Asbestos Prevention Tips and Green Alternatives for Home Owners

Regarded as an old American tradition, buying a home is something many people have in the back of their minds for a long period of time.

Gradually saving up for a down payment and taking the proper steps, when at last, you feel you are ready to make one of the most important decisions in your life. It may not be completely clear, but the first steps in the home buying process are important to the success and enjoyment during this process.

Newly bought homes are often remodeled and repairs may be needed. Having the assistance of an experienced real estate investment expert or agent can make all the difference in the many steps that lead to home ownership.

Many homes or buildings built before 1980 may still contain asbestos or old corrosive building materials. This should not make you overly concerned, because asbestos exposure is easily avoidable by taking simple precautions. Many green, Eco-friendly alternatives are available which not only provide a safe and health method of insulation, they can even help in reducing annual energy costs.

Tips and Prevention

Naturally-occurring mineral, asbestos was utilized in a variety of construction applications throughout the 20th century. Due to its flame resistant, highly durable and inexpensive qualities, it became the ideal choice for manufacturers as a form of insulation, piping, brake lining and flooring.

If any asbestos is located in the home, most experts suggest to just leave it alone and undisturbed. Asbestos that is not deteriorated and left alone will almost always not pose any risks. The best action may be no action at all. When its fibers are disturbed and become airborne, it can be a cause for concern.

If a home inspector suggests removal is necessary, it must be performed by a licensed abatement contractor who is trained and equipped in handling hazardous materials. They can perform the removal in public facilities, homes and work places.

Exposure to damaged asbestos can cause a rare but severe lung ailment known as mesothelioma. Accounting for three percent of cancer diagnoses in the U.S. each year, diagnosis of these forms of asbestos lung cancer has been a difficult task because mesothelioma symptoms are so similar to other, less serious conditions.

Going GREEN in the home

Living in the 21st century, there is a renewed importance towards environmental sustainability, green construction and lowering your carbon footprint. Many realtors have understood this important aspect of our lives and can greatly assist clients in achieving a green home.

Utilizing Eco-friendly methods of building and insulation can have many environmental, economic and health benefits, including enhancement of air quality, improvement of pulmonary health, increase property value and reduction of energy costs. Currently, many cities in the U.S. have created lumberyards which re-store where you can purchase recycled building materials that are authentically strong and inexpensive.

The use of cotton fiber, lcynene foam and cellulose are viable alternatives that possess many of its superior qualities without the toxicity. Cotton fiber is becoming a favorite insulation method. Made from recycled batted material, it is then treated to be fireproof. Water based spray polyurethane foam, lcynene, is a healthy insulation which contains no toxic components.

The United Nations Environmental Program states that the use of these recycled building materials, on top of the installation of energy saving appliances and the maximization of natural lighting in a building, can reduce energy use energy use by 25 percent.

Private Money & The Perfect Storm

I was recently at an Advanced Focus Group meeting, which is a sub group to our local REIA group, that presents specific topics that are a little more detailed oriented than what is usually presented at the REIA meetings.

The person speaking at this meeting said something that made me say “Wow!” because it was a “Holy crap, she’s right!” moment.  This woman was recently at a week long seminar with Greg Pinneo, and he mentioned this to his students.  When it comes to getting private money for your deals, we are in the perfect storm.

Let me explain, first of all when I say private money in this post, I am not referring to hard money lenders who charge you several points and high interest.  I am referring to the average (or above average) Joe American who has a good sized investment portfolio, at least one big enough to fund your deals.  Joe American who is willing to be a private investor and loan you his money to do your deals at 5, 10, 15, 20 & 30 years.

Ok, so here is the perfect storm:

  • Interest rates are low
  • CD rates are low
  • Stock market is a roller coaster with more down hills than up
  • It’s a buyer’s market

A lot of investors in the stock market are looking for investments outside of the stock market that are safe.  They can put their money in CDs, but CD rates are around 3% right now.  You, as an real estate investor, can offer to pay them twice as much interest and secure the loan by real estate.  If you are not buying any long term holds and are only doing whole sale and rehab deals, you can offer them 3 or 4 times as much, let the interest accrue (no payments) until your deal is sold and still come out ahead if you had used hard money.

So keep your ears open.  If you hear friends, family, colleagues or perfect strangers talking about their need to move their investments elsewhere, it may be your opportunity to get your first blue ribbon investor.

“Guru Review” – Mike Summey & Roger Dawson

I am reviewing both Mike Summey and Roger Dawson together because they have written many books together and hold a weekly chat on Mike’s website for anyone to join and ask questions.

Mike spoke at my local REIA group in 2007.  He has been investing for about 31 years and has NEVER sold a property.  This is known as FISH – First In Still Holding.  He owns several single-family homes, multi-family units, apartment complexes and commercial investments, and he uses the same formula I referred to in my earlier posting on Buying Rentals Right when purchasing all of his properties.

Roger is an expert in negotiations and has written many books on the subject, including the books written with Mike.  Roger currently is a full time speaker teaching managers and salespeople how to improve profits and make more sales with Power Negotiation tactics.

Together Mike and Roger have written 4 books and a fifth that has either recently released or will be soon.  The four books are:

  • The Weekend Millionaire’s Secret To Investing In Real Estate
  • Weekend Millionaire Mindset
  • Weekend Millionaire Real Estate FAQ (a companion to the first book)
  • Weekend Millionaire Secrets To Real Estate Negotiating

I have read the first book and it was well worth the read.  I would suggest it to anyone who plans to own rental properties.

Like most “Gurus,” Mike also has a computer program to help his students.  Unlike most “Gurus,” Mike’s program only costs $69.95, NOT $699.95!!!  His computer program is called The Offer Generator. This program is geared toward investors who are buying rental properties and uses the previously mentioned formula when determining if your offer will cash flow.  The program allows you to create several different offers on the same property and print them out to submit to the seller.  You enter the data on the property, like gross rent, maintenance reserve, taxes, insurance, loan information, down payment information, etc. and it will tell you if that current scenario has a negative cash flow and to consider adjusting your offer to avoid the situation.  Once you have created as many cash flowing offers as you want, it prompts you to add any stipulations you want, such as subject to an inspection or loan approval, and then it creates the offer letter(s).  From there you can make any additional changes you’d like, or print the letter as is.  You can also save the letters to a file.

Mike and Roger have one of the best systems in the business and have a proven track record.  Mike has not changed his formula in 30 years and it has stood the test of time.  The only thing I disagree with Mike on is when he says “If you have to sell a property to make money, then you’re a speculator, not an investor” and maybe the key words here are “HAVE TO.”  But when you have so many investors out there buying properties at 50 – 70 cents on the dollar, and reselling them in as little as 2 hours to other investors or end buyers, is it really speculating if you already have those buyers lined up?  If I buy a home in foreclosure for $350,000 and it’s worth $500,000, there’s very little chance I’m going to rent that house and cash flow; I HAVE TO sell it; however, if I have a client lined up who has already agreed to buy that home from me for $450,000 and they have a bank approval and/or cash to do it, am I really speculating?

Every Monday at 8:00 PM Eastern on Mike’s website, http://weekendmillionaire.com/, Mike and Roger hold a weekly chat with investors around the country.  Everyone is welcome, you do not need to be a member and it is free.  I’m usually there myself except the 3rd Monday of the month when I have my monthly REIA meetings.  Also on his site are links to past weekly chat transcripts, articles Mike has written for his local newspaper and interviews he has done for TV and radio shows.  Visit and check it out.  Hope to see you on a Monday night chat soon.

“Guru Review” – Than Merrill

I’ll save you the Google search, Than is short for Nathaniel.
Than Merrill

I saw Than speak at Larry Goin’s Investorpalooza (yes – Investorpalooza) in January 2008.  He was the opening speaker and he annoyed me to no end.

Maybe it is something national speakers are taught to do when the have the opening 8:00 AM session at these events – audience participation, to make sure they’re alert and not snoozing.  I mean really, how can push your product to someone trying to attain REM mode?  Than’s approach to audience participation was not to ask them a question and to have them all shout out some canned response he’d set up at the beginning of his presentation.  His approach was to make a statement, and then ask the audience to repeat the “key words” of that statement.  He did this SEVERAL times.  For example, Than has 2 systems and he’ll be talking away and make a statement like “… I have two systems.  How many systems?” and the sheeple respond together with “Two!”  Two systems!  Wow, I’m on the edge of my seat…

Than spoke for 90 minutes and I wrote down 4 things.  That’s not good, most of what he talked about was the basics most beginning investors can learn for free.  Most speakers with a product to sell will give you little nuggets of information used in their system and to get the rest of the story, you need to buy their product, sign up for a mentoring program with them (first 12 to the back get one-on-one sessions…), blah blah blah.  The 4 things I wrote down were 1. Track Marketing – I also noted I could do this on a spreadsheet).  2. Objection scripts – part of his TWO systems.  3. Buyers list is most valuable asset – can’t argue that. 4. Market general benefits vs. features – good nugget, when showing a home to a potential buyer, don’t harp on the stainless steel appliances and the nice new deck (features), concetrate on the benefits – close to work, shopping, interstate access, quiet neighborhood, good schools – whatever is a benefit to living there.

I did write down one more thing, and that was Than has one of the “Flip This House” teams on A&E.

That’s my review of Than.  I didn’t buy either of his TWO SYSTEMS and he should never be allowed to do an opening session at this or any similar event again.

Real Estate “Guru” Reviews

There are a lot of real estate “gurus” out there, most specializing in a specific niche market.  If you’re attending your local REIA meetings regularly and they are bringing in these gurus to speak at the meetings, then you’ve probably heard some of these people speak.

Here’s the typical real estate guru: they start out with how they started investing in real estate, give you some nuggets of information, then start selling you their product.  When they’re done, their product and bonuses cost as much as some mid-sized cars, but they sell it for one price on their website, but for tonight only you get it at the incredibly low price of $997 (or whatever).  If you decide their product is not for you, you can send it back opened, marked up or completely UNOPENED (it’s SELF help people, not SHELF help – you have to open the package before it can help you), keep the bonus material, and they’ll send you a refund.  Then they’ll ask you if you’d like to know how to get the product for free.  After a loud “yes” from the audience, they head to the back of the room and say “Follow me to the back and I’ll tell you how to get it for free,” which usually involves working their system and doing it successfully in a certain amount of time, send them a copy of the check and a testimonial to get a refund.

There are some speakers who do not follow this standard, and that’s a refreshing change.  I think the whole “follow me to the back” routine is asinine, but it does work.  I just wish they’d turn off their microphone, because it’s annoying to hear them answer questions, especially since we don’t know the questions being asked.

I will be individually reviewing gurus that I have seen or listened to in interviews with other real estate experts and let you know my opinion of them and their product.

Real Estate Investor Associations

When you get into this business of real estate investing, one of the best things you can do is to join your local Real Estate Investors Association (REIA).  To find group(s) close to you, visit www.nationalreia.com, click on “Find A REIA” on the left, click on your state and then find the group(s) closest to you.  There are costs to join, for example my REIA group is $150 to join, $99 renewable after that.  Add a spouse for $25.  Visitors pay $15 and that can be applied to a membership if you join that night.

REIA groups offer a chance for you to network with other investors and visit with vendors to see what they have to offer.  Some REIAs have a deal table where other investors bring deals they have to offer to other investors.  REIAs also offer education and this is probably the main reason for their monthly meetings.  This education can come in many forms, local members may talk about lease options one month, a mortgage broker may talk about different lending options available to investors, the next month may be 1031 exchanges and the next month may be a real estate expert.  My REIA group has a lending library.  We can check out courses, like Carleton Sheets “No Money Down” course, Bill Twyford’s NLP course and several of Ron Legrand’s courses, all at no cost just – one of the many benefits of being a member.

You may find another investor to partner with on some deals, perhaps someone who can mentor you through your first few deals.  Get to know these people, they can help you be successful.

Networking and education are two of the main reasons to join a REIA.  It is well worth the investment.

Buying Rentals Right

In my last post I mentioned buying your rental properties right.  There are several formulas out there to buying real estate.  Due to short attention spans, I won’t even begin to list them.

A common formula is After Repair Value (ARV) * 70% – closing costs – taxes – insurance – repairs – your profit = Maximum Allowable Offer (MAO).  This works great for rehabs and wholesale deals, but not always for rentals, because rentals are driven by the Net Operating Income (NOI).

Here is the formula used by used by Mike Summey, who co-authored “The Weekend Millionaire’s Real Estate Investing Program”, “The Weekend Millionaire’s Secrets To Investing In Real Estate”, “Weekend Millionaire Mindset” & “Weekend Millionaire Real Estate FAQ” (all are suggested reading).  The “Secrets” book has sold more copies than any other real estate investment book.

Gross Rent (what the tenant pays you)
– Vacancy Rate (usually 5% – 10%, depends on the area)
= Net Rent
– Management Fee (whatever the property manager charges)
– Maintenance Reserve (savings for future repairs)
– Utilties (what the owner may be responsible for)
– Taxes (1/12 of the annual property taxes)
– Insurance (1/12 of the annual insurance premium)
– Other expenses
= Net Operating Income

The NOI must be able to cover the principal and interest payment on your mortgage.  If it doesn’t, you can still “cashflow”, but you’re setting yourself up for failure.  If your gross rent is barely covering your Principal, Interest, Taxes & Insurance (PITI), you better hope that when your tenants move out, you can get new ones in right away and that the previous ones didn’t trash your property.  Otherwise, make sure you have a large cash reserve handy.

Let’s run an example of this formula:

Gross rent: $750 -
Vacancy Rate (10%): $75 =
Net Rent: $675 -
Management Fee (10%): $67.50 -
Maintenance Reserve (10%): $67.50 -
Utilities: 0.00 -
Taxes: $100.00 -
Insurance: $58.33 =
NOI: $381.67

Here are some mortgage amounts, rates and terms that can be covered by an NOI of $381.67:

10 years, 6% int., $34,378.03
30 years, 6% int., $63,658.80
10 years, 7.5% int., $32,153.41
10 years, 0% int., $45,800.00
30 years, 0% int., $114,500.00

Yes, that is ZERO percent interest on those last two examples.  For reference, the 30 year, $63,658.80 @ 6% has a total pay back of $137,397.81.  The zero percent interest can only be done with owner financing (if you find a bank loaning out at 0% for 10 or more years, let me know), and there are sellers out there that will finance you at that rate.  They won’t give it to you, you have to ask, they might say yes.

This formula is very similar to what commercial property owners use to determine Capitalization Rates (Cap Rates) and how much they can pay for a property.  Cap Rate is a posting all to itself.  I’m sure I’ll cover it eventually.  If you use this formula, your chances of being successful will greatly increase.

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