my email signature, I have a link to a calendar that someone can go in and book a time to meet me, one of those hours from 10 to three at our local bakery. And, you know. At first I thought, Oh, you know, I hope somebody’s gonna sign up for it. And at this point I’m usually booked four to five months out, which is really exciting for me. [inaudible] and I love doing it. It takes a whole day out of my work week, which is important. But what I’ve gotten back from it, from, not necessarily from the people that I’m meeting with, but from other things that have come in like the backdoor, it’s just, it’s amazing.
Wendy Sweet (00:26:35):
I have met the coolest people on Wednesdays. I mean, I had, the youngest guy I ever had come in was 17 years. He skipped school to come meet me. He’s, he’s trying to wholesale and he’s doing deals and that it was so cool to see that young kid come in and do that. I’ve had mother and daughter teams come in. I’ve had a commercial developers come in and talk and it’s, we talk about, um, all kinds of business, how they’re going to structure it, how’s it set up traction by Gino Wickman, how to find property. The other thing too is I’m involved in several masterminds across the country and I have just been blessed to meet some of the most incredible real estate investors. It just blows my mind what some of these people do and what’s really cool. The people that are coming in and meeting with me on Wednesday, I’m able to connect them with other people that I know across the country.
Wendy Sweet (00:27:33):
I’m able to get them out of our little local market and make them think bigger and, and see what really is out there for them to do. They, they’re now starting to think outside the box. I’m able to connect people that would never really know each other because they’re across the country and now they’re able to help each other. It’s just really, really neat. It’s one of the, it’s probably the best thing that I’ve picked to do and I’m so grateful that I felt called to do it because it’s just been so rewarding. So my question to you is what are you doing to give back? Because it’s really important to share what you know. And the other question, the other part of this question was, is there going to be an upsell? No, there’s nothing to sell. I don’t charge for it. Although I have had a couple of cancellations at the last minute, that kind of gets irritating because there are other people waiting that would love to come in.
Wendy Sweet (00:28:31):
So I’ve actually thought about maybe a [inaudible] charging $39 for each person to come and they have a choice to show up and get it back. Or if they don’t want it back, I can give it to an orphanage in Tanzania that we’re working on. So there’s ways of making that happen. Again, it’s just something I thought about. But no, there’s no upsell on that. And I challenge you to do something similar. Now I have question number eight, which is always very interesting when we talk about this word and it’s called Zillow. So are Zillow estimates accurate? Why or why not? Well, Zillow is accurate. Depending on where you live. Zillow tends to pull information from tax records. That’s really what they’re looking at. They’re also pulling from maybe a different market area than your local real estate person would pull from when they’re trying to figure out rents and true estimates of value. So you kind of a hit or miss with Zillow. What Zillow does for me,
Wendy Sweet (00:29:42):
when I use Zillow, I want to see what the tax history is. I want to see what the price history has been on the house. I’m hoping to see what the square footage is and that kind of thing. It’s kind of quicker to go there and then to pull up the tax records. Although tax records can be wrong and absolutely, So can Zillow, am I using Zillow to gauge what a prices for house? Mm. No, never. Actually when I’m really looking for what a comparable price would be. Luckily I’m a real estate agent so I can get right online to MLS and I pull comps within 0.25 miles of the house that I’m pulling up. Now an appraiser is going to go out sometimes as far as a mile, sometimes as far as three miles, but I like to not only stay within 0.25 miles, but it’s really important for me to stay within a neighborhood because you can have neighborhoods that are absolutely right next door, each other and really, really close together.
Wendy Sweet (00:30:43):
But one neighborhood is bringing a totally different value than the other. Could be the age of the houses could be who the builder is in the area. There’s a lot of reasons why one neighborhood might have a stigma attached to it that the other neighborhood doesn’t and it will really change the values even though the houses might be closer than 0.25 miles apart from each other. So that really means a lot to me. How close it is in a neighborhood. So I like pulling comps on MLS to really see what I believe the value is. Nobody’s going to give you a truer value than an appraiser. So that’s the best way. When you’re going to look at a house, look at buying a house, you really need to have it appraised. As a lender, we will never do a loan on anything unless we have an appraisal on it.
Wendy Sweet (00:31:29):
We’re looking for a subject to appraisal. We want to know what it’s going to sell for because that’s what we’re lending on is what that house is going to sell for. So that’s what we really care about is what that after repaired value is when we’re ordering an appraisal on it. What it’s worth right now really doesn’t mean a whole lot to us, but when you are buying house that what that after repaired value is, you know, that’s what you’re using to decide whether or not you know what you’re going to pay for the house. You know? You want to see how much it’s going to cost to fix it up and then you’re going to know exactly what you can pay for that house. There were some people that use Zillow estimates in their terms when they’re seller financing or when they’re partnering with people.
Wendy Sweet (00:32:14):
If, let’s say they’re lending money to you, to rehab a house, but part of their terms are they want to share in the profit. A lot of people will use the Zillow estimate when the house is bought and then three years later they’re going to use the Zillow estimate of when that house was sold and that will be their pinpoint of where they’re talking about the increased value from one point to another. So if you use it in the beginning, you want to use it in the end, if that makes sense. So Zillow is as good as you make it. Zillow can serve as great purpose with price and tax history, comps in the area, but you really get a much better price from a real estate agent. I would highly recommend that you call real estate agents. Get a real estate agent that you can work with that is willing to pull a comp or two for you on some houses.
Wendy Sweet (00:33:08):
Don’t have them do it for free. If you find somebody that you trust and they’ll pull comps for you, do something for them, send them a $50 gift card to a restaurant or you know, TJ max or some kind of great shopping experience. They would like send them a massage to get their nails done or a pedicure or a round of golf somewhere. Give them something for the trouble that they go to for you because it does take time out of their day to do that. Most of them are happy to do it, but you got to make them, feel appreciated and it’s a nice gesture on your part to do that. That will come around to you too. It’ll always come back to you. So make sure you give back on that.
Wendy Sweet (00:33:54):
I have question number nine here. Would you buy a property located, I love this, a half mile from a maximum security prison. What other places or businesses would you avoid and why? Okay. So as far as a prison is concerned, I would love to have a rental property near prison. I think it would make a great short term rental property because there’s lots of people coming in to visit, right. So it might stay full. I love to short term rent that, but again, I’m only gonna buy a house based on what the longterm value would be. Would it work out as a longterm tenant and I believe it would. I don’t see a prison being the problem there. Other things that I would avoid and wouldn’t go near would be smell issues. Like if there’s a hog farm nearby or a chicken farm nearby, I have hogs and chickens and I know they stink and they’re pretty far away from my house.
Wendy Sweet (00:34:57):
I want to make sure that they are downwind of my house and what I’m doing and luckily my neighbors are far enough away where it won’t make a difference for them either. You want to be careful about landfills. That’s another thing with the methane gas and just the smells, the noise, the traffic that comes from that. The other thing that I’m always a little weary of it or like a big power station or power lines that are going through my property. I know that if I ever wanted to sell a house that has a big giant power station beside it or a power line going through it, then it’s going to be really tough me to get that house sold. It’s going to stay on the market a really long time and I’m going to have to discount it to get it sold. Um, also, you know, they say that if it’s really close to like a power station that people say it causes cancer and things like that.
Wendy Sweet (00:35:51):
So I kind of have the heebie jeebies about it and I really won’t mess with power lines like that. Sewer plants is another thing now. We did in the downtown Charlotte area, there was a water treatment center that was located in the creme de LA creme area of Charlotte, the South park area. They were actually able to do something to that. I’m not sure what they did, but they were able to take the smell away. They didn’t change the plant. You can still see it, but they did something in there to take that smell away cause it was pretty nasty at one point. There were a lot of high dollar houses around it, so I’m sure there was a lot of stink caused by the neighbors too about it, little pun there. I’ll be here all day. The other thing I’m a little concerned about are a railroad tracks, cemeteries and high crime areas.
Wendy Sweet (00:36:44):
Now I had a couple properties that I had to take back that had railroad tracks that went right along. The backyard was probably a half acre away from the house, so it was a pretty good lot and we had a privacy fence and a buffer of small buffer, maybe a five foot buffer of trees across the back that block so you couldn’t see the railroad tracks and we even took time to be on video and record a train coming by. We had to get the schedule of the train that came by so that they knew how many times it came and what time it came for us to be able to sell that house. That was our biggest hurdle. Selling that house was real attractive. As it turns out, it was only used one time a day, but convincing people of that was really difficult. We had dropped the prices on those houses by $30,000 on each one.
Wendy Sweet (00:37:42):
They were $500,000 houses. We had to drop the price by 30,000 just because of those railroad tracks in the back. Plus we had to put up a privacy fence that we had not intended on putting up for something like that. So understand that being around railroad tracks, it’s going to take you a little bit longer to get it sold. Some people get the creeps when it’s around the cemetery. Some people don’t care, but that is something you need to be concerned about. And of course the high crime areas, nobody wants to live in a high crime area, so make sure you’re checking that out. The crime statistics, make sure you’re checking that out. When you’re buying in a neighborhood, the police department gives out that information like crazy. It’s all online, so you should easily know what’s going on in the area. So those are some of the things that I would kind of avoid.
Wendy Sweet (00:38:26):
Some of the smaller things you want to be careful about buying a house on a busy street, understand you’re going to have to drop the price. If it’s on a busy street, a lot of times that’s 10 $15,000 lower. Then the houses that are in the neighborhood behind it, even though it’s the same neighborhood because of the busy street, one way to fix that would it be, make sure you have an easy turnaround type driveway, maybe a horseshoe driveway or driveway that’s wide enough that they’ll be able to turn those cars around to be able to back out or come out of the driveway much easier. That will make a difference in helping to sell it and of course that’s a greater expense. Another thing is when you are buying in a neighborhood, the first three houses at the entrance of the neighborhood are usually the hardest ones to sell.
Wendy Sweet (00:39:14):
They’re the ones that see the greatest number of traffic and they’re the hardest ones to sell to an owner occupied. As far as rental properties, those are my favorite ones to buy because they have a lot of traffic going by and I know that as soon as one tenant moves out, I can get another one in there. I would also very easily do a short term rental. I’m one of the first three properties in the beginning of a neighborhood. So those are a couple of points you might want to think about and I’d love to hear from you if you’ve know of more cause I love to add to that list.
Wendy Sweet (00:39:47):
I have question number 10 here. It says Are properties in extremely rural areas worth investing in. Well, I am a person who lives on a farm, so I’m a little bit partial to them. I like rural, I love that I can’t see my neighbors. I like the fact that my driveway is order of a mile long. I love being out in the middle of nowhere. Some people don’t, but there are a lot of people that do like being out there. And in my opinion it’s really good to have properties that are rural because you certainly don’t have the competition from other investors when you’re buying properties like that. The other thing is in rural areas, you know, we’re in the Carolinas, bill and I are located in the Carolinas and we’re like mobile home capital of the world here in the Carolinas. So there’s a lot of mobile homes here, and I don’t know if you’ve been in a mobile home lately, but mobile homes that were built from say 2000 on up, actually even 1998 on up, they have garden tubs and walk in showers and kitchen islands and great cabinets and windows and lots of room.
Wendy Sweet (00:40:58):
They’re huge and most of them are not located in a downtown area. They’re out on a piece of land on an acre or more. People that live in mobile homes are in mobile homes because that’s where they want to be. They like having the space. They might’ve been raised in a mobile home and they’re real comfortable in there so they can be true cash cows for you cause you can get them really inexpensively. I like to sell or finance them myself after I have fixed them up and they’re just so, so good to work with. That’s a great rural product that I like to work with, but the same holds true for anybody buying, whether it’s a stick-built home or a mobile home in a rural area, people like being out in that area and from what we have found is that it’s not that difficult to sell them. You just need to make sure that you’re in a town that’s not dying because there are some towns where the population is dropping. I wouldn’t buy rural and that kind of an area, but in an area where it’s, it’s at a irregular growth or an upward growth, I would certainly buy in rural areas. I would not be afraid of it. It’s a great way to invest.
Wendy Sweet (00:42:13):
Let’s see, I have question number 11 here. As a landlord, besides reducing the rent, what are some interesting ways to encourage your tenants to renew their lease? Well, number one, I would never reduce my rent to have a tenant stay. It absolutely doesn’t make sense. In fact, I am going to regularly increase my rent. Even if it’s just $10 a year or $25 a year. I want to regularly increase my rent. Cost of living’s going up, everything’s going up, the price of rent is going up and I want to make sure that I’m in line with what’s going on in the neighborhood. At the same time, I wanna make sure that my rental property is worthy of the rent that I’m asking for. I want to make sure that my air filters are changed and my HPAC units are working well, that there are no leaks, that the cabinet hinges are nice and tight, that nothing’s coming loose.
Wendy Sweet (00:43:15):
I just want to make sure that that house is well taken care of and that it’s a good home for the people that are renting that property. So I wrote on here, I would never reduce my rent to keep a tenant. I would upgrade the house to attract a tenant. Now remember when you upgrade a house, anything you put in the house, even if it’s just regular maintenance, that’s a deductible expense that you get to deduct on your taxes. Let’s see. Rent should be increased every year like clockwork, even if it’s just $10 I did say that keeping your tenant is always cheaper. There’s no doubt about it. You really don’t want your tenant to move out, but if your tenant is moving out because they can’t afford the rent, they’re not the right tenant, you are better off finding another tenant and making sure that your property is worth the rent that you’re charging.
Wendy Sweet (00:44:13):
We are on question number 12 what advice would you give someone interested in real estate? Is it as easy as people make it out to be? I love that question and my answer is always this is not home and garden TV. It’s really funny, like I’ve said earlier that I’ve been in this business 20 years and we’ve always had new people wanting to get into this business because it’s a fun business and it’s lucrative and it’s just a great way to get that, get ahead. To leave your job, to build your future. There’s so many options in real estate. It isn’t even funny, but most people think that flipping houses is the only way to do it because of home and garden TV. So they see how easy it is on the reality TV stations. And I promise you that’s not reality. It’s a lot harder than it looks.
Wendy Sweet (00:45:07):
Problems are not solved as easily as it looks, and it’s not quite as dramatic as it looks on the television, but it is a great, great business to be in. Advice that I would give. There is no gender barrier. There’s no race barrier. I love that in this business, anybody can be successful. The only barriers in this business is in your head. Nothing is easy, nor it should be easy. Hard work is necessary in everything you do. If you want to be successful, learning as much as you can, getting plugged into the real estate groups, your local real estate investor association is absolutely the cheapest, deepest education you’ll ever get. And I absolutely would plug into there. Don’t buy all this stuff people are selling. Uh, there are some great gurus out there that are selling some awesome products. I promise you, and they’re honest about what they do.
Wendy Sweet (00:46:03):
There’s some really good stuff out there, but you need to see what all the options are because there’s so many different ways to make money in real estate. You can buy notes, you can sell notes, you can create notes, you can rehab properties, you can sell or finance what you rehab. You can buy and hold properties, you can get into apartments, you can do self storage, you can be a wholesaler. There are just so many different things that you can do in this business. You need to see what all is out there. And the only way to do that is to start going to those meetings and see all the things that other people do because there’s something that’s going to trip your trigger that you’re going to say, Hmm, that’s for me. That’s what I’d really like to try. And there are be many times when you’re looking at stuff you think, I want to do it all.
Wendy Sweet (00:46:50):
I like it all. It all looks interesting. Yes it does. But you can’t do it all. You have to pick one and stick with it, learn it well, and then move on to another type of real estate that you want to do. It’s really important that you understand all the options that are out there. So learning as much as you can, getting plugged in to the real estate groups, the meetups. That’s another great way to find real estate groups is the meetups. My favorite group to go to is not only the main meeting of your local association, but to plug into those smaller subgroups that meet. I lead one on Friday mornings every Friday morning for the past 17 years we’ve been meeting. It’s a great group of people. We have 50 to 60 people that show up there every Friday morning. We meet for breakfast at 7:00 AM we do a five minute devotional and then we bring in some sort of a speaker or anybody in that room can teach what’s going on in that class.
Wendy Sweet (00:47:47):
We’ve got CPAs in there that are involved in real estate. We’ve got attorneys in there, contractors, of course, wholesalers, flippers, hard money lenders, conventional lenders, all kinds of real estate people are located in those meetings and you need to know them, get to know them because we work with each other. And you know, one guy really might like a small town just outside of Charlotte called Gastonia. That’s the property that he’s looking for. Another guy likes property in Mount Holly and the Mount Holly guy finds a great deal on Gatonia and just refers it to the Gastonia guy, and then he’ll do the same thing when he runs across something that’ll work for somebody else. It’s a great way to network and get better at this at, at what you do. So I’ve written learning as much as you can, getting plugged into the real estate groups and meetups, surrounding yourself with the people that have been successful in the industry are all things that will help you make a profit.
Wendy Sweet (00:48:48):
Here’s one thing that everybody should know. You will lose money in real estate at some point in your life. You will if you haven’t yet, you’re going to, you just haven’t done enough deals yet expect that to happen. And it’s okay if that happens. The whole point is to learn from other people so you can avoid all those little piles of poop out there and not step in it because there’s going to be something out there that you will step in. And the more people you know, the more experienced you get, the easier it is to avoid all the mistakes that are out there. And there are some things that you just can’t control and that you couldn’t have seen coming down the pipe. So understand that there’s gonna come a point where you will lose real estate. You don’t let it deter you from what you’re doing.
Wendy Sweet (00:49:37):
You learn from it. Yeah, put your big boy panties on or big girl panties on and you continue to move forward. That’s why we’re in this business. But I would say this, even when you lose money, I bet it will cost you less than a college education, what it costs you. So that’s a good way to look at it. Okay. I am on question number 13 it says, what are some of the coolest real estate tricks that you know? Oh, there’s a lot of them. It says, I don’t believe there really are tricks to real estate. Your goal in this business really should be to ask yourself, what can I do to help the other person? If you really have that in the front of your mind, you can’t lose. My favorite way to gain property is a subject to property. Really my favorite way to get it to pick up a property in order to build my rental portfolio, I tried to get in with as little out of my pocket upfront.
Wendy Sweet (00:50:37):
Although most people that are wanting to to to sell a property subject to, they’re usually kind of backed into a corner. They might be a little bit late on their mortgage. They may have moved out of town. They can’t seem to get it rented. There’s all kinds of reasons why people will do a subject. Two, I like taking over property, subject to the mortgage being in place. I will pay the money to get them caught up if they’re behind. I will take over their mortgage payments and then I know that I can turn around and rent that property. That’s my goal is to be able to turn on and rent that property for more than that mortgage payment. I also know that those payments that are going to that mortgage every month are making the mortgage balance lower and lower and lower. So somebody else is still paying this mortgage off for me.
Wendy Sweet (00:51:23):
So it’s kind of a win win for everybody. That’s my favorite way to, to really get into the business. I think it’s one of the least expensive ways to, so that’s my one trick. My question number 14 let’s see what we’ve got here. What is the most expensive thing that can go wrong with a house or a rental property? Everything would be the answer. Everything can be expensive, right? So I’ve written here the worst thing that caused me the most money. Oh yeah. Is a city not allowing us to do repairs and demanding that it be torn down? Code enforcement can be your worst nightmare, but they can also be your best friends. If you get any kind of notice from code enforcement in writing by phone, whatever you need to respond, make sure that you start a rapport with these people. They don’t want your house, they don’t want to knock down the house.
Wendy Sweet (00:52:27):
Their goal is not to cause trouble for you. Their goal is to make sure that they’re doing their job and that they don’t get in trouble for leaving a house that has high grass or the roof is falling in or people are living in a house that humans shouldn’t be inside of. They want to want to make sure that things are safe. That’s really, really important. If you get any notices at all, don’t stick your head in the sand. I see people do that all the time. We’ve had a borrower do that. Talk to the code enforcement agent. They want to work with you. The other big ticket items that can always be hidden in the house or in the attic and in the crawl space. I know so many people that have purchased houses that have gotten bids, estimates on rehabbing a house and the contractor never stuck his head in the attic and they never went underneath the crawl space. Those are your hidden spaces that can cost you through the nose, that can make your deal not be a deal. So even if your contractor refuses to do it, you need to do it. Look in the crawl space. I’ve gone in several crawl spaces and I’m sure there’s several more I’ll go into. Attics are the same way. You’ve got to see what’s going on in that area. Mmm. Don’t stick your head in the sand.
Wendy Sweet (00:53:43):
Let’s see, I’ve got question number 15 what are some of the red flags on listings that usually only a real estate agent can spot? I love that question. I have been a real estate, a licensed real estate broker since 1981 yes, I was only six when I got it. Okay. It’s been a great thing to have it. It’s helped me out a lot. I don’t believe that you need a real estate license to be a real estate investor. In fact, in some cases I think it can hinder you because there you’re now obligated to disclose to someone you’re trying to buy a house from as a wholesaler. You’re trying to, let’s say you’re trying to buy it as a wholesaler. Now you’re obligated to tell them your real estate agent and if they hear the word real estate agent, they’re going to back off and not sell it to you just because you said that, but you have to let them know even though you’re not working in that capacity.
Wendy Sweet (00:54:39):
There’s some things you, you know that it could hold you back a little bit, but what are some of the red flags? So when a listing does not allow for FHA financing and they want cash only, what that means is it probably won’t qualify for FHA financing. It’s pretty stringent to begin with, but that means that there might be a lot more wrong with that house than you think. That means there were issues that a lender will not loan on. You need to watch out for estate sales, for dirt roads, for clouded titles or quiet titles that need to be performed that can take three to four months in our state and you don’t even know if it can get taking care of community Wells is something that a lender won’t lend on easements, whether it’s a power easement or a water easement underneath the ground.
Wendy Sweet (00:55:31):
There’s a lot of, lot of things you need to be worried about on that one. Shared septic systems can be an issue and mobile homes that have add on structures, appraisers don’t know how to appraise them. They’re pretty difficult to do. All of these can call them cause mortgage issues for the person that you want to sell it to. May not, might not have anything to do with you when you buy it, but when you turn around to sell it, you’re going to run into those issues. And if your answer is, well, I’m just going to hold it as vine hold, you’re going to want to get out of it at some point. So it’s gonna be an issue at some point. So be very, very careful when you’re seeing those things that I just mentioned. Question number 16 what is the shadiest thing you saw a home seller do or do we have a lot of answers for this from the, let’s see what I wrote on this one. Oh yeah. This is a great one accepting multiple contracts on a home at one time is wrong.
Wendy Sweet (00:56:30):
I have seen a couple tried to stall a closing after one of the partners contracting to close on a subject. Two house died in the car accident two weeks prior to the closing. The buyer investors had already done the repairs on the house and the brother never expected his sister to die. There were so many bad things that had been put into place for this deal. The paperwork was not done right. The people that were involved with the sister as a partner had everything as a handshake and once that sister died, all of a sudden what they agreed upon was completely different.
Wendy Sweet (00:57:19):
It just turned out to be a total fiasco for them. So I guess the moral of that story is make sure you have everything in writing. Even when you’re dealing with a friend, have everything in writing. Nobody expects their friend to do them wrong, and a lot of times that isn’t even the intention, but sometimes the words you’re using are not, not understood to be the same as what the person is that’s hearing it. You can be saying the same exact thing, but they just have a different meaning to different people. Just make sure that you have everything in writing out on paper, even if it’s relative or best friend. Make sure you have all that in writing because it can backfire on you and that’s something that’s hard to get over.
Wendy Sweet (00:58:07):
Number 17 will real estate prices plummet in 2020 well, my crystal ball broke back in 2008 it broke in half and then shattered into a million pieces, so I really don’t know what’s going to happen. You know? I wish that I did know when we talk with the different people that are in our masterminds, what everybody thinks, we all believe that you know there’s a correction coming. The pendulum always swings back and forth. History has been that way throughout time. It always swings back and forth. We know there’s going to be a correction. How bad is it going to be or how good is it going to be? We don’t know the answers to that question but we know that it’s going to change. It always does. You can go back, you know in many, many, many, many years of real estate history that I even remember, I’ve seen it go back and forth over and over again.
Wendy Sweet (00:59:02):
You just need to be prepared. You need to make smart moves. You need to not be over leveraged on properties that you’re working on. You need to have cash available at all times because when that pendulum does swing back and forth and goes back to where people aren’t buying and selling or let’s say they’re not buying as many houses and then you have a glut of foreclosures on the market, cash is King. That’s what’s going to be able to buy those properties or have a really good relationship with people that do have money that are willing to lend you money. Whether it’s a private lender with self directed IRA money or a hard money company like like we have, you want to make sure that you’ve built a good long standing relationship to be able to purchase those houses, fix them up, and then get them sold or get them rented.
Wendy Sweet (00:59:51):
That’s really, really important. You need to protect your credit at all costs during this time as well. The pendulum swings back and forth, so a correction is inevitable. I don’t know that I would use the word plummet to describe our future pricing, but a small, a stall and maybe a slight decrease in some areas will surely occur. If you live in a bubble market where prices are shooting up, then you are more likely to see a bigger drop. California, Arizona, Florida, Nevada in New York, places like that where you know things have really skyrocketed up. That’s what’s going to drop down just as quickly. Let’s see where if you’re in a more steady area that’s non-volatile, that market will also be the same. It’s just going up a little bit. It may just go down a little bit. Yeah, or maybe it won’t change at all.
Wendy Sweet (01:00:45):
You know, we don’t know. The way to protect yourself is to make sure that you’re making smart choices and you work in the affordable home market. People always need a place to live as lenders, we’ve kinda changed the whole way we do things. Just this year in 2019 we changed the way we do things here. We went from making those big high dollar loans in the regentrified areas that we’re selling like hotcakes. We stop making those loans in January and we started directing our efforts toward what we call the bread and butter market, the affordable market in our area. That’s like $300,000 in less what those houses would sell for, number one, they fly off the market. We also know that if for some reason we have to take them back tomorrow, we can rent them for what that payment would have been or close to what that payment would have been. Anyway, it’s almost a little bit, I hate to use this term, but it’s kind of a Bulletproof market to stay in that affordable home market because people will always need a place to live and that’s where we want to be where there’s plenty of fish out there that we can deal with.
Wendy Sweet (01:01:53):
Okay. This is question number 18 in your opinion, what makes a good investor, and I wrote a good investor is someone who educates themselves no matter how much they already know. They make decisions based on numbers rather than emotion. They buy based on profit or cashflow and not appreciation. They have the best interest of the other party in mind. They believe in steady plotting and know that plenty of singles and doubles are smarter investments than one or two home runs. They share their knowledge, their past mistakes, their wins with others to give back. They operate from a sense of abundance and not scarcity and if they can’t beat fear, they do it scared. That’s really what an investor does. I hope this has helped you. Thanks for listening. Hi. If you really liked this show, what you can do is you can check out some of our other shows that might or might not pertain to it. You can check up there, you can check over here. You can check down here, check it out. Don’t be afraid to like us, right? Subscribe! Do that too. you subscribe to our page and hit like, we’d love to have you do that. Thanks.