Analyzing a potential rental property - what to look for

If you're thinking about buying a house for an investment rental property, what factors should you consider? I give lots of guidance about due diligence and environmental issues to look out for here at Rental Property Analysis

Stopping Junk Mail and Annoying phone calls

One of the best ideas I ever came across on the Internet was the location of web sites to stop junk mail, get on the No Call List and Opt out of Credit card offers. This has literally saved me hundreds of hours per year that I can focus on making money or just relaxing. Taking action is really simple and takes no more then a few minutes for each registry, but great in reducing wasted time. Most highly recommended.

Finding Money for your investment rental property purchases

The banks, despite receiving billions from the Fed continue to hold onto their money and not lend to investors. This requires some creative real estate investing ideas to circumvent the problems. Here are a few ideas for real estate investors:

• Seller financing


• subject to financing


• rent to own investing


• 401k loans


• hard money loans
• family loans
• peer to peer lending

Hope some of these financing ideas stir your creative juices.

Investment Property Capital Gains

Need to figure capital gains taxes for your investment property? Use this page on investment property capital gains to get an idea of how much to pay the IRS if you sell your rental property

Fire! Why every renter and landlord need insurance

The first rental property that I purchased during my second attempt at being a landlord had a fire last week. The tenants had just moved in 5 days previously and had a fire in the fireplace. They went to sleep at 1:30 and the smoke alarms woke their kids at 4am. Luckily the previous tenants had moved and I had replaced the smoke alarms (the previous tenants had disabled them). The smoke detectors saved the lives of these tenants.

Unfortunately for the tenants they did not have renters insurance. However, I did have landlords insurance policy which covers loss of rental income. My policy also has a clause which requires the insurance company to cover any upgrades required to meet building codes. This is a lifesaver since my locality requires that any time a building permit is issued upgrades to older homes are required.

Buying a House for Investment

How do you go about buying a house for rental property investment? Basically, it is the same process for buying a house that you might live in. However, you must know local rental incomes for houses and it is best to buy what many call a "starter" home. This makes it easy to use rent to own investing to ensure that you receive the highest rental income possible.

50 Tips for Investing in Rental property

I've compiled a list of over 50 tips for investing in rental property here. Many have links to more detailed explanation of what to do.

Will the banks ever lend again?

During the early part of the last decade banks seemed to have unlimited money available to lend. Credit card offers poured into my mailbox, "no doc" loans for buying property were common. 100% financing for investment property was easy to obtain.

No more - during the past 18 months all of my HELOC's have been cut to zero. Funny, in my location (western NY) property values never sky-rocketed as they did in other parts of the country. And while other housing markets are seeing a big burst of the bubble, my market has continued to climb in value. Despite this, the automated valuing programs that banks use to assess property value seem to use a "one size fits all" approach.

I had several unsecured lines of credit available to me that have also been cut. In fact, every time I make a payment, the credit limit is cut some more. Despite my debt load dropping 10% during the past year and never being late for a single payment, my credit score is dropping like a rock as my balance increases relative to my total credit available.

What to do? Actually, I am reducing paying off debt and increasing the amount I send to my emergency cash reserves. It seems like not what Dave Ramsey would advocate, but if something major happens I can no longer count on borrowing from a bank.

Even Peer to Peer Lending sources like LendingClub have become more selective.

Despite what our government officials tell us, the money lenders tell us not to expect much of an economic recovery for a long time to come.

Real Estate Rent to Own Working Great

A couple of years ago I tried my hand at flipping real estate. However, after months of being unable to sell my flips in 2007 (in hind sight just before the big real estate crash), I started using lease-options to keep the property occupied.

Now after over 2 years my rent to own strategy has been remarkably successful. I detail all of the methods I use to this strategy here at rent to own homes secrets.

I haven't had a stretch of more then a week when any of my properties is unrented.

Best Real Estate Advice

Some have written and asked why I rarely write about real estate now. The reason is that there is not much to write about. All of my properties are always full and I get above market rental income. How I did it is detailed in Rent to Own.

So what have I been doing? Building a website with all of my real estate information in one place. It's something that I had wanted to do for a long time. I have always thought that the $2000 courses that real estate guru's teach is way overpriced and wanted to share that information free.

So for the best free real estate advice website go to Investing in Rental Property.

How did I create that website? Visit SBI and find out for yourself. It was fun and relatively easy to do it.

Some also ask why I write on political stuff. The answer is simple - there is no bigger danger to the efforts any entrepreneur may face then government intervention. The success of people in the US is based on property rights. Any thing that the government does to undermine property rights erases the work that I do. Whether it is imposes massive tax increase based on the hysteria of global warming or the attempt to create a single payer government run health care system. It all undermines my work - putting a gun to my head and stealing my money.

Karl Marx reincarnates in San Francisco

"From each according to his abilities, to each...." Well if you're a landlord in SF you'll be giving your money to your tenants.

San Francisco laws bar rent over 33% of income

Well... its all part of Obama's plan to redistribute the wealth

Another IRS audit

I'm beginning to think that there is an IRS conspiracy against rental property owners. I've received another notification for an IRS audit of my rental properly documents. This will be the 4th time I have been audited.

I'm not really worried about this. Three previous audits ended in no change and one gave me additional refund. But it is a pain to have to spend 3 hours with an auditor.

I wonder if the IRS tax cheat in chief (Geithner) will be audited as much as I have been?

State of the Union Feb 2009

Obama will deliver his first State of the Union address today. So far the stock market is screaming "no confidence" in his plan as evidenced by the huge drop in stock market value since his election and the worst market in 113 years. My 401k is 50% of what is was at it's peak and I'm not sure how much lower it will go. For a 20 year old this is probably a great time to invest in stocks but not so much for people near retirement (what ever that is?!?)

My only solace is my real estate investments. Real property values continue to rise in the greater Buffalo region. Demand for my properties is high (using my Rent to Own methods). My only concern is what will happen to interest rates.

Right now interest rates are at historic lows. However, the government has expanded money supply so much that it will come back to bite us. Are we heading to the stagflation of the Carter years? My guess would be yes. Unfortunately, I have a mortgage and several HELOC's that are linked to the prime rate. Once inflation hits the FED will be forced to raise interest rates. And I don't think Obama is going to rescue the investor class anytime soon.

TV shows caused the real estate bubble?

Here's a new one - TV shows caused the real estate bubble:

The real villains here, the truly bad seeds at the heart of this crisis, have gone unpunished thus far and are still in operation. They are Jeff Lewis and Ryan Brown of Bravo's Flipping Out, Armando and Veronica Montelongo of TLC's Flip This House, Kristen Kemp of TLC's The Property Ladder, Kendra Todd of HGTV's My House Is Worth WHAT?, and the TLC, Bravo, HGTV, and Fine Living networks in general. All of them encouraged people to take out massive loans in order to buy and
renovate homes and sell them at a profit when, really, most people have terrible taste, and furthermore, are bad at laying tile. These shows are still on! WHY?

Want to have a web based business?

I mentioned in an earlier post that I was looking into SiteBuildit as a potential source of income. Two years ago when I decided to invest in rental property I used a web business called InvesterPro to build a web site for me. It cost me nearly $600 for them to develop a site for me and about $50 per month to maintain it. During the two years that I had the site live I had very little traffic and only a few contacts. None resulted in a real estate transaction.

After purchasing SiteBuildit for $299 my eyes have been opened as to why the previous web site did not attract many visitors. The InvestorPro web site was just a cookie cutter site (every subscriber had the same site except for the name of their business. Search Engines like Google tend to ignore these type of sites.

The main concept behind SiteBuildit is what they call the C-T-P-M process. Intuitively this makes a lot of sense to me. The extensive instructions tell you how to find niche key words that can attract traffic without a lot of competition. Lots of advice on building content and monetizing your site. After working with the software for a couple of weeks I created a web site called Investing-in-rental-property.com. (It's not completed yet but I'm starting to put into writing some of what I know.) I've been really impressed by how easy it is to build web pages. Once I have the time, I'll be able to improve the look and feel. Lots of information in the forums as well.

Overall - a very impressive service for building a web based business.

Rent to Own homes concept reduces pressure on rents

I read the other day that 50% of foreclosures are limited to 4 states - California, Florida, Nevada and Arizona. I have noticed any changes to the number of foreclosures in my area based on the foreclosure list subscription service I subscribe to. I expect that real estate prices in those 4 states were driven by speculators who bought properties before they were even built.

The Wall Street Journal carried a story today that the bursting of the real estate bubble has put downward pressure on rents. The Buffalo area is losing people and jobs and so I would expect that there would be some downward pressure to reduce rents here as well. So far, I continue to receive calls about when one of my properties may come available. This despite no advertising on my part. I would guess that this is due to the "rent to own" homes concept that I have been using. Not having to worry about whether I can find tenants is a great stress reliever for a landlord.

Increasing Income

My company has announced no raises for 2009 and no bonus. I have to make an extra alimony payment to my ex-wife out of a non-existent bonus and I usually use it to pay down on debts. Like many people I either need to increase my income or cut expenses. My expenses are pretty barebone right now, so there is little to cut

What do I do now? Invest in more real estate? Take a part time job? Find another source of income?

Is the real estate market at a bottom yet? Probably not in the hot markets of the past few years if you look at this graph. The market neither increased rapidly nor dropped in the Buffalo area (it's up 4% in the past 12 months). Underwriting for investment loans has become very strict the past year. If I could get a real estate loan, I would re-finance one of the properties I own that has a variable rate loan. I just cannot see any purchases of real estate at the moment. Besides, cash flow from my properties is revenue neutral and I wouldn't expect that a heavily financed purchase would produce a positive cash flow.

I mentioned here and here about my experiences with multi-level marketing through Amway/Quixtar (I read this weekend that they are now dropping the Quixtar brand and reverting to Amway). I don't really consider Amway an option due to the high people skill requirements for success.

I "tried" the Internet with this blog. But my 25 months of blogging has earned me a cumulative $2.46! Of course, I do not have a good sense of how to make money on the net. One of the aspects that I really grasped with Amway was the "franchise" concept (see point #2 here). Distributors like Dexter Yager had created an excellent "system" for success.

As I mentioned a couple of posts ago, I have been looking into SiteBuildIt. It seems to me that the creator of the site has done a pretty good job of building a good system that can be followed by most people. The system looks pretty comprehensive. If you are (like me) uncertain what type of Internet business to create, there is a Brainstorm section which provides lots of data. You can use the data to determine supply Vs demand for any particular keyword (i.e. business idea). His C-T-P-M model makes a lot of sense (and points out why this blog doesn't make much money!).

I am applying for a Census job and have thought about taking a second job. The problem with second jobs is that they have little flexibility. Since my boys have not been willing to get their driving licenses, I still need to do a lot of chauffeuring.I thought about becoming a Real Estate Agent and took an on-line CCI - but, as I suspected, the competencies needed are much like Amway and I scored in the lowest 20%.

So, over the next few weeks I will explore a web site in more detail and may pursue that for the time being.

When is the best time to buy/ sell your house?

Here's an interesting plot I made from data of the Buffalo/Niagara regions median home prices over the past 5 years. Typically there is a 60 day lapse between an offer being accepted and when a home is closed here.

So, if you want to buy at the best price, the ideal time to make an offer is in December. On the other hand if want to sell at the highest price, you should probably put your house on the market by the end of March.

How much will housing prices fall?

I found this graph here. It sure seems to indicate that some housing markets will be in decline for some time to come. Real estate prices tend to correct at a much slower rate than say stock or commodities. This doesn't mean that all real estate prices are falling (Buffalo's are rising).

The question is, will the politicians allow the market to correct and face a short, sharp recession or will they try to prop up prices and keep the country in a long period of stagnation? My guess is the later. We are a society that tries to avoid pain at all costs.

Irrational Pessimism

Many remember Alan Greenspans claim of irrational exuberance during the 1990's stock market run up. Now the market value has dropped about 40% from its peak and each day brings news of triple digit market losses. Foreclosures are up as well as joblessness and it's hard not to be afraid, especially for those in their mid-fifties who were hoping to retire in 5 to 10 years.

So is the world ending as we know it? Many people are thinking that way, claiming that this is the next Great Depression. The media claimed for over a year that we were in a recession despite the fact that the economy was still growing. Self fulfilling prophecies are part of the reality we deal with and as people are told that things are bad they change their behavior until things do become bad.

One contrarian is Warren Buffet who recently published an article recommending people buy now. I think that is exactly what smart investors need to do. Stocks have always come back. And some areas may have good real estate values where sellers have irrational pessimism (though I think that values will have to drop by 50% or more in some markets).