All Forum Posts by: John Matthews

BP,

Particularly those landlording in montco (Perhaps more specifically Norristown, PA) - has anyone worked with Your Way Home Housing? I've got a unit which I'm currently marketing for a tenant and was contacted by them just wanted to get anyone's opinion who's actually worked with them.

Are they a pain to work with like Philadelphia Housing Authority (section 8)? Are there any reasons why you'd never rent to them again?

My understanding is they find housing for people who have gone homeless for any number of reasons and provide rental assistance directly to the landlord (similar to section 8), but that their assistance decays after they have found employment (not sure at what rate however). The appeal to me of section 8 is that you are guaranteed payments from PHA indefinitely and they are disincentivized to be a bad tenant (if they're evicted theyre kicked off the program permanently). I love the program, but the fact that they could lose assistance and then fail to meet the rental requirements worries me.

First thing I would do would be to get an idea of what you think your home would be worth based on comps, recent sales. As you said prices have gone up, but by how much. If they've gone up by 1%, you probably haven't paid much towards your mortgage, probably not worth it. But you need to do the math.

More importantly though, what are you going to do with the money? If it were me, first thing I would try to do would be to figure out what you want to do with the money - find a location you like, dial in your criteria. There's no sense in sitting on the money for 2 years and not doing anything with it.Then again, most major banks require your money to be seasoned for 2 months (it to be in your bank account for 2 months).

The flip side of all this is that an appraisal is a couple hundred bucks, so you could just pull the trigger and try for a refinance. But without knowing much about your situation, I think you'd just be throwing that money away.

@Susan Zoe I would recommend you keep looking. With $40k in your pocket you can definitely achieve what you're looking for, but you can also do some damage if you don't do things right - particularly if you're not sure you even want to be a landlord. If it were me, I'd find a property that can sustain itself AND a property manager in the event that you need one. You can definitely find these in Grays Ferry. But then again, you should be comfortable where you invest, so if you don't know the area you should probably steer clear.

As @David Fitch suggested it may be safest to take a more passive approach in the market and just sit it there for a while. Alternatively, the other option is to partner with someone on a deal that makes sense. I'm sure there are plenty of people who are looking for money partners. I am actually partnering up with a colleague right now in a similar situation.

 The other option is to sell it on land contract (seller finance / installment sale). Basically pay taxes on capital gains over the life of the loan. The nice thing about this is that it might keep you out of a higher tax bracket if the sale is going to bump you up for the year.

The only way I know to get around pa transfer tax is if you're transferring title to a family member.

@Gita Faust Agreed with your statements, software programs will always have issues that people don't like, you can't please everyone, I get that. I think you're missing the point though:

• Intuit clearly does accept landlord into their merchant services program as that's what I signed up as and was accepted as.
• I have been making a point of checking my books every 1,3 and 5 days. I log in every day after work. Seriously. The failed tenant transactions didn't show in my books at all because they failed before they made it to my end. I didn't find out they had any failed tenant transactions until getting escalated 3 times on the phone with their support during a 3 hour conversation. So no, I wouldn't have been able to stop this. This is precisely the reason why I'm upset with Intuit, because you're right, had I known this before I could have stopped that tenant from paying through Intuit.
• Indeed, companies aren't perfect, but typically, when they make a mistake, they go out of their way to fix it manually, Intuit didn't go the extra mile.

@Shane H. Thanks for the recommendation. I'm going to look into buildium today. Does it handle accounting / end of year taxes well? If possible I'd love to stop using QBO entirely so I'm not paying $40/mo twice. If I end up sticking with buildium I'll let you know so you can be my referral.

Nancy - Indeed, I see your point of view. That said, Quickbooks IS at fault for the bad business practice of just pulling money from my account with no warning, receipt or anything like that. Am I wrong in thinking that if a company withdraws money from my account, there better be some kind of trail dictating such? Secondly, it seems like it would be a good business practice to give a user a chance to contest derogatory remarks on their file, similar to how one does on their credit report. Yes it's in their TOS that they can cancel my merchant services account at any time for any reason, but because they can legally, doesn't mean it's not a bad business practice. I can get into a cross walk in front of a speeding car about to run a stop sign, legally I'm right, but that doesn't make it a good idea.

So, this is a two parter – 70% Rant, 30% Tip, feel free to skip down to the tips section…

RANT:

So I’ve had a busy year, went from 0-8 houses, and I’m definitely feeling the growing pains, but the biggest one is with Intuit. As a result of my growth I got started with quickbooks as I wanted to track everything correctly and use their invoicing feature to bill my tenants and receive rent electronically. Things were going smoothly for the first 4 months or so. Tenants were paying their bills online and my books were transitioning (slowly) from red to black.

Two weeks ago I saw a strange bill in my bank account for $21 dollars. I received no notice from any company saying what it was, and had no receipts with that dollar amount. So I naturally called my bank to see where it was from they couldn’t tell me, just that the description was “[My business name] svc fee [My business name]”. The bill didn’t match any other recurring bills I have setup, so thinking it was fraud I disputed the transaction. Just for clarity, typical charges from intuit look like this: "Withdrawal ... INTUIT * QB ONLINE ..."

Then I get an email saying one of my tenants paid an invoice, great. Immediately after the funds cleared, the same amount was withdrawn from my account. This time the description read “[My company name] returns [my company name]”. This time I called intuit, the customer service rep “looked into it” and said it wasn’t on their end and to call my bank. So I go to my bank, they tell me that it’s definitely on intuits end. I should pause at this point to mention that I’ve received no email or notification from quickbooks that the payment didn’t go through or that it was reversed – I just happened to notice a matching withdrawal on my bank account. The invoice even showed “paid” on my quickbooks account. Anyway so I called back - 2.5 hours later, here’s their story:

My account is a risk to them, so they closed it. At the beginning of last month a tenant paid a water bill using quickbooks. Then their bank rejected the payment. I never saw this, because it happened before it hit my account. Then at the end of the month, the same tenant paid an invoice (mentioned above) and again their bank recalled the payment. I saw this happen once on my bank website, but evidently this happened three times, twice before it got to me. So 4 times, my tenant initiated a payment and then their bank cancelled the payment. So then intuit billed me a “bounce fee” and collection fees for the other invoices that were going through just fine, to the tune of $21. I thought this was a fraudulent charge since there was no record anywhere (and still isn’t nor can quickbooks provide a record / receipt) so I called my bank to dispute the charge. After this 5th failed transaction they revoked my payments feature for that account – permanently.

After explaining to them the fatuousness of the whole thing, the rep agreed but ultimately can’t do anything about it. All said and done, I now have to update my system, tell all of my tenants that they can no longer pay that way, and find another way to pay. The part that frustrates me the most however is that I have spent hours upon hours setting up my quickbooks account, getting my chart of accounts setup, recurring transactions, etc. and now most of that time is lost. Sure I can export my chart of accounts, and import them into a new system, but likely that’s a more than a few hours process to get it all setup correctly, particularly when it wasn’t my fault, I had no warning it was happening, and thus couldn’t do anything to stop it.

TIP:

Too many declined transactions will revoke your merchant services account. If you use quickbooks payment feature, and you see anything shady going on with bill payments, contact your tenants/clients immediately to verify that they aren’t trying to pay multiple times with the same information. If they cancel the transaction once with their bank, they can never use that bank again as their bank may refuse every transaction from that source going forward without anyone’s knowledge. A single tenant can break your entire quickbooks online setup.

Am I the only one who thinks this is ridiculous?

Hey all, thanks for the responses. By timer light, I actually meant the lights where you rotate the knob and it's on for 30 minutes, then it ticks down and automatically shuts off in 30 minutes, like a hot tub or sauna.

At anyrate, LED lights are definitely a good option since they're stupid cheap to run for long term. Thanks for the advice!

So, I didn't run all of the numbers, but I'm thinking you're going to be making a bit less than the $10k if you include holding costs. Let's assume you are though. Say you're all in for $185k to make $15k, you're looking at a 12% return...before taxes. Assuming you can get this done in 4 months (one month for rehab, one month to get it locked up and 2 months to close) that's 48% annualized.

Instead if you rent and refi, lets say you go a business loan with the following terms: 30 year amortization, 5% and a DSCR of 1.2, you're looking at a max loan of about $145k. In that case, it doesn't make sense to pay to fix it up. So let's say you don't fix it up and it's currently worth $140k, and you refi at 80%, so you're looking at a loan of $112k, for $28k left in the property as equity and $14k lost as closing costs. So you're all in at $42k. Assuming $100/mo net after all expenses and debt service, you're looking at $1.2k earned per year for a measly 3% annual return, not including tax benefits and equity in property. The numbers change if it'll appraise for more than $140k, if you can get it to appraise for up to $175k as is, then I'd almost definitely say keep as a rental to pull almost all of your cash out and try again.

Personally I love the rentals vs flips, but this is a pretty cruddy rental. My suggestion would be to sell and get a better rental.

Have you spoken to past references? Have you spoken with his work about them paying the rent (are they a legitimate company)? Has he been evicted? Did you do a full background check? If you can't answer all of those questions with the right answer, then I'd say no.

I know you can put language in  your lease which says that partial acceptance of rent does not make eviction impossible, but I don't know how well that will hold up in court. You could always use a site like dwolla.com or even paypal to accept payments then you don't have to worry about them taking money out of your account. I don't know if they can pull funds from your account without your permission.

If you are still looking for a renter than you aren't advertising well enough or your priced too high. Lowering the rent by $50/mo and losing $600/year is way better than needing to evict, having your money stolen, house ruined, etc.

Personally, if it were me and you had any doubts but you really wanted to get this guy in, get him in on a month to month lease, so if there are issues, you just issue a 30 day notice to quit/vacate, then you'll have a much easier time to evict, since you don't need a reason, it's just a non-renewal. Then if you like them you can always have them re-up in a few months for a full 2 year term.