The Lake Erie Landlord Association

LOGICS NEWSLETTER OCTOBER 2009

A Non-Profit Educational Organization

Logics October 2009

Contents: Page 2 Welcome new members Page 3 Weatherize with Sam Hitchens

Page 3 Ask the Expert Page 4 "Chips from Chuck" Page 5 A Hot Commodity Now: Rental Properties Coming LELA Page 6 “Marilyn Sez” Events: Page 6 Section 8 Quality Standards update Page 7 Rental history most often repeats itself October 6: Lorain County Elyria & Lorain City Council Meeting Community Action, Page 8 dates Mr. Sam Hitchens will talk on the Protecting Tenants at Foreclosure Act of Incentives of Going Page 9 2009 GREEN. Holiday Inn 7:00 PM

Page 10 LELA Vendor members October 13: Board Meeting Page 11 Spot Light Vendor for October at LELA offices 6:30 PM Page 12 Mr. Landlord tips on Management November 3: “Insurance, How to Protect Our Page 13 Member Educational Sessions Review selves” Mark Land Installment contract / tax credit Pro- Page 14 -15 gram Page 16 Stress Importance of On time Payment November 10: Board Meet- ing at LELA offices 6:30 PM The Lake Erie Landlord Association (LELA ), is a non- profit educational organization providing a means for ex- changing land-lording and real estate investing informa- Watch for new tion. None of the information contained in this newsletter, educational presented at our meetings, or advice given by our members, opportunities should be considered Legal Advice or opinion. Special in- terest should review the exact language of the regulations starting in or seek advice of an attorney specializing in that area of the Fall. law.

1 Executive Board Members “For Rent” signs are available at the

President: Vassie Scott LELA office or in the Norwalk area by

440-282-8447 calling Tom Gross at 419-663-4176 V. Pres. : David Reddy

216-406-4746

Secretary: Kathy Barney

440-458-5790

Treasurer: Chuck Holtzman

440-748-1648 Vendor Members:

Office Staff Exec. Asst.: Linda Kinder • Erieview Title Agency, 440-233-5300 Secretary: Lourdes Hardy Welcome New LELA LLC, Jane Karolak 440-233-5300 Members Directors We would like to Kent Sutton 440-324-6416 Kerri Johnson 440-323-4166 welcome the follow- Patrick Judge 440-288-1528 ing new members who

Scott Schraff 440-670-0313 joined during the past JoAnne Werling 440-458-4613 Joshua Sauvey 440-225-7500 month: Steven Taylor 440-324-5275 Matt Harkins 440-371-2506 • Patrick Melchior, Strongsville

• Phil Zollos 440-937-9737 Les Nerva, Wellington • Richard & Rebecca Porter, Newsletter Editor Elyria Chuck Holtzman 440-748-1648 • John Harb, Brecksville Program Chairmen • Patricia Donegan / Hellen Dave Reddy 216-406-4746 Donegan, Columbia Station Scott Schraff 440-670-0313 • Greg Seighman / Aaron Steve Taylor 440-324-5275 Stevens, South Amherst

FREE MONEY DRAWING (you have to be present to win) Winners: Welcome No. 968 Robert Childers Drawn for $50 not present to LELA

Next meeting the drawing is worth $75

2 LELA General meeting: Community Development as an HWAP Inspector for four years, and in the Cleveland Housing Network as Regional Maintenance Co-Coordinator. Sam is also Weatherize with Sam Hitchens the former owner of Maximum Comfort Insulation. by Scott Schraff Sam lives in Lorain with his wife Janice and two chil- dren. In my 11 years of managing rental property, I have noticed a marked increase in my prospective ten- .Ask the Expert: ants' awareness of weatherization in recent years. No, they never say the word "weatherization". But they Q I want to buy a house but I hear I need to raise ask a lot of questions that they never used to. They my credit score. Do I have to get a better paying ask things like: What are the average gas bills? How job or what? old is the home's furnace? What is the efficiency rat- ing of the furnace? Where and what kind of insulation A Many people don't know that your credit score is in the house? Are the windows dual pane? Like has nothing to do with income. A person making many of us, they have likely been stunned by an off- minimum wage could have a credit score equal to an- the-charts high gas bill in the last few years, and yes - other making $100,000 a year! The credit score tells it left a lasting impression on them. lenders only one thing: How likely you are to pay back the loan. Today, if one of our single family houses even These days, a credit score of 720 to 750 is usu- SEEMS like it is not energy efficient, we will pay for ally considered a good starting point for a home loan. it in the form of increased vacancy. If you own an However, FHA loans may be more lenient. apartment building where you pay the heat as the land- So, assuming you are looking at homes you lord, well, I don't have to tell you where it hurts you. can afford, you don't need to raise your income. In- Heating bills have been the single biggest variable ex- stead, you need to establish a history of paying your pense for some landlords, and some have been driven bills. Here is a One-Year plan for better credit: under by soaring heating and cooling bills. 1 Go to annualcreditreport.com and look over On Tuesday, October 6, 2009, at 7PM, LELA will pre- your free annual report from each of the three credit sent weatherization authority Sam Hitchens Jr. Sam reporting agencies. Correct errors. serves as the Director of Energy Conservation for the 2 Pay your bills on time. You must never be Lorain County Community Action Agency late even once. (www.lccaa.net ). 3 Work on getting your credit balances below This will be an excellent opportunity to learn 50 percent of your maximum credit limit. That raises about aid programs available to property owners to your score. If you balances are below 30 percent, it help pay for weatherization. Sam will cover the topic raises your score again. thoroughly, including an explanation of various 4 If you don't have a credit card, look into es- weatherization terms and techniques, eligibility re- tablishing a secured card. With a secured card, you quirements, required documentation, landlord respon- send the card company a deposit and then they send sibilities, and plenty of time for questions and an- you a credit card. You can only use the card for the swers. amount on deposit. But when you get the card, you should use it. Buy something, and then make your Sam was born and raised in Lorain, Ohio. Sam payments perfectly. graduated from Clearview High School where he was 5 Don't apply for a store account every time a member of the State basketball champion Clippers in the clerk says you can save 10 percent. Each time you 1974. He is a third generation steel worker, working fill out an application, the company hits your credit at the docks from 1976 until 1982. Sam is currently report. Inquiries like these count against your credit. serving his second term with LCCAA. He started Don't make applications for credit unless you actually with LCCAA as a Weatherization Technician in 1989. need it. He then went on to serve as an Estimator/Inspector in Ohio's Home Weatherization Assistance Program Continued on page 6 (HWAP). He also served in the Detroit Shoreway 3 On the “what could it hurt” side: Chips from Chuck • I really cannot think of a thing!

by On the “what could it accomplish” side: Chuck Holtzman • They may find out we have a small business to run

• They may find that it is not very rewarding at

times. As many of you know, retirement has been • They will realize that Cash is King in this business very active for me. Most people retire from their job as there are always immediate needs that require and layback. On the other hand, I was not brought up cash (or its equivalent) to satisfy that way by my hardworking parents. • They may find out that regulations and taxes, al- The way I look at retirement is just another though needed can crush the landlording business step in life’s path. You know we have to take each • They may realize that taxes upon landlords, like all step one at a time. And, usually we have no idea other businesses are passed through to the tenants, where life will lead us. many of which can not afford to pay. In my case, life has lead me to being a Land- • They may realize that increasing taxes that in- lord and helping out where I can in community ser- crease the community tax revenue also contributes vice. As you know, landlording has presented a lot of to increased vacancy’s opportunities these days with the recession (some say • They may realize that utility bills should be the depression). Trying to find good tenants, keeping the responsibility of the occupant not the landlord units occupied to pay the bank, keeping up the proper- • They may realize too many vacancies can result in ties to maintain good community presence and coping blighted properties. with all the negative connotations sent our way by • They may realize that the bank can and will call elected officials and disgruntled tenants. the loan on rental properties just like any other if Maybe it is time we invite some of the commu- you don’t make the payments. nity leaders to be a “Landlord for a Day”. What could • They may realize not all people are good tenants it hurt? What could it accomplish? • They may realize landlords need help as they can not discriminate • And, they may understand that the wheel turns and as landlords are pressed out of business properties crumble, values drop, tax money slows, and the community suffers So, where do we go from here? We have a very active Legislative Committee that works with the community leaderships on our behalf. Maybe, just maybe, it would help to run the “Landlord for a Day” idea up the flagpole. If we do get some to participate, I am convinced they will have a new appreciation of our business and it’s needs. After all “Landlording” is one of the oldest small businesses in the history of our existence. Eve- ryone needs some place to bed down, and someone needs to provide it. Even the destitute, unemployed, middle class, and affluent of our society. We all need to work together to provide the best possible facilities for our tenants. Cooperation is the name of the game and we need to work together to understand each oth- ers needs. Lets help make North East Ohio a better place for all to live.

4 A hot commodity now: * Location: If the property is in a nice area, it will be easier to rent. The same is true if it is close to Rental properties amenities such as a park, a good school, medical fa- cilities or shopping opportunities. Demand for rental homes and apartments is * Maintenance: Consider the building's exte- soaring all over the country and our area is no excep- rior. A brick building or one with good plastic siding tion. won't have to painted. We are not happy that some homes and condos * Below-market rents: If the units are now are in foreclosure, but there is one way we can help. renting for less than general market prices, you can We can put ourselves in a position to offer people a raise them. Higher rents also mean that the property is decent place to live while they rebuild their lives. worth greater because rental property values are based At the same time, there is a significant finan- on income. cial advantage to ourselves. Owning a four-unit apartment building is al- * Less than 20 or 25 years old: It's mechanical ways a matter of making profit now while the value of system is less likely to have building code violations the property increases over the years. The same is true and have fewer expensive maintenance issues. with larger buildings and even with duplexes and sin- gle-family homes. * A building that is owned or managed by With the great deals available on these proper- someone out of state: These buildings are often the ties, their value in future years will be far greater than best deals because the sellers are interested in a quick one could normally expect. If you are looking to boost sale. your net worth in the next five years, 10 years, or at * The neighborhood is stable or improving. It retirement, this could be a great investment. doesn't have to be in the best neighborhood, but it Some factors to consider when looking at should be in one that is not declining because of a rental properties: great many foreclosures or other problems.

5 erty is a losing venture and some adjustments must be made. If a person has cash reserves he could pay this Marilyn mortgage down. If he has excellent credit and other assets he could perhaps refinance.

Sez Sadly to say in most cases in today’s market the only solution is to lose the property by foreclosure as it is next to impossible to sell for money owed. Last week I did something that is in direct con- trast to everything that I have ever believed in or Blame the bank, blame the Politicians, blame would advise someone else to do. the Real Estate people, blame the economy, blame Government, Blame your advisor, but in the final I advised an investor in real estate to let his analysis just look in the mirror and you will find the property go back to the lender either through foreclo- guilty party. sure or by giving a deed in place of foreclosure. I have always thought that everyone should DUMB AND LAZY– THE TWO pay their just bills and be responsible for that for WORSTDISEASESIN THE WORLD! which they have committed. Even though this investor did many things that Ask the Expert continued from page 3: were not good business practices he has found himself 6. If you have unused credit accounts, don't in a losing situation as a result of his own doings. close them if you are planning to apply for a mort- He had purchased property at a very good gage. That can actually make your score drop. price with relative good financing until the lure of easy money caught his attention through re-financing. 7. During your credit improvement year, don't buy a car. Lenders don't want to see buyers committed You, of course know the rest of the story. A to several large credit accounts. Never finance a car fold over type loan with easy money up front and a before you try to take a mortgage. low payment for the first year or so. Later that interest would become over 11% and the loan is in excess of $80,000 on that home purchased for $35,000 and may 8. Plan to open three new credit accounts dur- ing your credit improvement year, even if they are se- or may not be worth that today. cured accounts. Be sure to space your new accounts What happened to the money he borrowed? by three months. Use each account and pay each off Did he buy other real estate? Did he pay down other COMPLETELY every month. This is the kind of mortgages? Did he travel? Who knows? credit management that improves your credit score AND teaches you how to manage credit Who or what is at fault in a situation of this nature? The one thing that is for sure is that this prop- .

6 Section 8 House Quality Standards: avoid any air or water infiltration, have no holes, have all trim intact, and have a F. ACCEPTABILITY CRITERIA AND EX- threshold. CEPTIONS TO HQS All interior doors must have no large holes, have all trim intact, and operable door The PHA adheres to the acceptability criteria in the knobs. program regulations, local codes and the additions Floors: described below. All floors must be in a finished state (no ply- wood). All wood floors having loose or Additions to HQS: (additional criteria established to warped boards, must be re-secured and strengthen the HQS requirements) made level . Pressure Relief Valve (Hot Water Tank) All floors should have some type of base should be at least six to twelve inches from the shoe, trim or sealing for a "finished look." ground. Bathrooms: All hanging light fixtures designed to have a All worn or cracked toilet seats and tank globe, must have a globe. Missing or broken lids must be replaced and fit properly. globes will be considered an HQS deficiency. All sinks must have proper p traps, func- tioning stoppers and faucets. Walls: Security: In areas where plaster or drywall is sagging, If window security bars or security screens severely cracked or otherwise damaged, it are present on an emergency exit window, must be repaired or replaced. they must be equipped with a quick release system. The owner is responsible for ensur- Any exterior or interior surfaces with peel- ing that the family is instructed on the use of ing or chipping paint over the deminimus the quick release system. requirements under the lead based paint Smoke Detectors: regulations, must be scraped and painted Owners are responsible for providing, re- with two coats of unleaded paint or other placing, and maintaining smoke detectors. suitable material in units built prior to 1978. Tenants are responsible for replacing bat- teries within the smoke detectors and are All walls in a tub or shower area must be instructed not to remove batteries. Tenants covered with ceramic tile or other material are also responsible for replacing smoke detec- that is impervious to water to prevent water tors when damage has occurred by tampering. damage. Bedrooms: A bedroom must have a floor area of not Windows: less than 70 square feet, and every room oc- All window sashes must be in good condi- cupied for sleeping purposes by more than tion, solid and intact, and fit properly in the one person will contain at least 50 square window frame. Damaged or deteriorated feet of floor area for each additional occu- sashes must be replaced. Windows must be pant thereof. weather-stripped as needed to ensure a water- tight seal. In cases where a slope ceiling exists over all or part of the room, with a clear ceiling There must be one properly fitted screen in good height of at least 7 feet over not less than condition per habitable room with openable win- one-third of the required minimum floor dow(s) (HUD approved 9/9/83). Holes or tears in area. In calculating the floor area of such metal screens pose a cutting hazard and constitutes rooms, only those portions of the floor area a failed HQS. with a clear ceiling height of 5 feet or more Doors: will be included. All exterior doors must be weather tight to Continued on Page 8:

7 City Council Section 8 Continued from page 7: Schedules: Bedrooms in basements or lower levels:

The ceilings of such rooms will be in every City of Elyria: part at least 3'6" above the surface of the street or ground outside of or adjoining the same. All City Council meetings are held at There will be appurtenant to such room the use 7:00 p.m. on the second floor of of a toilet compartment, which is properly vented to outside air. Such room will have one or more window City Hall Room 200. openings of not less than 10% of floor area, exclusive of sash frames, and will open readily to the street or yard for purposes of ventilation. (ex: a 10 x 12 room • October 5 = 120 sq. ft. and requires window glass to measure at • October 19 least 12 sq. ft.) • November 2 The floors and walls will be waterproof and damp-proof in accordance with an approved method if • November 16 in contact with earth. Such waterproofing will be be- • December 7 tween the floor and wall finish and the ground. • December 21 No dwelling or dwelling unit containing two or more bedrooms - sleeping rooms will have such rooms City of Lorain : arranged that access to a bathroom or toilet compart- ment, intended for use by occupants of more than one sleeping room, can be had only by going through an- All City Council meetings are held at other sleeping room. 6:00 p.m. on Monday (unless when it Nor will room arrangements be such that ac- cess to a sleeping room can be had only by going falls on a federal holiday then it is through another sleeping room, bathroom or toilet moved to the next day) in Council compartment. Chambers of Lorain City Hall. The date Modifications for a person with a disability Modifications or adaptations to a unit due to a disabil- and time for all Committee meetings ity must meet all applicable HQS and building codes. shall be set by the respective Chairman and announced at regular or special Lorain Metro Housing auth, 1600 Kansas Avenue, Lorain, meeting of Council unless deemed an OH 44052, USA emergency by the Chairman.

• October 5 • October 19 • November 2 • November 17 • December 7 • December 21

SEE YOU THERE???

8

9 Attending LELA Protect Your Investments Welcome !!! Vendor Members Maintenance Systems of Northern We would like to extend a warm Ohio has been a contractor for welcome to our newest Vendor We would like to thank the follow- pavement maintenance services Members: ing vendor members for their par- since 1975, specializing in solving ticipation in our monthly meeting maintenance problems for commer- Erieview Title Agency LLC on September 1, 2009. cial, industrial, and residential cus- Jane Karolak tomers. 440-835-4505 • Behr Paints / Home Depot Services include: www.erieviewtitle.com • Bobel Electric Pavement seal coating, rejuvena- • Cleveland Plumbing Supply tion, crack sealing, line striping, Vendor Directory • Keller-Williams Realty sweeping, parking curbs, bumpers, Any member needing a copy of our • Consumer Choice Marketing speed bumps and D.O.T. signage. current Vendor Members / Ser- • Pre-paid Legal Services Inc. They’re here to protect your valu- vices / Contact Numbers can pick • Erieview Title Agency LLC able investment with a guarantee of up a copy of our September – No- • Sting Exterminating a high quality, long lasting product, vember Companion Directory at the priced fairly and serviced profes- LELA Office or log in @ LELA.cc , And a special thanks to our sionally. go to LELA Vendors category and September Spotlight Vendor All attending LELA Members re- print a copy. Maintenance Systems ceived an additional 5% discount The Companion Directory will be Of Northern Ohio, Inc . on top of the standing discount of included in your newsletter once Mike Ensign – Representative 10% that is always available to all every quarter and all new Vendor 440-323-1291 / 800-433-9840 LELA Members when using any of Members will be listed monthly in www.maintenancesystemsco.com Maintenance Systems services! our newsletter until the updated Di- rectory in published .

10 customers they bring aboard, and the fact that he can offer them free Our Spotlight enrolling takes just a couple of min- moving assistance with a truck. Vendor For utes either with a hardcopy or This perk definitely gives the land- online at myutilitybrokers.com/ lord an edge over his competition. October will be: gibb. Obviously the truck also comes in

Make sure you attend our handy for general maintenance use Consumer Choice Marketing October meeting as Bill will award in the landlord's normal rental op- Bill Gibb--Energy Broker a special gift to one lucky member. eration, (440) 225-9266 Remember - winter's on it's way, trans-

and once the heater lights up it porting Consumer Choice Market- rarely shuts down until spring! carpet, ing is a company dedicated to sav- appli- ing residential and commercial gas ances, customers money on their natural etc gas bills with no fee or contract in- EVER THOUGHT OF when volved. In the Columbia Gas mar- BUYING A USED needed. ket the savings have historically U-HAUL? And if a resident goes sour, the been between 10-15% per year truck can be used to assist which translates to hundreds or in helping a problem resident get thousands of dollars depending on A Missouri landlord bought an out- moved out of the property so that it how much property you have under of-service U-haul truck to offer as can be more quickly turned around roof. an extra perk to rental applicants and ready for the next resident. De- CCM has an agreement with and new residents. The used truck pending on the circumstances, the a PUCO-approved gas supplier who was bought for just a few thousand move-out assistance however, may discounts their already low rates for dollars. When applicants are apply- ing, the landlord makes mention of or may not be offered for free.

11 MRLANDLORD.COM Google not only the email address, but also Google TIPS ON MANAGEMENT the applicant's name and phone number.

USE A LIMOUSINE TO FILL VACANCIES In regard to MySpace, you want to see if applicants have a MySpace account. More and more rental appli- One Michigan rental owner said one of the most popu- cants have one, as many as one third to half or more lar strategies to fill vacancies was to use a Limousine. depending on your target market, especially if you rent The owner bought a limousine no longer in use at a to those in their 20s. By checking MySpace, you can big discount. Then he advertised the fact, the limou- often learn interesting tidbits about the applicant’s sine was an exclusive bonus perk available to those lifestyle, hobbies, pets, work and more. To search who rent his properties. Residents could “hire” out the MySpace, go their home page, click the Search link limousine for practically nothing (just the minimum which will allow you to search by name or email ad- cost of paying a low hourly fee to the driver). Prior to dress. Google and MySpace are just two more tools the “limousine” advertising, the owner had a 20% va- that a landlord can take advantage of using when cancy rate. Now the owner has a waiting list. screening rental applicants

OFFER DOG RUN AS A SERVICE UPGRADE

A Southern California rental owner shared what he offers pet-owning residents as a service up- grade. He offers to put up a fenced in Dog Run. His dog-owning applicants love the idea and are willing to pay an extra $45 per month for this up- grade. Residents who desire this added service up- grade sign an additional service agreement which per- mits the owner to increase his income even in a rent- controlled area. The landlord also loves the added benefit that with the addition of the Dog-Run, there is less wear and tear and less property destruction to the property by the dogs that are now in a fenced area.

GOOGLE THEM! When screening rental applicants, consider using both Google.com and MySpace.com. To do so, start by asking for email addresses on the rental application. Sometimes a red flag can be raised by the email ad- dress that some applicants use. For example: hot- [email protected] or [email protected] . LELA.CC Breaking News! Members can now register for educational sessions on line. Just sign on and follow the instructions

12 Member Educational meeting of the LELA membership. was directed not to give away the Sessions Revealed Kent Sutton moderated a panel of “meat” of their presentation. presenters: Bill Bobel, Josh Sauvey, Each educational session By Jack Green, Brian Reinhardt, Dave will be open to the membership Chuck Holtzman Reddy. The group discussed the first come first served basis. There sessions in generalities without pre- will be a lot of good information The Fall Curriculum was senting a syllabus of the classes. shared with those in attendance, so announced at the Sept. 1 general It was a bit hard to follow don’t waste time getting signed up. the presentations as each presenter

From: JoAnne Werling, Education Coordinator

13 R EPRI NTED W I T H P ERSISSION : your Federal income taxes. L AW O FFI CE O F Third – until you have paid 20% of the princi- E DWA R D D. H AY M A N pal amount of the purchase price, or until you have 2 8 4 9 9 O RA NG E M EADOW L A N E O RA NG E V ILLAGE , O H I O 4 4 0 2 2 been under the Land Installment Contract for 5 years, L A N D 216.292.3830 C E L L 216.695.1184 F A X whichever comes first, - in the event of your default 216.292.7122 you need to know that you can be evicted from the [email protected] www.haymanlawyer.com property in a manner which is similar to a Lease ten- ant. After you have either paid 20% of the principal amount of the purchase price or have been under the LAND INSTALLMENT CONTRACT/TAX CREDIT Land Installment Contract for 5 years, your Seller can- PROGRAM not recover the property without a full “foreclosure” procedure. Thank you for your interest in the Land Installment Contract/Tax Credit Program. We hope the informa- Q. Can you give me an example of what my monthly tion offered here will be helpful to you. payments might be, and the tax benefits – both from the First Time Homeowner program and Q. What is a “Land Installment Contract”? “ongoing” tax benefits?

A. A Land Installment Contract is an agreement with A. Let’s take the example of an $80,000.00 house, a Seller of real estate whereby you purchase the with taxes at $2,400.00/year, with Land Installment Seller’s property “in installments.” Specifically, Contract interest rate of 8.0%. (The check from the by making monthly installment payments over a IRS is explained below and on the next page). period of time, you build up equity toward eventu- ally receiving “full title” to the property. $72,000.00 Amount financed by Seller ($80,000 - $8,000) Q. Are Land Installment Contract’s protected and $528.31 monthly principal and interest governed by any types of laws in Ohio? $200.00 real estate taxes (monthly) $ 75.00 Insurance (monthly) A. Yes. Land Installment Contracts are governed ______by Ohio Revised Code Chapter 5313 – here is a link to $ 803.31 Subtotal the law: http://codes.ohio.gov/orc/5313 - 101.73 Net ongoing tax benefits* (not includ- Land Installment Contracts have been “legal” in Ohio ing the $8000 government check) since 1969. Among other things, your Land Install- ment Contract is “recorded” with the County Recorder $701.58 Net monthly cost of ownership so that no liens can interfere with your right to obtain clear title to the property * “ Continued on Page 15:

Q. What is the difference between a traditional “Lease” and a Land Installment Contract?

A. There are several important differences. First, under a Land Installment Contract, you are responsible for all maintenance of the home, and for taxes and insurance. After all, it’s “your” home, even though you won’t receive the “full” title until you pay off the balance of the Land Installment Con- tract. Second, you are entitled to receive the same tax deductions available to “traditional” home owners – you can deduct the real estate taxes and the “interest” portion of your monthly payments from

14 Continued from page 14: A. No. It really means you (and/or your spouse, if you are married) have not owned a house for three Net ongoing tax benefits” assumes you are in the 15% years prior to the Land Installment Contract. tax bracket – if you are in a higher bracket, it gets even better. Q. Do I get to put the entire $8,000.00 in my pocket? $2400.00 real estate taxes $5738.27 annual interest portion of payments A. Possibly – it depends on the “deal” you make (first year – goes down very slightly with your Seller. Some Sellers will want the entire each year) amount applied to the purchase price – which means ______you have automatically built up $8000.00 in “free” $8138.27 x 15% = $1,220.74/ 12 months = $101.73/ equity toward your final price. Other Sellers are will- month ing to share the money with you, for you to spend as you please. Q. How does the First Time Home Buyer Tax Credit Help Me? Do I really get a check from the IRS for Q. What if I ultimately do not purchase the house? (up to) $8,000.00? A. If you decide not to complete the purchase of A. Yes. The IRS has ruled that Land Installment the house at that time after the first 3 years, you can Contract’s qualify for the First Time Home Buyer Tax surrender the house back to the Owner* with no pen- Credit – see http://www.irs.gov/newsroom/ alty except for any damage beyond normal wear and article/0,,id=206291,00.html (10 th item from the top). tear to the property (and any “missed” payments). You are entitled to receive a tax credit of 10% of the You can also surrender the house earlier. However, if purchase price under the Land Installment Contract – you surrender the house in less than 3 years (or your so in the above example, the IRS will issue you a Land Installment Contract is terminated for non- check for $8,000.00. The maximum credit is 10% of payment), you must re-pay the IRS the full $8,000.00. the purchase price, up to an $80,000.00 purchase. If Under no circumstances will you receive a refund of the house is $90,000.00, your check will be still be any money paid to the Seller. $8,000.00. Specifically, you will file an amendment to your 2008 Q. Are there any up-front charges? tax return, using IRS form 1040X (we help you with this). Assuming you have already paid your 2008 A. Some Sellers will require 1-3 month’s down taxes, you will receive a CHECK for $8,000.00. payment, depending upon the house and your personal circumstances (such as your credit history). If so, this Q. What if my 2008 taxes were less than $8,000.00? money is fully applied to your ultimate purchase price. What if I owed no taxes at all? *A provision to surrender the house is optional, which A. That doesn’t matter. You will still receive the full may or may not be offered by your particular Seller. $8,000.00. (Amazing, but true!)

Q. What if I haven’t filed my tax return for 2008?

A. You must file your 2008 tax return. If you haven’t yet filed, you must do so. (We can help you with this). If you owe money to the IRS, then, it will be deducted from the $8,000.00 and you will receive the difference.

Q Does “First Time Homeowner” mean I have never owned a house?

15 STRESS IMPORTANCE OF out of savings or retirement fund, 4) Contact your church or some other agency to see if you can get ON-TIME PAYMENTS help.

Explain your rent collection policy to all new If a residents pays, but pays a couple of days residents before they move in. Have this policy in late, remind the resident of the actual due date and writing, and stress the seriousness of prompt pay- asses appropriate charges if they were not in- ment. Remind new residents that late payments may cluded. Say something like, “We really appreciate affect their credit rating. Have the new resident circle your rent, but since it was paid after the due date, the and initial the lease section that says rent due on the following amount is now immediately due to avoid 1st. Because many owners offer grace periods, resi- eviction proceedings. Thank you!” Be aware of all dents may think rent is due on the 5th. Consider, if residents who are delinquent. Do not harass or embar- your state permits, not providing a grace period. “Rent rass the delinquent resident, but be firm with your is due on the first with a $XX late charge on the sec- policies. Do not entertain options that do not include ond.” Sounds tough, but it works! But you must en- the resident paying the rent ASAP. If you negotiate force late charges. Threatening late charges but never and let the resident off easy, the real loser is you! And enforcing them only causes more delinquency. The never use the eviction as an empty threat or a mere residents will see you as all “bark” and no “bite.” If collection strategy. When you start to evict, go you clearly communicate the rent collection policy through with the process. before move-in and reinforce your conversation by giving new residents the policy in writing, then they will believe and expect you to enforce the policy. Moneywise: Rent-to-own customers want Move quickly on delinquencies. All residents short term options who have not paid by the first must be sent notifica- tion on the second. If the resident says, “It’s in the When it comes to buying a needed appliance, mail,” ask for a substitute check and return the mailed some customers don't want to charge it to a depart- check when it arrives. Again, the key is acting imme- ment store account or to a credit card. And they don't diately. Demonstrate an expectation to every resident want to pay cash. that you know they will pay rent on time. When a That's where rent-to-own stores come to the resident is late, be understanding, but make it clear to rescue for acquiring electronics like TVs, and house- the resident “We want the rent, and we want it hold appliances like refrigerators. They will rent by now.” Do not accept excuses nor negotiate with the the week or by the month. Some of these stores have resident to catch up next Friday. One possible option seen an 18 percent increase in sales over last year. for stimulating payment of rent is the "emergency con- Critics say rent-to-own stores take advantage tact". Hopefully your rental application gives you per- of customers, because a product's ultimate price is mission to contact all "emergency" references in case very high. Industry officials, however, say just 5 per- of non-payment. If so, notify the resident’s emergency cent of their customers end up buying their products. contact if rent is not paid on time. Yes, our residents Customers are just looking for short-term solutions sometimes have legitimate financial problems. Job when an emergency occurs, such as when a critical lay offs, car troubles, or medical emergencies can appliance goes out. really put some of your great residents in a financial bind. Yet, your obligation to your family is to collect The wisdom of Buddha: ALL the rent remains. The ethical thing for you to do The secret of health for both mind and body is is aggressively go after full payment and late not to mourn for the past, not to worry about the fu- charges. Your response to the delinquent resident ture, or not to anticipate troubles, but to live in the pre- should be, “Sorry you were laid off from your job, but sent moment wisely and earnestly. your rent is due now. Let me suggest the following All things appear and disappear because of the options.” 1) Ask for a loan from family or friends. 2) concurrence of causes and conditions. Nothing ever Use a credit card for a cash advance, 3) Take money exists entirely alone. Everything is in relation to eve- rything else.

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