5 Benefits of Investing in Real Estate Through Private Lending

Real estate investing is a key ingredient for creating a long-term investment plan that will maximize your wealth and can even lessen your risk. But it seems like there are limited options available to you, considering most investors don’t have the necessary time or experience to do it successfully. You can:

Purchase your home. Although this is considered more consumption than investment, this is still an investment in real estate with potential appreciation.

Purchase rental property. Most people have heard about the ups and downs of owning rental properties, but collecting monthly rent from tenants is great way to generate income. The downside is the need to manage the property yourself or hire a property manager to directly handle tenant and property issues.

Purchase REITs. Similar to purchasing stocks, a real estate investment trust is a corporation that raises money by trading on major exchanges, and it pays investors 90 percent of its taxable profits via dividends.

Buying real estate doesn't necessarily mean dropping a ton of cash into the ground.

Buying real estate doesn’t necessarily mean dropping a ton of cash into the ground.

Besides these options, there’s another that the majority of real estate investors are unaware of: investing in real estate through private lending. As a private lender, you essentially become the bank. You lend your money to other investors (borrowers) and charge an appropriate interest rate for the use of your money. Here are some of the benefits of real estate private lending:

1) Monthly cash flow: The borrower pays you interest every month, which is typically between 8 and 15 percent.

2) Security: Your investment is secured by a lien on a tangible piece of real estate. That gives you collateral when lending your money, aside from just the soundness of the borrower. Typically, you shouldn’t loan more than 75 percent of the property’s current market value, giving you some cushion in the event that the property’s value decreases.

3) Diversification: Real estate private lending gives you the ability to diversify your portfolio — and not only from a real estate perspective. If you want to create current income, it’s another fixed-income option.

4) Lower volatility: You can better manage the market risk if you keep your real estate loans short term.

5) Passive investment: Instead of learning the nuances of real estate development, construction, management, etc., you can lend to other experienced real estate investors who do all the work. You just act as the bank and receive interest payments, and your money is returned at the end of the investment.

Being a real estate private lender is a great way to get exposure to real estate without doing all the work. But you still have to understand some of the risks involved. The market value can cause properties to quickly increase or decrease in value due to local and national factors.

Borrower credit can also be volatile; you need to make sure the borrower is in stable financial condition and can pay back the loan. Also, verify that the borrower’s investment strategy is solid.

Finally, make sure you have good legal representation to draft loan documents, coordinate the transaction, ensure your loan is properly recorded, and see that agreements are in place to protect you as the lender.

Real estate private lending is a great way to get exposure to real estate and generate passive income for your investment portfolio. As with any investment, you need to understand the risks involved and do your homework before jumping in headfirst. But if done right, real estate private lending can generate some of the best risk-adjusted returns in the marketplace.

Jeff Carter is the managing director and founder of Grand Coast Capital Group, where he oversees all aspects of the business. Grand Coast Capital Group is a national private lending firm based in Boston that provides creative short-term financing to real estate investors, builders, and developers across the country.

6 Tips for Paying off Your Mortgage Quickly (Without Going Broke)

Paying Down Your Mortgage Free Financial AdvisorWouldn’t it be nice to stroll around your living room before work with a donut in one hand and a cup of coffee in the other feeling

like the king (or queen) of your castle?

The house is yours. Hooray! After years of apartment serfdom, you finally own the place.

Well…sort of.

There’s that mortgage again, nagging at you. Of course, you should never rush into a big financial decision, and having a mortgage can be a really sensible way of staking your claim on the property ladder. But there’s no better way to feel like you own the place than, well, owning the place.

Paying your mortgage off early can free up your money, allow you to make investments elsewhere, and make your retirement years more comfortable. Here are some manageable ways to stop that mortgage from dragging you down:

1. Pay one extra payment a year.

It sounds like a simple solution, but you’ll be surprised how much extra you can save when you push yourself. By buying one less cup of coffee per week or watching a movie at home instead of going to the movie theater, you can make small daily savings that add up to a hefty sum at the end of the year. This mortgage calculator from Bankrate shows you how repaying a little more here and there can reduce your mortgage in the long run.

2. Plan a staycation.

I’m a firm believer in rest and recuperation, but vacation packages, hotels, and airfare can be really expensive, so why not save some money by vacationing closer to home?

A family road trip or a camping expedition can be an adventure, and there are so many beautiful national parks and sights in the U.S. that you’ll always have somewhere new to try. By trading your trip abroad for a staycation even just once every three years, you could save enough to manage some extra payments and be mortgage-free sooner than you think.

3. Refinance for a shorter-term mortgage.

Refinancing your home from a 30-year to a 15-year mortgage can make the light at the end of the tunnel much brighter and reduce the amount of interest you pay overall. You’ll need to budget carefully to make sure you can afford the higher monthly payments, but if your income allows, it can be a smart financial move.

4. Use your tax refund.

Making sense of your tax return can be nightmarish, but that magical refund is the reward. Putting that amount toward paying off your mortgage every year could dramatically reduce what you owe and ease the financial burden. Plus, your mortgage may be part of the reason you’re getting a refund in the first place, so keeping that money in the mortgage fund is a nice, neat way to control the flow of your finances.

5. Apply your bonus.

Did you just get a bonus at work for a job well done? Instead of going shoe shopping or buying a fancy lawn mower, why not put that extra money toward your mortgage? The only thing more rewarding than cash is that feeling of pride you’ll get from owning your home outright.

6. Get a roommate.

If you’ve got some extra space and wouldn’t mind sharing your home with another person, getting a roommate is a creative way to help you pay off your mortgage faster. If a permanent roomie doesn’t sound appealing, use sites like Airbnb to fill your extra room for just a couple nights a month to generate some extra money without making a huge commitment.

Don’t let your mortgage get you down. Even though it can seem like it’s always there, judging you, there are ways to help you be mortgage-free sooner rather than later.

 

Elizabeth Dodson is the co-founder of HomeZada, a cloud-based home improvement and organizational software tool. HomeZada strives to educate and provide resources for homeowners in all areas of home management, including home improvement projects, maintenance, inventory, property information, and property value.

Photo: TaxCredits

Review: Mobile Landlord App

The pace of telephone technology amazes me. Only 30 years ago you were the exception if you carried a “cell phone.” Now you can do pretty much anything on your phone. You can check the weather, do your grocery shopping online, have a business meeting seeing your client’s face on video without having to travel eight time zones, and even dictate a text so the phone writes it for you when it gets too complicated to thumb it. The pace of change has been fast and has dramatically changed how we use technology.

mobile landlord app

Some say being a landlord requires a little liquid “help”

Well guess what? I’ve just been introduced to another app that’s been added to the list, allowing you to manage your rental properties on your smartphone as well. The mobile Landlord app from Direct Line for Business helps you stay on top of every aspect of managing a rental property.

New landlord clients always told me that the process of becoming a landlord was overwhelming. It can be, if you aren’t organized. There are lots of things to remember, your tenants may be needier than expected, asking you to come over every time a window doesn’t close properly, and some of the most basic tasks may skip your mind, such as the furnace’s annual inspection before winter, creating hefty bills you could have avoided.

That’s where the Mobile Landlord app comes in.

It helps you keep all the important information about your rental in one convenient place: your phone. No more browsing all around for that paper rental agreement, or having to wait until you come home to contact your tenants, it is all there with you all the time.

Here’s How It Works

You can get the Mobile Landlord app on iTunes, it is free to download and install in just a few clicks.

You will be offered a quick tour of the areas the app covers.

Once you reach the home screen, the property tab will ask you to register up to five rental properties, complete with their name, address, the name and contact details of your tenants, how long they are renting and other details of the tenancy (such as the rent amount). You can also add important contact details, such as the repairman, the maintenance company of the building, the neighbors for when you are on holidays and have an emergency, or the council’s.

On a second tab called “reminders,” you can enter any alert concerning your rental property, like a prospective tenant’s visit, a plumber coming over, or a bill that needs to be paid by a certain date.

Finally, the last tab of the Mobile Landlord app is called knowledge centre, and offers an array of small articles directed towards landlords who want to have more information about certain aspects of their rental investment. The articles offer tips about maximizing your rental income, minimizing your costs, the rental trends, and much more.

In just a few clicks, you can locate the people you need, calculate the yield of your investment, and enter a reminder for the next time you need to pay the house a visit.

With all the time you just saved by automating part of your property management, you can use the free time read the third tab’s articles, learn more about investing and make the most of your rental property.

Selling Your Home During the Holidays

If you are hoping to ring in the New Year in a new home, the holidays may be the perfect time to put your current house on the market. While your own circumstances and the local real estate market play a major role in deciding when to list a house, listing during the holiday season is no longer considered taboo. In fact, listing a house during the holidays may actually be to your advantage. Below are three reasons to consider selling your home during the holidays – and how to position your home for a quick sale:

Buyers are always looking at potential homes online.

In the past, conventional wisdom said that buyers simply did not have the time to view open houses and wade through real estate listings during the holiday season. While last-minute shopping trips and holiday travel may make for poor open house attendance, buyers are still looking for potential homes. Thanks to popular smartphone and tablet apps like Trulia and Zillow, would-be home owners can now browse listings on their morning commute or while waiting to pick up the kids from school.

Be sure your home’s online listing is up-to-date and features flattering, high-res pictures of each room. Consider hiring a professional stager to truly showcase your house for the online photos and create a video tour.

Housing inventory is lighter during the holidays.

Despite the shift in buyers’ behavior, there is still a misconception that buyers are not shopping for homes during the holiday season. Consequently, many real estate agents continue to discourage sellers from listing until after the New Year. This means that if you do list your home now, there will be less competition.

Stand out even further from the competition by completing minor home repairs, such as touching-up the paint, replacing leaky faucets, and repairing cabinet scratches. Have your home inspected for pests, like dry wood termites. A certification that your home is pest-free will put buyers’ minds at ease and assure them that it is move-in ready.

Seasonal décor puts buyers in the mood.

From “Miracle on 34th Street” to “It’s a Wonderful Life,” there’s nothing quite like being home for the holidays. Tasteful seasonal decor helps buyers imagine what it will be like to celebrate the holidays in your home. Prior to hosting an open house, make your home feel cozy and inviting by lighting the fireplace, playing soft classical music, and offering homemade treats. When your home is warm, cozy and tastefully decorated, buyers will spend more time inside admiring your home’s best features.

When decking the halls, keep your home’s curb appeal in mind, too. Your home may look like a winter wonderland from the street, but that doesn’t mean potential buyers will appreciate icy sidewalks or snow-covered driveways. Bare trees equal a more exposed home, so be sure to touch up exterior paint, clean the gutters, and shovel stairs and walkways.

Pay a Little Extra on Your Mortgage – What a Difference it Makes

Could you adjust your budget and pay a little bit more toward your mortgage every month? Perhaps you can save a small amount and make a lump sum payment once per year?

It might not seem like it, but paying a little bit extra can actually make quite a big difference over the length of your mortgage. It is possible to take years off the loan by simply paying a small amount more per month or making one extra payment per year. When you shorten your mortgage loan, you also end up saving thousands in interest rates over the years.

You might not feel like you can afford to pay extra money on your mortgage, but there are likely a few adjustments that you can make to your budget so that you can squeeze in more payments.

Paying Biweekly Rather Than Monthly

One strategy for paying more on your mortgage is to change your payments to biweekly rather than monthly. Instead of paying a monthly amount, you will pay half the monthly payment every two weeks. As there are 52 weeks per year, you will end up making 26 payments rather than 24 if you made two payments per month. However, you will not notice the difference to your monthly budget.

Make a Big Lump Sum Payment Every Year

Another way to reduce your mortgage is to make a single large payment from the amount that you owe. When you do this, it will be taken directly off the capital, which will mean that your mortgage term becomes shorter. For example, if you get a Christmas bonus at work you could use the amount to pay off some of your mortgage. By doing this, you can reduce your mortgage loan length by several years.

Round Up Your Payments

Why not round your mortgage payment to the nearest hundred? For example, if your monthly payment is £573.45, you could pay £600 instead. This will not affect your budget too much, but it will mean that you end up paying an extra £26.55 per month, which adds up to an extra £318.60 per year.

To find out more about how you can pay more on your mortgage, talk to a UK mortgage broker such as First Mortgage.

Photo: 401(k) 2013

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6 Wacky Ways to Sell Your House Fast

While I’m in Ohio kicking my family’s butt at board games over the holiday, Dominique Brown agreed to take over the reins for a day. Thanks, Dom! 

For those of you who don’t know him from our podcast, Dominique Brown is a financial planner, landlord, personal finance blogger and video blogger. He is the owner of YourFinancesSimplified.com where he talks about everything from being a new father to his worst financial mistakes. He is also the owner of InsiderRealEstateTips.com where he talks exclusively about real estate. He’s been featured at The Huffington Post and H&R Block. You can find him either on Twitter, Facebook, Youtube or Instagram.

Maybe your adjustable rate mortgage is about to put the ARM on you. Maybe you just took that once-in-a-lifetime job halfway across the planet. For whatever reason, you need to sell your house fast. When your back is against the wall, you might try some of these unusual methods to sell your house fast.

Saturate the Internet

It may surprise you to know that 66% of folks shopping for homes begin their search online. For this reason, make certain your realtor has your property listed on the internet. The top five sites are Trulia.com, Homes.com, Craigslist.org, Zillow.com and Yahoo.com. While there are other sites, these top-of-the-heap places give your property greater exposure, hopefully shortening the time to sell your home. Don’t overlook social media sites like Facebook, LinkdIn, and Twitter. Send out copies of your listing to everyone on your contact list. Start a blog about your home, talk up the neighborhood, schools, and nearby attractions, such as parks or community centers.

Try eBay

I know this sounds wacky, but for about $150, this is a cost effective way to create buzz about your home, and can land you a ton of traffic. The auction is not binding, and if you choose not to accept any offers, that is your privilege. If you need to sell your house fast, consider this part of your advertising expense. Who knows…you might sell your house fast!

Got Kids?

Put them to good use. I read about a couple that had “Buy My House” T-shirts made for their children and all their children’s friends. This shouldn’t get you into hot water with Children and Family Services and hey…a lead is a lead, right?

Incentivize Your Broker 

Offer your broker a bonus for a quick sale. The bonus should parallel your need to sell your house fast. Avoid cash bonuses. Offer a weekend get away to Las Vegas, Chicago, or Atlantic City. Maybe your broker is a sports fan and would appreciate getting tickets for that big game. Use your imagination. That’s why I suggest you avoid cash. So boring!

Incentivize Your Buyer

Offer to pick up the full boat on closings costs. Maybe you could sweeten the deal by prepaying the property taxes for few months. This could really help a first time buyer.

Price it Right 

Work closely with your broker to arrive at a selling price that is attractive, but not so attractive as to arouse suspicion in potential buyers. If you price your house too far below the rest of the market, prospective buyers may think something is amiss with the home, the neighborhood, or the schools. This is a balancing act, and if your broker is clear on your goal to sell quickly, then together you can arrive at a Goldilocks’ price—not too high, not too low, but just right.

Some people think that under pricing your home is “good thing.” These people believe that market forces will come into play. They believe potential buyers will actually bid against one another and force your selling price into line with market prices. You and your broker will have to make that call.

Don’t Forget the Basics

Don’t get caught up in the wacky things you are doing to speed the sale of your home and forget the basics. Do not make that mistake. You still need to make certain your home is in good repair inside and out. Make sure the rooms are clear of clutter. Keep the dishes washed and the kitchen spotless. Bathrooms should always be spotless too. If you have pets, consider boarding them with friends or with a kennel. Not everyone is a fan of the furry friends. Make sure you mow the lawn, put toys and tools away and repair any problems with outbuildings or fences. When your broker is showing your home, it is usually best for you to be absent. Spend some time visiting open houses. This is a good way to get ideas for highlighting your property, and it is free.

 If you have had experience with selling your house fast, let us know about it. Have you had success in making a fast sale?

 

Mortgages for a Young Borrower

Thanks to RefinanceMortgageRates.org for the guest post!

For a young adult, purchasing a home has many advantages. Home owners can quickly establish good credit, accumulate equity, build net worth, and create a sense of stability for themselves. Also, going through the process of buying property at a young age allows buyers to become familiar with a good long term asset class: real estate.
However, before a young adult decides to embark on home ownership, there are a few important points they absolutely must understand. By understanding the steps involved in the mortgage process and accurately planning your budget, you will have more success in keeping and maintaining your loan.

 

How Do I Establish Credit to Qualify For A Loan?

To secure a good mortgage interest rate, you will need to have an established credit record and at least two years on the job at the same company at a consistent pay rate.
Establish your credit by finding and using a secured credit card. This type of credit requires you to place a deposit against the card which equals your credit limit. Don’t be confused between a secured credit card and debit card; only the former will ensure that the company reports your good standing to the credit bureaus.

As you begin making timely payments on your new card, look to establish other lines of credit. Do not, however, create too many lines. Mortgage companies worry about a metric called your debt to income ratio. Too much debt will show you with an unbalanced credit health, and will make it difficult for you to secure good mortgage interest rates. A good rule of thumb is to never exceed 50 percent of your credit limit in charges on your credit clines and cards. This will help you achieve the highest credit score possible without a mortgage.

After two years on the job and a credit history of 18 at least months, it’s time to begin shopping for a mortgage!

 

What Are The Down Payment Requirements?

Place at least 20% of the purchase price down on the home you’re purchasing to receive the best mortgage rates from a commercial lender. I know what you’re thinking: this could be a significant amount of money for a young up-and-coming borrower. If you have the ability to save this sum in a short time…do it. This will secure low interest rates and create instant equity in your new property.

If you’re unable to save such a large amount in a short period of time, check out something called “mortgage insurance.” This type of insurance is offered by agencies such as the Federal Housing Authority (FHA), Veterans Administration (VA), Department of Agriculture (Farm Home), and occasionally even from private insurers.
Mortgage insurance allows you to place as little as 3.5% down on your home. Here’s why: the insurance policy states that the mortgage will be paid even if you default. Banks feel much more comfortable with this in place. However, there’s more good news about these programs. They allow for lower credit score qualifications, enabling more people to purchase homes.

As a last resort, you may also wish to consider borrowing money from family or friends for the large down payment. It should be noted that many banks now frown on this method for down payments. You will need to speak with your preferred lender to glean whether they’ll allow you to borrow money for a down payment.

 

How Much Loan You Can Afford? (Income Guidelines)

 

This is perhaps the most important thing a young borrower should understand. Your monthly mortgage payment should never exceed 33% of your monthly bring home pay. For example, if you bring home $3000 a month after taxes and insurance premiums, your mortgage payment should not exceed $990 per month. By keeping to this guideline, you should have enough budget room to easily afford your loan.

Many lenders will provide mortgages that are up to 40% of bring home pay. This creates risk for both the borrower and the lender. The average person needs at least 67% of their income to pay for living expenses and saving for their future. Once you pass this threshold, other areas of your life are certainly going to feel the weight of the mortgage.

The best thing you can do for your credit and lifestyle is to only purchase a home you can afford on your current salary. As your life develops, your career blossoms, and your need for a larger home increases, you can sell your current home and purchase one based on your new income and desires.

This information was provided by RefinanceMortgageRates.org. Click here for more information on mortgage, refinancing and housing.

Photo Credit: Kimubert

My Favorite Quirky College Saving Strategy

My niece, Madeline, heads to the College of Charleston today. Good luck, Maddie!

Sometimes people don’t want to invest in a 529 college savings plan. I understand that thinking. Once college is over, the investment is gone and what does mom or dad have to show for it? Hopefully you have an educated child with a good enough job to afford a really big house. They might even let you sleep in their guest room if you’re lucky.

What if there was a way to save toward college but keep the investment AFTER junior finished graduation? Wouldn’t that be cool?

There is such a beast, but there are caveats, as there are with any investment:

First, you have to be interested in rental real estate.

Second, you have to have enough money for a down payment on a piece of property.

 

Here’s how it works:

 

Find a house near the school junior plans to attend. Make your best deal for the home. There are plenty of sites that discuss how to purchase rental real estate. I recommend you read Paula Pant’s story Is This House a Good Investment at Afford Anything.

Interest rates are low now, so this is an especially good time to jump on this strategy.

Complete the purchase and perform any needed repairs to rent it.

Ask junior if any friends would like to live in the house with him/her. If not, place an advertisement in the local newspaper and on Craig’s list. PT Money recently ran a good story about how to check the credit of your renters (read Find a Tenant: Credit Check and Screening). The kids might not have any credit, but mom or dad probably do.

Rent the house for enough to cover the mortgage costs and upkeep. Even if junior’s friends become your renters, make sure everyone pays a security deposit and signs a lease. Keep it professional.
 

…and here’s where it gets fun.

 
Hire junior to be your property manager. For this to work, JUNIOR MUST DO SOME ACTUAL LABOR. Make a list of official duties, create a pay scale, and have junior sign an employment agreement.

Pay junior a wage. You may want to hire a local payroll firm to deduct taxes and create an actual paycheck (this service costs far less than you’d imagine). If he does well, give him bonuses liberally.

Junior uses the wage to pay tuition costs.

At tax time, claim the rental house income and expenses on your taxes. This includes the cost of junior’s labor.

 

Why this works:

 

You’re receiving a huge discount on your college expenses AND collecting any excess rent plus keeping any appreciation on the property.

Junior, at best, is collecting the wage while in the 10% tax bracket. You’re probably in the 25% bracket if you’re like most people who read financial blogs. You save 15% off the cost of your college simply by paying junior to take care of your property for you, plus you have a built-in manager (no real out of pocket additional expense…you were going to have to pay that money out anyway for school costs).

Additionally, you receive MORE savings off of the education expense because you’re deducting junior’s salary as an expense from your taxes.

I need to be 100% clear here: this can’t be a tax avoidance strategy. You’re asking for an IRS audit that you’ll lose if you simply buy a house a funnel funds for junior’s college through your property costs.

Your goals should be: 1) own rental real estate; 2) make a gain on your investment by deducting all legal costs of owning property; and 3) employ junior for a fair wage as he/she heads to college. If junior uses this money for school, great.

 

If not, you’ll have other ways to make your child sorry they didn’t listen to a good parent’s advice!

 

 
Photo: College: 401k 2012

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What Happens When You Fall Behind On Your Mortgage?

Apparently, someone in Miami just dropped $47 million on a house so that must mean things are getting better, right?

Thankfully, we’re starting to see some hints of improvement in the residential mortgage sector.

But what does the bank do if you’re barely hanging on, and are still a little behind – or maybe still a lot behind – on your mortgage?

First, it depends on your definition of behind.  It may not be the same as the bank’s definition (not shocking). Let’s examine:

1 – 15 Days Late

Most companies allow a 15-day grace period before tacking on any additional fees.  I know that, being self employed, my mortgage company calls me on the second of the month if I didn’t pay on the first, but there’s nothing to worry about if you’re “behind” less than 15 days.  No big deal.  That’s why they call it a “grace” period.

15 – 30 Days Late

If you’re in that 15 to 30 day time frame, prepare for a ton of telephone calls from your mortgage service provider (probably between two and four a day).  You’ll also begin receiving letters reminding you that if you forgot to pay your bill, now would be the perfect time to make that payment.  Back when my income was very unsteady, a sneaky trick my mortgage company would pull was to send out another bill insinuating that I was two months behind and that if I disagreed with them I should call ASAP.  Sneaky snake oil salesmen they were.  During this fifteen to thirty day period, if you can’t pay, don’t worry about the phone calls.  You’ll have to pay a small late fee of some kind, but there still won’t be any damage to your credit report.

30 – 59 Days Late

It’s important to note here:  If you’re running up against that 30 day late period, it’s best to drop everything and pay your mortgage.  Even if you’re habitually late 29 days; it’s better than being 30 days late from a credit reporting standpoint.

Now the letters and phone calls increase dramatically, until you’re 60 days late.  Your credit report will note your current late status. Your credit score will fall.

60 – 90 Days Late

Here the phone calls and letters will cease.  Does the mortgage company give up?  Ah…that would be nice, but alas, no.  They change tactics.  Once you’re over 60 days late, they’re going to send someone out to your house, just to make sure it and you are still there.  You can see these people coming a mile away.  They circle your block two or three times, usually they don’t look like they belong in your neighborhood, then they run up to your front door, peer in a window or two and leave a note on your door saying “Sorry we missed you.  Please call us at once.”

It’s at this point you should start preparing for your next steps.  If you’re 60 or 90 days past due, it’s probably a lingering problem, but hope is not all lost.

The biggest thing you can do when you’re behind is to communicate with your lender.  Home lenders have instituted a number of programs to help you work through your late status. The second biggest thing to remember is that the people you talk to don’t know you and you don’t know them.  And, they don’t care about your problems.  It makes no difference to them whether you stay in your house.  They’re a thousand miles away in a cubicle.  Stay calm while talking to your lender.

When you’re behind more than 30 days, you need to start talking – but don’t wait until it’s too late.  Call your mortgage company, explain your personal circumstances, and begin laying the ground work to solve the problem.  Can you pay the late payment over a couple of months?  How about rolling that payment to the back of the mortgage?  Can they waive a fee or two?  Sometimes they will, sometimes not.  But you’ll never know if you don’t ask.

Next week I’ll talk about the different options you have when you’re really behind on your mortgage and what they all mean.  Stay tuned!

Photo: Hanging On: Jess2284

My Experience in Landlording 101, or I’m Not Donald Trump

I’ve been renovating my rental property this week and haven’t had enough time to pick a Blog Post of the Week! Instead, you get obscure ramblings from an over-caffeinated blogger….I’ll have a Blog Post of the Week! again next week for you. Have a great weekend!

I Never Wanted To Be A Landlord

When I was an advisor, I’d hear horror stories from my clients with tenants. Early on I learned that I probably didn’t have the stomach for some of the negotiation and strong-arming that it takes to work with tenants. I prefer REITs for my real estate exposure.

But, after my home didn’t sell when we moved to Texas, I realized that I had two choices: short sale or try my hand at tenants. I opted for choice #2. I wasn’t completely green. I’d read extensively about landlord/tenant contracts, strategies and tactics so I could be useful to clients. While “fun” might not be the right word, it’d be educational to try it first hand.

The surprise? I didn’t know how much I’d like it.

I’m no Donald Trump and am still too much of a pushover. I want to be a little more callous with my tenants because they realize they can get away with stuff (and do). An example: my tenant the last three years was late with her rent EVERY MONTH. The good news is that I wrote a $100 late fee into the contract, which she gladly paid EVERY MONTH. I got used to her checks two weeks late and came to enjoy the $1,200 extra income from her.

Lessons Learned From Landlording

Is landlording a word? Probably not (Pages doesn’t think so….), but I’m running with it. That’s the kind of rebel I am.

  1. Don’t rent a furnished place unless you’re okay with everything being ruined OR you write penalties into the contract. None of our furniture matched our new house (of course, that would be made too much sense….), so we left most of the furniture there. My tenant, a school teacher, was excited about getting a home with nice stuff. Imagine my surprise three years later when my sofa, living room chair and desk were all destroyed. She apologized a ton, but no cash exchanged hands.
  2. Bolster your reserves or keep credit handy for surprises. We had a water leak, tree fall down, bathroom fan breakdown and flooding in the basement. If I didn’t have a reserve, there would have been trouble.
  3. Either live close to your rental or find reliable help. There are many people who will collect rent, fix up the house or manage the property, but most aren’t very good (according to my clients who were in real estate). You need great help or have to do as much work as possible yourself. I live halfway across the country from my rental, but have a great handyman, Dave, who is a quick call away, charges reasonable fees and responds lightening fast. To make sure he’s happy, I pay him the SECOND his bill arrives (that’s overstatement, but you know what I mean).
  4. Try to complete each “fix it” project yourself at least once, even if you’re going to find help.
  5. Remember that it’s a relationship with your tenant. My main goal is to have my tenant stay in the house. I’ve tried to make sure the house is well-maintained and I’m accessible so my tenant stays around. That said, I also need to keep up with economics. I’ve looked at rental prices in the area and raised the rent once in the past three years. I was poised to raise it again before I found out she had to move out (through no fault of mine…her son wants her to stay in his house while he’s away on business for two years. I can’t beat “free rent.”)

Are you a landlord? Have you rented from a good or bad landlord? Share your success or horror stories in the comments!

Photos: For Rent: Charleston’s The Digitel

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