All posts by JanneZack

I grew up in Memphis TN, got a bit tired of humidity, so moved to New Mexico for College and then to Utah with a job change. I began working with an Architect there, and decided to change careers. I moved back to Memphis to apprentice in the Residential Home Design field. Now, almost 18 years later, I design custom homes which are built all over the United States. I LOVE what I do.

Landlords VS. Pets

Are you a landlord and do you LIKE having pets in your units? If not, and if you have a “NO PET” policy, you may want to read this post.

I am a landlord, I don’t want pets in my units.  The main reason for this is because I know what pets do to a house, I have pets!  I had been told by what I thought were reliable sources that if you have a “NO PET POLICY” you simply won’t have to allow pets in your house. Then I heard a question about Service Animals.  A way was suggested to get around having to have these animals in your units was to simply change their policy to read “NO ANIMALS POLICY.”

Then, one day, while reading Facebook, one of my daughters posted that she wanted a puppy.  She lives in New York City and most of the places she has lived have all had strict “NO PET” policies.  She was planning a move, but I told her that finding an apartment that would allow a pet would be next to impossible and reminded her that she couldn’t afford to pay extra just because she wanted a pet.  (I suggested that she become a dog-sitter on the weekends so that she could get lots of puppy time, but NOT own a pet.)

But then, one of her friends commented on the post:  “You can just write off to one of those websites that will give you a certificate stating that you have an Emotional Support Dog and any Landlord will be required to allow the pet to live with you.

This freaked me out as a landlord!

So, at that time I began to do extensive research on the topic.

This is what I have learned (so far) and I’ll try to be brief, though, if you’ve read any of my posts, you know they aren’t.  Sorry.

SERVICE ANIMALS:

  • Service Animals are trained to do specific tasks for a disabled individual.  The disability may be physical or mental. (Seeing Eye Dogs, Hearing Dogs, etc.)
  • Sometimes a Service Animal might be a Miniature Horse, but Service Animals are not Cats, Ferrets, Monkeys, etc.
  • These animals often cost between $17,000 and $22,000 EACH!
  • These animals are NOT pets, they are considered by the ADA and HUD as “Necessary Medical Equipment”
  • Service Animals are allowed to go anywhere the public is allowed to go:  Restaurants, Grocery Stores, Hospitals, etc.  However, they are not allowed to go where the general public is not allowed to go, such as in a restaurant’s kitchen…unless the disabled person WORKS there.

LANDLORDS and SERVICE ANIMALS:

  • Landlords are allowed to ask ONLY 2 questions when presented with a prospective tenant who says they have a Service Animal
    • Is this a Service Animal? (yes or no)
    • What TASK has this animal been trained to do for you?
  • You may NOT ask “what disability do you have requiring you to have a Service animal!  That is personal medical information that does not have to be disclosed to you.
  • You may NOT charge extra rent or extra “security deposits” for the animal.
  • These animals do not have any type of ID or License other than regular shots/vaccinations from the vet.
  • You can not discriminate because of the breed of the dog even if your insurance company has said they don’t want “viscous breeds” in your rent house, such as Pit Bulls, Dobermans, Rottweilers, etc.  Each animal must be judged on a case by case basis.  Remember these animals have had roughly $20,000 worth of training.  Do you think they are going to attack you? Really?
  • You CAN, however, require that the tenant PAY for any damages to your unit caused by the Animal (or the tenant).
  • You CAN evict a tenant IF their animal becomes a nuisance:
    • excessive barking which annoys the neighbors repeatedly; or
    • the dog attacks other animals in your complex (for example, you allow up to 20 lb animals, but this is an 80 lb German Shepherd who attacks other animals)
    • the handler/owner does not keep the animal under control when in public areas or does not clean up after the animal or follow the pet policy you have in place (allows the pet to poop on the playground rather than in a pet friendly area)

EMOTIONAL SUPPORT ANIMALS (Assistance Animals)

These are NOT SERVICE ANIMALS (ESAs).  These are, many times, formerly a pet that has been promoted to the position of Emotional Support Animal.  These animals are prescribed by a Medical Professional, Mental Health Professional or Social Worker. Many people with conditions such as PTSD, Epilepsy, or Autism may find the help of an Emotional Support Animal to be a great comfort and a calming effect when their emotions get out of control.

  • An ESA is NOT trained to do specific tasks for the individual and these animals may even be rescued animals from an animal shelter.
  • Many ESAs are generally regular pets that have been promoted to an ESA position because of their owner’s current mental or physical condition
  • To have an ESA, the tenant’s physician or social worker will write a prescription for the animal.  This is only good for Housing and Airplanes.
  • An individual may have more than one ESA, but will have a prescription for each.
  • An ESA does not have to be a dog, it may be a cat, snake, etc.
  • If you have “PET or ANIMAL” policies for your rental units, the owner of the ESA is required to follow these policies, such as no animals in the pool area, this animal is not allowed to go into the pool area (Service Animals, on the other hand,  are allowed to go anywhere their owner is allowed to go).  ESA can go outside in approved areas (if you have pet zones) and inside the house and anywhere else pets are allowed to go on your property.
  • You may NOT charge an extra security deposit for the animal(s)
  • You may NOT charge extra rent for the animal(s)
  • You MAY charge the tenant for all damages
  • You MAY evict if the animal becomes a nuisance to other neighbors, or threatens other tenants/workers.You may also evict this tenant if they can not control their animal(s)

AS A LANDLORD, WHAT DO YOU DO WHEN FACED WITH THESE ANIMALS: 

If someone wishes to have a Service Animals or ESA move into one of your unit, they must do the following:

  1. For both types of animals, the tenant must make a  written request of you requesting “Reasonable Accommodations” for their animal to be allowed to live in the unit, (be it a Service Animal or ESA).
  2. For a Service Animal, ask only the 2 questions listed above, write the answers down on your tenant’s application and file with your records.
  3. For an ESA, you should require a copy of the tenant’s “prescription” provided to them by their health care provider or social worker.

NOTES:  

  • When you ask for a copy of their “Emotional Support Animal Prescription” and if they have no idea what you are talking about, chances are, this is NOT an ESA, it’s the family pet and THIS person is probably “impersonating a disabled person”, which is a crime!
  • There are websites that WILL let you fill out a questionnaire online to help determine whether or not you might need an emotional support animal.  If the answers you provide see to be worthy, for a FEE, a mental health worker will call you and interview you.  If they believe you could benefit from an ESA, they will give you a letter.  While this may be perfectly legal to do, and landlords will need to allow the animal to live in their unit even though they don’t normally allow pets, ask yourself this, is this person getting the mental health care that they really need?  No!  BUT, you better not discriminate if they have this letter because if it really is legit, you wouldn’t want a discrimination law suit brought against you by the ADA or HUD. Better safe than sorry in this case.

THE GOOD NEWS:  

All of your other rental criteria for tenants should be met apart from the animal issue.  If they don’t make enough money, they don’t qualify.  If they have terrible credit, or have a criminal background that is undesirable, you are not obligated to rent to this candidate.  Your rental unit criteria needs to be written so that you can give the tenant a letter stating the reason for their tenancy denial.  You must treat all tenant applicants equally, so make sure you are following the rules you set forth.  The animal should NOT be any part of this denial, or you’ll still get sued.

Stay tuned for other posts about your written criteria for tenants if you don’t have these already established. 

 

Copyright:  Janne Zaccagnino

 

What do Michael Jordan, Itzhak Pearlman and Real Estate Investing have in common?

Michael Jordan – Itzhak Perlman – Real Estate Investing?

I’d be willing to bet that you never thought you’d see those two names in the same sentence, much less the same article about Real Estate Investing, right?

Welcome to my brain!

Michael Jordan: Arguably the best basketball player of all time.

Itzhak Perlman: A polio victim who became a world famous violinist.

These two men are great examples of how a person can excel if they put their mind to it.  But, what does this have to do with Real Estate Investing?   As property investors, our goal is to make money, possibly quit our day job, but just like becoming a world famous violinist or the world’s best basketball player, you can’t do this flippantly. A little effort may make you a little money, but EXTREME effort could make you an ALL-STAR in the Investment game.

How do you get really good?  You must ‘tune up’ your brain and learn the rules.  You must ‘exercise your brain’ so that every time you shoot that real estate basketball deal toward the hoop, it swishes! (He shoots, HE SCORES!)

STEPS TO BECOMING A REAL ESTATE  INVESTING ALL-STAR:

  1. Attend meetings, every meeting and go to seminars.  You can visit the National Real Estate Investors Association website to see if there is a local REIA club in your area.  If there is, this is the BEST place to learn how to become a REIA All-Star.  (www.NationalREIA.com)  My local REIA group is the Memphis Investors Group:  http://www.memphisinvestorsgroup.com
  2. Take notes. Just like in school, write them down, then review them later.
  3. Study the notes you’ve taken, organize them into investment categories (landlording, finding good tenants, wholesaling, insurance, bookkeeping, taxes, etc.) and then study some more.
  4. Write down questions you have, you can put these in your phone or on a note card, and ask an expert at the next Friday Luncheon or MIG meeting.
  5. Never stop reading great books about real estate investing strategies but don’t neglect to also learn about running your business.
  6. REMEMBER: Being a real estate investor is a business, so don’t neglect learning how to run a business (if you’ve never run a business before).  In the real estate investing businesses, records, file organization and bookkeeping are extremely important especially if an auditor comes calling.
  7. PRACTICING FUNDAMENTALS is the only way to get good, really good, at this sport.

I’m sure that Jordan has shot about 10-million free-throws in his lifetime. Perlman has probably played violin concertos until he could play them backwards and blindfolded…all from memory. You need to do this with your career in real estate investing.

In order to be great at Real Estate Investing, you need to develop a certain muscle group, mainly your brain and logic; you need an education.  I’m not telling you to go back to college, though you could, but a great place to get started with your education is at MIG meetings.

Next, get creative.  Take what you’ve learned from the masters and add to that your own style, your own ideas and create something unique, your own brand.

The next step is to DO.  Once you get the education, you must begin to stretch your wings and take some steps into your dream.  Shoot that basketball toward the hoop.  Draw that bow across those strings.  Will it swish the first time? Will you be a virtuoso immediately?  Nope.  BUT, the only way to get better is to practice.  Dr. Sinichi Suzuki, the inventor of the Suzuki Violin Method (which teaches 3-year-olds to play the violin) says the old adage “Practice makes Perfect” is incorrect.  He says, “Perfect Practice plus 100 repetitions makes perfect.” 

  • Start small: Beginning on an elementary level is ok.  We all start somewhere.
  • Get advice to do it right: Talk to your professionals, take “lessons” if you will, talk to the coach and run the drills.
  • Negotiate and Close the deal: Take yourself off the bench and play in the game
  • Make the money: Win the game.
  • Repeat 100 times. Perfect practice plus 100 repetitions makes you money. (Wash.    Repeat).

Expand the muscles of your brain, just like an athlete or musician who has honed their skills, don’t take what you do lightly, but then again, it isn’t rocket science.  Study, learn and apply (do) what you have been taught.

 

Always pass on what you have learned.  Do or do not.  There is no try.  ~ Yoda

Happy Investing!

Copyright: Janne Zaccagnino

Slush Fund for Landlords

“Help, my rental unit has an expensive problem and I don’t have the cash to get it fixed!!!”

NOTE:  These notes and figures were created in the Memphis TN market in 2016 and may need to be adjusted for your housing market and the year.

Does this sound like you? Are you a new landlord?  Have you run into this situation with your rental units or your own personal house (or car, or lawn mower)?

We all face this.  There is a time when some expensive repairs are required for things we own, but we don’t have the money to fix the problem.  Somehow we figure it out, we borrow the money, we use a credit card and then slowly but surely we dig our way out of debt, but isn’t there a better way? Going into debt is awfully hard on your blood pressure, and paying it back leads to strife and money problems, as well as arguments with your spouse, not to mention sleepless nights.  What can you do to make your financial life easier with regards to your rental units that are supposed to be making you rich but instead, it often feels like all you do is pour money into them over and over again?

The answer is SIMPLE: a “Slush Fund”.  Your money gurus have better names for this, but it is nothing more than a savings account set aside strictly for repairs of your rental units.  We all know that these expenses will arise (at the least opportune moment, like December 20th) and when they do, it causes extreme stress especially if we aren’t prepared to take care of the problem quickly.  We fret and fuss and yell, but none of that fixes the problem and often leads to sleeping on the couch.

 

HOW TO CREATE A SLUSH FUND:

 

This is hard to do during a cash flow cricis, so if you are reading this now and you don’t have a cash crunch problem at the moment, NOW is the time to start your Slush Fund.

  1. Open a NEW Slush Fund Account – either at a local bank or online, but make it a separate account from any account you currently have. This will help keep you from accidentally spending it, you will access it on purpose for a specific reason in the future.
  2. Now begin funding your Slush Fund. How much of your cash flow can you afford to live without right now?  If you say, none, you are in trouble!  If you only own a couple of rent houses, chances are, you have a day job, so put 100% of your cash flow into your Slush Fund to fund it quickly.  If you use your cash flow as income, you’ll have to reduce your spending to afford to put some of your cash flow into your Slush Fund. Set aside a particular amount each month and set a total goal.  Make a decision, deposit the money as soon as you receive it, not at the end of the month when the money will suddenly not be there anymore. PAY YOUR SLUSH FUND FIRST.

HOW MUCH DO I NEED IN MY SLUSH FUND?

This is probably the million dollar question.  There are no easy answers here, but this is how I would evaluate it.  I will run through a recent example to try to give some guidance, but ultimately only you know your own properties.  My friends who own a bunch of units in Midtown which could be upwards of 100 years old may need more cash per unit, however, they are typically smaller units, so the numbers may still work out in the end.  My units are newly constructed single family houses, so their maintenance, at least for the first 10 years should be minimal other than “tenant damage.”

EXAMPLE:  You own a rent house, maybe 10-15 years old with no major maintenance issues.  The HV/AC is in decent shape.  The electrical systems are all up to par.  The roof and carpets are all great.  All the appliances work…for now.

How much do you need in a slush fund for this ONE house?

What is the worst case scenario?  Tenant moves in and does great for 6 months straight, then one of them gets laid off at work.  They’ve trashed the carpets (kids and Kool-aid) and because of the “getting laid off” they fight, the husband damages a few doors because he was mad.  Because mom and dad are fighting, the toddler opens the dishwasher and stands on the door to reach the cookies…now the dishwasher door won’t close all the way, but they use it anyway and the leak damages the kitchen floors.  Now, because they have no job and know they can’t pay rent, they move out in the middle of the night taking with them the stove, all the ceiling fans and leave you holding the bag for this month’s rent.  They of course don’t leave you the keys, but DO leave you a semi-trailer amount of crap and a broken down swing set and trampoline in the back yard.

How much will this cost to repair and get ready to rent again?  I know this does not happen every time you have a tenant move out, at least I hope not, but let’s explore some possible costs.

Carpet Replacement             $1000

Dishwasher                    $500

Plumber Labor               $300

Vinyl in Kitchen              $800

2 new Doors                   $60

Carpenter Labor            $300

Locksmith                     (you have extra locks, so you change out the locks yourself)

“Got Junk”                    $500

Paint                              $1500 (they had painted all rooms a funky color)

Past-Due  Rent             $950 (or actual rent amount past due from tenants)

Lost Rent                       $950 or more (clean up time and finding new tenant)

TOTAL REPAIRS             $6,860.00

These numbers may be off a little, but many MIG members with real life experience can tell you their actual numbers, some are true horror stories.  Recently I had to rehab a house after 8 years of the same tenant.  He had the NERVE to call me and tell me that it was all “clean” for his move-out inspection.  The total cost of the rehab was $4,500 not counting lost rent.  His $775 Security Deposit barely covered his past-due late fees much less the rehab on the building. He actually threatened to “take us to the court house” to try to get his $775 back, luckily we took pictures and have receipts. He didn’t try.

  • We replaced all the carpets and had to paint the entire interior.
  • We had to replace the HV/AC unit, (he didn’t tell us it wasn’t working… but it was fried), not that he was responsible for this, but it would have been nice to know.
  • The disposal didn’t work and the kitchen sink was totally clogged, therefore the dishwasher couldn’t drain.
  • He had apparently let sodas or beers “spew” in the great room so there was sticky goo on 2 of the 4 walls and no attempt had been made to dab up the spills, therefore, there were at least 3 hard, dried, sticky beverage “disks” stuck to the carpets.
  • There was also a strange green stain on the carpets, like a green sharpie had lived under the sofa, bleeding its green blood onto the carpet until it finally died a slow and agonizing death.
  • He had, at some point, overflowed the toilet and water got onto the carpets. At the time I offered him a cleaning option which included him doing the cleaning, (we don’t pay for overflowed toilets) and he opted to clean it by renting a machine.  When he moved out, the entire master bedroom had black mold all over the carpets.
  • He had smoked so much (in the non-smoking unit) that the windows were brown and had to be scraped clean with a razor blade!
  • One bedroom’s closet had staples in the drywall, about 10,000 staples where posters or something had been affixed to the walls. There were torn corners of posters left and the painter charged us extra to remove all these staples.
  • There was also extreme mowing required because he moved out on June 1st, but had not mowed the yard once that spring/summer.
  • One exterior light was busted, had to replace it.
  • One window was broken
  • I had to re-key all the door locks as his room-mate wouldn’t return her keys.

If you add the lost rent to my $4,500, the total was now up to $6,050.  BUT, he lived there for 8 years, so $756.25 per year (or about $63 per month) would be needed for my Slush Fund to fully fund itself for this unit if this is a fair assessment of what could happen on any given rent house.  But if he had done this much damage in one year and moved out, I would be severely lacking in funds if $756 was all I had in my Slush Fund.

So in answer to the question, “How much Slush Fund” do I need for THIS house, the answer is $6,000 or more per house…depending on how many you own, but we’ll get to this later.  Ideally you should have this on hand on day one.  Hopefully every tenant doesn’t leave your house this bad (The bathroom walls alone; what DIED IN THERE!?!) but to save yourself a lot of stress and strife between you and your spouse/partner, you need to be prepared.

One way to fund your Slush Fund would be to set aside this much money as you buy the property.  You know there will be closing costs, taxes, insurance, there will also be needed repairs and rehabs.  COUNT THE COST and set aside this money immediately, the entire $6000 if you can, then you are good to go no matter what happens as a general rule.

But you tell me, I have 5 rental units, or 20, or 50.  How much Slush Fund do I need?  Do I just multiply $6,000 times the number of rental units?  Twenty rent houses times $6,000 is $120,000!  You could probably buy a few more rent houses for that amount of money!  The question here is; how often do you need to rehab a house?  Does every house need major renovations every time you change tenants?  And, do all your tenants move out at the same time?  The answer to both of these is, ‘no’.   If you have been at MIG for long, you’ll know that getting good tenants by having a great screening process in place helps many times, just not always.  Most tenants wants their security deposit back, so they will try to keep the unit well and clean it before they leave.  Some landlords teach their tenants well and treat them fairly, so the tenant tends to want to keep the unit better. But some tenants will never understand what “clean” is, therefore will never be able to accomplish clean.

So, if you don’t have a lot of money to start with, you already own a bunch of rent houses and don’t have a Slush Fund, set a goal, $100 per month, or $500 per month.  As stated above, use 100% of your cash flow if you only own a few properties and you still have a day-job so that you can fully fund your Slush Fund quickly and then live with peace of mind, once fully funded, you can begin to use your cash flow to acquire more properties, or go on vacation, but until you have a fully funded Slush Fund, don’t spend your cash flow.

Think about this, though; if you have 10 houses, you probably don’t need 10-times $6,000 ($60 grand).  They won’t all need renovations at the same time.  Also, there will be varying degrees of rehab required for individual units depending on the tenant.  So, my suggestion is to save about 3-5 times your ideal “per house” Slush Fund and keep it in the special savings account.  Then when you need to rehab one house, use some of the money ONLY if you can’t fund the rehab from your regular operating expenses account (this is actually the goal, to have a rehab line item in your normal budget).  An easy clean up rehab (maid service, lawn mowing, carpet cleaning, touch-up paint) can generally be absorbed with regular funds, but one bad tenant may require additional funds from your Slush Fund.  IF, at that point, you dip into your Slush Fund, your deposits to the Slush Fund need to be started back (or increased monthly) to re-fund it to get it back up to your total target (Ex. 5 x $6000 = $30,000 – Slush Fund Goal for someone who may own up to about 10 houses).  If you use $5,000 out of your Slush Fund, then repay yourself over the next year ($416.66 monthly) or 2 years ($208.33 monthly) to fully re-fund your Slush Fund.  If you always keep this Slush Fund funded, you should never have the stress of not having enough money, or having to find a loan, or maxing out your credit card and you’ll get all the cool horror stories without all the stress.  If you own 140 houses, like some in our group, you should keep a slush fund for huge emergencies, but your business plan and annual budget should have a percentage set aside for rehabbing your properties.  If you have 140 units, you have probably been at this game long enough to know exactly what you will spend in any given year for rehabs.  But for you new investors, be SURE to count the cost before you invest every penny you have into your property and then don’t have more when things go bad.

 

Copyright: Janne Zaccagnino

 

 

Michael Jordan & Itzhak Perlman

keep-calm-and-play-on-bb-hoop

I’d be willing to bet that you never thought you’d see those two names in the same sentence, much less the same article about real estate investing, right?  Welcome to my brain!

Michael Jordan: Arguably the best basketball player of all time.

Itzhak Perlman: A polio victim who became a world famous violinist. 

These two men are great examples of how a person can excel if they put their mind to it.  But, does a famous basketball player and a virtuoso violinist have to do with Real Estate Investing?   As property investors, our goal is to make money, maybe lots of money so that we can possibly quit our day job, but just like becoming a world famous violinist or the world’s best basketball player, you can’t do this flippantly. A little effort may make you a little money, but EXTREME effort could make you an ALL-STAR in the Investment game.

How do you get really good?  You must ‘tune up’ your brain and learn the rules.  You must ‘exercise your brain’ so that every time you shoot that real estate basketball deal toward the hoop, it swishes! (He shoots, HE SCORES!)

STEPS TO BECOMING A REAL ESTATE ALL STAR:

  1. Join a Real Estate Investors Group.  In Memphis, the best one is the Memphis Investors Group (MIG).
  2. Attend meetings, every meeting and go to seminars sponsored by the group or national seminars.
  3. Take notes. Just like in school, go to meetings prepared, bring a notebook, take good notes.  Later, at home, re-write them and review them.
  4. Study the notes you’ve taken, organize them into investment categories (landlording, finding good tenants, wholesaling, insurance, bookkeeping, taxes, etc.) and then study some more.
  5. Write down questions you have, you can put these in your phone or on a note card, and ask an expert at the next monthly meeting or call up one of the professionals in a related field.
  6. Read GREAT BOOKS about Real Estate Investment strategies.  Read with a grain of salt, not all states have the same laws.
  7. REMEMBER: Being a real estate investor is a business, so don’t neglect learning how to run a business (if you’ve never run a business before).  In the real estate investing businesses, record keeping, file organization and bookkeeping are extremely important especially if an auditor comes calling.
  8. Landlording is a subcategory unto itself.  There are lots of rules, but this only makes you a great landlord.  Write down your rules and stick to them.
  9. PRACTICING FUNDAMENTALS is the only way to get good, really good, at this sport.

I’m sure that Jordan has shot about 10-million free-throws in his lifetime. Perlman has probably played violin concertos until he could play them backwards and blindfolded…all from memory. You need to do this with your career in real estate investing.

In order to be great at Real Estate Investing, you need to develop a certain muscle group, mainly your brain and logic; you need an education.  I’m not telling you to go back to college, though you could, but a great place to get started with your education is at your local Real Estate Investors Association Group.

Next, get creative.  Take what you’ve learned from the masters and add to that your own style, your own ideas and create something unique, your own brand.

The next step is to DO.  Once you get the education, you must begin to stretch your wings and take some steps into your dream.  Shoot that basketball toward the hoop.  Draw that bow across those strings.  Will it swish the first time? Will you be a virtuoso immediately?  Nope.  BUT, the only way to get better is to practice.  Dr. Sinichi Suzuki, the inventor of the Suzuki Violin Method (which teaches 3-year-olds to play the violin) says the old adage “Practice makes Perfect” is incorrect.  He says, “Perfect Practice plus 100 repetitions makes perfect.” 

 

  • Start small: Beginning on an elementary level is ok.  We all start somewhere.
  • Get advice to do it right: Talk to your professionals, take “lessons” if you will, talk to the coach and run the drills.
  • Negotiate and Close the deal: Take yourself off the bench and play in the game.
  • Make the money: Win the game.
  • Repeat 100 times. Perfect practice plus 100 repetitions makes you money. (Wash.   Rinse.  Repeat).

Expand the muscles of your brain, just like an athlete or musician who has honed their skills, don’t take what you do lightly, but then again, it isn’t rocket science.  Study, learn and apply (do) what you have been taught.

Always pass on what you have learned.  Do or do not.  There is no try.  ~ Yoda

 

Happy Investing!

The Red Room

by Ralph Jones

When I first came to Memphis in 1959 my first employment was with Wallace E. Johnson, Home Builders.  My position was assistant to the foreman, Mr. Robert Herring, in Winchester Heights Subdivision on Knight Arnold Road.  Robert was an excellent teacher and an excellent builder.  There were 409 lots in the subdivision and we built 408 of them, the only one that we did not build was built by another builder (and he built it entirely of concrete blocks).  The builder found out quickly that it would almost rain inside the house because of the humidity in the area, consequently he did not build any more concrete block houses.

The houses we built were 900 to 1200 square foot homes, on grade concrete slab, 3 bedrooms, one bath, all siding with just a handful of brick on the front for looks, and there was only one model with a single carport, the others had a gravel parking space..  The driveways were all gravel, the front yard was spot sodded with nothing planted in the rear yard.  It did have a 2” tree in the center of the front yard, which I laughed at when we planted them; however, I drove back through the neighborhood recently and those skinny little trees are about 24” through now and much taller than the house.

These were not sub-standard houses; just small and low cost.  All were Federal Housing Administration (FHA) insured houses; the down payment was only 3% and the notes were in the $50-$60 per/month range.

If you bought a house before it had been painted inside or outside you got to pick your colors.  Inside we were using a flat, oil based, wall paint; good paint, but it sure had a strong aroma.  The largest plan, with the carport, was our model house on the main street and the middle front bedroom was painted red with white trim.  Now when I say it was painted red, I don’t mean just red, it was red, red, red, with a capital “R” and a capital “D”.  It looked like red velvet on the walls, beautiful is not a big enough word for its color.  None of the other colors gave us any trouble; however, there was one big drawback to the red color; the walls could not be touched with anything.  If you put your hand on the wall it left a smudge.  If your shirt rubbed against it there was a streak remaining, not that it was not still red; but you could see every smudge mark and it changed the texture from flat red velvet to shinny red in that area.  Well, it did not take long for us to realize that the customers were not going to accept this; we must repaint these red rooms.  The frustrating part was that another coat of the red would not adhere to the other.  It simply ran off the wall, onto the base boards, and the floor.  We finally discovered that the only way to cover the red with the same color, or any other color, was to shellac the walls first, then reapply the new coat of paint.  What a mess we had until we figured all this out!  The sales contract was changed to address this situation and the red rooms became a thing of the past.

There are some pretty room colors around today, I just hope they don’t pose the problems this red paint invoked.

LOOKS ALRIGHT TO ME

by Ralph Jones

The first subdivision I worked in had small, lower cost homes in the south-east part of Memphis.  These houses were only 900 to 1200 square feet in size, 3 bedrooms, one bath a living room and eat-in kitchen.  A sink with a two foot cabinet on each side of the sink and a washing machine hook up was the extent of the kitchen.  There was a space allotted for the range and refrigerator as well, but neither of these was furnished.  All were built with a concrete floor, no garages and only the larger units had a single carport.  All the driveways were gravel unless extra money was paid, and most folks did not have enough to purchase the house hardly, much less, a concrete drive.

We had regular sub-contractors that did all of the building, be it concrete work, framing, electrical, plumbing, heating or whatever.  There was a foreman and one hourly labor, “step and fetch-it” guy on the job other than the sub-contractors.  This hourly laborer cleaned windows, hauled debris, and was there just in case an extra set of hands were needed.  Except where I was concerned and they were trying to teach me how to be a foreman so they put me with one of their best, Robert Herring.  I took almost every step that Robert took and sometimes more.  I learned all that I could from him and soon enough they turned the subdivision over to me to complete and moved Robert on to a new area.  We started early in the day, about sun up, and quit late in the day at dark or past.  It is almost like Mr. Kimmon Wilson, founder of Holiday Inn use to say, “You only have to work half days for me, the first 12 hours or the last 12 hours.”

The company I worked for had about 8 or more subdivisions going at any one time and these sub-contractors would move around to the other jobs as needed.  There were three brothers that did concrete work for several of the subdivisions, named Bohannon.  These guys worked for me out in the Parkway Village are and one day the payroll clerk, Pat Roper, called me in and asked me about their payroll.  They had worked for three different foremen that week and had spelled their names different on each work sheet they had turned in.  I told her they were indeed all the same people and to just pick the name that looked right and pay the guys, they too were good men and hard workers.

One of the contractors we had was a very nice person that did our electrical work.  He had a crew and they did a good job.  However the boss of that crew, let’s just call him “Frank,” had broken his neck in the past somewhere, and although it had healed; his head always leaned to one side.  We all got use to this head leaning and thought nothing of it, like I said; he was a real nice fellow and a hard worker.

Sometimes when things were very busy he would jump in and help his men wire the house.  I could tell when he had been helping with the “finish-out” of the house.  All the receptacles and switch plates were crooked.  They all leaned in one direction.  I’d walk into a finished house and there it would be staring me in the face, all the electrical plates leaning.  I’d call him over to the house and say, “Now Frank, you’ve got to straighten all these receptacles and switches up before it will pass final inspection.”  His reply to me was always, “Well, they look alright to me!”  We’d both laugh and he would have them repaired and corrected before the inspector came.

I would have him wire anything we had and never would there be a problem except if he did the “finish-out” all the visible plates would be crooked; but they “looked alright to him.”

 

 

Introducing Ralph’s Writings

Ralph Jones, now retired, began his lifelong career in construction, and later home design way back when he was just a kid.  He began working on construction sites back in High School in Pontotoc Ms.  His parents had always taught him to be a hard worker and give a man an honest day’s work for an honest day’s pay.

Through the years, he has collected some rather good stories of people he worked with, or worked for.  He has learned some lessons along the way too.  These are too valuable to let fade into obscurity, so I have decided to have him write some of his favorite stories down and I will forward them on to you, his friends, family and former co-workers.  I hope you enjoy his stories.

If you are interested in reading his stories, be sure to bookmark this page.  You will see off to one side or another the topics covered in this Blog.  If you click on “Ralph’s Writings” you will see all the stories I publish for Ralph.  Feel free to click on any of the other topics as I think they are also worth the read.

I hope you enjoy them as much as I do.

Janne (aka Ralph’s daughter)

Don’t be a Closet Painter

My dad, Ralph Jones, has been in the Construction and Residential Design business since… well, way before I was a twinkle in his eye.  He has some stories to tell, so I thought I’d share some of there here on my blog.  We are thinking about writing a book about the process of designing and building houses, but some of these stories will probably work their way into the book to lighten up the process if not educate everyone in better building practices.  Hope this gives you something to smile about as well as watch out for in your own building endeavors!

“Back in 1952, when I was about 15, I started working for G&K Construction Company in my hometown of Pontotoc, MS.  The ancient two story elementary school building with a full basement had burnt to the ground during the winter.  I was fortunate enough to secure a job with the company doing the construction of the new building when they began the next spring.  That first summer was a tough one, digging footings and grade beams; and since there were no redi-mix concrete company’s within 100 miles, we mixed our own concrete on the job.  That sun baked red clay was almost like digging in concrete itself, but we made it through somehow.

The boss Mr. Charles Gaskin saw that I was not going to quit, however bad the job was, so he kept me on.  When school was about to start again in the fall, he told the foreman to use me in some capacity whenever I showed up for work through the winter.  Working Saturdays and holidays through the winter it rewarded me with a little spending money and also kept my job in-tact.

As we got the frame of the building up, a roof installed, and began the interior finish, some wood work was to be added; and a painter was hired.  He was an old gentleman; tall, skinny, a good natured guy, but very quiet.  As far as everyone knew, he did his job with no complaints from anyone.  His job got done, but no one saw much of him during the day; just when he came to work and as he left.

Being a school job, an architect of the project visited on a regular basis to check and see what was happening and if all was up to his required standards.  One of these requirements was the wood trim had to be coated with a coat of primer paint on both front and back before it was installed.  This old painter would lay the strips of wood trim on saw-horses and prime them in each room.  Since I was sort of an “extra” on the work detail my job might be working here one day and there the next, moving around sweeping, cleaning, whatever.  As winter progressed, I noticed that a stray Gordon’s Gin bottle would show up occasionally; empty of course.  The further into winter we went, the more bottles showed up.  I would discard them as I went about my job of keeping the job at least ‘broom clean.’  I had no idea of who was drinking the gin but I had an idea.

One day while working in a particular class room there were several empty bottles, some saw-horses with freshly painted trim lying across them, and a tall metal scaffolding setup there in the room by some other tradesman.  This room had a medium sized storage closet opening into the room, but the metal scaffolding was pushed nearly up against the only door to that closet.  Again I thought nothing of this scene but a noise or something told me to move the scaffold and see what was going on inside the closet.

Screeching back the scaffold on the concrete floor, and opening the door; there was a scene that would never be forgotten, even though more than 60 years have passed, the old painter was sitting, ‘spraddle’ legged on the floor, head down on his chest, drunker than ‘Cooter Brown; either passed out or asleep; reeking to high heaven of paint primer and Gordon’s Gin.

Gordon's-Gin - 1952

I probably should have turned him in to the boss or foreman, but I had not been exposed to such a scenario before, so I just eased the door back closed and pushed the scaffold back near the door just as I had found it.

That was the last time I ever saw the old painter.”

Running the Business of YOURSELF Better…

There is a wealth of free information available to us via the web.  I know many of us “old folks” are not in love with the web, computers or new technology, but it is really incredible how much you can learn for FREE if you know where to go for the information you need.

In my day job as a home designer, I was recently looking for information on Solar Panels.  Search for that on YouTube.com and you get hundreds of videos, everything from where to buy them, what brands to buy, to how to install them, how to link batteries – both serial and parallel (whatever that means) and how many do you need for the Watt hours you’ll be using… WAY more information that I could actually digest, but extremely helpful!

Last weekend I tried to pick up a pair of knitting needles that had been sitting in a basket for over 2 years.  I couldn’t remember the first thing about knitting.   I opened a knitting book, but it was full of these weird abbreviations causing me to get lost immediately.  “YO” and “Slip 1” and “PSSO” and “K2tog”. I was lost until I remembered YouTube.  So I searched for “Knitting YO” and there were dozens of instructional videos about that one stitch.  So each time I came across an abbreviation that I didn’t know, I searched for that thing specifically.  Before I knew it, I was knitting again.

It doesn’t matter what you are interested in doing, whether Real Estate Investing, starting a Food Truck, cooking in a Pressure Cooker or Knitting there are YouTube videos and Pod Casts for every walk of life, even Real Estate Investing.  To prove my point, go to YouTube.com and type in “Real Estate Investing” and you’ll see a list like this:

Be Specific on what you are searching for!
Be Specific on what you are searching for!

Click on any one of these topics and you’ll get a bunch of videos to watch.

If you are not an experienced investor, M.I.G. is definitely the best place to be for monthly meetings and break-out meetings as far as education and networking are concerned.  Many M.I.G. members are very experienced in their particular course of investments (Wholesaling, Buy & Hold, Hard Money Lending, etc.) and are happy to help educate the rest of us, but one thing we could all use some help on every once in a while is running the business of ourselves better.  When it comes to our own Real Estate Investment companies, many of us work for ourselves and though we may extensive formal education, most of us need refresher courses in running our daily business of ME.  How do we recharge ourselves to get re-invigorated about the business we own (or aspire to own)?  How do we plan out our day to keep the main thing the main thing and to avoid having the tail wag the dog?

How do we prioritize our daily activities so that we:

1.) Get the things done that need to be done; and

2.) Improve ourselves a little bit each day; or

3.) Become a better business person and overall better individual?

There are countless self-help books that can be checked out at the local library that we can read for free, or purchased in a store or online, but which book would you begin with? There are thousands to choose from!  You can get recommendations from other M.I.G. members or from your friends.  A few favorites would include Rich Dad, Poor Dad by Robert Kiyosaki, Seven Secrets of Highly Effective People by Stephen Covey, or Failing Forward by John Maxwell.  There are literally hundreds of books out there that will come highly recommended, but if you are like me, the first thing you’ll get is overwhelmed by so many choices.   My quick answer to this “where to begin” question would be podcasts and/or YouTube videos. They are generally short and free.  You can listen while you are otherwise bored:  while driving or waiting in a line at the DMV or the doctor’s office.  You can “subscribe” to these which makes listening/viewing very easy.  My suggestion on the perfect place to begin this year:  Listen to the Bigger Pockets podcast # 157 (created on January 14, 2016) and work your way back to # 1.

I am a member of Bigger Pockets (www.biggerpockets.com), a national club, a lot like the Memphis Investors Group where you can go online to visit discussion forums, get forms for your investing business, network, ask and answer questions, etc.  They even have calculators where you fill in the blanks to see if a deal is worth the investment (membership has its privileges). Kevin Perk, former M.I.G. president (SmarterLandlording.com) has a regular posts on Bigger Pockets.

Last Thursday I got the weekly email about their new podcast and as I was reading through the main page (on my phone at a traffic light – it was red!) I accidentally hit “play” on the podcast and because I was driving, decided to let it play rather than listening to my music (for a change of pace) because I have a daily one-way commute of 30 minutes and podcasts really make the time fly.  WOW!  Was it AMAZING!  It was not about Real Estate Investments per-se, but about beginning your day better regardless of your line of work.  The guest was Hal Elron, who wrote the book The Miracle Morning which has sold THOUSANDS of copies to date.  The podcast was certainly worth the time spent listening and that has prompted me to actually purchase the book as I believe it will be well worth the read.

I highly recommend the podcast and/or YouTube video (of the same thing).  You can listen to the podcast here:  https://www.biggerpockets.com/renewsblog/2016/01/14/bp-podcast-157-simple-morning-ritual-help-dominate-every-area-life-with-hal-elrod/ (even while you drive) or you can watch the interview on YouTube here from your home computer or mobile devise:  https://www.youtube.com/watch?v=SeiqShce96w

I find it cool that a well respected person like Robert Kiyasoki has not only enjoyed this book personally and put its principals into practice, but has highly recommend it to regular folks like you and me.

 

Quote from Amazon: “As my rich dad often said, “I can always make another dollar, but I cannot make another day.” If you want to maximize every day of your life, read Miracle Morning.”  – Robert Kiyosaki

 

I hope some of you out there will read this book with me, but will also recommend other books that are especially meaningful to you as I’m always up for a good read… but often get overwhelmed at all the choices!

 

Janne Zaccagnino

Ralph Jones Home Plans, LLC

901-756-6070

The Rent House dilemma

Well, I haven’t posted a lot lately, but thought I’d add a little bit today.

I have a dilemma.  I finished construction of a beautiful Rent house in Cordova, TN back in July.  I have posted signs around it (including a HUGELY BUSY main road, I have listed it for sale in the Newspaper as well as online, (at least 30 websites have my house listed) as well as the Military Off-Base Housing site to try to attract military guys/families.

It is priced well, or so say my investor friends, but it has yet to rent.  I know it is probably “user error”, (i.e. I’m doing something wrong) but I can’t figure out what that is.

I started off advertising it at $1365, which is what Zillow had suggested.  But after no hits, I took it to $1295, then $1199, THEN $1095… I got LOTS of hits when I took it to $1095, but all of them had CRAZY credit issues from multiple Bankruptcies to Evictions and even one Meth Felony Conviction!!!  I can’t put someone in my house who could possibly start cooking Meth again!  WOW!

Once I got the house down to $1095, one of my really experienced Landlords told me that I had the rent WAY TOO LOW!  So, I contacted a Real Estate Manager to try to list it on her end for a great fee.  I sent in all my paperwork, but it’s been 3 weeks and she still doesn’t have a sign in the yard.

Just a bit frustrated at this point and don’t know what else to do to get it rented.  I would LOVE some feedback.