Things are looking better at the Houston apartment complex. Of course, the previous times I’ve said this it’s usually turned out to be a short-lived turn-around, but still, a good month is a good month. Rental income increased in February by almost $10,000, mainly due to decreased rent concessions. This month saw the highest rent revenue since April 2011. We had t pay out $3,800 for some repairs to the roof and access gate, but other expenses are running according to budget. Management implemented a water conservation plan and that has resulted in significantly decreased water and sewer bills. They are now moving forward with a gas billback program. This means the residents will start paying a portion of the gas bill. They currently pay a portion of the water bill and with the reduction in that expense, management feels the gas billback will be accepted by the tenants. They should still have an overall lower billback cost than they had prior to the water conservation program. They also installed a separate water meter for landscaping so they can begin a billback program for landscape water usage.
Now, it’s been a long time since I lived in an apartment – at least 20 years. Maybe things have changed since then, but I know I never paid any sort of utility billback for general landscaping or anything. I paid my rent and that was it. If I recall, the units were individually metered and all the utilities were in my name, so that might be part of the reason. Off hand, I can’t remember how the units in the Houston complex are metered. It just seems strange to me to bill renters for water used for landscaping. Of course, this might also be a regional thing too. If that’s how things are done in Houston, then it makes sense that we do it too.
Last month, management asked the investors to inject another $250,000 into the property to help it get through the current rough financial situation. I opted not to contribute and apparently, I wasn’t the only one. They raised $140,000, well short of their goal. However, they are using this money to catch up on payments with vendors who we still owe money to. Management is also using the funds to make ready more units to help improve the occupancy number. They didn’t give an occupancy percentage with this report, but if I use the gross rent and vacancy numbers from the financial report, it looks like we are at about 91% occupancy right now.
On the hard money lending side of things, I didn’t blog about it, but my partner said last month that things seemed to be picking up and he was short of funds. Well, a lot can change in a month and things have now reversed and he has money waiting for investments. Our main borrower says deals have slowed down a bit, although he is still buying a couple properties a day. A short time ago, he was doing two to three times that amount. As my partner says, the business is often cyclical and he has learned to be patient and wait for good deals rather than invest in questionable deals just to get funds invested in something. That's how you go 20 years in this business without losing a penny of your investors' principle.
On a more personal note, I got my taxes back from my accountant this weekend and I got hammered on my federal taxes. I owe a couple thousand. I wasn’t sure how that could have happened until I remembered that in 2010 I converted a traditional IRA into a Roth IRA and elected to report the income over two years. I should have adjusted my withholding rate last year to help alleviate this, but I guess I forgot. The good news is that next year, I won’t be hit with another big tax bill (hopefully), as that conversion has now been fully reported. The Houston apartment complex gave me a roughly $7,000 passive loss I can claim. Unfortunately, it can only be used to offset passive gains, of which I have none. So that loss will just get carried forward until I have some passive gains I can use it against. I had thought that the interest from my hard money lending was passive income, but my accountant reminded me it is not. Based on my current investments and future outlook, I think this loss will probably end up being carried forward until the Houston apartment is sold. But that’s OK. It just means I’ll be getting a nice surprise in the future, as I’ll probably forget about it. That actually happened to me this year on my state return. I had a $400 credit from 2009 that was carried forward, adding to my state tax refund this year.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Potential Windfall For Foreclosure Investors
CNN is reporting that the Senate has passed a bipartisan bill to address the foreclosure crisis. Among the provisions: a tax credit of $7,000 for people buying foreclosed properties! Wow! It's unclear if this will apply to investors or just owner-occupants, but..holy cow.. A $7,000 tax credit! Not a tax deduction mind you, but a tax credit. That will certainly spur a wave of buying from investors if they can claim it!
Of course, this is just the Senate's version of the bill and the House version did not contain that credit... The credit will probably never come to pass, but it would be a nice present.
Of course, this is just the Senate's version of the bill and the House version did not contain that credit... The credit will probably never come to pass, but it would be a nice present.
Tulsa House Is Likely Rented!
I say likely, because it's not official yet. A potential renter saw the property on Saturday and wanted to make sure I was ok with his dog before he signed a lease. Actually, he asked if I was ok with his malamute. My first thought was what is that, a ferret or something? A quick wikipedia search showed me what he was talking about. This dog doesn't bother me. I charge a $250 pet deposit, which should be enough to cover the extra cleanup that will need to be done when he moves out. (I'm expecting this dog will shed lots of hair.)
The management company is contacting him again and hopefully, I'll have a signed lease soon. He is paying the higher $800 rent, so I'm making some extra cash there. That will come in handy because my previous glee at finding out I was being charged a lower property tax this year turned out to be short lived. Over the weekend, I got an updated property valuation notice that my property tax will indeed be based on my purchase price, not the lower purchase price of the previous owner. This was to be expected and I used the higher tax amount in my analysis when I bought the place, but I thought I was going to get an extra year of the lower tax. No such luck.
I don't think this guy is a Section 8 tenant. I gave the management company the go-ahead to accept Section 8 tenants, but I think this guy found the place before the Section 8 inspection / approval process was finished. I'll have to verify this the next time I speak with the management company.
The management company is contacting him again and hopefully, I'll have a signed lease soon. He is paying the higher $800 rent, so I'm making some extra cash there. That will come in handy because my previous glee at finding out I was being charged a lower property tax this year turned out to be short lived. Over the weekend, I got an updated property valuation notice that my property tax will indeed be based on my purchase price, not the lower purchase price of the previous owner. This was to be expected and I used the higher tax amount in my analysis when I bought the place, but I thought I was going to get an extra year of the lower tax. No such luck.
I don't think this guy is a Section 8 tenant. I gave the management company the go-ahead to accept Section 8 tenants, but I think this guy found the place before the Section 8 inspection / approval process was finished. I'll have to verify this the next time I speak with the management company.
Vegas, Baby!
Just got back from a quick trip to Las Vegas, where my wife and I stayed at The Wynn. We got an offer in the mail for a discounted room rate plus $100 in money to gamble with. In order to maximize the value of the free $100, we decided to play the dollar video poker machines, rather than the quarter machines we normally play. Good thing we did! From the $100 they gave us, we won $80. As my wife was playing through that, she hit a royal flush! That's a $4,000 payout! And it came within the first hour of us being there!
We spent the rest of the day and all of the next day playing dollar video poker, with some blackjack thrown in to break up the monotony. On our last day there, we played more dollar video poker, but were losing big time, so we switched to quarter video poker machines with a progressive jackpot. Believe it or not, my wife got ANOTHER royal flush! This one netted us $1066!
We didn't get a picture of the first royal, unfortunately. At the other casinos we've played at, they take a picture of the jackpot for you. They apparently don't do that at the Wynn and by the time I thought to take a picture, the jackpot had been paid and the screen cleared. However, I did remember to get one of the second jackpot.
So after years of going to Las Vegas and never hitting a royal flush, but seeing every other person she went with get one, my wife finally got not one, but two in the same trip! Awesome! And we also ended up getting one of our nights comped because we played so much, so between the $100 they gave us to gamble with and the one free night, our room for the trip was free!
Because her first jackpot was over $1,100 dollars, the casino must report the winnings to the IRS and give us a W2-G form, Certain Gambling Winnings, for us to report the income on our 2008 tax return. Luckily, the IRS allows you to deduct gambling losses against gambling winnings (only up to the amount of your winnings), so after a quick phone call to my CPA to find out the documentation requirements, I spent the rest of the trip keeping track of all our losses to help offset her winnings. Luckily, her second jackpot was under $1,100, so there was no W2-G generated for that.
I'm attending a presentation today on a potential multi-unit property investment. I should have more info to post about that tomorrow.
We spent the rest of the day and all of the next day playing dollar video poker, with some blackjack thrown in to break up the monotony. On our last day there, we played more dollar video poker, but were losing big time, so we switched to quarter video poker machines with a progressive jackpot. Believe it or not, my wife got ANOTHER royal flush! This one netted us $1066!
We didn't get a picture of the first royal, unfortunately. At the other casinos we've played at, they take a picture of the jackpot for you. They apparently don't do that at the Wynn and by the time I thought to take a picture, the jackpot had been paid and the screen cleared. However, I did remember to get one of the second jackpot.
So after years of going to Las Vegas and never hitting a royal flush, but seeing every other person she went with get one, my wife finally got not one, but two in the same trip! Awesome! And we also ended up getting one of our nights comped because we played so much, so between the $100 they gave us to gamble with and the one free night, our room for the trip was free!
Because her first jackpot was over $1,100 dollars, the casino must report the winnings to the IRS and give us a W2-G form, Certain Gambling Winnings, for us to report the income on our 2008 tax return. Luckily, the IRS allows you to deduct gambling losses against gambling winnings (only up to the amount of your winnings), so after a quick phone call to my CPA to find out the documentation requirements, I spent the rest of the trip keeping track of all our losses to help offset her winnings. Luckily, her second jackpot was under $1,100, so there was no W2-G generated for that.
I'm attending a presentation today on a potential multi-unit property investment. I should have more info to post about that tomorrow.
The IRS Will Get You Every Time
Last year, I wrote about a tax credit that you could claim for the telephone excise tax that has been collected on phone bills for years. If you took the credit, the IRS also paid you interest on the amount you claimed. No good deed goes unpunished and this year, I received a form 1099 from the IRS reporting that interest ($34 in my case) as income which must be claimed on this year income tax. *sigh*
There's an article about this here.
There's an article about this here.
Christmas Present From The Tax Assessor
I got my tax bill in the mail for the next year's property taxes at Rental #1 and got a nice surprise. When I was analyzing the property before purchasing it, I used the tax estimate calculator at the assessor's website and had estimated my yearly property tax to be $989.00, based on my purchase price for the house. But the tax bill is currently still being figured using the seller's purchase price, which means my tax bill is only $376, just a bit higher than the $371 the previous owner was paying. That gives me an extra $51 a month in cashflow! Of course, I'm sure next year the taxes will go up, but at least I got a one year reprieve from the higher tax.
And that money will come in handy. The property is still not rented yet. It's only been on the market for two weeks though. The old tenants moved out the end of October and the management company had it off the market for two weeks for cleaning. December is the first month that I've had to make a mortgage payment without getting any rental from it, so hopefully it will rent soon.
And that money will come in handy. The property is still not rented yet. It's only been on the market for two weeks though. The old tenants moved out the end of October and the management company had it off the market for two weeks for cleaning. December is the first month that I've had to make a mortgage payment without getting any rental from it, so hopefully it will rent soon.
Bankrupt AMH's Property Tax Checks Bounce
I heard about this from Savvy Saver - American Home Mortgage, the subprime lender who is in serious financial difficulty, has apparently been bouncing checks that it sent out to pay mortgage holder's property taxes in Maryland. Curiously, I can't find this story on CNN or MSNBC, but there is an article here. I did find a story from three days earlier about Freddie Mac trying and failing to take over loan servicing from AMH. However, AMH filed for bankruptcy protection before Freddie Mac could get the servicing rights.
There are a couple scary things about this. First, the escrow accounts of mortgage holders are supposed to be get separate from the other funds of the business. These accounts are protected by state law from bankruptcy proceedings, but there is a possibility the accounts were incorrectly frozen when AMH filed for bankruptcy. Being of a more cynical nature, I tend to think the company "borrowed" money from these accounts as their financial crisis escalated. We'll have to wait to see how this thing plays out to find out for sure. However, the big losers in this mess are the people whose property taxes were not paid. They are still responsible for the taxes and will need to find some way to pay the bill.
The second scary thing about this is this quote:
So your government officials aren't going to notify you until your taxes are past due and the penalties and fees have started accruing. That's nice. Instead of giving people an extra two months notice and more time to find a way to come up with the tax payment, they'll just hope the problem goes away by then. Yup, the mayor sure does care about her constituents.
There are a couple scary things about this. First, the escrow accounts of mortgage holders are supposed to be get separate from the other funds of the business. These accounts are protected by state law from bankruptcy proceedings, but there is a possibility the accounts were incorrectly frozen when AMH filed for bankruptcy. Being of a more cynical nature, I tend to think the company "borrowed" money from these accounts as their financial crisis escalated. We'll have to wait to see how this thing plays out to find out for sure. However, the big losers in this mess are the people whose property taxes were not paid. They are still responsible for the taxes and will need to find some way to pay the bill.
The second scary thing about this is this quote:
Anthony McCarthy, a spokesman for Mayor Sheila Dixon, said the city does not plan to notify the affected homeowners. They will get a notice in November along with all other delinquent taxpayers if the problem isn't resolved by then.
So your government officials aren't going to notify you until your taxes are past due and the penalties and fees have started accruing. That's nice. Instead of giving people an extra two months notice and more time to find a way to come up with the tax payment, they'll just hope the problem goes away by then. Yup, the mayor sure does care about her constituents.
Phone Excise Tax Refund Not Being Claimed
One of the huge advantages of investing in real estate is the special tax breaks you can take advantage of. Many people invest in real estate solely for those reasons and yet, they fail to take advantage of even the simplest tax saving strategies. For example, msnbc.com is carrying an Associated Press story about how roughly one-third of the early tax returns filed so far (over 10 million of 31.8 million) have failed to claim the telephone excise tax refund offered this year and a surprising number of those were returns filed by professional tax preparers. Granted, itemizing the bills might be a bit much for most people, but claiming the standard credit is as simple as filling in one additional line on your return. To me, there is no excuse for a tax professional to miss this deduction. If yours doesn't claim it for you, fire them.
The standard refund is between $30 to $60, depending on how many dependents you are claiming. If you have your phone bills from 2003 and later, you can itemize and get a refund of the actual amount you paid plus interest. I actually do have all those bills and spent an hour or two last weekend adding up amounts. My total: just over $250! And this is a tax refund, not a deduction, so it is a dollar for dollar reduction in your tax bill. I should state that the reason my credit was so high is because I have four phone lines, so your credit might be less. Use IRS form 8913 from the IRS to itemize the credits. The instructions for filing out the form are here. If you are taking the standard deduction, you do not need to use a special form. I should also note this credit is good for the 2006 tax year only.
The standard refund is between $30 to $60, depending on how many dependents you are claiming. If you have your phone bills from 2003 and later, you can itemize and get a refund of the actual amount you paid plus interest. I actually do have all those bills and spent an hour or two last weekend adding up amounts. My total: just over $250! And this is a tax refund, not a deduction, so it is a dollar for dollar reduction in your tax bill. I should state that the reason my credit was so high is because I have four phone lines, so your credit might be less. Use IRS form 8913 from the IRS to itemize the credits. The instructions for filing out the form are here. If you are taking the standard deduction, you do not need to use a special form. I should also note this credit is good for the 2006 tax year only.
