Archive for November, 2011 Searching for Young Landlords is on the search for young landlords would like to be interviewed for the website. The interviews could be conducted via email, phone, or even in person. Photos are a must. In search of a young, ambitious, entrepreneurial landlords on a mission to increase their personal net worth.


I Do Not Think I Should Be a Landlord

A while ago I wrote an article taking a look at purchasing single family homes as rentals (a very popular article for this site). I put some hypothetical numbers up, and I came to the conclusion that being a landlord is simply not worth it. I revisit this topic today and I’m certain this will not be the last time I talk rentals.

1207294_1Today I take a look at a multi-unit building. Two unit in particular.

This unit is located in a neighborhood called Oakley. Oakley is viewed as a possible up and coming location in Cincinnati. It has a fantastic commute to downtown and a great neighborhood feel. It is located next to the Hyde Park neighborhood which is generally known as one of the best near downtown neighborhoods.

This 2-one bedroom property has newer furnace (2005), newer roof (2000), and New Kitchen and appliances (2007).

Asking Price: $70,000 – Most likely willing to sell for more like $60,000 – $65,000.

Let’s say for the numbers purchases you purchase them home for $60,000 with 20% down. Taxes are $1840 a year. Insurance is $700 a year.

Mortgage: $60,000 – $12,000 = $48,000  – @ 4.25% 30-year = $236.13 a month
Insurance: $700 a year / 12  = $58.33 a month
Taxes: $1840 a year / 12 = $153.33 a month
3%** Property value in yearly maintenance = $1800 a year / 12 = $150 a month

** I recently read on several real estate blogs and sites that 1-3% is the approximate cost of maintaining a rental property, to be conservative I’m taking the full 3%

Monthly Cost: $597.79 – Let’s call it $600 even.

Rent for these units: Probably going to be $500 – $600. Let’s assume 90% occupancy @ $500 a unit.

$600 – $900 [$1000 * .9] = $300 a month net, or $3,600 a year.

Amount of Equity in the first year: $812 equity built.

Amount of Tax benefit @ 28%: ($60,000 / 27.5) * .28 = $610.90 tax benefit.

With no repairs, no rehabs, no closing costs, no disasters above the 3% budgeted maintenance – you are going to net approximately: $5,023 [$3600 + $812 + $611] – Now this is not cash in hand – $812 is unrealized equity.

Furthermore if you assume a 5% rate of return – the $12,000 down-payment’s opportunity cost was $600.

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School Levies and How They Hurt You Financially

5039775621_4a7c4ae47fIt’s that time of year, school levies. Throughout the nation, cash-strapped schools are begging their community for more support and in many parts of America, communities are not ponying up for their schools. My home is located in West Chester, OH – which is home to Lakota High School, one of the better school districts available in the Cincinnati, OH region. Before the recession started, Lakota found no problems with funding large projects, increasing teachers, and building larger buildings, but after the recession – things became desperate.

First it started with threats.

If you don’t vote for the levy – the school will drop bus routes to the minimum and cut activities and sports.
Teachers will lose their jobs and the ratio of student per teacher will sky-rocket!

Then came the insults.
If you don’t vote for the levy – Your home will be worth a lot less because the school district will score lower. You would be stupid not to vote for it.

Then came the logical appeal.
It will only cost you $<x> per $100,000 of home appraisal!

So when should you vote for or against a levy?
Sadly its virtually impossible to tell when you actually should or should not. It’s a pretty hard balancing act between high taxes and good schools.

I would say if you support your children’s school system – then you probably should pony up the cash and back it up.

But what about homeowners without children, like myself? A balancing act of allowing your school to have a bottomless pit of money and possibly hurting your property value by allowing the school to decline.

The facts presented to you are usually too vague to make an educated decision because they tend to be extremely bias on both sides of the debate. The local levy has failed enough times that if it continues to fail – the city of West Chester, OH might be a poor choice for education versus other options such as their local rival of Mason, OH.

$145.47 per $100,000 of value on a home – Approximately $240 a year or $20 a month. It’s painful for me to cough up an extra $240 a year. I also hope that my taxes don’t get so high as to turn off a potential buyer, another balancing act to perform as a homeowner and voter.

Last year the levy failed 53.45% to 46.55% (6.9% margin). Funny thing about that the 2010 levy is that if the levy was decided on the number of “for” and “against” signs in property owners yards – it would have passed about 95% to 5%. People who tend to vote “against” tend not to be as vocal. A lot of people who are vocally “for” a measure will surprisingly wimp out when it comes time to vote and pay the bill.

I’ve got skin in the game. I’m doubtful that this levy will pass. Oh the joys of homeownership.

Personal Portfolio Update: November 2011

personI thought it would be interesting to my readers to give periodic updates of how my personal stock trading account is doing. So I’m going to start this month and do monthly or quarterly updates.

As of 11/7/11, I am up 15.49% and after a short hiatus, have only been trading since July 2011. Roughly 4-months and +15.49% would put my yearly rate at 54.03%. Now I don’t exactly plan on having a 54% year, but July to Nov has been extremely good to me.

I have funded $5750 in my account and have started weekly automatic contributions of $50. My account’s value is now $6640 (+$890).

I buy stocks and options and I buy and short. I took a GIANT hit from AEM (gold mining company) because they made a public statement that one of their mines was a total loss  — that took a solid 9-10% away from my 4-month performance. 

What am I currently involved with? GE and NFLX. I wanted to buy NFLX a week ago, but was hesitant to pull the trigger. This stock is completely oversold my in opinion.

Disclaimer: Always consult a financial expert for investment advice. Investments carry risk.

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