Fabulous Financials

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I have a question…

What is so catastrophic about a foreclosure?

I don’t “personally” know anyone who has experienced a foreclosure, so I’m trying to put it in perspective based on what I do know.  Growing up in Brick City, then living in a rural, clearly segregated, small town in NC, here are my thoughts:

Foreclosure.  Eviction.  Same thing.  I’ve seen the latter happen many times.  Life goes on.

Whether you’re renting an apartment or buying a house - in both situations - you make a deposit (maybe), sign a written agreement, move your family and all of your worldly possessions, enroll your children in school, and create family memories/traditions as you make the place “home.”

During the housing boom (or bust, whatever you want to call it now), many people who didn’t previously qualify to buy a home began buying them left and right.  Now reality has set in and they are at risk of losing the home they couldn’t afford in the first place.  Why is this bad?

By the time the bank comes to repossess, dude, you had a 2-3 month head start.  Pack ya shyt and bounce!  Go back to the living arrangements you had before you bought the house.  It was acceptable then, so why isn’t it acceptable now?  Why do you want to stress yourself out for 30 years to keep a home you can’t afford?

Help me out people.  This isn’t tongue in cheek, I’m really confused.

This makes year 3 and I can get used to this.  Same as last year, and the year before, I received a refund check from my mortgage company for a projected overpayment in my escrow account.  Based on my estimated taxes and insurance for the upcoming year, my mortgage company has estimated that I will pay them too much.  So they give it back!

• The 1st year (’06), it was $500+
• The 2nd year (’07), it was $300+
• This year, it is $500+ again

Woo wee!

But wait…

I can’t afford to make THIS mistake again, so I poked around a bit until I saw that my monthly mortgage payment will decrease by $16.  Not much, but I’ll take it!

Ok, celebrate now.

Woo wee!!

As usual, this refund will be used to pay for my annual HOA fees.  Great fun. [sarcasm]

The stress is over…or starting again, depends on how you look at it. LOL

After showing my townhome at least two dozen times, dealing with no shows, laughing at people who wanted me to ‘work with them’ on the security deposit and rent amount, giving the *side eye* to the young engineer who wanted five roommates, expressing concern to the disabled man who insisted that living in a 3 story townhome with 2 flights of stairs wouldn’t bother him, gasping in shock at the single mom who wanted me to falsify Section 8 documents, rolling my eyes at people who demanded that I ‘lower the asking price for rent’ as if they were doing me a favor, and completely ignoring countless other nutcases - it’s ALL over now.  Thanks to the best real estate agent/friend in the whole wide world, I selected a new tenant and they signed a one year lease, effective today.

A married couple, relocated from another state, new jobs, and two young children with pets.  Nice lady (didn’t meet husband, he’s not moving until Oct), well mannered children, good vibe.  The only thing that concerns me is the pet situation, but I collected a separate non-refundable pet deposit, so it’s enought to calm my fears.  Besides, I tried to learn from my mistakes of last year, so I did quite a few things differently.

• Other than the standard background, credit, and employment check - I also checked their rental history and chatted with their previous landlord.  Of the two listed, I was only able to get a hold of one.  He was the most recent so that was ok with me.  They were his tenants for four years, paid late two times, and left the property in decent condition.  He expressed concern about one of the children (autistic), but reported that they were good people.
• I provided a copy of the 500+ page HOA handbook and addressed major nuances based on experience with previous tenants.  I walked the neighborhood with the new tenant to identify extra parking spaces, the community center, and explained what NOT to do.
• We also discussed responsible pet ownership, yard appearance, maintenance calls, etc.
• Rent is to be paid via direct deposit only.  No cash, checks, OR money orders.
• I will schedule and commit to quarterly inspections with 48 hours notice.  Even if I can’t personally attend, my maintenance guy (along with my RE agent or next door neighbor, if necessary) will conduct the inspections on my behalf.

With all of these corrections, I don’t expect a repeat of last year’s issues.  However, it is very possible that I will experience new issues (and possibly, a few repeats of old issues), but at least I’m prepared this time and know how to manage my expectations.

Slowly but surely, I’m losing my personal connection to this home and it’s all starting to feel like a business transaction, which is a good thing.  As of today, my bank account is $3,000+ heavier and I have monthly cash flow again.  Yay!

*Lord, please help me through another year - Amen*

I received a small pay raise of ~3% that will increase my bi-wkly net income by ~$80. I refer to it as “small” because I’m used to double digit raises, but this salary adjustment wasn’t tied to performance, so I can’t complain. However, I am looking forward to my first semi-annual and annual performance review like a kid on his way to the toy store.

Now that I have a little extra change, what am I going to do with it?

1. Tax Adjustment: This small raise forced me to do something that I’ve been putting off since July - oh just call me the Procrastinating Queen Bee. I’ve been meaning to adjust my tax exemptions because I’ve had zero rental income since June and more business expenses than anticipated. So the first thing I did was increase my federal exemptions to 7 [I'm not a tax professional so please don't ask me how many exemptions you should claim].

2. Savings: I also reinstated a payroll allotment that was previously canceled when I achieved my eFund goal. I was supposed to redirect all extra income to my non-retirement investment goal. Remember that $5,000? Unfortunately, this summer alone, I’ve spent almost the same amount on rental property expenses. Needless to say, I probably won’t reach that goal this year. *shrug* It’s ok though. I’ll keep my eye on the prize, but I can’t worry about it right now. I’m just thankful I had the money to cover ALL rental property expenses without incurring debt. Therefore, the reinstated allotment will deposit $100 bi-wkly to a savings account that is earmarked for future rental property expenses.

Based on the above, I expect my bi-wkly net income to remain the same as pre-raise. “Every little bit helps” has proven true in this situation. The small raise made a big difference because it will help me prepare for the financial unknown(s) associated with this rental property.

Wish it could help me deal with these psychos submitting rental applications. Pure comedy! LOL

In March 2007, I accepted a new job, relocated to a new state, and contemplated what to do with my first home when I wrote To Sell or Rent - That is the Question.

Once I made up my mind to rent my home, I went on an All-Star Tenant Search.

In less than 30 days, I found suitable tenants and was pleased with my selection. They paid the rent on time and I was a happy landlord. That is, until 5 months later when they threatened to break their lease…right in the middle of the Thanksgiving/Christmas holiday season!

When problems in paradise are mixed with affairs of the heart, the result is a bunch of ish gone wrong. Unwilling to intervene in private matters, I kindly informed my tenants of “their” legal obligation to me and told them to make a decision ASAP. Fortunately, an interim solution allowed 1/2 of the dueling duo to honor the remainder of the lease.

After the full 12 months, they were gone. Whew! And I conducted my very first rental property move out inspection. Boy, was I in for a surprise! Dirt, crap, and more crap.

After the repairs and clean up began, I received a rental property update from my maintenance guy. Things were so bad, it took him almost an entire month to repair, paint, and clean the property to make it “good enough” for rental again.

The total damage? Read more »