Credit for your business: Keep Books Clean

Loral Langmeier taught us that to co-mingle is like committing suicide. I have made it my personal job to keep our money, our bank accounts, our tax information and our spending as separate as possible.

When I asked her if my vacation to Puerto Rico could be a business trip because we would go look at properties, her answer was no if..
NO if you didn't pay with a business bank card or business credit card.
NO if you aren't set up as an entity and can't spend four hours a day on your business and put that in your minutes book of your company.

Well. we didn't like that because honestly, we do look at properties and meet with realtors where ever we travel. That was the last straw. We then finally incorporated.
I urge you to incorporate and reap the tax benefits.
Go to Your entity solution to have your entities set up effectively.

This is the last step to buying investment real estate. Once you set up an LLC for your properties, be sure to transfer the deeds and you are protected:)

You own the house!

Hopefully you have now bought your first investment property. So you may be asking what next. Set up 2 spread sheets. One will be your tenant info. spread sheet and the other will be a cash flow sheet.

As you acquire tenants, fill the sheet with names, contact phone numbers, job information and be sure to have a column indicating if they pay on their own, if they have welfare assistance, social security or another government assistance program.

The cash flow sheet should begin with gross rents minus the property management fees. Then you should subtract out monthly expenses such as water, electric or fluke maintenance calls. Take the remaining number and subtract your mortgage. Your final column should indicate the left over cash after all expenses. This equals your cash flow.

Loral Langmeier always says, "Do your paperwork, or be poor."

Millionaire Inside

One of my favorite shows is The Millionaire Inside on CNBC. Tonight it just so happens that one of our mentors is on the show. Loral Langmeier. She is a big advocate of being an entrepreneur, and because of her coaching program, we bought our first 2 investment properties. Also, on the show tonight is Barbara Corcoran...the real estate maven. They both believe real estate can make you rich in any market. Right now things in the housing market are shakey. Don't be afraid of this up and down time. We have been talking about real estate. Here are Barbara's Tips in buying real estate:

AREA: Is there a good job market? Check out what people are driving.
SAT Scores: Find an area that has high SAT scores because the schools will be good.
HOUSE: Always buy the lowest priced house.
CAN YOU LIVE THERE?: If you can't sell it, you can live there.

Check out the show or the website.

Learning: Day 7: What's Behind Door 1?

Now you are ready to begin looking at prospective properties with your realtor. Hopefully, you have chosen a realtor who is also an investor, otherwise they can't really steer you in the right direction.
When looking at prospective properties, here are some tips to keep in mind:

1. If you are searching in a market where snow is possible, don't bid until snow melt. You want to be able to see the roof, the foundation and the basement after melt off. You also want your inspector to be able to do a full inspection, and he can't do that with snow covered yards, and roofs.

2. When looking inside, check the kitchen well for roaches and under the sink for rat droppings. These pests are harder to get rid of than you realize. You can bomb the aprtment, but if eggs are in the tenants belongings, more can survive.

3. Check to see who is home if your visit is in the middle of the day. Are there more adults than bedrooms? Should these adults be at "work" at that particular time of day? No work, no rent:)

4. Look at ceilings for leaks, basements for water or water stains, and under sinks the for drips.

5. Count the meters to be sure the electric utilities are separate. An even better gauge is to count and check the condition of the electrical panels in the basement.
You don't want to paying for house utilities...trust me!

6. Next be sure we have separate and functioning water heaters. Plumbing can be expensive. The same goes for the age and condition of furnaces. Don't inherit someone's 50 year old ancient furnace.

7. Steps and sidewalks. They are an investor's nightmare. Any cracks or damage should be corrected before you inherit the property, We don't need a lawsuit 5 minutes after we close.

8. If tenants are home, verify the rent you see listed on the listing. Rents are often inflated. One question and the tenants start giving more information than you really wanted. It's a great look into to real situation.

9. Walk the property. Be sure you don't have animals or garbage in the backyard. That is a problem waiting to happen. It's also good to be sure outdoor lighting covers front and back entrances. Another possible liabilty.

10. Lastly and most obvious, be sure to get a well-known inspector. I recommend psoting for requests in local yahoo chat group run by investors, or checking out the local investors association. Don't let your realtor set up the inspection unless they are sesoned investors themselves. That inspection should be video taped and completed in a timely manner. Do not sign a contract without an inspection contingency.

These step can be fun, but it is vital. Do it right. Take your time.

Good Morning,
I am off to work this morning, but tonight I will be posting, so stay tuned. We have about a week more on making money in real estate. Then we will discuss businesses, franchises and much more. In the meantime, check out Little Baby Headquarters. On that blog, I have amazing posts on deciding if you want to get out of your W2, how to decide, and what would work best for you. Check out those archives. Lots of GREAT info.

Credit

Just a little tip about credit. Since mid-October we had been paying a certain amount for the mortgage on our 4 family. One night, just last month, I looked at our statement carefully. I realized we were paying an optional fee that increased the amount by $40. The next day I called to inquire. The representative told me that he had a record that we requested, at closing, that we have this optional fee added to our mortgage payment for disability and unemployment. Quickly, I explained that it was a mistake, because my husband doesn't even believe in warranties. The representative went on to explain how it's helpful to have. He obviously didn't know that every penny eats into investors cash flow. We canceled the "optional fee" and added $40 a month to our cash flow. Lesson learned. Read everything, check your documents, as much as you like a team member...assume nothing.
Take action.

Learning: Day 6: Credit!

At this point your have decided a market and team members. A very important team member is going to be the bank or mortage broker. Now that rates are going down, we think...BUY. Not necessarily. It is good to buy while prices are down. It's also hard to get approved. You may have difficulty getting approved because you are an investor. You must be honest that it is not owner occupied because that will be revealed through the insurance. Also, investors may be forced to put some more down. Do your shopping and know your credit score. If it's not great, hold off on buying for three months. There are many actions you can take to quickly restore your credit score. Don't wait...Take the Leap!