I've been spinning my wheels now for more than a year.
With the time pressures of a more than full time job, baby, husband, landlording, life, etc. my ability to manage our finances has been backsliding.
I'm not paying bills on time, rent is not being collected (that is Mr. Sam's duty), our savings rate has gone down. I haven't even started to create our 2016 spending plan (our form of a budget), although I've put down on paper what I'd like to accomplish for savings. Mr. Sam has not created our 2016 savings Excel chart.
I know the reason for all of this: full time job, baby, husband, life, etc. I've yet to figure out a solution.
I used to spend 20-30 minutes 2-3 times a week working on finances or reading about finances (money blogs help me stay on track) when I arrived at the office. But, I used to arrive at the office @ 7:30 am. Now, on average, I'm arriving at @ 8:45 am.
The solution is to get up earlier so I can get to work earlier. Today, I arrived at @ 8.20 and spent an hour or so on finances and made good progress.
Showing posts with label Landlord. Show all posts
Showing posts with label Landlord. Show all posts
Thursday, April 14, 2016
Thursday, June 5, 2014
Aspirational Housing
Great article by author Michael Lewis of The Blind Side fame regarding the perils of expensive housing. Even a very rich man like Michael Lewis couldn't keep up with renting a landmark mansion in his home town. Mr. Lewis' fun essay also documents the hidden costs of utilities, maintenance and furnishings for a much larger house.
I'm in a phase right now where many of my friends are selling their first or second home and upgrading into McMansion world. It is somewhat surreal for my husband and I to visit our friends/peers who have moved from reasonable rancher to gated community McMansion. Some of them bought during Florida's real estate bubble deflation so they got good deals, but it is still a whole different world. One of my friends, who moved into McMansion world in the last couple of years mentioned that she felt like she had to buy (or lease) a new car to keep up with her new neighbors.
My friends' homes are beautiful and sometimes its hard not to think envious thoughts about those new chef kitchens and especially the walk in closets. But, I have no desire to take on that kind of debt. I did have a refreshing conversation with a college friend recently and she is just a couple of years away from paying off her home in full. Great motivation for me as not having a home mortgage is a goal that is always in the back of my mind.
I'm in a phase right now where many of my friends are selling their first or second home and upgrading into McMansion world. It is somewhat surreal for my husband and I to visit our friends/peers who have moved from reasonable rancher to gated community McMansion. Some of them bought during Florida's real estate bubble deflation so they got good deals, but it is still a whole different world. One of my friends, who moved into McMansion world in the last couple of years mentioned that she felt like she had to buy (or lease) a new car to keep up with her new neighbors.
My friends' homes are beautiful and sometimes its hard not to think envious thoughts about those new chef kitchens and especially the walk in closets. But, I have no desire to take on that kind of debt. I did have a refreshing conversation with a college friend recently and she is just a couple of years away from paying off her home in full. Great motivation for me as not having a home mortgage is a goal that is always in the back of my mind.
Tuesday, January 7, 2014
Cash Money
We have new tenants in Rental # 3 and they prefer to pay their rent in cash.
The upside of cash is that it is cash. I know there is not going to be a bouncing check issue and when I deposit the cash it is instantly credited.
As an aside, have you seen the new $100 bill? It has a 3-d security ribbon and a liberty bell hiding in the ink well. There is also more color on the front and back. I had several new $100 bills, which were new to me, a couple of the 1996 $100 bills and one 1990 $100 bill. After I got over my amazement at the new $100 bill, the old school 1990 $100 bill really looked fake to me.
The downside of cash is that I have to go to the bank to deposit since, sadly, there is no remote way to deposit cash. The other downside of cash is that it is hard to keep track of. With checks, I have an image of the check for my records. So, we have come up with a system. First, we give the tenants a receipt so they have a record and we have a record in the receipt book. Then when I deposit the cash, I am keeping an ATM receipt and putting that in my records in place of the check image.
The upside of cash is that it is cash. I know there is not going to be a bouncing check issue and when I deposit the cash it is instantly credited.
As an aside, have you seen the new $100 bill? It has a 3-d security ribbon and a liberty bell hiding in the ink well. There is also more color on the front and back. I had several new $100 bills, which were new to me, a couple of the 1996 $100 bills and one 1990 $100 bill. After I got over my amazement at the new $100 bill, the old school 1990 $100 bill really looked fake to me.
The downside of cash is that I have to go to the bank to deposit since, sadly, there is no remote way to deposit cash. The other downside of cash is that it is hard to keep track of. With checks, I have an image of the check for my records. So, we have come up with a system. First, we give the tenants a receipt so they have a record and we have a record in the receipt book. Then when I deposit the cash, I am keeping an ATM receipt and putting that in my records in place of the check image.
Tuesday, December 3, 2013
What Would You Tell Your Younger Self?
Over at Get Rich Slowly April Dykman posed the question of what would you tell your younger self regarding personal finance. Below is my post.
I think the most important ingredients to my financial success are as follows. First, I invested in a good education which lead to a well paying, good, professional job. I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money. Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.
How about you, what personal finance guidance would you give your younger self?
This is fun!
To College Sam – walk away from the credit card offer, you don’t need that free t-shirt.
To post college Sam – good job on taking that personal finance course through the local extension system. You learned a lot and it will help you in the future. Good job on paying off that college credit card, now you really ought to cut it up. Also, congrats on opening your first IRA even though you are earning poverty wages in social services. And tell your parents thanks for paying your way through college, you probably didn’t even appreciate the fact that they saved each month your entire life to give you a great education.
To post professional school Sam – good job on paying off that student loan debt and good job on keeping your student loan debt lowish during school. You rushed into your first house purchase, but it will turn out great. Now that you are making a good living you are making a lot of good choices, paying off the student loan debt, creating your first budget (2001), investing in your work 401k and paying off all credit cards in full each month. I sure wish I could tell you that even when you are paying off your credit cards in full each month you are still spending too much money. You should have listened to me when I told you to cut up those cards post college.
A few years later Sam, just because everyone is investing in Florida real estate doesn’t make it a good investment, maybe you should do some more research before you buy that investment property in 2005, 8 years later it will be worth half of what you and soon to be Mr. Sam paid for it. Good thing its rented.
To engaged Sam, good job on picking a spouse that is hard working, frugal and recognizes that even though he has the MBA he is terrible at budgeting and bill paying so he turns it over to you upon marriage.
To married Sam, whoo-hoo, good job to you and Mr. Sam in paying off $55,000+ in just over a year during your first year of marriage. That first year of marriage in which you created your first annual spending plan (an update on the 2001 individual budget), finally cutting up the credit cards, creating an allowance system, prioritizing savings and making sure that you and Mr. Sam are on the same page when it comes to money, that will pay off big time. Seven years later and you guys have increased your net worth by $550,000.
Now, stop eating out so much. :)Looking back at my own journey, I certainly have made some mistakes along the way. It is hard not to, and many of those mistakes or detours have helped to make me a better person.
I think the most important ingredients to my financial success are as follows. First, I invested in a good education which lead to a well paying, good, professional job. I was able, both due to my parents and due to smart choices (savings/grants/working) in professional school, to avoid student loan debt until the very end of my education. Second, early on in my career I started utilizing a spending plan/budget and focused on paying off debt and having a plan for my money. Third, I met and married a frugal man who, while horrible at paying bills and tracking spending, is fully on board with living a debt free life and prioritizing savings/investing rather than consuming.
How about you, what personal finance guidance would you give your younger self?
Friday, November 15, 2013
The Upside of the Real Estate Crash
I was on Zillow today, poking around looking at a home that was recently listed a couple of blocks away.
Of course, I had to look up our home as well. As for the Zillow Zestimate, it has our home listed as worth $40,000 less than what we paid for it, almost 10 years ago now, which I would say is not too far off the mark.
More interesting to me, Zillow has property tax records listed going back to the year we bought the home. And while I knew hour taxes had gone way down, whoo-hoo I was surprised by the actual numbers. Our property taxes are down 54% from 2004. And, since Florida has both a homestead law and a law called Save our Homes, our property taxes on our primary dwelling (does not apply to our investment properties) can only increase at the rate of inflation or 3% which ever is less. As a result, it is going to take a very long time, assuming values continue to rise, to get back to that initial tax bill from 2004.
Of course, I had to look up our home as well. As for the Zillow Zestimate, it has our home listed as worth $40,000 less than what we paid for it, almost 10 years ago now, which I would say is not too far off the mark.
More interesting to me, Zillow has property tax records listed going back to the year we bought the home. And while I knew hour taxes had gone way down, whoo-hoo I was surprised by the actual numbers. Our property taxes are down 54% from 2004. And, since Florida has both a homestead law and a law called Save our Homes, our property taxes on our primary dwelling (does not apply to our investment properties) can only increase at the rate of inflation or 3% which ever is less. As a result, it is going to take a very long time, assuming values continue to rise, to get back to that initial tax bill from 2004.
Thursday, November 14, 2013
Time for 2014 Goal Planning
Since it is November, it is time to start thinking about our 2014 annual spending plan and our 2014 savings goals.
First on the list, 2014 IRA savings. As I previously posted, I have already set up our 2014 IRA savings account at CapitalOne 360 (f/n/a ING). The 2014 contribution limits for IRAs are holding steady, so we can each contribute $5,500 to our non-deductible IRAs.
Second, 2014 401k contributions, I will contribute $17,500 to my 401k at work (again the limits are not increasing next year). We need to figure out if Mr. Sam will be eligible for a 401k at his new job in 2014. If he is not eligible, then he may be able to contribute to a deductible IRA (see above) to get a bit of tax savings. But, regardless of whether he is eligible for 401k we will sock away $17,500 anyways. Yes it will be after tax money so we will lose out on that advantage but we will still put that money into the trading account.
Third, I assume we will put money into the emergency fund and for house projects.
We will need to decide whether it makes sense to continue to pay down the mortgage principal on our primary home. While I continue to have the goal of being debt free and paying off the mortgage on our primary home could provide significant insurance savings, we really are not saving much interest by paying early because our mortgage interest rate is so low (2.75%).
I also think we need to start a savings account for a replacement car/truck. I bought my car, a 2006, in 2008. I just put about $3000 into it so, even though it is 7 years old, it should be good for quite some time.
But, Mr. Sam's truck, which we bought used in 2005, is more than 10 years old and not in the best condition these days. He would prefer to keep it and have me buy a newer car and he would take my current car for his work car. Then we would have the truck to use for house projects and the like when we need it. But that means we would have 4 cars (we also have an antique weekend car) and that is a lot of insurance. I'm also not keen on having 4 cars to store/park. As such, I'm more inclined to replace Mr. Sam's truck with a newer and nicer truck (something with a bigger cab and shorter bed and a smoother ride.
Second, 2014 401k contributions, I will contribute $17,500 to my 401k at work (again the limits are not increasing next year). We need to figure out if Mr. Sam will be eligible for a 401k at his new job in 2014. If he is not eligible, then he may be able to contribute to a deductible IRA (see above) to get a bit of tax savings. But, regardless of whether he is eligible for 401k we will sock away $17,500 anyways. Yes it will be after tax money so we will lose out on that advantage but we will still put that money into the trading account.
Third, I assume we will put money into the emergency fund and for house projects.
We will need to decide whether it makes sense to continue to pay down the mortgage principal on our primary home. While I continue to have the goal of being debt free and paying off the mortgage on our primary home could provide significant insurance savings, we really are not saving much interest by paying early because our mortgage interest rate is so low (2.75%).
I also think we need to start a savings account for a replacement car/truck. I bought my car, a 2006, in 2008. I just put about $3000 into it so, even though it is 7 years old, it should be good for quite some time.
But, Mr. Sam's truck, which we bought used in 2005, is more than 10 years old and not in the best condition these days. He would prefer to keep it and have me buy a newer car and he would take my current car for his work car. Then we would have the truck to use for house projects and the like when we need it. But that means we would have 4 cars (we also have an antique weekend car) and that is a lot of insurance. I'm also not keen on having 4 cars to store/park. As such, I'm more inclined to replace Mr. Sam's truck with a newer and nicer truck (something with a bigger cab and shorter bed and a smoother ride.
Wednesday, November 13, 2013
Progress on Debt
Updating our networthiq.com numbers today and I was pleased to see we have less than $540,000 in debt (all real estate debt). We have paid off just under $35,000 in debt in the last twelve (12) months.
These types of round numbers make me happy. Now to get under $500,000 in debt.
These types of round numbers make me happy. Now to get under $500,000 in debt.
Monday, October 7, 2013
Investment Property Debt
Hit a milestone this month with our investment property debt, at present we owe less than $300,000 on our investment properties.
Feels good.
Friday, September 27, 2013
2013 Savings Goals - October Update
(1) Max out 401k(s) - $24,981 (71%) (goal is $35,000)
(2) Max out IRA(s) - $10,631 (97%) (goal is $11,000)
(3) Add to e/r fund - $7,600 (76%) (goal is $10,000)
(4) Pay down mortgage - $3,320 (66%) (goal is $5,000)
(5) Trading account fund - $50 (1%) (goal is $5,000)
(6) House projects - $1,900 (63%) (goal is $3,000)
Total: $48,482 (70%)
Posting a few days early as I was working on our personal finances this morning. We are still about $3200 behind on where we should be. We also have some unexpected upcoming expenses for Rental #3 (more about that later).
While I feel like we are working hard to catch up, doubling up on our mortgage prepayments, throwing money at the 2013 IRA fund, we are still $3200 behind as were were last month.
We also have to work on our taxes this weekend (Ugh!, my least favorite thing to do) as we have our appointment next week with the CPA and the deadline to file, with our extension is October 15, 2013.
Have a great weekend everyone!!
(2) Max out IRA(s) - $10,631 (97%) (goal is $11,000)
(3) Add to e/r fund - $7,600 (76%) (goal is $10,000)
(4) Pay down mortgage - $3,320 (66%) (goal is $5,000)
(5) Trading account fund - $50 (1%) (goal is $5,000)
(6) House projects - $1,900 (63%) (goal is $3,000)
Total: $48,482 (70%)
Posting a few days early as I was working on our personal finances this morning. We are still about $3200 behind on where we should be. We also have some unexpected upcoming expenses for Rental #3 (more about that later).
While I feel like we are working hard to catch up, doubling up on our mortgage prepayments, throwing money at the 2013 IRA fund, we are still $3200 behind as were were last month.
We also have to work on our taxes this weekend (Ugh!, my least favorite thing to do) as we have our appointment next week with the CPA and the deadline to file, with our extension is October 15, 2013.
Have a great weekend everyone!!
Tuesday, March 26, 2013
Remote Check Deposit
Between the collection of rent checks and reimbursements from work, I can find myself at the Wells Fargo ATM depositing checks multiple times in one week. While I'm happy to have the money, each of those trips to the ATM takes at least 15 minutes. And, for some reason my local ATM seems to be out of order on a regular basis so at least one in ten trips requires a second trip to the next ATM.
I just recently learned, while I was at the ATM on Saturday, that Wells Fargo now has smartphone deposits. I already had the Wells Fargo app for my iPhone so it was easy to simply click on a tab on the app to add remote deposits to my available services. One of the helpful Wells Fargo bankers walked me through how it works and the process is super easy. You simply sign into your account on your iPhone, you select mobile deposit from the menu options, take a photo of the front of the check and then the bank, select the account where you want the money to go, type in the amount and deposit the check. Then you hold onto the check for fourteen days and then destroy it.
I'm very excited about this new option and I think its going to save me at least an hour of time a month.
I just recently learned, while I was at the ATM on Saturday, that Wells Fargo now has smartphone deposits. I already had the Wells Fargo app for my iPhone so it was easy to simply click on a tab on the app to add remote deposits to my available services. One of the helpful Wells Fargo bankers walked me through how it works and the process is super easy. You simply sign into your account on your iPhone, you select mobile deposit from the menu options, take a photo of the front of the check and then the bank, select the account where you want the money to go, type in the amount and deposit the check. Then you hold onto the check for fourteen days and then destroy it.
I'm very excited about this new option and I think its going to save me at least an hour of time a month.
Wednesday, January 23, 2013
Insurance Homework - Follow Up
Six months or so ago I posted about how we were in the process of obtaining life insurance. And in September, I posted information about an umbrella insurance policy we were investigating.
I pleased to report we can cross these tasks off our "to do" list.
Regarding life insurance, we each obtained $500,000, 20 year term life insurance policy through the private market. I have a $500,000 life insurance policy through work which is very reasonably priced. When open enrollment comes around in December 2013 I understand that I can obtain a similar policy on Mr. Sam at similar discounted rates. So as of now, I have $1 million in life insurance and Mr. Sam has $500,000 in life insurance but we will increase that to $1 million early next year.
As for the umbrella policy, as I previously posted, this process was complicated by the fact that three of our properties are insured through the Florida state insurer of last resort, Citizens. Citizens insurance policies only provide $100,000 in liability coverage so we had to first obtain a "wrap" policy to increase our liability coverage from $100,000 to $300,000 for these three properties and then we had to obtain the umbrella policy.
We also ended up not including our property up north in our umbrella policy because it was going to cost us a almost $1000 to obtain a regular insurance policy before we obtained the umbrella policy. Since our property up north has no structure on it, we believe the risk of someone injuring themselves on our property is very low. Since there is no structure on the property anyone on the property is not an invitee and is trespassing, which while that doesn't mean there is no liability risk, the risk is pretty low.
So overall our insurance costs are going up, but we ended up saving about $1000 per year when we combined our car insurance policies and moved to a new company (we also increased our coverage) last year. As such, the money saved in our car insurance category is going to cover our umbrella and wrap policies.
I pleased to report we can cross these tasks off our "to do" list.
Regarding life insurance, we each obtained $500,000, 20 year term life insurance policy through the private market. I have a $500,000 life insurance policy through work which is very reasonably priced. When open enrollment comes around in December 2013 I understand that I can obtain a similar policy on Mr. Sam at similar discounted rates. So as of now, I have $1 million in life insurance and Mr. Sam has $500,000 in life insurance but we will increase that to $1 million early next year.
As for the umbrella policy, as I previously posted, this process was complicated by the fact that three of our properties are insured through the Florida state insurer of last resort, Citizens. Citizens insurance policies only provide $100,000 in liability coverage so we had to first obtain a "wrap" policy to increase our liability coverage from $100,000 to $300,000 for these three properties and then we had to obtain the umbrella policy.
We also ended up not including our property up north in our umbrella policy because it was going to cost us a almost $1000 to obtain a regular insurance policy before we obtained the umbrella policy. Since our property up north has no structure on it, we believe the risk of someone injuring themselves on our property is very low. Since there is no structure on the property anyone on the property is not an invitee and is trespassing, which while that doesn't mean there is no liability risk, the risk is pretty low.
So overall our insurance costs are going up, but we ended up saving about $1000 per year when we combined our car insurance policies and moved to a new company (we also increased our coverage) last year. As such, the money saved in our car insurance category is going to cover our umbrella and wrap policies.
Monday, November 5, 2012
2012 Savings Goals - November Update
(1) Max out 401k(s) - $31,379 (92%)(goal is $34,000)
(2) Max out IRA(s) - $5,829 (58%)(goal is $10,000)
(3) Add to e/r fund - $8,400 (84%)(goal is $10,000)
(4) Pay down mortgage - $2490 (50%)(goal is $5,000)
(4)(a) Savings for goal (4) - $415
(5) House projects - $1,200 (24%)(goal is $5,000)
(6) Trading account fund - $50 (1%)(goal is $5,000)
Total - $49,763 (72%)
I've added a sub goal to our list, since at present, I'm allocating our mortgage paydown money to savings until I figure out how to prepay our new mortgage.
At present, we are approximately $9,900 behind on our 2012 goals and the gap is approaching $10,000.
What can I say about our current savings deficit and the fact that it continues to grow?
I can tell you that (1) we've spent thousands on certifications for Mr. Sam this year (to improve career opportunities); (2) I can tell you we spent thousands on refinancing our primary dwelling and (3) thousands on fixing our our primary dwelling for the appraisal for the refi; and (4) recently a few thousands on some projects at Rental # 3.
But, I can also tell you that in the face of the above we have failed to change our lifestyle in any significant manner. We continue to eat out more than we should. I just booked a girls weekend in South Beach, Miami and, of course, I just bought some fabulous art.
So, with two months to go, including the expensive holiday season, it seems doubtful that we will reach our $69,000 number. Rather, at this point, while I'm not amending our goals, I'm hoping to meet and surpass last year's savings number which was $60,060.
Thursday, October 18, 2012
Happy Days
Good news, I received a 5% raise yesterday at work. And further good news is that the raise is retroactive for a few months. Whoo-hoo!
So, since today is pay day for me, I received my newly increased paycheck via direct deposit and a check for the retroactive pay. Eyeing that retroactive pay, we could use it towards funding our 2012 IRAs or towards paying down our mortgage. We are behind on both of these 2012 savings goals (behind $2371 in funding our IRA, and behind $1461). Or we could put it towards expenses related to turning Rental #3 (which Mr. Sam is working on as we speak).
But, what I really want to do is put it towards the art work that I've been saving for since Memorial Day.
What would you do, put it towards 2012 saving goals, put it towards current rental related expenses or spend it on something fun? As an aside, I already have $110 in my art account so I only have $515 to go before I have sufficient funds to purchase. This piece of art would be my Christmas present to myself from myself and Mr. Sam.
So, since today is pay day for me, I received my newly increased paycheck via direct deposit and a check for the retroactive pay. Eyeing that retroactive pay, we could use it towards funding our 2012 IRAs or towards paying down our mortgage. We are behind on both of these 2012 savings goals (behind $2371 in funding our IRA, and behind $1461). Or we could put it towards expenses related to turning Rental #3 (which Mr. Sam is working on as we speak).
But, what I really want to do is put it towards the art work that I've been saving for since Memorial Day.
What would you do, put it towards 2012 saving goals, put it towards current rental related expenses or spend it on something fun? As an aside, I already have $110 in my art account so I only have $515 to go before I have sufficient funds to purchase. This piece of art would be my Christmas present to myself from myself and Mr. Sam.
Tuesday, October 9, 2012
Rental Update
Earlier, I posted that two of our rental properties were vacant.
Rental #2, as I indicated before, has rented with an increase of the monthly rent by $5. We had the property tented for termites which cost $800 and we also had a small electrical issue addressed which cost about $200. Both expenses would have been necessary regardless of the tenant turnover.
Rental #3 is a work in progress, Mr. Sam was over at the property all weekend working on cleaning up the exterior of the property and having the interior painted. So far we have spent $600 on labor and supplies. We hope to have the property ready to show by mid-month, but obviously we are not collecting the rent for the month of October.
Due to the refinance of our primary property, we did not have a mortgage payment this month which means we have been able to utilize that money for all of these projects rather than dip into our rental property escrow savings accounts.
Rental #2, as I indicated before, has rented with an increase of the monthly rent by $5. We had the property tented for termites which cost $800 and we also had a small electrical issue addressed which cost about $200. Both expenses would have been necessary regardless of the tenant turnover.
Rental #3 is a work in progress, Mr. Sam was over at the property all weekend working on cleaning up the exterior of the property and having the interior painted. So far we have spent $600 on labor and supplies. We hope to have the property ready to show by mid-month, but obviously we are not collecting the rent for the month of October.
Due to the refinance of our primary property, we did not have a mortgage payment this month which means we have been able to utilize that money for all of these projects rather than dip into our rental property escrow savings accounts.
Friday, September 7, 2012
More on Insurance Home Work
As I previously posted, Mr. Sam and I are working on obtaining term life insurance, we met with our insurance agent last night and completed the life insurance application for each of us. We have settled on $1 million in life insurance for each of us for a term of 20 years.
We also are exploring umbrella insurance. An umbrella insurance policy provides broad and additional insurance above and beyond home owner and car insurance. Because we have three rental properties and an additional property (just land) and because our net worth has now hit the $1 million mark (and has held there for a few months) an umbrella insurance policy makes sense for us. We don't have control over four properties that we own from day to day, the three rental properties obviously involve people who may or may not hurt themselves or invite people onto our properties that might hurt themselves.
Step one of obtaining an umbrella policy is to increase our car insurance coverage. Luckily, increasing our coverage and combining our previously separate policies, as a married couple, will decrease our overall car insurance costs. The umbrella policy we are looking at requires underlying $250,000 bodily injury per person and $500,000 per accident coverage which is normal for umbrella coverage, so we are increasing our coverage.
Step two of obtaining an umbrella policy is to increase our liability coverage on each real property (and/or determine that we have sufficient liability coverage). The umbrella policy we are looking at requires underlying $300,000 liability coverage for each home and property we own. At present, we have determined that one of our homes has sufficient coverage, the other three homes covered by Florida's Citizens Property (the state run insurance organization) most likely do not because Citizens has reduced liability coverage across the board. But, we need to check. To the extent our Citizens' insurance policies do not provide sufficient coverage we will need to purchase gap insurance to provide the additional $200,000 in liability coverage which will run $200 per year per property (so probably $600). We also have property up north which is undeveloped, and, as such, it never crossed my mind that we should have an insurance policy on it. But, of course there is a chance that someone could enter our property, get hurt and sue which is why a liability policy is required on that property before we can get an umbrella policy. So I've called an insurance agent up north to see how much a liability policy will cost, hoping its cheap as the risk seems quite low.
We also are exploring umbrella insurance. An umbrella insurance policy provides broad and additional insurance above and beyond home owner and car insurance. Because we have three rental properties and an additional property (just land) and because our net worth has now hit the $1 million mark (and has held there for a few months) an umbrella insurance policy makes sense for us. We don't have control over four properties that we own from day to day, the three rental properties obviously involve people who may or may not hurt themselves or invite people onto our properties that might hurt themselves.
Step one of obtaining an umbrella policy is to increase our car insurance coverage. Luckily, increasing our coverage and combining our previously separate policies, as a married couple, will decrease our overall car insurance costs. The umbrella policy we are looking at requires underlying $250,000 bodily injury per person and $500,000 per accident coverage which is normal for umbrella coverage, so we are increasing our coverage.
Step two of obtaining an umbrella policy is to increase our liability coverage on each real property (and/or determine that we have sufficient liability coverage). The umbrella policy we are looking at requires underlying $300,000 liability coverage for each home and property we own. At present, we have determined that one of our homes has sufficient coverage, the other three homes covered by Florida's Citizens Property (the state run insurance organization) most likely do not because Citizens has reduced liability coverage across the board. But, we need to check. To the extent our Citizens' insurance policies do not provide sufficient coverage we will need to purchase gap insurance to provide the additional $200,000 in liability coverage which will run $200 per year per property (so probably $600). We also have property up north which is undeveloped, and, as such, it never crossed my mind that we should have an insurance policy on it. But, of course there is a chance that someone could enter our property, get hurt and sue which is why a liability policy is required on that property before we can get an umbrella policy. So I've called an insurance agent up north to see how much a liability policy will cost, hoping its cheap as the risk seems quite low.
Friday, August 31, 2012
Tax Time
It is that time of the year and we have just received the notice of proposed property taxes for our various properties in Florida.
Florida's homestead law complicates the real estate tax situation. Florida's homestead law provides protection against forced sale of one's primary home. One of the reasons O.J. Simpson lives (or lived, he is in jail at present) in Florida is because of the generous protections from creditors provided for one's primary dwelling no matter how big or expensive.
For our purposes the homestead law provides a tax exemption from our real property taxes. A family with a homestead property receives a $50,000 tax exemption for all real property taxes except for school taxes (for which $25,000 of that exemption applies). So a family with a home valued at $200,000 would only pay taxes on $150,000 of the value and $175,000 for the school district taxes.
Even more important though is the protection provided against the rate at which taxes can increase from year to year. For a Florida homestead property, the rate at which taxes can increase is 3% or the rate of inflation which ever is less. For 2012 that increase is 3%. So, that means, when we receive our proposed taxes for our primary home there are two numbers for our home, the assessed value (which is the market value for our home and land less the $50,000 homestead tax exemption) and the taxable value. The taxable value can only rise by a maximum of 3% year over year and that is the number we pay taxes on. For our Florida investment properties the assessed value and the taxable value are the same and there are no exemptions.
While the Florida real estate bubble deflation has been hard on our net worth, the upside (gotta look on the bright side) has been that the assessed value went down on all of our Florida properties, which means that our real estate taxes and overall carrying costs have gone down. Now that property values are starting to edge up we have the 3% tax rate cap protection for our primary home so it will be quite few a years untill we are paying taxes at the level we were paying back in 2007 and 2008 (at least on our primary home).
For some long time Florida home owners, during the recession their real estate taxes continued to go up because there was such a huge gap between their assessed value and taxable value. For folks like us, landlords to three Florida properties and our primary home was purchased in 2004 our real estate taxes have come down to be similar to the rate that the long term residents of our neighborhood pay. We live in a very eclectic area so the disparity in real estate taxes is not as glaring as newer construction areas, where you could have, during the boom time, two identical sized homes with one owner paying $4000 in real estate taxes and the other non-homesteaded resident paying $8000 in real estate taxes.
Florida's homestead law complicates the real estate tax situation. Florida's homestead law provides protection against forced sale of one's primary home. One of the reasons O.J. Simpson lives (or lived, he is in jail at present) in Florida is because of the generous protections from creditors provided for one's primary dwelling no matter how big or expensive.
For our purposes the homestead law provides a tax exemption from our real property taxes. A family with a homestead property receives a $50,000 tax exemption for all real property taxes except for school taxes (for which $25,000 of that exemption applies). So a family with a home valued at $200,000 would only pay taxes on $150,000 of the value and $175,000 for the school district taxes.
Even more important though is the protection provided against the rate at which taxes can increase from year to year. For a Florida homestead property, the rate at which taxes can increase is 3% or the rate of inflation which ever is less. For 2012 that increase is 3%. So, that means, when we receive our proposed taxes for our primary home there are two numbers for our home, the assessed value (which is the market value for our home and land less the $50,000 homestead tax exemption) and the taxable value. The taxable value can only rise by a maximum of 3% year over year and that is the number we pay taxes on. For our Florida investment properties the assessed value and the taxable value are the same and there are no exemptions.
While the Florida real estate bubble deflation has been hard on our net worth, the upside (gotta look on the bright side) has been that the assessed value went down on all of our Florida properties, which means that our real estate taxes and overall carrying costs have gone down. Now that property values are starting to edge up we have the 3% tax rate cap protection for our primary home so it will be quite few a years untill we are paying taxes at the level we were paying back in 2007 and 2008 (at least on our primary home).
For some long time Florida home owners, during the recession their real estate taxes continued to go up because there was such a huge gap between their assessed value and taxable value. For folks like us, landlords to three Florida properties and our primary home was purchased in 2004 our real estate taxes have come down to be similar to the rate that the long term residents of our neighborhood pay. We live in a very eclectic area so the disparity in real estate taxes is not as glaring as newer construction areas, where you could have, during the boom time, two identical sized homes with one owner paying $4000 in real estate taxes and the other non-homesteaded resident paying $8000 in real estate taxes.
Wednesday, August 29, 2012
Lease Break
Ugh, one of our tenants has decided to break her lease. Our tenant has a job opportunity that is requiring her to move and its an opportunity that she can't pass up so she has opted to break her lease.
Mr. Sam normally handles the interactions with our tenants, because I can be too tough and over the years he has done a better job at working and managing our tenants. This is our plan, we will review the lease and abide by the lease. I'm sure you are thinking, of course you'll abide by the lease, well Mr. Sam can be too nice and not charge fees that we ought to be charging. So, because we only got notice late in the month, we will charge her the last month of rent (which we have in our tenant account) because we won't be able to lease the unit before September first. If we rent the place quickly (i.e. mid-month) we will refund part of her last month's rent, meaning we won't collect the rent twice for the same unit. We also will charge her the lease break fee (which we also have in our tenant account) since she is breaking the lease. The lease break fee covers the expense of advertising the unit and any other expenses related to re-renting the unit (i.e. there is a utility fee for transferring the utilities back to our name).
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