Just Moved Shmandlord to it's New Home

I just finished the transition to Shmandlord's new home. The new address is:

http://www.landlordshmandlord.com

Please update any links you have. If you're using an RSS feeder, you should not experience any problems (as long as you're using the feedburner feed).

Please email me if you have any problems!

This is the last post that will appear on the blogspot page.

See you over at the new pad!

Link ADD

• I just stumbled upon a new site on which I've already wasted too much time: neighboroo. It allows you to analyze a few statistics about the population of the country by zipcodes, then work your way out.


• Check out John T. Reed's analysis of Kiyosaki's Rich Dad, Poor Dad, which goes completely against what you'll hear from most real estate investors. If you're familiar with Kiyosaki, I'd like to hear your thoughts on this analysis.


• A cool rental listing site: housingmaps,


• Maybe/Someday: Sotheby's International Realty


• I've been playing a bit of chess recently, and would like to play against any interested Shmandlord readers. If you'd like to play, start up a game with me over at Post Card Chess (using the email address landlordshmandlord AT gmail)

Image: saad

Organizational overhaul

For a while I've wanted to overhaul my organizational system in hopes that I can improve my productivity and prevent important details from slipping by. In addition to my landlord ventures, I have a full time job and am also starting my own software company.

So, this weekend I made the move to implement the Getting Things Done system. The basic premise is that you:

1. capture all the things that need to get done into a logical and trusted system outside of your head and off your mind


2. disciplining yourself to make decisions about all the inputs you let into your life, so that you will always have a plan for next actions that you can implement or renegotiate at any moment

In the next few days, I will describe how I fit my landlording into the system, what worked, and what didn't. If anybody has or does use this system I would appreciate your thoughts.

Thanks kengo for the image.

A lesson on what not to do

I know I've mentioned the blog before, but I cannot stop reading I am Facing Foreclosure. Just for the quick overview, Casey (the blogger) bought 8 properties to flip (not rent) with a combined value of over $2 mil. He did this by taking out over $140k in credit card debt, lied on his loan applications, and put no money down. He is now suffering the consequences.

Anyway, I just wanted to post a quote from one of his blog posts that struck me as funny. I have to admit that when I first read it, I felt a hint of jealousy, but quickly snapped out of it for obvious reasons. He is toying with the notion of renting out one of the houses that is being foreclosed:

I’m not paying the mortgage so why not collect some cash, right?

You know, I really wish I could just not pay my mortgages, and pocket the rent. Wouldn't you? He then enumerates the reason why renting is not worth it to him.

Funny. If you have any thoughts on how I can stop paying my mortgages please let me know. However, I will not consider suggestions that result in foreclosure.

Thanks sercasey for the image.

Working things out with Section 8

I spoke with the Section 8 inspector, and he was very reasonable.

It turns out that the township code was recently changed, and that is why I need to fix the wiring in the basement. He just wants the visible wire properly replaced, which will have to be done by an electrician. He also gave me a very generous timeline.

Regarding the paint, I don't have to scrape and repaint all exterior wood like the sheet said, just the areas that need it.

Regarding the pipe, he was also very reasonable, saying that I could just properly cap it.

He also asked if I could call back Monday to schedule inspections of my other apartments, which is required by the township every two years. All of the remaining inspections will most likely be sometime in December.

Problems with Section 8

Looks like I spoke too soon when I said that the Section 8 inspector hasn't made my life a living hell.

I don't think that I'm on the guy's bad side, but I just got the letter about this year's required fixes. The list isn't pretty, including:

• Replace visible wiring in the basement (the wiring hasn't changed since I've received a CO).


• Remove an unused natural gas pipe in the basement. (What? This has also been there for years.)


• Scrape and repaint porch, and all visible wood outside. (It really just needs patching, not a full scrape/repaint).

There are a few other requests, but the rest are understandable. I'm trying to get in touch with the inspector to see why all of the sudden he found things that have been there for years.

I will let you know what happens.

New: The Carnival of Real Estate Investing

Anesia over at The Landlord Blog just started the The Carnival of Real Estate Investing.

Check out the first edition here!

Is it really?

As was pointed out in the last carnival, the National Association of Realtors has launched a $40 million campaign to end any softening promote the buying and selling of properties. Their slogan is "It's a great time to buy or sell a home", which obviously cannot be completely true.

Now, I'm not one of the extreme pessimists who believes that you will spontaneously explode if you own investment property early next year, but I do believe that the market will continue to soften and that it may not be the best time to buy or sell all homes. Over at The Big Picture there are two articles about this, but the second one titled Analyzing why "It's a great time to buy or sell a home" dissects every line in the recent WSJ ad and explains why "every single statement in the ad is materially false or misleading".

I think it's worth a laugh read.

Also, here is the first article.

Carnival of Real Estate 17

There were lots of great posts this week, and it's been hard picking which ones to include. I was very impressed with the breadth of topics, and feel that we, the Carnival of Real Estate community, should continue to encourage posts regarding all aspects of real estate: realtors, mortgage brokers, landlords, stagers (yes, there was a good post on staging this week), etc.

I am going to list my top 5 and then include the remaining posts in no particular order. Here it goes:

1. The Pumpkin That Sold Me a House describes how a realtor can differentiate him or herself. Whatever industry you're in, it is always important to focus on the customer's experience, which is something that is too often forgotten. This post is short, but illustrates how one realtor, without exerting much effort, is reaching their customers in a very effective way.



2. Ugh. True Gotham has a really great read about a frustrating mess, at Co-op Board Antics-Redux.



3. In Defense of Landlords over at hotpads.com explains why rental prices are rising.



4. Mike's Corner Web 2.0 for Real Estate Pros has some good commentary about adapting to change in Change is a good thing.



5. Transparent RE makes many much needed points in An Open Letter to the Title Insurance Industry.

Additional Posts:

• This Old House is Worth $1.23 Million compares two houses, each worth the same, in two different parts of the country.



• Are Zoomf and Nestoria imitating Trulia? What are British real estate sites like?



• The National Association of Realtors Takes an Ad in the Wall Street Journal. "It's a great time to buy or sell a home"? Doesn't sound like sound economics to me.



• Bloodhound blog refutes some of the ridiculous claims against Zillow by the National Community Reinvestment Coalition in Defending Zillow.



• We often don't hear from Stagers on the CoRE, but this week Home Staging, Rants & Ravings submitted a list of reasons to stage in Stagers.. are we red headed step children that get no respect?.



• What's the difference between the rich and the ultra-rich? Wisdom From Wencypoo's Mental Wastebasket describes it in A Revolt of the Fairly Rich.



• Zillow blog gives an overview of the Blog Business Summit containing many good tips for using your blog to help your business.



• Nubricks.com has a little insight into Parisian real estate at The future of immobilier in the Paris property market.



• Always a great read, The Landlord Blog has (one of many) great posts about Sifting Through Property Manager Candidates.



• YoChicago today on What does it mean when a Chicago developer moves into his or her own building?



• Real Central VA has a short but good post on Brand loyalty and quality customer service stemming from a recent consumer experience.

Thank you everybody for submitting the wonderful posts. Also, thanks to everybody who stopped by for the Carnival of Real Estate. Next week, the Carnival will be hosted at True Gotham. Please submit your posts by Sunday, November 12th.

The Reverse-Millionaire

It's been over two years since I bought my first building, and since the very beginning my goal has been to accumulate as much real estate as possible. The phrase I've been using to describe this aspiration is to become a Reverse-Millionaire: to owe as much money to the banks, in the form of secured real-estate mortgages, as possible. The thought is, that the more money I owe the bank, the more properties I'll own and the more money I'll make, not necessarily in the short term, but by holding for the long term. If I can become a reverse millionaire while I'm young, in 15-20 years I'll most likely have "boatloads of money". There are lots of other advantages, for example, any rent inflation, becomes more money that I can pocket each month.

In order for this tactic make sense, I have a few important rules.

1. Only buy a place when you definitely have the monthly cashflow to support it. I only want to buy a place if I know that I have the money to pay for it. I assume a 33% vacancy rate, meaning that if I receives $1,000 a month rent, count it as only +$666.67 toward cashflow to cover maintenance and vacancy costs (banks conservatively use 25% when calculating your income before giving you a mortgage).


2. Only use 30-year fixed mortgages. Although you will have to pay a higher interest rate, this will keep the mortgage costs from spiraling out of control. After I buy a place, I know that my principle and interest payments will stay the same for the next 30 years, which is very comforting (although insurance and taxes go up).


3. Do not lie on the applications. This should be obvious, but it isn't always as you'll see shortly. When a bank gives you a mortgage, they're betting based on the information that you gave them that you are going to pay the loan back. They use the information on the application to determine how likely it is that you will default. If they are willing to give you a loan based on an honest application, then they believe that they won't, within a tolerable level of risk, lose money. There are reasons for the checks and balances that the bank uses, when you lie you're much more likely to get yourself in over your head.

Now, using this method I've purchased four properties in the last two years. I am not quite the reverse millionaire that I want to be, but I'm about two-thirds of the way there. Because I followed the rules listed above, I am in fine financial shape. If interest rates go to 500% tomorrow, that's fine for me because I will be paying the same amount for the next 30 years. If a tenant doesn't pay rent for a few months (as regular Landlord Shmandlord readers are aware does occasionally happen), then I can handle it.

The key point that I want to make is that, if I didn't follow something similar to the above guidelines, it would have been very easy for me to achieve my goal of becoming a reverse millionaire by now. For example, I could have selected much riskier loans, like the infamous interest-only ones. Or I could buy more places from sellers that are in kahoots with shady mortgage brokers, which appear to be able to offer loans regardless of credit scores. The problem is, if I did these things the entire house of cards would be much more unstable than it is now.

Not everybody has been as careful. Case in point: Casey at I am Facing Forclosure dot com. This guy racked up 2.2 mil in debt (including 140k in unsecured credit card debt). Now, as you'll see very quickly on his blog, he's in trouble. I stumbled upon his blog on I Will Teach You To Be Rich, where oddly enough Ramit knew Casey from high school and gives some insight into Casey's character:

Casey had tried to sucker people into a scam real-estate deal less than a week before he admitted he was going through foreclosure. I was fortunate enough to recognize his pitch as bulls**t, but what if someone had gotten conned into it? Financial scams on unsuspecting people make me furious. So I read through his site. It turns out that he had bought multiple houses in different states (hoping to flip them quickly), lied on his applications to get his loans approved, and had grossly miscalculated how much it would cost to renovate and flip them. Bad move. His debt is now over $2 million.

Now I don't feel quite as bad about not being a Reverse Millionaire yet. However, I'm still confident that if I continue the course that I'm on, I'll eventually get there in a reasonably safe way.