Taxes: Record Keeping

I love tax season.

No, I’m not sadistic nor am I certifiably crazy. Tax season means one thing: tax refund. Who doesn’t like that?

Let me state that when you have investment property, you should also have a tax professional prepare your taxes. My guy costs $300.

The return on this, usually between $4,000 and $5,000, is well worth it.

Preparing for tax season need not be complicated. I’m going to present you with my system, which has served me well over the years. Relax: no expensive software to buy nor is this a sales pitch. Actually this entire system is free. Maybe 5 minutes of your time each month.

Spreadsheets

Google offers users free access to their online spreadsheet program. This has been my best weapon at organizing all these expenses. As we all know, each spreadsheet is broken down into tabs. Each tab can be used for a single property.

The first section: Rent. Each month, I track when the check arrived and which unit paid. Since I keep a photocopy of each rent check, I don’t write in check numbers. Keep it simple.

Section Section: Repairs and Maintenance. The water heater breaks or the toilet requires snaking; whatever is broken is cataloged here along with how much it cost to fix and the date. The receipt from the store or the contractor is kept in my 2015 Expense folder. And the guys who come once a week to cut your grass? That counts too. Yard maintenance is key. I use Sugar Land property management team for a few properties, their fees, yup, deductible too.

Third Section: Upgrades. Did you have the property repainted? How about installing a new screen door? Those particular items aren’t repairs and qualify as upgrades. Your accountant decides which because repairs qualify as tax deductions today. Upgrades qualify as deductions upon the sale of the property.

At the bottom of each section is the SUM function, which turns everything into one number. Print this tab and take it with you to your accountant.

Overlooked deductions

Any publication such as Barrons or Investor Daily can be a deduction. Your membership to the Landlord Association? Yep. Do you blog about real estate? Another deduction coming up!

Remember that one time, at band camp, when you had to buy a snake for the toilet? Those 15 miles you drove to Lowes counts at $0.35 per mile. That’s $5.25 and round trip, that means $11.50 you can write off. Make sure to log the date and time in your spreadsheet along with the mileage.

Your prefer Quicken to all this spreadsheet mumbo jumbo? The $70 is deductible. Now that your computer is involved, that probably gets to be depreciated as a business asset. How does that sound?

Target Number

The more money you can attribute to your investment, the more you’ll get back in your refund. The standard rule of thumb is 40 cents back on the dollar. Let’s say that with all the repairs, maintenance, and other deductions you can write off $1,000.

That means you’ll get $400 back just on that part alone. This doesn’t even consider the interest paid on the mortgage not the depreciation of the property. Your accountant can take care of that.

Oh, and the $350 I pay the accountant? Yep, that is deductible too. I’ll get roughly $140 back.

Property Taxes

Don’t forget about your property taxes too. Yup, deductible. And not only deductible, but sometimes even complete write offs.

Gutter cleaning – Why you must do it

Gutter cleaningAfter heavy rain the last thing any home owner wants to experience is to have to spend a lot of money replacing damaged plaster and paint work on the inside of their home or repair roof tiles.

However, it is possible to save yourself a considerable amount of money simple by understanding the need for regular gutter cleaning. Most property owners view their roof drainage system as “out of sigh, out of mind” but cleaning the gutters at the top of your home is a vital part of any home maintenance and should never be avoided.

Many years ago, homes and building were not fitted with gutters, and architects and old time engineers never considered that an effective gutters system was important.

Roof top drainage was usually achieved by homes and buildings being constructed with very steep and large over hanging roofs that where constructed in such a way that water was channeled into a specially designed gathering area which was then used for washing and drinking.

But now the standard for modern constructions all over the world is an efficient roof drainage system – which clearly makes good sense. When we have a heavy down pour or storm, the water is effectively channeled of the roof, into a practical drainage system and routed away from our valuable homes.

All gutter systems are fitted with downspouts – usually located at each corner of our property to ensue water is carried away quickly and with minimum risk of overflowing.

There are many environmentalists that prefer having gutter systems that lead directly into a specially designed catchment containers where the water is then stored for later use in the dry months. Separate water catchments systems are not only considered environmental friendly but can also have significant savings on household water bills- if your home has a water meter.

But, irrespective of whether the water is stored for later use or led away by a regional or national underground drainage system, having clogged gutters can be a very expensive affair. Water from your roof is unable to escape through the nearest downpipe then they will eventually overflow and the water will come rushing down your exterior walls, then it’s is only a mater of time before it starts to permeate through your outside walls and through to the interior of your property.

As internal damp and wet patches start to manifest within the inside of your home paintwork and decorations will rapidly start to break down and become strained.

Flash floods can happen with very little notice and if your gutter system is blocked rain water can also penetrate through your roof tiles, and into the attic area of your home then down onto your inside ceilings. Apart from the financial costs to replace broken roof tiles internal plaster and paint work on your ceilings will be come damaged.

Whether you get your gutters attended to by a commercial gutter cleaning company or you decide to do them yourself, in the long term it can only help you avert an expensive disaster buy possibly saving you a lot of unnecessary repair work.

All property experts agree that you should get your home gutters checked at least once or twice a year, to stop roof moss, twigs from trees, dead leaves, dead birds and even children’s toys from blocking your gutters. And you can use a removal service like Montgomery County Dumpster Rental that I use here, or if you’re lucky enough to have a small yard you can always just compost them and be even more eco-friendly.

So the next time you see your gutter system overflowing, take immediate action, and have them checked by a competent gutter cleaning company before the internal damage to your home turns into expense that could have easily been avoided.

Using Condos as Rental Units

When I first got into real estate investing, every real estate self-help book talked about starting with condominiums. They talk about finding one then laughing all the way to the bank. They always skip over the potential ugliness that can come with having a condominium. I never saw a story about Special Assessments that drove the cash flow negative for nearly a year.

Some investors recommend condominiums as investments due in part to their relative cheapness. Compared to buying a single-family home (SFH) or even a duplex, condominiums are cheaper. Are they really the better vehicle for investing?

Pros

Condos are typically cheaper to purchase than Single Family Homes (SFH). The biggest difference: a yard. Banks just love a property that stands on it’s own, surrounded by grass.

But that leads into the second benefit which is there isn’t a yard to maintain. The exterior of the actual condo is the responsibility of the Home Owners Association (HOA). They make sure the grass is cut, the pools are maintained, any public buildings are clean.

If anything public is affected and needs repaired, the HOA pays for it. For instance, if you and several other units experienced blocked plumbing, the HOA would have the plumber come out and fix the problem. Who pays the bill? The HOA does using your monthly fees.

As a rental unit, HOA fees are tax deductible. If not all then a portion certainly is.

Cons

No private yard usually translates into lower rents. Tenants do like to store things on the property. Broken down car, dog house, meth-lab and usually they are willing to pay a premium for it. Because of this, condos typically rent less than a SFH would.

As the house market fluctuates, condos are typically the hardest hit. When a market correction occurs, condos are the first to lose value and the last to recover.

Read the HOA agreement carefully. Several points:

– HOA fees can be increased year over year without membership voting. Either by a small percentage or a flat fee. Build this into your business model.
– Associations can decide if condos are used as rentals or not. They may decide to screen your tenants and give final approval. You’d have no say in the matter.
– Special Assessment will become two words you’ll hate to hear. The HOA may decide to install flamingo pink around the property. YOU have to pay for it out of pocket.

Choosing not to pay HOA fees or the Special Assessment may result in your property being confiscated or liens being placed against your property. A lien on your condo is a fast way to bring your investing career to a screaming halt. Your library card may even be revoked.

Summary

This is not to scare you from considering condominiums as a rental income machine. Many investors do it and are quite please with the results. Before jumping in, make sure to review the HOA agreements thoroughly along with your other documents during escrow. It is critical to ensure you are purchasing an asset, which will put money into your pocket rather than a money pit.

Backyard Smoking!

Smoking Your Own Meat

Smoking Your Own MeatSmoking Your Own Meat

If you are someone that is interested in smoking your own meat, you would be glad to know that there are plenty of different ways to do so. There are a lot of benefits to doing so as well.

Not only can it allow you to develop a skill that you can pass down to your children, but it can save you an incredible amount of money and even allow you to get better results from your cooking.

However, in order to smoke your own meat, you will need various tools at your disposal. Below, we will be going over some of them.

What Is Needed To Smoke Your Own Meat?

1. BBQ Smoker Thermometer.

One of the main tools that you should purchase if you are looking to get into smoking your own meat would be a BBQ smoker thermometer. You want one of these because it will allow you to really get a good gauge on where your meat is at. By doing this and having it available to you at all times, you are going to be able to figure out when you will need to do various things during the stages of the meat smoking process.

This will allow you to smoke your meat at just the right temperature and get it perfect each and every time. There are plenty of different options available that you would be able to choose from whether you want wired or wireless.

2. Grill Set.

Another major tool that you are going to want to have handy if you are looking to get into meat smoking would have to be a variety piece grill set. If you can only afford to purchase one single accessory for your meat smoking hobby, you are going to want to choose this one.

A grill set will allow you to be able to do everything from handling the meat to cooking it right. You want various items in this kind of set including a grill brush, tongs, spatulas, basting brush, and more. You can find other good smoker tips here.

3. Insulated Food Gloves.

Another important tool that you are going to want to have available would be a good pair of insulated food gloves. Handling any kind of smoked food can be a dangerous proposition. Therefore, you will want to be sure to provide your hands with proper protection for temperatures that can exceed 500 degrees at times.

This is going to allow you to handle the food and the tools necessary to smoke the meat easily without the risk of burning yourself.

Overall, there are plenty of different things that you are going to want to do when it comes to smoking meat. If you are looking to get into the hobby of smoking your own meat, you will want to properly prepare for it by investing in these handy tools and gadgets.

That way, you will be able to get the best results from your meat smoking activity and you will be able to do it effectively and safely.

Cost Saving Ideas to Preserve Your Cashflow

After buying your duplex, the monthly cash flow is around $175. After the honeymoon has worn off, one fact occurs to you: things break. One month, the tenant reports the shower head broke. The next month, the yard light has burned out. Not long after, the toilet is clogged thanks to someone’s Tonka Toy collection going for a swim.

Here are some tips to protect your cashflow from being eaten away by minor maintenance.

Tip #1: Gift Cards. With Christmas and the holidays approaching, what better way for your family to tell you they love you than with gift cards from Lowe’s or Home Depot. People may snicker at the idea but when you’re bleeding money each month the gift card concept sounds better all the time. Birthdays and anniversaries are also good times for gift cards.

So unless you really want that pink bunny suit from Aunt Mildred, play the guilt card and get your family into the gift card spirit.

Tip #2: Coupons. Still think that coupons are for little old ladies trying to save a dime on canned corn? Lose that notion. The next time you jump into your car to go to Lowe’s or Home Depot, print out a coupon for 10% off your purchase. If you have to replace that shower head, might as well save some money while doing it. Also using coupons make those gift cards from Aunt Mildred last that much longer.

Where to get coupons?

Change of Address: Every time you fill out a change of address card, a thick package of coupons arrive at your new address. Use them all!

eBay: Yes, everything is for sale. People sell packs of coupons on eBay for $10 or less. Buy from someone reputable and make sure your coupons have bar codes on them. I got burned once because my coupons were barcodeless.

Google: Go to Google and type in “Lowe’s Coupon” or “Lowe’s Online Coupon” and watch the sites appear. Most sites have links that allow you to directly print out a coupon to take. Other sites may require that a coupon be mailed to you.

Tip #3: Videos. Watching videos can save you money? Face it: you watch YouTube at work. Stop watching Ninja Cat and learn something useful.

Your tenant’s toilet is clogged. You worked that plunger until the bathroom floor was covered in water. Nothing. Before calling the $80 plumber, watch a video instead. Just because one technique didn’t work doesn’t mean another one won’t.

This happened to me. When the plunger refused to remove the clog, I almost called a plumber, Dreading the $80 service call and watching a butt-crack, I found a video talking about a plumber’s Auger. Spending $7 on an Auger sounded more appealing that an $80 plumber butt-crack so I did it. It worked.

Good thing to because a month later, the toilet got clogged again. Come to find out, the water pressure isn’t the greatest and it will require an occasional Auger to clear it.

Do you think a plumber should share that information with me? Each time I call, I’m handing him $80 for five easy minutes of work. I’d rather not.

At the end of the day, every investor wants to keep their cashflow coming. The higher the cashflow, the better. Don’t let trivial problems eat away at your money. One day, when you have dozens of rental units, your handyman can worry about those repairs. But until that point, don’t be afraid of a little elbow grease.

Closing Costs and Tutus

Would you pay someone $150 to send an email?

Whether you’re buying a duplex, condo, house, etc. the lender is always going to charge fees for giving you a loan. Not all fees are given to the real estate agent. The lender is going to make some money on the deal. They charge fees as well.

What’s involved with real estate closing costs?

  • Processing Fees
  • Attorney’s Fees
  • Appraiser Fees
  • Underwriting Fees
  • Application Fees
  • etc etc etc

Generally, anyone not directly working for the lender is going to be firm on their price. The Appraiser, for instance, charges a flat fee for their work. OK, fine.

But what exactly is an “Application Fee” and why do they want to charge $100 for it? If the lender says that its to process the application, why are they charging a Processing Fee of $400?

Why do they do this?

The Loan Officer-to-Lender relationship is similar to a Car Salesmen-to-Dealership relationship. Car salesmen make their money when the car is sold. Dealerships make their money by financing the car. The same applies with Loan Officers: their money is made when the deal closes. Lenders make their money by financing your investment.

To maximize their payout, Loan Officers charge for everything. Emailing documents, reading your application, grooming their dog. Then they charge a fee for that.

What can I do to protect myself?

  • Question everything.
  • Negotiate everything.
  • The lender may be singing you praises about the great loan he got you and super low monthly payment. But nothing is for free. What is involved in getting this great deal?

Ask them.

If your lender begins to babble, talking about his tutu wearing pet monkey and yet cannot provide a clear cut definition of what each expense is and why each costs as much as it does, then you should probably avoid that lender. If you’re dealing in good faith, is it too much to ask that the lender deal in good faith as well?

Once you understand what everything is, start the negotiation process. Ask your loan officer if it really costs $150 to send an email. They may concede and knock $25 off the price. Twenty five dollars may not seem worth the effort. But once they start knocking $25 off from every fee, this can quickly add up to a few hundred dollars.

Is that worth your time?

If you want to be sneaky, tell your lender that you’ve been talking to a different lender and their closing costs are significantly less. You might get lucky and see some hoop jumping.

Once you have negotiated, get everything in writing. Then when you have your closing statement in front of you, compare the numbers. Did they live up to their agreement?

In the end, it has the potential to save you a few hundred dollars. This may not seem like much, considering you’re going after at $150,000 loan. But in the scramble to come up with funds, wouldn’t it be nice if the money you needed was suddenly just a little bit less?

Real Estate Networks and Kool Aid

Real Estate Networks are here to “help you”.

Yeah, I don’t believe that either…

The REI Networks advertise that they are around to help new investors build their real estate portfolio. Quickly. They hold free seminars, give you kool-aid and cookies, and then pound you into submission with a two hour infomercial with no bathroom breaks.

What goes on behind the scenes of these Networks?

These Networks provide everything to start investing. Real Estate Agents, Lenders, and Property Management companies. Guess how the Network makes money? By charging the Real Estate Agents, Lenders, and Property Management companies. That kool-aid you drank costs money. So it’s in the best interest of the Network that you buy something. Anything. But through their network.

They promise cashflow and a new house!

First, their calculation of cashflow is off base. Sorry but Rent minus Mortgage is not considered cashflow. Second the new house they are offering? It’s one of 50 new homes in a subdivision, all sold to new members of the Network. Do you think the Property Management company is going to be able to rent all 50 homes?

But they offer partners since I have no money.

Yes, they do. You and your partner sign an agreement, drafted by lawyers of the Network, and the rental property is yours. But who gets what in the deal? The partner gets 50% of the sales when the property is sold. They also claim the tax write-offs of the property.

What do you get?
YOU
YOU

You get to make the mortgage payment when the house sits empty, next to the other 50 empty houses. You get to scream at the answering machine of the Property Management company because they won’t pick up. You also get free kool-aid at the next Network seminar. In other words, the partner gets all the benefits and you assume all the risks.

Are Networks evil?

Not necessarily. Look, people should expand their investment portfolios. If Networks can help, use them. But make sure to ask the tough questions. Don’t buy the “sales pitch” they give you. Put the kool-aid down and perform your own analysis.

Use the Business Modeler to analyze what the cash flow would really be. Also I would never buy “site unseen”. If the Network won’t allow you to do your own investigating, then seek help elsewhere.

Real Estate Clubs are a different story . . .

Real Estate Investing Clubs

What are REI Clubs?

Definition of the word “club”.

  1. Group of people, organized for a common purpose and meets regularly.
  2. Preferred dating tool used by Cavemen.

For REI Clubs, a group of real estate investors getting together. Unlike REI Networks, Clubs won’t drill you with “buy buy buy” speeches. It’s probably a safe bet that their kool-aid isn’t spiked either.

Why find an REI Club?

REI Clubs allow you to network with seasoned investors in your area. These people know the ins and outs of investing, probably offer some guidance and advice. Ideally they could point you to good Real Estate Agents or Lenders. Legal affairs, such as evictions, is something they should know about.

Maybe a potential mentor or partner could be running around. Yes, do some networking.

What do they offer?

Advice. Usually these clubs have experts that come in and give presentations about various topics. Tax planning, tax strategies, lending opportunities, other methods of making money in real estate . . . the list is endless.

How do I find an REI Club?

I’m glad you asked.

  1. Most of the time, Landlord Associations and REI Clubs go hand in hand.
  2. Check out the ultimate club site http://www.meetup.com. Meetup.com has the largest collection of clubs and they allow anyone to start a new one. Are you a business woman, not interested in REI Clubbing? Search for “Woman Entrepreneurs” and get bombarded with clubs.
  3. Type REI Club into Google and you’ll find http://www.reiclubdirectory.com/
  4. OK so if you’re completely xenophobic, check out the Rich Dad Forums. Membership is free. Just remember that these groups are international and you may not find a specific answer to your specific area. But for me, I can find plenty of information on builders townsville.

One of the key benefits of these clubs is so that you never find yourself totally alone. If you have questions, seek out answers from people who know. So unless you’re vampire, allergic to sunlight and garlic, it may be well worth it to venture outside and check out one of these clubs.

What Landlords Can Really Do?

landlord problems

landlord problemsHow to safe guard yourself from unlawful circumstances between you and your landlord.

Well I must say first of all that I have always loved to move. I’m just one of those odd people. However, I just moved and it has been a Hellish experience. There have been numerous things but the highlights are: the realty company has refused to send someone to fix my air conditioner-it gets up to 100 degrees in here; I am also renting another property from them and they have tried to make me turn in my keys while making me pay the rent for three more months.

This means that they would be getting money from me for two houses (one that I would not have access to) and a new tenant.

And finally, after two weeks of living here I received a call saying that they sold this house and that I have to move again and that if I decide to move to somewhere that is not under them that I will lose my deposit. Wow!A San Fransisco landlord has been in the media lately for being sued. He has tried shutting off utilities, threatening, and intimidating the current tenants so that they will move and he can raise the price for new tenants.

The renting industry is getting vicious all over the nation-they have become the new faulty “car salesman”. Here are some things that you as a tenant should be familiar with to safeguard yourself.

Deposits

There is a legal maximum amount that a landlord can charge you for a deposit:do research to make sure that you are not being overcharged. Make a list of every scratch and crack in the apartment or house you are about to rent; if you do not (even if the landlord knows the problem was there before you moved there) they can say you did it and keep your deposit.

Your landlord cannot withhold your deposit for things such as nail holes; they can however, for things such as big holes in the walls or broken windows that were not there prior to you moving in.

Leases

Many times a landlord will tell you things that are not in your lease to get you to move in. Make sure that you get this in writing-and always keep a copy of your lease and written statements from the landlord.

You can get out of your lease if you have proof that your landlord has violated your renter’s rights or the lease.

It is imperative to read your lease thoroughly before signing it; sometimes there are some illegal clauses within the lease agreement such as :

  • statements that you will give up your right to defend yourself in court against the landlord.
  • statement that the landlord can enter your house at any time.
  • limitations to responsibilities that a landlord is legally responsible for.
  • statement that if you and your landlord have to go to court that you will pay their court fees.
  • statement that the landlord has the right to keep your belongings if you go move or get evicted.

Rent

Most states do not have rent control laws. If you are about to renew a lease, the owner can increase the amount of rent to any price (even if it is outrageous).

Landlords

If your landlord refuses to repair something you should write a letter to them (and keep a copy) with the date, your name,problem,if the problem is a threat to your health or safety, and you can also legally add that if the repairs aren’t done in a week’s time that you will: take legal action, make repairs yourself, terminate your lease, or request a written explanation as to why the repairs are delayed or refused. But remember, these are for legitimate repairs, not for something like Christmas lights installation or even lawn care unless it is specifically in your lease.

Your landlord can only enter your home for reasons specified in your lease and with notice.

Your landlord cannot harass you (such as the San Fransisco landlord) or threaten you or turn off your utilities.

If you are evicted, the landlord must allow you to get your belongings if not they can be convicted of “conversion” which is a term basically for theft.-This also means that they cannot damage your personal belongings.-This also includes the fact that they cannot keep your personal belongings for past rent that is due.They cannot sell your property for past rent either. They can hold your property as collateral if it is in the lease.(This is a crime).

Evictions

The landlord can only legally evict you in the following circumstances:

  • For breaking your lease.
  • For not paying due rent.
  • If you are committing crimes within the property or destroy property.
  • If you are renting on a month to month basis and your month is up.

I know this sounds like a lot but you should know your rights and state laws to keep yourself safely within your home. You should always keep rental agreements and written notices in case a situation comes up or you must go to court.

Benefits Of Artificial Turf for City Dwellers

artificial turf in ciryArtificial turf is essentially ‘fake grass.’ It has many applications and is actually used across a variety of industries. It is now being adopted for consumer residential use as well. There are numerous advantages of artificial turf. Below, we will be going over some of them.

Benefits Of Artificial Turf – What Is It?

1. Low Maintenance.

One of the biggest benefits of this kind of artificial turf is the fact that it requires very little to no maintenance at all. Unlike natural grass, turf actually requires no maintenance in order to maintain it properly. Therefore, it can achieve the same beautiful green appearance regardless of the time of year or whether it’s had sufficient care.

Because it never grows, you do not have to worry about cutting it at all. All you need to do is simply lay the turf down in place and you can forget it’s even there.

2. More Green.

Another significant benefit of artificial turf is the fact that it is much more green than traditional grass and other alternatives. Because natural grass goes through various stages and periods of time where it might actually turn brown and look unsightly, it is not going to provide you with all year green.

This is especially true if you live in an area that does not get a lot of rain throughout the entire year. Because of this, a lot of homeowners are turning to the artificial turf in order to have a great looking yard throughout the entire year without having to worry about drought seasons.

3. Environmentally Friendly.

Another significant benefit that you are going to be able to get with artificial turf is the ability to invest in something that is actually good for the environment. Because the product itself does not require any sort of maintenance, you are not going to have to consistently use a gas powered lawn mower to cut it and you wouldn’t need to waste water on it as well.

Because of this, it is much more eco-friendly than having natural grass yards. You do not need to waste any sort of natural resources on maintaining the look of artificial turf.

4. Save Money.

Another benefit that you are going to be able to get from investing in artificial turf is the ability to save money over the long haul. Because it does not require any sort of maintenance, you are not going to have to invest in a lawnmower or anything to maintain your lawn. This alone is going to keep you from having to make high initial investments in your lawn and it can end up adding up even more throughout the lifetime of your turf.

Overall, there are plenty of different benefits that you are going to be able to get and enjoy when you make the investment in artificial turf. You should really look at it as an investment that can pay off in a big time by providing you with more free time, less stress, and the ability to save money.