Real Estate Investing

In Liverpool, England, landlords are getting pretty fed up with tenants who are skipping out on paying rent.  They may be able to hide when the landlord shows up to pay the rent, but they can’t hide from the ridicule from their neighbors when they see the Rent Dodger signs out side their flats.  Before a sign is posted, the landlord will try to work with the tenant.  In addition, they won’t put a sign up for people who are genuinely suffering from financial problems,

“It’s not a medieval witch-hunt. The signs will not apply to hardship cases, but there are people who take the rent paid to them by the Government and do not pass it on.”

My guess is that if this happened in the U.S., we’d find some way to turn the tardy tenant into a victim.

Meanwhile if you want to throw $50 in a pool for th chance to win a house, a 6000 square foot home is being raffled in Edgewater, Maryland. Some of the rules include,

Sponsor reserves the right to cancel the raffle if less than 31,500 tickets are sold. Sponsor further reserves the right to extend the entry period until the requisite number of tickets are sold, up to a maximum of 120 additional days. If the raffle is canceled for any reason, 99% of the ticket price will be refunded to each paid entrant.

That’s certainly a unique way to sell a house!

Have a great weekend!

I keep hearing that investors are starting to snatch up houses and getting them at great deals.  I haven’t worked with an investor yet this year, but several of my colleagues have.  However, I *have* worked with sellers who have taken their homes off the market in order to rent them.  The cost of making months of mortgage payments on unoccupied houses has become too much for them, so they’ve become landlords to stop their pocketbooks from bleeding.

If you’re in this position, you need to know how to protect your home, how to insure the house, what rights tenants have, what your rights are as a landlord, how to budget for repairs, and more.  Even with typos, this site provides a helpful list of 10 Things You Should Know About Being a Landlord.  For example,

Having a clearly defined set of rules for residents can save you time and money. When you draw up your list of rules, make sure the same rules apply to all your residents. Don’t discriminate based on age or gender. For example, don’t just say “children are not allowed in the pool area.” You either have to say “no resident or guest is allowed in the pool area” or “children under the age of 8 must be accompanied by an adult in the pool area.” Using general terms, such as “resident” and “guest” will mean that you can’t be accused of discrimination.

If a resident does break your rules, then you have every right to keep a record of such behavior. Keep written records of the time and date when the incident took place and how you found out about the incident. Keeping records will mean that it’s far easier to evict a residents if there are any problems in the future. Having rules and guidelines for residents clearly laid out means they know what is expected of them before they agree to rent from you. Make sure you look at the laws in your own state before you finalize your rules.

In Ogden, Utah, a Realtor is also a landlord and shares his “no dogs” rule.  Some of his “good” tenants moved out and he discovered ruined carpet and subfloors,

Not surprisingly, the pad was completely disgusting as well. Subfloors too. In all, this reflooring experience will top $2500. The tenant’s (now forfeited) deposit was $700 so I am out about $1800 for the experience. Unfortunately, these particular tenants suffered a significant decline in their credit so it would be pointless for me to take them to court. As the saying goes: You can’t bleed a turnip.

Jeremy says the the biggest step in making money as a landlord is by thoroughly screening potential tenants. 

You can check their credit scores, ask for references from previous landlords (and call them!), ask for personal references.  Also, you can ask for their supervisors name and number to confirm employment.  Once you’re satisfied they have the ability to pay the rent and they move in, open communication is key to a happy relationship.

My colleagues and I have been tossing around newsletter ideas this past month and have decided our next issue will describe how to create college savings for your children and grandchildren through a home purchase.  To this end, another agent just handed me an intriguing list that details the benefits of investing in residential real estate.   This list has five benefits, while most other investments offer only one or two.

1. Cash Flow.  The rent provides income.  A wise real estate investment will pay for itself on a monthly and annual basis, while paying the note. Your ultimate goal is to own property “free and clear,” which creates maximum cash flow.
2. Leverage.  You can own $150,000 worth of real estate with only 15-20% cash. You can borrow cash from one property to buy another. Your short-term goal is to use leverage to acquire a portfolio of real estate. Your long-term goal is to pay the loans off and own your properties “free and clear”
3. Debt Reducation.  Real estate is one of the few investments where someone else will make your payments. In essence, the tenant makes the payments and reduces your debt.
4. Tax Savings.  You are allowed to depreciate the house and write off your expenses in order to reduce your taxes*.
5. Appreciation.  Over time the value of houses and condos have risen. The average value of home has traditionally doubled in value every 15 years**.

*Consult your accountant or tax attorney to specifics related to the tax benefits of investing in real estate.

** The government Office of Federal Housing Enterprise and Oversight figures appreication rates for Metropolitan Statistical Areas around the county. Check this site to see what appreciation rates have been in your area.

Coming Soon: How to buy a home to pay for college on behalf of your children and grandchildren.

Photo from here.