Monthly Archives: March 2012

How NOT to be an asshole landlord

Posted by neil on March 18, 2012
General / 15 Comments

Hi Folks,

Did you know that, the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you?

This post is going to spark some controversy no doubt.

If you are someone who is looking to buy your first rental property, one of the things that probably freaks you out the most is non paying tenants.

Over the years, I have talked to a lot of new real estate investors.  Two of the things that make people very afraid about investing in real estate are:

1) Non Paying Tenants, and

2) Property Management

If you purchase a rental property, and hold that property for any gs rolex day date 118135 36mm mens automatic watch length of time, no matter what Country or City you are located, chances are that eventually you will encounter tenants that are late with their rent.

Like many real estate investors, if you expand your portfolio by purchasing more than one rental property, you increase the likelihood that you will have tenants that are late with their rent.

Most experienced real estate investors and educators will tell you that when a tenant is late with their rent, you have to be very strict with them and lay down the law.

Many say that if tenants are even one day late with their rent, you should send a notice for eviction.

Well, in my opinion, that is a big pile of Bullplop!

I bought my first rental property 7 years ago, and only 7 years later I figured out something very important.

I have discovered that when it comes to the vape Líquidos collection of rent, that:

“the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you.”

There is much more to this of course, however, for this post, I want to keep you with these wise words…

Once again, they are:

“the more of an asshole you become towards your non paying tenant, the more of an asshole they will become towards you.”

In part II of this blog post I will share with you my findings on how NOT to be an asshole landlord when it comes to the collection of rent.

Now…Enjoy this very funny video of Pearl The Landlord.

[youtube]http://www.youtube.com/watch?v=9OVt7xEZHxo[/youtube]

ps: If you are looking to buy your first rental property, sign up to my blog today.  Simply enter your email address in the top right hand corner of the blog.  You will receive tips from experienced real estate investors on how to buy your first rental property!

 

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Priceless Tips From An Experienced Real Estate Investor Part 2

Posted by neil on March 03, 2012
General / 4 Comments

Hi Everyone,

A major reason why people do not invest in real estate is because they have many questions that go unanswered.  In an effort to answer questions from my readers, I have implemented, Priceless Tips From An Experienced Real Estate Investor.

Already we are on Part 2 of this series.  I have no doubt that this article series will continue on for a long time, as the questions from you the readers will continue to come in.

As time goes on, I am going to have other experienced real estate investors take turns in answering your questions.  However for now, it is I who will be providing the feedback on these questions.

So here we go.

I got an email yesterday from another reader.  This reader wanted some direction on how to move forward with real estate investing.  Once again, to protect their confidentiality, i am going to be referring to them as, ‘Reader’.

Here is the question that the Reader sent.  I have included their question in BLUE Text.  My answers to their questions are in RED Text.

Here we go…

“Hey Neil

I am currently in my first home and am soon going to be buying a larger one now that the family has grown. I am considering keeping my first home as a rental property. (Great idea so far.  Definitely hold onto all the real estate that you can.  Let’s read on…) However, I am not sure what is the best way to go about with the mortgages. Here’s what I am thinking my 2 options are. (In the coming weeks I am going to be having guest posts from Mortgage Brokers who help people finance their first rental property purchases.  Stay tuned for those upcoming posts. However, for now, let’s answer the questions at hand…)
1) Take out a line of credit and use it as a down payment on the larger house house and pay off the remaining mortgage on the home I will be renting out. 
2) Remortgage my current home and use the equity as a down payment on the new larger one
In the first scenario, I would have a mortgage on my new home, and a line of credit on my rental property. (Reader, this first scenario that you outline is not a bad one.  The benefit of having a line of credit on your rental property would be that your monthly carrying cost of that property would be reduced versus, if you had a mortgage on that property.  For example, if you had a line of credit on that property, all you would owe monthly would be the interest payments.  Versus, if you had a mortgage on the property, you would own interest and principal.  The disadvantage to this is of course when and if interest rates go up, your monthly carrying cost will increase, as the interest that you owe each month will go up.)
In the second scenario, I have a mortgage on my new home and a mortgage on the rental home. (I personally like this option better.  I had the option of putting a line of credit on one of my rental properties but opted not to.  I opted not to because I like the idea of mortgage pay down.  As the years go by, and the longer you own a rental property, you are always delighted to see the mortgage balance come tax time because it is always a little bit lower than it was the previous year. Fast Forward 5 years and you see significant mortgage pay down)   Which way is better for taxes? I know with a line of credit, i would have more flexibility with making payments in case i had problems collecting rent, but i’m not sure if I get the same tax breaks. Do you have any recommendations?
Any info would be great, thanks”
(The one thing that I have learned over the years is that taxes are complicated!  Your tax advantages or disadvantages can be dependent upon where you are geographically.  I would recommend asking an accountant that has experience in dealing with clients who are real estate investors.  Whenever I have a question related to taxes, I always refer to my real estate accountant.  The best place to find an accountant who is competent with real estate related questions, is to get a referral from real estate investors who are currently utilizing this type of accountant. )

Reader, I hope this information helps to answer your questions.  For those of you with questions, please keep them coming.

Until next time…

Neil.

ps: If you know anyone who would be interested in reading my blog, please tell them about it.  Feel free to Tweet the article using the icon above or share the link on Facebook.

pps: don’t forget to read part one of this series titled, Priceless Tips From An Experienced Real Estate Investor

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Priceless Tips From An Experienced Real Estate Investor

Posted by neil on March 01, 2012
General / 1 Comment

Hi Everyone,

If you really wanted something, and you were able to get this “something” for free, would you take it?

Take a moment and think about that.  I am not trying to trick you. I would hope that your answer would be an astounding….”YES!”

You are in for a treat because I am going to give you this ‘Something’!

This ‘something’ is advice!

Not any old advice, but advice on real estate!

This post will be the first of many posts devoted to answering questions from you, the readers of First Rental Property.  Moving forward, I will also be asking some experienced real estate investors to provide their answers to your questions.  This will allow you to have a diverse array of opinions.

Below is an email that I got from one of my readers today.  They were asking for my opinion on a number of topics.  I thought that it would be best to publicly answer all of these questions so that more of you could benefit from reading these answers.

So here we go.  Here is the email I got today…

To protect their identity, I will be referring to them as….”Reader”

Reader:
“Hi Neil
In 2010 I purchased my first rental property!  I used the equity from my primary residence through a SLOC to put a 25% deposit on my first rental property.  Now that I am enjoying being a real estate investor my husband and I would like to purchase two other single family homes within 5 years. 
The SLOC that I have is 150k some was used for the deposit and the rest personal use.  Now my question for you:Does it make sense to consolidate the SLOC and my current principal residence mortgage (3.5% variable term ends 2014) and change my mortgage to a re-advancing mortgage (pay applicable penalties), then wait to accumulate the necessary funds to purchase investment property # 2 and then repeat the process again? does this make sense or is there other ways of doing this?
Neil:
Secured Lines of Credit (SLOC) are nice, but readvancable mortgages (a.k.a. matrix mortgages) are even better!!  For those of you that do not know, there is a difference between regular secured lines of credit and matrix mortgages.  The basic difference is that with secured lines of credit, your available credit limit is capped.  Whereas, with matrix mortgages your available limit continues to increase as you pay down your mortgage.  All things being equal, for every dollar that you pay down on your mortgage, you gain an additional dollar in credit.   Bottom line this means that as you pay your mortgage down over the years, you have a lot more credit available to you.  For example, if you paid your mortgage down by $10,000, your credit line portion will increase by $10,000. 
This is a sweet deal for real estate investors! Essentially, as you pay down your mortgage, you are generating more funds through your secured line of credit that you can use to invest in real estate. 
The reader asks:
“Does it make sense to consolidate the SLOC and my current principal residence mortgage (3.5% variable term ends 2014) and change my mortgage to a re-advancing mortgage (pay applicable penalties), then wait to accumulate the necessary funds to purchase investment property # 2 and then repeat the process again?”
Neil:
My answer to this all depends on how much available room the reader has on their secured line of credit.  Personally, I am not a fan of paying penalties when you don’t have to.  So, ‘Reader’, if you can avoid paying penalties, please do so.
If you have enough room on your secured line of credit currently to buy your second rental property, do it.  You can always do this and then wait until your mortgage term ends in 2014.  At this time, once the mortgage term has expired, you can then convert your secure line of credit over into a matrix mortgage and avoid paying any penalties.  That is what I would do, if I were you…
Too often I see people get super impatient and want to buy so many properties in a short period of time.  They get focused and buy, buy, buy everything in sight.  When the dust settles one of two years from the purchases…they are left owning a pile of hot garbage.  That is, their real estate portfolio resembles hot garbage.  Vacant units, tenant evictions, under market rents, repairs and maintenance bills, and the list goes on…
The Reader asks:
“Does it make sense…to…repeat the process again?”
Neil:
I say, why the hell not?!  If you want to keep on buying properties, and they are good properties, do it.  That is of course, if that is what you REALLY want to do.
 The Reader asks:
Final question: fixed rate vs variable what are your thought on that since the fixed rates are not a big difference to the variable rate mortgages.
Neil:
Variable. 
Reader asks:
“BTW would you consider writing blogs on how to purchase your second or third rental property”
Neil:
Reader, that is an interesting question.  My answer to that is no.  What I might very well do is write blog posts going forward on why people should not buy their second or third rental property.  Thanks for the idea! Stay tuned, and thank you for the questions Reader.  I hope that I answered all of your questions.  If not, please let me know!
What do you think about the ‘Readers’ questions?  Do you have similar questions yourself?  If so, let me know, and I will either answer them myself, or have one of my trusted and experienced real estate investor friends answer the questions for you.
Until next time…
Neil.
ps: Do you know anyone that would benefit from reading my blog?  If you do, don’t keep the blog a secret!  Tell them all about it.

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