So now your tenant is all moved into your unit. When a tenant moves into one of my units, I provide them an inspection sheet that goes over the condition of all parts of the unit (paint, doors, appliances, etc) which they sign off on stating that they agree to the condition of the unit when they moved in. We give our tenants fifteen days to go through the unit to see if there are any repairs needed that may have been missed by my rehab crew. These repairs are done at no charge to the tenant. After fifteen days, the tenant is charged the first sixty five dollars of all repairs. This keeps the tenant from calling us to repair small items like toilet guts for instance.

I actually added this to our lease after a tenant called us at 6:30 one evening to tell us her kitchen sink was stopped up. It turned out that her small child had stuck a cup down into the garbage disposal. It just needed to be removed. The way my lease reads now, that tenant would be charged a fee of $65.00 to have my repair guy go out for something that wasn’t a repair. This one clause will save you from a lot of unnecessary trips to your units for repairs.

I also have someone who checks my rental units every sixty days or so to make sure they are being cared for properly and that the tenant has not added animals that are not on the lease. We also make sure they have not moved in any more people who are not on the lease. This is grounds for immediate eviction. Within the body of our lease, we also cover how long visitors can stay as well so there is a clear definition as to what a visitor is and what an extra tenant is. You can also hire a property management company to handle your units, but I just feel like our units are better handled by my staff. I also send letters to the neighbors surrounding my rental units letting them know that we are interested in any input they may have about my units and my tenants. The neighbors become kind of a watchdog for me to let me know if there are any problems I should know about. Read More→

One of my favorite business books is Good To Great by Jim Collins. In this book Mr. Collins gives a great example that I realized applied to me when I was building my real estate business and will apply to you too. The author gives us an example of a great big fly wheel. He describes this as a giant metal disk on a thin pole. Imagine this disk weighs thousands of pounds and is currently stationary. Your job is to get this disk spinning.

It is easy to imagine that it will take time and effort to get the giant, heavy wheel to spin. You will begin with a single shove on the wheel. Very little will occur with this initial input from you. The wheel may move very slightly. You will push and push and the wheel will slowly start to move. Your effort will be great and the results will be minimal. Shove and shove and shove…the giant wheel begins to spin slightly faster and faster.

At a certain magical point the wheel will become much easier to spin. The weight of the wheel is now working for you. Its own momentum will keep it spinning with very little effort on your part. You can now give small gentle pushes and the wheel will keep spinning on its own. Read More→

Picture this: a man purchases a house in 2007 with a loan from a major mortgage lender who then securitizes the loan. After 7 years of making payments, the homeowner loses his job and defaults on the loan. The lender sends a foreclosure notice to the homeowner, claiming the ability to foreclose on the loan. But does the lender actually have the right to foreclose? The answer is a bit complicated, and does not look good for the major banks. To understand why, let’s take a closer look at exactly what the banks did and what it means for homeowners and real estate investors.

When a loan was securitized it was lumped together with a massive pool of loans and then sold in parts to investors around the world. The investors were then paid from the principal and interest payments on the loans based on their percentage of ownership. It sounds simple enough. If it was that simple, why did mortgage lenders begin the process by selling each loan in the massive pool of loans through a sequence of sales? And why was the last sale almost invariably to a single-purpose entity, usually a trust with a major bank as the trustee? The point of this sequence of sales was to separate the pool of loans from the assets and liabilities of the originating lender. They did this in case the lender was to file for bankruptcy or go into receivership. If the loan had not been completely separated from the lender, the lender could then claim the loan by right of redemption, effectively leaving the investors with nothing.

If the homeowner continues to make their payments, this is the end of the process for them until they have paid off the loan. If the homeowner misses payments and the foreclosure process begins on their loan, that’s when things get hairy. Read More→

Plan for retirement

What should you do with your Real Estate IRA? If you are a Baby Boomer, you may want to consider using a Real Estate IRA to purchase that dream home before you hit retirement. Then, when you reach age 59 ½, you can take the home as a distribution and begin enjoying your new retirement home. Remember, you may not use this home for your own personal use until you reach 59 ½ and take the home as a distribution.

One important point that people forget when talking about taking a home as a distribution is the taxes due on distributions. If the home was held in a Traditional IRA, then taxes will be due on the amount of the distribution (the appraised value of the home) in accordance with the individual’s tax bracket. That’s why most people recommend using a Roth IRA for this strategy. With a Roth IRA, taxes are due at the time contributions are made, after that all profits grow tax-free and since you paid the taxes at the time the contributions were made, distributions are tax-free as long as you have reached age 59 ½ and the account has been open for at least 5 years. Read More→

It is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Know how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this by you the members submitting questions to Karen@smallbusinessadvisor.biz, and getting answers here in this column.

Q: From time to time I have an entry that I really don’t know how to enter properly. It may be a deposit or a check and I don’t know where to either show the income or the expense. Where can I put this until I can find out from my CPA how to handle it?

A: Create an account named ‘SUSPENSE” and make the type of account a “Bank”.   It will live on the balance sheet and will immediately get the attention of your CPA. If you use only this account for these types of entries you can eliminate the Miscellaneous, Uncategorized and Ask my Accountant accounts. Too often these types of accounts get used and the information is scattered across them instead of being in one single account. I usually delete these accounts after I have moved all the transactions to their proper place and then only have Suspense to work with. Read More→

How can you get not only what you want but MORE than what you have ever wished for?

Nothing is Unreachable

Your success depends on your vision.

• Do you want to work independently, or do you want to work independently and be wealthy?
• Do you want to pay off your credit cards, or do you want to be completely debt free?
• Do you want to take a vacation, or do you want to travel the world?

When you expand your thinking, you can expand your success. Expect more and work knowing that you can have it. From the start, know how big you want your business to be and work as though it is already there.

Big business owners keep good analytical data on sales, acquisitions, expenses, and growth. With good analytical data, you can prove that you are a good business person, and people will want to loan/give you money. Read More→