My new house... finally

I feel kind of like Crystal now, having to write these horrible blogs about all the legal issues of buying a house, title issues, flood plain issues, property lines, etc. If you haven't read about my problems, check out my previous blogs. We made an offer on a house (not for invesment, personal, but still a rehab) in January, were supposed to close in February and ended up closing a couple of weeks ago. Short story is that there were flood plain issues, IRS leins, etc. This is the end of the story:

We planned to close on a Monday. As far as we knew all title issues had been worked out, all the documentation had been submitted for the loan, utilities were scheduled to be turned on, etc. On Friday we receive an e-mail. The title company would not close because they found out that there was still a person out there who had a right to purchase (Quit Claim Deed?) the property. Here is the story as we were told:

The house was going into foreclosure and an investor approached the bank and placed an amount down in order to get the right of redemption. Apparently, the owner (occupant) of the house still had the right of giving that to someone else, which they did. This superceded the first deal, so the bank attempted to contact the investor and tell him to come get his money back. He never got in touch with them. Now the title company found this on the title and had to get in touch with him to get the needed documentation from him. Luckily, they were able to get this taken care of on that Tuesday and the title was officially CLEAR!!! after months of issues.

Now I have had the joy of getting to spend the last 2 weeks scraping/sanding popcorn ceilings and coming home covered in a thick layer of dust each day. Finally, that is done and we can move on to the fun stuff. There is a picture in my pictures of the house with the new roof.
I have been so busy with this. I have gone over to the house almost every day straight from work and then working there till 9 or 10. I'm sure you all can relate. Hopefully I'll have some time soon to get a picture of me wearing my new RealEstateInvestor.com t-shirt posted on here soon.

The 5 Hottest and Coolest Real Estate Markets

by Brenda Spiering – RealEstate.com

Remember the old adage about the three most important things when it comes to real estate? “Location, location, location.” It seems it’s still true. While home sales in many parts of the country may be down from what they were a year ago, in some regions they’re still booming.

What are the hottest and coldest real estate markets in the country? According to the February 2007 National Association of REALTORS® home sales report, the percentage change in the median sales price of existing single-family homes between the fourth quarter of 2005 and the fourth quarter of 2006 was as follows:

Metro areas that increased in value the most in 2006
1. Atlantic City, New Jersey +25.9%
2. Salt Lake City, Utah +22.7%
3. Trenton-Ewing, New Jersey +18.9%
4. Beaumont-Port Arthur, Texas +15.1%
5. Salem, Oregon +14.9%

Metro areas that dropped in value the most in 2006
1. Sarasota-Bradenton-Venice, Florida –18%
2. Palm Bay-Melbourne-Titusville, Florida –17%
3. Cape Coral-Fort Myers, Florida –11.7%
4. Springfield, Illinois –10.4%
5. New Orleans-Metairie-Kenner, Louisiana –9.3%

But before you assume the average homeowner in Atlantic City has just made a small fortune and those in Sarasota have just lost their shirt, it’s important to understand a few things. First of all, the National Association of REALTORS® report based its stats on median home prices. While those numbers can be useful in tracking general real estate trends, they can be misleading when used to pinpoint specific peaks and valleys.

Take the two hot New Jersey areas, for example. Jeffrey Otteau, president of the Otteau Valuation Group, a real estate consulting firm in the region, points out that in both Atlantic City and Trenton, a significant number of new upscale townhouses were completed and sold last year. Assuming these units sold for considerably more than the more modest housing they replaced, they would have pushed up the overall median price of homes in the region, even if the price of many homes remained relatively flat.

It’s also fair to assume the sharp drop reported in certain regions of Florida may have been due to the reverse effect. If, during 2006, enough high-end properties with over-inflated values adjusted to more realistic levels, it would have caused the median price of homes in those areas to drop significantly even if, once again, the price of more modest homes remained far more stable.

So, while zeroing in on the hottest and coldest housing regions in the country may be interesting, it doesn’t necessarily give you a picture of the nation’s overall real estate market. The National Association of REALTORS® reports that the percentage change in the national median sales price of existing single-family homes between the fourth quarter of 2005 and the fourth quarter of 2006 was down 2.7 percent: from $225,300 to $219,300.

It’s also useful if you look at housing trends that have occurred over a longer period of time. Even in areas with recent price declines, most home sellers achieved healthy gains on the value of their home over the last five years. National Association of REALTORS® President Pat Vredevoogd Combs says “a broader view of home prices is necessary because housing is a long-term investment.” And while he isn’t predicting a big change in the immediate future, Coombs does expect to see “a gradual rise in sales and home prices that will be good for the overall housing market.”

Published on April 23, 2007

What Real Estate Investors Should Know About Security Deposits

I had questions about this, so thought others might be interested as well. It sounds like you have to find out what your state's regulations are, because there are no clear cut answer that apply to everyone. If anyone has any links to specific state's rules, please feel free to post them in the comments.

Thanks,
Matthew

Charging a security deposit to cover potential damages a tenant might inflict on a unit is part of rental income property ownership inherent to smart real estate investing.

There are rules, however, and not unlike other landlord-tenant issues, there are state limits and exemptions regarding deposits that real estate investors should be aware of.

Should You Charge a Security Deposit?

Real estate investors who do not charge a security virtually let in tenants who have nothing to lose by damaging the unit.

Yes, you should charge a security deposit—the bigger the better. You inherit less of a financial burden if the tenant leaves owing you rent or if you have to repair damage, and the tenant who has money at stake is more likely to respect the property.

How Much Deposit Can You Charge?

Many states limit the amount that can be charged for a security deposit.

Alaska, for example, exempts income property owners from security deposit laws when the rents are above $2,000. Hawaii and Massachusetts restrict the security deposit to no more than 1 month’s rent; Iowa and Virginia to no more than 2 month’s rent; Nevada to no more than 3 month’s rent.

Sometimes, the state limit is based on other factors such as the age of the tenant, whether the unit is furnished, what kind of rental agreement is being used, or whether a pet or water bed is being permitted.

The best advice is for real estate investors to learn what state limits are and to charge as much as the legal limit and the market will allow—though it is not uncommon for the market to dictate a security deposit below the legal limit set by state and local law.

The Importance of Remaining Consistent

If you charge different security deposit rates to different people you can be headed for trouble–a claim of discrimination could be held against you in a lawsuit.

Whatever deposit you charge, therefore, just be sure that your security deposit policies remain consistent with every tenant and avoid even the appearance of discrimination.

Can You Increase a Security Deposit?



Let’s say a long-time tenant obtains a pet—can you legally increase the security deposit? Yes, but it depends on the situation.

If you are using a fixed-term lease, you cannot raise the security deposit during the term of the lease unless the lease allows it. Otherwise, you must wait for the lease renewal date to increase the security deposit.

If you are using a written rental agreement in a month-to-month tenancy, the security deposit can be increased the same way that the rent is increased—by giving the tenant proper notice, which is typically 30 days.

If your rental properties are under rent control, raising the security deposit may have even more restrictions. In this case, real estate investors who own rental property under rent control are advised to understand the restrictions before raising deposits.

Must You Pay Interest on Security Deposits?

State laws vary regarding security deposit interest requirements.

Whereas some states impose no regulations, many states require that landlords accrue and pay interest on deposits.

Washington, for example, unless it is specified in the lease or rental agreement, permits the landlord to keep any interest accrued; Iowa lets the landlord keep the interest for only the first five years of tenancy. New Mexico requires payment of interest if the deposit exceeds 1 month’s rent; Minnesota requires the landlord to pay interest, period—accruing the month after the security deposit was paid.

Conclusion


Real estate investing consists of layers of nuances particular to real estate investment property important to successful investing—like security deposits.

Whereas a smart real estate investor will charge a tenant a security deposit before use and occupancy of a rental property to insure payment of rent on time and responsible care of the unit; the prudent investor will also understand state and local regulations where the income producing properties are located, and above all, abide by them.
Whether you are seasoned or beginning real estate investing for the first time, if you are unsure about these issues, do not hesitate to consult with legal and other real estate professionals for advice.

Gathering sound investing real estate information from reliable and knowledgeable sources is what a smart real estate investor does.

Kitchen Cabinets

We are working on completely pulling out a whole kitchen and replacing all cabinets, countertop, sink, appliances, etc. Once before, we bought unfinished cabinets from Home Depot and sanded and stained them ourselves (a lot of work). We're talking $40-100 per piece. I don't know how much that is per linear foot on average, but it's not cheap still.

This time we are doing a higher end kitchen and don't trust ourselves with the finish/installation, etc. At a local REI group here in Kansas City, there was a vendor there who sold building supplies to contractors. They had an annual membership fee ($100), but they were offering free signups that night. I signed up because they gave generous discounts off of retail price. For example, on flooring, they give you 30% off. Basically they want you to be able to go into their showroom with a client and tell your client that you can get them 15% off of the prices, while you pocket the other 15%. For me though, it's a full 30% discount.

Recently, we got a rough quote on cabinets and found out that the base price is approximately $106 per linear foot. Then we found out that this was retail and with 40% off, it would only be about $63 (Not bad!!!). After choosing a finish and door style, it boosted that to $75, but still easily doable.

Basically what I'm trying to say, is that it is worthwhile finding these places in our area. They can definitely pay off when purchasing materials, over using a big box store.


Question: Does anyone know what a standard rate would be for a contractor to come in and install cabinets? I have a feeling I won't want to pay what the store would charge, but I haven't gotten a quote on that yet. Anyone have experience with this?

Popcorn

We are about to close on a fairly large house (2,800 sq ft living space). The problem is, every celing is covered in popcorn. I guess that makes approximately 2,800 sq. ft. of popcorn, not including vaulted ceilings, skylights, etc.
I searched online and overwhelmingly found that the best (though messy) way of removing popcorn is to spray it with water using one of those pump garden sprayers and then scrape it onto a tarp. After that, you should be left with unfinished sheetrock again that you can patch, sand and paint. A lot of work!

I recently heard a friend say that they were able to just take one of those joint compound sanding tools with the mesh, and basically only knock off the popcorn, but leave a foundation of textured mud still on the ceiling. Then all they had to do was paint over this to create a finished, textured look. If this works, I will go with this.
I'd appreciate anyone elses experiences with this type of work.

Also, I've read that the compound used prior to 1978 could have Asbestos in it. Our house was built in 1984, but I've still been given warnings. I was told that inventory that existed in 1978 when the ban was implemented was not required to be destroyed, so that it is not uncommon for houses built in the 80's, to still have popcorn with asbestos. Also, I called a testing lab (only $20 to test), and they told me that you can still buy materials today that contain it. Really? I guess it's better safe than sorry. I'll at least know whether or not I should wear a respirator.