Personal Finance Resources

Well today hasn’t really been a good day in my real estate quest. I own a double wide on the outskirts of town, and had some renters that I just evicted. They had been consistently behind on their rent, and finally only paid for half of last month’s rent, and nothing for this month. So today, we were in the house trying to clean up after them.

The rotten meat in the refrigerator sure was a nice touch. Not to mention the dog feces in the master bedroom. But what really got me was the destruction of my bathroom door, and several pieces of trim in the house, and the bottoms of walls that had been scratched up from the tenant’s pet. You might be thinking, “Well Jeffry, why did you allow them to have a pet in the house?” And the answer to that is that the dog was illegal. The contract did not allow for a pet, nor did they attempt to modify the lease, pay a pet deposit or anything.

I guess I am just venting with this post, but I would like to be able to connect with my readers who invest in real estate, and let them know that I am a real person, and that I have struggle with bad renters just like the rest of us. Anyways, keep your heads up out there, and I will try to keep mine up as well. The rental market here is still strong, so I hope to have it rented out again soon. But I think I am going to put it up for rent or sale, and just see what happens. ‘Til next time…

Bookmark, Share or Email this article.

There comes a day in every real estate investor / property manager’s life when they have to issue a notice to vacate. Last Monday was my first time. I truly believe that this is the worst part of managing properties; other than perhaps a contractor that does shotty work and still wants to get paid. But truly, in evictions, there are no winners. The tenant loses their residence, and the landlord is typically left with a trashed out unit and an unpaid bill. I am not anyone special, it was the same for me.

This particular tenant was having problems getting their rent to me on time in the past as well. Only one or two months did they pay their rent on time. So, as you probably can guess, they just got further and further behind on their rent, until finally last month they were only able to pay a little over half of what they owed in regular rent, not to mention all of the late fees. The good news is that they did in fact leave without me having to go to court and get the eviction finalized. With just the notice to vacate, they left the property. This is one area that I think my treatment of them through the problems paid off.

Working with Your Tenants

You know, problems happen, and tenants sometimes cannot come up with their rent in a timely fashion. But I believe if you work with them a little bit, and don’t hassle them too much, they will be more likely to make it a priority to pay you. Now don’t get me wrong here, you still charge your fees and you still send letters, but getting nasty and upset with them is not going to get you anywhere. In fact, in some instances, getting upset with them will cost you more, if they think you are tyrannical, they may trash the place before they leave, and drag you through the eviction process to expel them. I think in my case, the tenants were so ashamed about the whole situation, that they just left.

Read the rest of this entry »

Bookmark, Share or Email this article.

As a fellow real estate investor, sometimes deals come along for multiple rental properties, and getting a blanket mortgage for those properties is an ideal situation. I just came over from doing some property rehabbing at one such unit today. The deal involved two duplexes that were several blocks away from each other, that had the same owners. So we negotiated the purchase of these properties (a great deal by the way, some 1% - 1.5% rent to purchase price ratio, after repairs) and set off to our banker to get a loan.

Working with a Great Mortgage Broker / Banker

Again, one of the key fundamentals to doing any legitimate business is having strong relationships with business to business units. Your mortgage broker or banker, any contractors, property managers, etc. must be of very high quality and at the cheapest possible price. I stressed quality first, because in today’s world the best price is often accompanied by some very unscrupulous business practices. Get references, and test your relationships before you do big deals with them. It might be a little more effort, but it is worth it, as you will see in a moment.

Getting the Blanket Mortgage

Read the rest of this entry »

Bookmark, Share or Email this article.

Continuing on my article “Small Home Based Side Business Idea Part I“, I would like to demonstrate some ways to convert your newly acquired inventory to cash. Ok, so once you have cleaned out the unit, and concluded your business with the storage unit, then there are four ways I have for you to make money on the unit. These are options that have various time line for recapturing your investment, but the general rule of thumb is that if you can wait a little longer to get your money, you should be able to make more of it. So let’s look at some of these techniques:

1. Running a Garage Sale
   Quick, simple. This is the easiest way to turn around your money quickly. If you price the items low, and focus on larger, more expensive items selling, you should be able to sell most of the unit on a typical Saturday. One Saturday that I did this, I was able to do effectively triple my money spent, and I still had items left over to be able to sell elsewhere.
2. Using Ebay
   If you want to make a little more money, and take a little extra time, you can utilize the internet and local advertising to sell the items. Getting an account with Ebay and listing the items for sale through its online auction system can be a great way to drive up the price you get on a particular item.
3. Utilizing Craig’s List and Local Papers
   Craig’s list and local papers can give you good exposure at a low or no cost base. I would limit my use of these services to larger items that you can get a good price for. Things like lawn mowers, furniture, etc. would be a good fit for these items. Craig’s list is a free service and is available for many, many areas across the country. Check with your local paper for advertising costs and dates.
4. Pawning the Items
   If all else fails, consider just pawning the items at your local pawn shop. This is a great way to sharpen your negotiating skills, as pawn shops are expert negotiators. The easiest way to learn - watch what they do, and mimic it. Always been pessimistic and reluctant to sell your items, as you worst case scenario is going across the street and selling the items to the competition. “No” is the best negotiating word.

So if you take these methods and put them into practice, you should be looking at a few hundred dollars in additional income each month. These auctions happen all the time, especially in bigger cities, thereby providing you a continual stream of inventory to sell. And if you hold a garage sale continually, you should be able to build up a client base, that will check out your garage sale week in and week out. So go out there and make some money, and let me know how you do.

Bookmark, Share or Email this article.

If you are investing in rental properties like me, you need to make sure you have a rental formula that works for the property of interest and provides positive cash flow. There are several different formulas that you should consider. One is a formula for calculating an offer price based on expected rent, one is a vacancy and maintenance formula, and another is a calculation on net cash flow/income generation on the property.

Simple Offer Price Calculation for a Rental Property

Some experienced investors have a complicated formula for calculating their offer price. While this usually lends itself to a better decision, I like to make a simple calculation first. If the bid price is going to be near this calculation, it might be worth it to continue estimation of repairs, etc. but sometimes you can just ball park the rest. But most investors like to look at a rental property this way:

1% x Offer Price = Expected Rental Price

This is a good rule of thumb to get you started. Now, I have offered on properties where I am looking at 1.5% or greater, in which case I don’t spend too much time estimating repairs. The cash flow is so good, you can absorb a goodly number of repairs and still make quite a bit of money.

Vacancy and Continuing Maintenance Equation

Another thing to consider is the vacancy rate and continuing maintenance that your new rent property will need. Here’s a general rule of thumb:

75% of the Rent is kept by the investor, 25% of the rent is spent in maintenance and vacancy.

Now I have seen the hassle and problems that surround renting properties, and I tend to lean toward 1 year leases, just to try to minimize issues related to vacancy, moving a renter out and advertising for a new one, etc. If you really need to get a property rented you might consider doing a 6 month lease, but I would focus on getting 1 year leases.

Net Cash Flow / Income Generation

I threw in this just for some additional help, but it shouldn’t be that hard to figure out.

Rent - Maintenance - Vacancy + Depreciation (usually 30 straight line depreciation) + Tax Deduction on Maintenance, Office Supplies and Mileage

So my recommendation is to take a part of your house as an office (for tax purposes), that way you can take all of your miles for any trips back and forth from your office (home) to all of your properties. You’ll have to recapture the depreciation on your home office when you sell your home, but its worth it.

Bookmark, Share or Email this article.

As I have mentioned in the past that there are only two ways to have more money, making money and saving money. So today I want to give you an idea for a small home based side business you can implement quickly, easily and cheaply. So the object of today’s lesson is to supplement your income with a side business that only takes a small amount of time each week, very little overhead and investment, and that can produce a few hundred dollars (perhaps) per month. I have personally used this system to generate some extra cash on the side.

Storage Auction Sales

Yep, that’s right. It’s not selling oxygen and water on Mars, it’s simple. Buy low, sell high. Easy huh? Well that is what everyone will lead you to believe. But this system actually is pretty easy. Are you going to have to work? Yes. Will it be worth it? Yes. Here’s the idea:

When a person rents a storage unit, and then later cannot pay for it, many times they will abandon their belongings. When this happens, the storage unit will advertise an auction of the delinquent customer’s items to cover back rent and other fees on the unit. They are required to advertise the auction time and place in the local newspaper, generally under the “Notices and Legal” section. This is where you come in.

All you need to do is show up for the auction with cash money, and bid on the unit. I recommend having a couple hundred bucks on you, just in case there are some really good auctions. From my experience, the majority of the time the storage business wants to sell the entire unit all at once. There have been times when they have just auctioned off individual items, but they usually want to sell the whole unit of belongings, as it is just much easier for them to do it that way.

A Quick Rundown of the Auction Day

On the day of the auction, make sure to show up a few minutes early. Talk to the clerk about the auction, and find out what their procedures are for administering the sale. Often, you will be allowed to “peak” into the contents of the unit, but not allowed to go in and thumb through individual items. But just being able to look in should give you a pretty good indication of the type of person/stuff they might have in the unit. Then determine your top price for purchasing the unit. Buy the unit, and get your truck ready to clean it out. Usually the storage unit will give you a deadline to get the unit cleaned out.

Continue to Small Home Based Side Business Part II…

Bookmark, Share or Email this article.

It’s getting late, and I haven’t had a chance to get much done today, but I wanted to give you a quick tip.

Building relationships and working deals are the key to getting anything done. In this particular instance, I have built a friendship with an older man, who likes to go fishing. I like going fishing too, and so he has had me go along with him several times this year. I help him with launching the boat, and any tough issues like today when the lanyard on the trolling motor broke (that wasn’t very fun fixing). So for just a short 15-20 minute drive, I am able to go fishing, and catch dinner.

If you like eating fish, you know it is expensive to buy at the grocery store. So catching it under circumstances like mine is very cost effective. I just had to pay for a fishing license, a few lures that I have lost while out on the water and gasoline to get the boat ramp. My friend takes care of the rest. Now don’t be too quick to judge here, he would go out without me. In fact he has been going out for years mostly on his own, but having me there to help him launch, etc. is very nice for him. This is what I mean by building relationships. Try to create win-win situations, and you can get a lot of things done.

Bookmark, Share or Email this article.

This article outlines some simple and cheap tips for creating solid entertainment for your young one on his or her birthday. With ideas for invitations, games, and goody bags, you will have a good start on throwing a quality birthday party on a budget. In this world of increasing inflation and stagnant or decreasing income, we all have to find ways to get the budget down, and save money. Even with something like a birthday party, it still makes sense to think smart before spending several hundred dollars for outlandish things your son or daughter may forget anyway.

read more | digg story

Bookmark, Share or Email this article.

In this post, I would like to outline a question that I received via email. Someone very close to my demographic wrote back and forth with me, and basically wanted to know how to allocate a sum of money they received from an inheritance. The basics of the request are as follows:

Hi there, was wondering if you could perhaps give me some advice.

My mother passed away in 2005, leaving me with both a 401k inheritance and life insurance. However, the passing was unexpected as I now have a lot of student loan debt that she would have helped me pay back. Regardless, I have come up with an idea that I would like to assure is not a bad move.

Me: 21
Assets: 401k ($125,000) and remaining life insurance ($80,000)
Debts: $90,000 student loans ($4,000 of it Federal), $4,500 credit card

I was looking to not even touch the 401k and begin adding to it once I began my career as a Police Officer in July. I wanted to use the life insurance to pay off the credit cards and federal loans in its entirety, and bring down the private one to $45,000, leaving me with a $15k liquid emergency fund/savings (after living expenses for the remainder of my time in college) This would then be my only debt, manageable at about $300 or so a month, maybe less once I consolidate. I just wanted some input on if this is a good idea, especially with the loan-pay down. Seeing as how the gov loans have a lower rate, I’m not sure if I should use the $4,000 directly in addition to the private pay down while keeping the gov loans open. Please let me know what you think, thank you.

Credit Card: Just one, at a rate of just under 10% (9.8), with a 5k limit (so practically maxed out)
Federal: Not completely positive since they are not due for repayment just yet, but approx. 5.6 since I last checked
Private: Has hovered between 7.6-8% (Since our economy is in shambles, it has been at the lower end for the past several months)

As of now, all student loans are on a 20 year plan. If I choose to consolidate the privates for a lower rate, I have the option of jumping to 30 year.

I would like to begin by saying that this gentlemen has a level head and some good ideas about how to allocate the funds. But I would like to elaborate on the best financial way to attack this issue. Now, if you have been following this personal finance blog, you are aware of my staunch hatred for debt of any kind. However, in some circumstances, carrying some debt can be more beneficial than paying it off. But let’s dive in and break this situation down:

Regarding the 401k Money

I believe that keeping the money in the retirement account is indeed the best use of this money. Without question, breaking into this money would have serious consequences, mainly Uncle Sam taking a gigantic bite out of the money. Plus, with being so young (age 21) and having 38.5 years to go before retirement (assuming he retires at age 59 1/2), and assuming he could average 8% per year in mutual funds, the $125,000 would grow to $2,419,494.28 without any additional payments into the account. That is a pretty solid retirement wouldn’t you say?

So bottom line, I would definitely keep the 401k money in the 401k account. Let it grow tax deferred (or tax free, if it is a Roth IRA).

Allocating the Life Insurance Money

On this point, I would have to recommend a slightly different strategy than the one he outlined in his email. Starting with the easiest decision, I would pay off in its entirety the credit card debt. Beating 10% interest on the stock market or any other kind of moderately risked asset is going to be hard to consistently do. So with regard to the credit card balance, yes, pay it off.

With regard to the federal and private students loans, I have a different suggestion. I believe that the rates you are paying on these loans are too high. I am fairly confident that you can obtain a consolidation loan to get all of your student loans condensed into a single loan, and you can probably get the interest rate down considerably. I consolidated my student loans back in 2003, and have since paid them off completely. At that time, I was able to consolidate at a rate of 3.5%. Now I understand that the market today is a little different, but let me give you a couple of approaches on how to get the best deal on a consolidation loan.

Read the rest of this entry »

Bookmark, Share or Email this article.

It’s bad enough when a tragic accident happens, or a loved one gets sick and has to have an extensive hospital stay. But after all the turmoil with family and friends, in come the bills. And in today’s world, paying medial bills is an extremely expensive proposition. I want to dedicate this article to folks that need help paying medical bills, with a focus on a singular point - negotiating with the hospital/health care organization. I do not intend to provide any links to services, companies, or government aid in paying for health care, this is a self help focused article.

America has drifted in to a price taking, lazy, “gimmie, gimmie, gimmie” nation. People do not want to work hard to earn money, and if they are able to make a little money, spend way more than they make. But enough ranting, I want to elaborate a little on what I mean when I talk about negotiating with the health care provider.

Did you know that many insurance companies, Medicare, Medicaid, and other big organization customers have pre-arranged, set rates that they pay hospitals and other health care providers? They do. I worked at a hospital before deciding to venture off on my own in the internet business and real estate investing/property management. While I was there, I was shocked to learn that some of the larger health insurance companies paid 60%, 70%, or 80% of what was billed to them. Does that make any sense? When you get a monthly bill in the mail, such as a bill for cable TV or phone service, are you allowed to pay a fraction of the bill, or the whole amount? Well obviously, the entire amount.

But you see, it is different in the health care industry. In fact, Medicare pays based on what they call a Relative Value Unit (RVU), or a fixed amount per unit. And depending on the service rendered, they will pay a certain number of RVUs. So what this means is that the health care provider is going to get a fixed payment, so there is not much incentive to go the extra mile. So the bottom line of what I am saying is this, almost every entity that pays a health care provider is paying less than full price.

Read the rest of this entry »

Bookmark, Share or Email this article.