All Forum Posts by: Robert Steele

I had a tenant that on move in day asked if they could paint the apartment camouflage green. :mrgreen:

I told them as long as they gave me the money up front to paint it back they could do it. They never did.

I have one blue collar rental on a busy street. The only thing I need to do to get it rented is put a sign in the yard. No Realtor fees, no newspaper advertising fees. It always rents fast. One time I had it rented within a few hours of putting out the sign.

It depends on whether you want a replacement policy or cash value policy. With the former they will pay for to build a new house if it burns down. They will also pay for a new roof it you get hail damage for instance. With the latter they will only pay out the cash value if the house is a write-off. They will only pay the pro-rata amount based on the age of the roof if you need a new roof.

Personally I have replacement policies with high deductibles but I am tempted to switch to cash value policies. Mainly because the replacement values they estimate are way higher than the actual value of the property. Remember you don't need insurance for the land.

Finally, don't use the logic "but if I spend extra money I will get a nicer house when my house burns down". The chances of your house burning down are very low and if you have multiple properties the chances of them all burning down at the same time is astronomical (assuming they are not right next to each other). I think home insurance is mainly to protect lenders.

When my properties are paid off I am considering ditching the insurance. I can save the insurance payments for a disaster fund and have enough in the fund within 10 years to replace one of my properties (should it burn down).

The landlord probably doesn't have the security deposit anymore or the money to cover it. I actually saw a landlord lose their property on the county courthouse steps last year because they wrongly withheld the security deposit from a tenant. I kid you not! I was there bidding on properties.

I spoke to the tenants lawyer and here's what happened. When the tenants moved out the landlord wouldn't give them their deposit back. The tenant took the landlord to court and got triple damages. So I am assuming it was wrongful withholding. Which begs the question why didn't the landlord give them back the security deposit. No money?

So now the landlord owes the tenants about $3k instead of $1k. Time goes buy and the landlord still doesn't pay up. So the tenants take that judgement and gets the Sheriff to seize the property and sell it to satisfy the judgement.

The worst part is that the house was free and clear! I heard from the county clerk that up to and including the day of the auction the landlord (husband and wife) were frantically running around to banks trying to get a loan for the judgement amount. How they managed to not get a secured loan on unencumbered property I'll never know. Probably just a case of sticking their head in the sand until the last minute.

Amazing story hey and its 100% true.

Yeah it is a bit more complicated than I let on. Especially if you are selling paper gold (GLD, PHYS, GoldMoney.com, certificates, etc). It largely depends on what vehicle your gold is in. I actually don't think gold jewelry is considered a collectible but I am pretty sure that gold bullion and coins are. The IRS does have a publication on this.

Oh I almost forgot.

4. Insurance. Be vigilant. Every time you get a renewal notice try to get your agent to lower the premium. Either by lowering the declared value of the property (a lot of times they will over insure) or by increasing the deductible. I increased my dedicatibles by $1500 and it resulted in $100 a year saved. Multiply that by 10 or 20 properties and that is a good chunk of change. Also consider getting quotes from other Insurance companies once a year. I manage to boost my cash flow a good bit by doing this a few years back.

5. Refinancing. If you have a second mortgage get rid of it as soon as you can. If you are paying PMI get rid of it as soon as you can. Don't chase rates and don't pay points. You don't want to be forking out thousands in refi costs just to have rates drop again a year later. Have all the costs come out on the back end. That means you will pay a higher rate but have little to no money out of pocket. The higher rate doesn't matter because it is all relative. It's not like you are going to keep that 30 year mortgage for 30 years so why pay for the best rate.

I agree with Travis. Unless you are cashing out your IRA to retire with rental properties then don't buy all cash with financing so cheap and the specter of inflation so nigh.

A few tidbits:

1. Get the property taxes down and keep them down. Usually when you first buy the property it will have a higher appraised value than what you bought it for. Use your HUD-1 to get the appraisal lowered. Also each year you must fight every appraisal. Even if their appraisal seems fair, fight it. They will usually throw you a bone to shut you up. It is better to go talk to the appraiser first before the review board. Here in Texas they changed the law in Jan 2011 to state that appraisers cannot chuck out comps because they are foreclosures (which they were doing).

2. Don't be afraid to raise rents. Particularly if the market can support it. If you have a nicely maintained and upgraded property charge a premium. Most tenants love bling. Make sure you give a minimum of 60 days notice. If you only give 30 and they know they need to give you 30 their initial knee jerk reaction is give you a vacatation notice. If they have time to look around and your rent is fair they will figure out it's better to stay put. Also if what is fair market rent is a little fuzzy consider nuisance rent raises (1%-2%). No one is going to go through the hassle of moving for a few lousy bucks.

3. Keep your property maintained so you can get the maximum rent out of it. You want to be at the high end of the range in your neighborhood. Consider that if a $10K remodeling added $100 in cash flow then that's a 10% ROI. Without all the added expense of closing costs, deferred maintenance, risk of bad tenants and everything else that comes along with a new purchase if you were consider putting that $10K down on a new place instead.

The IRS considers gold a collectible.

Normally, when you sell a capital asset you've owned for more than one year, your tax rate is capped at 15%.

But when you sell a collectible, tax law caps your maximum rate on long-term capital gains at 28%, not 15%.

I assume that this gold has been owned for more than a year otherwise it can be up to 35% as you know.

So I hope his all cash house purchase price is less than $360K or he will have to dip into additional funds.

Just following up here. We paid them $700. We had them sign a waiver. It has been about 8 months now. I have not heard from them again. While I don't think I did anything wrong except maybe I could have handled it better it all came down to the advice; find the best solution - not necessarily being right. The price was worth not having this turn into a huge mess. I have told others this with similar problems. That sometimes in the business you just have to pay to make problems go away when in all fairness you shouldn't have to.

Thought I would follow up on this thread. Well she made good for about another few months and then we were back at court in front of the judge in an eviction suite. The tenant finally realized she couldn't afford the place and moved out before I had to get a writ of possession. She left the place clean and in good condition. I politely threatened her that if it wasn't I would come after here for monies owed. I got the place rented out again very quickly. All up I think I lost about $2K.