Hey Folks,
I thought I’d post a quick tip for investors who are holding any properties, even those you have occupied with tenants buyers in a lease option.
Whether you have purchased your properties subject to, or some other way, take a look at the outgo on each.
What do I mean by that?
Simple………what do you pay out EVERY MONTH on each property……..how much? To whom? when? Where?

Now, the most common places your money goes out to each month will start with your mortgage payment(s).
The first place to look, would be the escrow account, if there is one.
The escrow paid monthly is most likely going to pay your taxes, and property insurance.
From here, take a look at each insurance policy.
Evaluate them, and see what they cost. Check the coverage, and make sure it fits your property, and over all plan.
Perhaps increase your deductible from $1,000 to $2,000 to reduce the amount of the policy premium.
In addition, check to see the total amount you are insured for.
Here is why?
Example: Say you have a property that was worth $150k last year, you owe $100k against it, and now its worth $130k. Why insure it for the full $150k? See if that can be changed, it may lower the premium as well.
While you are at it, shop around for insurance prices.
You may be suprised what the difference would be by simply changing companies.
I know when I began, we by default, used State Farm for all insurance needs, because we had been for years, and all personal items were insured by them……..this gave us discounts.
The thing is, here in Florida, State Farm has had issues for years, with prices going up like mad, and crazy increases being asked for by the company from the state.
When we were told the premiums could rise by 45% one year (they did not), I shopped around.
From that, I was able to increase my cashflow on all properties previously insured by State Farm, a hundred here, fifty there, couple hundred another place, and in the end, we increased cashflow by a few thousand dollars.
This cost nothing, because insurance is escrowed with payments. All that needed to be done was sign up the new policy, cancel the old, and provide the new company with the mortgage lenders contact info, loan information, named insured, etc………and the new insurance company handles everything else.
Imagine if you are collecting $1100 in rent, and paying out $800, right now…….then, a change on the insurance makes your PITI payment go down to $800.
That’s $100 more in cashflow…or almost a 10% increase.

That is just insurance.
What about property taxes?
Now, the hassle to contest your property assessement may scare some off, however, most county tax collectors have a process laid out for doing do………and it can be done by any home owner.
It has to, because government must be accessible.
So, same scenario.
Property value drops, and your taxes are based on a 3 year old assessment, or, your property is valued at one thing by the county, but, there are foreclosures and reo sales in your properties area, that bring the value down.
If you get that changed with the county, your taxes go down……..which means your monthly escrow payments will go down.
This of course will not happen right away like with the insurance adjustment………..the mortgage lender will adjust escrow the next fiscal year.
But, knowing that your payments will descrease next year, when you will most likely raise rent as well, makes cashflow grow larger than it is today.

Home Owners associations;
If you own property that is governed by an association, whether it be a condo, townhome, or house in a neighborhood, you pay dues to these committes of residents, who set rules, and spend those dues.
Get involved, attend meetings, and check the books of these associations.
The first venture for me doing this was in a condo development we were working in, and the dues were rather high. After looking, I realized, the previous board had raised dues to cover some improvements, rather than a one time assessment from the owners.
Basically, spreading out the expense.
The thing was, the HOA now, after the improvements were completed, and maintenance free, the dues were creating a surplus of cash in the HOA account.
They had reserves, more than enough, for any upcoming issues, seen or unforseen………….nearly three times the amount needed.
My involvement, was to distribute a flyer outlining a plan to approach the board to reduce the fees.
This took 3 months of intense negotiations, as HOA folks seem to get into the “I’m in charge here, billy bad ass mentaility”. They feel power and don’t let go easy.
I did win, because we reduced the HOA fees from $375/month, down to $75/month.
That helped cashflow……….and yes, it took time, BUT, it was the right thing to do for all, and worked out well.

There may be other things you can reduce the expense on as well.
Lawn care? Maintenance? Property management?
Take a look at EVERYTHING you spend these days, and shop around.
In this economy, we hear about folks begging for jobs, so use that, and hire some of these folks.
They will work for less than you would have spent a couple years ago.
I would imagine I’m not the only one spending the same amount for some services that we did two years ago.
Some changes are taking place here as well.
My lawn guy, he’s gone, wanted to raise his prices.
Instead, we have someone else, who was laid off, and used to do lawn work part time.
Now, that is all he does, so his prices are cheap.
One house we have, went from $70/month in landscape maintenance, to $25………a neighbor will be handling it.
I’m sure it will look nice, because he lives two doors from it, and is retired with lawn equiptment.

Another thing, take a look at how you pay your mortgages. While it may only cost a few bucks, I’ll bet some of you make your payments online, or over the phone?
Ever notice the fees they charge for this service?
Check your banking institution, they most likely have online banking………most larger banks do these days.
One common feature is bill pay, and most times, its free……if your bank is not, find a new bank, or open a checking account where things are free.
From there, you can use online bill payments for free, and cut out the fees for doing so at the lenders website, or on the lenders phone line.

Rent collection?
How do you collect rents?
Most landlords have checks mailed to them, or dropped off.
This is nice, and how most of mine come in too.
However, we do have some on a trial plan, to test it.
Here it is, an insider tip for ya……..before the final report is released.
Set up autodraft, or epayments for your tenants.
Offer them incentive if they are on a lease already…..we did this.
A discount, like $10 if paid/deposited on the due date (the 1st).
The tenants signed a form allowing this, as an addendum to their lease.
The addendum further states that if direct deposit is not done, and payment is late, there is a new late payment schedule, and as always in my leases, fees for collecting rents (going to get them) fees to serve notices, etc, and these all become ‘additional rent’.
This can increase your cashflow as well.

Bottom line, look close, at all properties, the books, the numbers, and what you spend.
NOW is the time to bargain shop, for services, and tweak what you pay out……while keeping rents the same.

There ya have it, a few tips for the landlords in the house.

Take care, and Happy Sunday!
Jim
The Biker Who Buys Houses

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