2012 Goals

I haven't made New year resolutions in a very long time but 2012 is the year for which I am happy to set some goals. Isn't blogging great? 2011 was a great year. I achieved most of what I planned to do. I also started this blog in 2011 which I hope to work harder on in the coming year. I will have to review my progress every month quarter here. (OK I didn't).
Quarter 1: Never Done
Quarter 2: HERE...
Quarter 3: end September 2012
Quarter 4: end December 2012
New year 2012 goals below:

2012 PERSONAL FINANCE GOALS

1. Online income to R5000 per month by December 2012. This will take some work in my writing. I expect to spend at least 1 hour per day writing.
2. Maintain at least 12 months expenses worth of an Emergency Fund.
3. Spend an average of 50% of my net income or less.
4. Maintain giving of about 10% of income
5. Buy a new rental property
6. Remodel the duplex that we have put off the market. Prepare that property for rent by the end of 2012, when we no longer need to use it. Remodel the bathroom in a two bedroom property.
7. Push for 70% equity on our home by December
8. Get retirement accounts to 45% of the target
9. Get stocks to 55% of the current target. This is the most important personal finance goal for me. All my wealth growing energies are on this in 2012..

2012 HEALTH GOALS
I got a bit sick end 2011. I was diagnosed with PCOS which may have caused some insulin resistance. I put on a lot of weight in a short space of time. Health is the most critical area in my life in 2012. My target is to make time to exercise 3 times a week. I might join the gym, which is not necessary. I have to put my treadmill, stationary bike, zumba, and tons of DVDs into good use. I am so embarrassed to mention them by name. (LOST 12kg ALREADY - Sept progress)

2012 FAMILY GOALS

1. Holiday in the Mediteranean Europe with hubby in 2012. I just cant wait for this.
2. Spend great amount of time with my family. I spent the past two years in two cities/ countries. My properties kept me busy in one city whilst my business was in the other city.Looking forward to having more time with my family.
3. Visit my parents for at least 2 weeks.

CAREER GOALS
Get training in some media form. This can be online. It can be anything from writing to publishing, production to public relations. Anything at all.

HOBBIES, ETC

1. Read at least one book per month. I have to make time for this. I already have a good number of books that are not read.
2. Finish all my unfinished home and craft projects. I have lots of material. I don't even need to buy new stuff.
3. Do charity work as much as I can.

Have fun whilst doing it all.

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Rental Income vs Capital Growth

Apartment Rental Income vs Capital Growth

Its Christmas almost yet I am here thinking of whether I should choose a higher rental income vs capital growth as a strategy for 2012. When you are in business, there is just no holiday season in your diary.

My strategy was to buy apartments in the apartment blocks where I own individual units. That way I can someday own the whole block of apartments. Sounds like a long shot, doesn't it? Anything is possible.

The apartments are close to the city center. The capital growth is not great but the return on investment is amazing when you rent the places out. The demand is great. I haven't had a vacancy since 2002 in one small apartment. All in all its a "buy-to-let" dream location. I own 3 apartments in the area to show for my confidence. Well, after a long inner planning session, I decided to go buy a few units in the suburbs to balance my real estate portfolio. In the suburbs the returns are lower but capital growth is great. I do have a feeling that I will want to sell some of my properties in a few years.

The Decision on Rental Income vs Capital Growth
My decision should be based on what I will do with the property. If I buy for speculation reasons, which happens to be a possibility, i would rather buy in the suburbs. If I buy for long term rental, I should go to the city. The problem is that I don't have an idea what I will do with the properties I want to buy in a few years time.

Whilst in the dilemma, a nice lady who lives in her apartment close to one of my apartments send me an email.
"Hi REG

I have decided to sell my apartment at a  20% discount. The agent fees will be extra if sold by an estate agent. I am putting my apartment on the market the first week of January.

Happy Xmas"

I was interested in buying this apartment even when it was 100% cost. At 80%, I am super interested but I havent decided whether I want a rental income boost or a quicker net worth growth in a few years. The properties closer to the city are relatively old and not so safe. The demand for rental units is high, but who knows what may happen in a few years. Suburbs offer stability and peace. All owners are usually investors who take great care of their investments. Which is which?

Lord please help me take a decision.

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Monthly Spending and Budget Report Nov'11

My monthly spending and budget report is what keeps me focused. You may notice this is very late. I struggled to post it here because of my ridiculously high overspending. I helped my baby sister with her college fees. I like it when I do that but I never got an opportunity to see it in black and white in my report. Anyways tracking my income and spending has made me much better at taking care of my personal finances. Being conscious of my spending proved to be healthier than I ever imagined. I still hate drawing a budget but I am very aware of where my money comes from and where it goes.

My November 2011 monthly spending and budget report:

INCOME	% OF TOTAL	NOTES
Real Estate	54%	It helps that all (but one) mortgages are paid off.
Hubby Allowance	35%
Once off	0%
Online	11%	I made my target. Its still tiny but I'm not complaining.
Dividends	0%	This is not monthly YET. 2012 will be spent growing this

My income is back down to where it should be, it was a very normal month. My online income keeps growing (close to $50 increase for November). December is usually a bad month, I'm not holding my breath. 

ITEM	%OF INCOME	NOTES
Real Estate	35.9%	1 mortgage, gas & taxes/rates. I overpaid somewhere.
RA & Unit Trusts	7.3%	Fixed
Loan to Business	0%
Internet/ Phones	1%	I keep this very low.
Consumer	12.9%	Groceries and all that jazz.
Bank Fees	0.9%	Shocking
Giving	56.9%	My contribution to baby sister's college fee. Its not a loan.
To Invest	-14.9

We had a trip in November. Unlike in October where I had an extra 54% left over at the end of it all, November saw me 15% in deficit. There go my savings. The real estate assets are doing well, all my properties are fully let, no vacancy. My handyman disappointed me though, some small work still needs to be done in my one apartment.

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Paying off Mortgage

Yes I know what I said in the past about not paying off mortgage and leverage and gearing and returns and alternative investments. Shoot a girl for trying to please a man in her life!
Before getting to this financial decision, let me disappoint you further with my holiday season spending news. The past few weeks of my less than perfect health lead me to "not so cool places" like gynecologists and even heavier names like endocrinologists. These overwhelming few weeks left me yearning for a holiday. I took a short trip with my son and I did spend quite a bit of my hard earned cash. My son scored new games and I even got me a nail grooming kit. Its promising to save me on salon manicure costs.  I guess after the illness you can get yourself into a state of "money disrespect". But at least I am now back only to plan another holiday to Swaziland for next week.

I vow to not overspend on this trip. It will be a lovely holiday for my family. I don't promise not to behave like a tourist though. I may get a few memento items.
On the mortgage news, we decided to just work on paying up our one mortgage. That's the only mortgage standing. After the hubby has begged and begged, and against my better judgement we are paying the darn mortgage up. Debt no more! This whole mortgage pay-up process is made exciting by the tier kind of interest we are charged. We are in the last and lowest interest rate tier. Our minimum mortgage installment has dropped remarkably and I couldn't be happier. This makes it even easier to kill and bury this debt faster.

The reasons I decided against my "never paying off mortgage" position are:

1. I am never going back to work. That means we will be having one salary and other income sources we created over the years. Paying up the mortgage will mean cutting down on our monthly expenses. That should be great news right? It also mean that the hubby can be able to decide to also have his job being optional. He doesn't hate having to have a job as much as I do though.
2. My hubby was nagging me all the time about paying off this debt. He hates it and I think its only fair to make him happy this once. Its not everyday that a girl gets married to a guy who is happy driving an old car and paying up all his debt. I love him again for that.
3. The most important reason is that we CAN. So why not?

I have a suspicion that I will keep thinking about what this extra mortgage payment would have translated to in alternative investment returns. I don't think I should worry about it though as the funeral of this debt will be as rewarding as having a winning lottery ticket. We will try to to have a "paying off mortgage" trip to the Mediterranean parts of Europe next year (2012). That will coincide with our 10 year marriage anniversary. Time flies dear friends. Its amazing how our marriage survived the worst of conditions including tons of relocations even across countries, renovations and more of those, two pregnancies and strong cravings and debates on whether to pay or not to pay debt off. What kept us so happy is having a common goal and values.

If you are a parent, remember that, investing in your health and spirituality is even more important than ensuring a better financial future for your kids. Our children don't need money but us alive for long.

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Monthly Spending and Budget Report

Two months ago I started tracking my income and spending and that has made me a much better investor. Before that, I never knew how much of a consumer I was. Being conscious of your spending can be so healthy. I still hate drawing a budget but I am so aware of where my money comes from and where it goes. I am asking myself why I didnt start this blog earlier. I even decided to live in my house and stop house hunting because, for some reason my house is not that small anymore. Thats what this monthly spending report has done to me.

INCOME	% OF TOTAL	NOTES
Real Estate	50%	Percentage gone down because of increse in allowance.
Hubby Allowance	32%	Doubled, I took all the real estate responsibility.
Once off	9%	Gift from family
Online	9%	About $100 growth this month.
Dividends	1%	This is where I wana grow now.

My income went up but its an artificial growth because its all coming from my family. My online income is what is growing steadily. I got a good $100 increase this month. I hope to see another $100 increase in November.

ITEM	%OF INCOME	NOTES
Real Estate	22.4%	1 mortgage & taxes/rates
RA & Unit Trusts	6.5%	Fixed
Loan to Business	7.7%	Online income slowly taking care of business.
Internet/ Phones	0.9%	Glad I could reduce this.
Consumer	0.6%	Hubby took care of groceries. And I spent a negligible amount here.
Bank Fees	0.3%	Need to pay my bank a visit.
Giving	7.4%
Left for investing	54.1%	Never had 50% left over to re-invest  before.

I nearly had a trip in October, which is postponed to November. Meaning my spending in November will be higher. October has been great in that I had an extra 54% left over at the end of it all. This means my savings are getting a boost. My properties are fully let, no vacancy. I will be replacing some closet doors though, which means November will be a pricey month.

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Early Retirement or Semi Retirement

Early Retirement Extreme

Depending on my mood or on the asker, I say I am on early retirement or semi retirement. Its quite scary to be outside of the formal employment, for some strange reason. But I find the new definitions of retirement (financial independence) less overwhelming. In 2013, when my loooong holiday is over, I have to take a decision whether I go back to work or make my retirement permanent. Whilst having those amazing options is great, its equally scary. "What if real estate investment world goes sour? What if the stocks we have are hard hit?" That should be normal right?

Personal finance blogs like Jacob, the author of the book "Early Retirement Extreme" have been my biggest motivation. Now I know its very possible. I have to admit though, I spent most of my life making extra income from my properties, and CONSUMING it at frightening rates. Whats with extravagant houses, embraced consumerism and 2 hour commuting days, just to go to work and back home. Lots of my money has polluted the air and caused some harm in the environment. Looking back makes me stronger though, so no regrets. Aren't I lucky that even at my rate of consumerism I failed to go into debt.

Now that I have my priorities straight, I am grateful to PF bloggers and random people I meet with amazing stories like the guy we met at my son's school fundraising event. He is an engineer the hubby once took me with to go see at his work. He tells us that he has walked away from his job because he doesn't want to be defined and limited by a box. I supposed that's a cubicle or corner office he is referring to. "So, what are you now doing?" I asked with my ears wide open (thanks to a noisy music background). "I am taking 2 months to myself, just to think of what I want to do with my life". Hubby was impressed by the 2 months, maybe a teeny weeny jealousy too. We never stopped talking about this guy for another day. The truth is that, most people cant go a week without their jobs. Yet this guy looked more alive than when I met him in his office, past his personal assistant. How liberating being at home with your loved ones is, as opposed to being in an office with a PA and people doing whatever you require of them. That's what I will choose in 2013. I will choose my kids, my family, my home again and again.

I will go back to work for 3 - 6 months in 2013 to tie loose ends or rather to loosen tight ends. So am I in Early Retirement or Semi Retirement? I don't care to define it, I am just enjoying myself, my family and my life. I love preparing a healthy breakfast and lunch snack for my son. I enjoy being there with a warm hug to welcome him when he comes back from school. I enjoy working with my daughter's noise in the background. My investments give me a cash flow which is 50% of my previous salary, but I am happier spending 50% less. I choose that. I am saving myself and the planet and that puts the smile on my face.

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How Much Rent to Charge

Determining how much rent to charge does seem easy, I know. Just survey a few comparables, look at what a neighbor charges and what the other landlord in the similar property gets...that easy. NO, in my 10 years as a small real estate investor, I find determining rental levels quite complex. Even when the property has been occupied by a tenant before, one cannot just assume that the last rental paid by the previous tenant, is the one to be asked from the next. The landlord may have to reduce the rent he/she charges because of the changes in the economic conditions, changes in the property and neighborhood, etc. Similarly, he/she can increase because of those changes or because when those changes occurred, he/she couldn't change the rent high enough for the tenant. (You may also be interested in my article on things to consider when buying a rental property)

Every time you have a vacancy, you go back to research on the "going" rental rates. Firstly, if you haven't already read our articles on preparing the property for rent and one on how to market a property, you may like them. Pointers to How Much Rent to Charge: 

Property Appearance from the Outside

1. How the garden, paint, windows (and window treatments), design, driveways, etc, are, play a role in how much of the tenant's hard earned cash he is willing to part with. 
2. Clutter in your driveway, porches or garden will cost you a lot in rental you charge. The house has to be de-cluttered to be shown to potential clients.
3. The whole character of the building, even in multifamily dwellings will affect the rental rate.You will need to bring out the curb appeal of the property.
4. Preparations for the show-house involve some work on the whole "look and feel" of the place. That's what prospective tenants see first, and we know how powerful the first impress ions are. 

Property Appearance from the Inside

1. The layout of the rental unit may be outdated. One may think of changing the internal plan, if the rental increase justifies the cost. In some cases, a few dollars difference in rental doesn't justify the thousands of dollars to be spent on breaking walls.
2. The piping and fixtures also have an effect on how much rent a landlord can charge. A house with outdated lamps is expected to bring in lower income than the one with modern chandeliers. A landlord has to keep updating the fixtures with modern and more economic ones. Older technology costs a lot more to use in electric bills, etc.
3. Finishes are probably the most influential in the tenant's decision to take the place or "pass". Cracked tiles, missing wooden floor pieces, broken blinds, stiff door knobs, and hanging closet doors are not going to get you the best tenant, let alone your landlord neighbor's rent.
4. The best views will earn you slightly more than your neighbor facing the cemetery. Pair that with a balcony with appropriate seating, and you score a great tenant and a few hundreds of dollars.
5. De-clutter again. Nothing is as costly as clutter. Unlike buyers, prospective tenants wont look at the potential. Why should they look beyond clutter, when they have a few options?

More for Multifamily Dwellings
Some of the factors that affect multifamily units are not in the landlord's control. This is more so when the landlord doesn't own the whole building. The landlord should try to be active in the homeowner association (HOA) to have an influence in how the place is run and managed. The following are a few factors that determine "how much rent to charge":

1. Cleanliness and appearance of lobbies and corridors
2. Lifts, doors, stairs, floors
3. storerooms, gardens, garages
4. Employees and their attitude
5. Noise, etc

As a landlord, you should keep up with the trends in the rental rates in the area where you have invested. I do that all the time. Even when I have appointed a property manager. As an investor, its in my best interest to keep with trends and changes that affect my investment. Now, let me go email the photos of the duplex that I have available from 1 October. It has to get a tenant for me to keep on building that emergency fund. The place was remodeled just over a year ago in preparation for the tenant who is leaving end of September. All I need is a reliable handyman to fix the tiny issues like window rails. And then the screening of prospective tenants begins.

Wishing you a great week ahead. Let me know how you also determine "How Much Rent to Charge" in your own properties.

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Tenants' Rights and Landlord Obligations

Tenants' Rights and Landlord Obligations

Over and above the tenants' rights and entitlement to certain minimum standards of accommodation, I would love to think that I go an extra mile to provide my tenants with comfort. I have never rented a unit I wouldn't occupy myself. I pride myself in that. I believe its for that reason that I received an email more than twice from my new tenant declaring her love for her new home... makes me happy. 

*to your left is the image of when this property was being remodeled in 2010. It was really bad*

Off course my tenant has filled my move in move out checklist and identified the following to be faulty.  

Tenant’s checklist

1. Kitchen stove’s plug came off the wall
2. Bathroom sink is cracked. It may start leaking.
3. There is a problem with the bath drainage system. It is quite urgent.
4. Guest toilet sink is coming off the wall and needs to be attached.
5. All bedroom cupboard doors need to be replaced or re-attached. They are loose at the hinges.
6. 1 bedroom cupboard shelves need to be replaced.
7. The balcony door doesn’t close properly.
8. Geyser (water heating) cupboard needs to be closed 
9. The toilet seats in both toilets are broken
10.  The bathroom mirror is broken

I may have missed on telling you that this property was completely remodeled just over a year ago to prepare it for rental. Why does stuff have so much short shelf life when it comes to rental property and tenants? I am happy that there is no major project, but the small repairs do add up and can become too costly.
Having a tenant who seems to be reliable helps though. I hope she keeps being that way. And a huge bonus is that I got me a handyman again. He came highly recommended. I don't think I will easily bounce back if he disappoints me. I trust the property manager who recommended him.

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Monthly Spending and Budgeting Report

Last month I started tracking my expenditure and drawing a budget, sort of. I am very glad I did. My impulsive spending has been tamed, remarkably. I even took over a few financial responsibilities from hubby's hands. Here we go:

Income

Real Estate = 64%

Allowance = 22% (I get this from hubby because all work from home spouses do, I think.)

Online =13% (This is growing, makes me very glad. The $500 per month target is so close)

Surprise Dividends = 1% (not worth talking about)

 Expenditure

Real Estate = 42% (about $300 more this month due to the added tasks taken from hubby's hands)

Gifts = 10%

Home Making = 6%

Small Investments/ Policies = 7%

Phone & internet = 2%

Loan to my small business = 9%

Left for Investments = 23%

I realized that other personal finance bloggers write the amounts. I don't think I'm ready to that for now. I am not frugal, I just work hard at increasing my income streams. I now have the luxury of working from home and spending a great amount of time with my daughter and son (after school). Nothing compares to that, but going back to work part time is an option that I never completely crossed off my list.
I did stick to my budget guide. Nothing beats writing stuff down to help one commit. I took over paying taxes and gas for our holiday place from hubby. Lets just say, we have to have this home. Its a necessary temporary expense.

I still cant believe I managed to remain with more than 20% of my income to invest or save. It makes me feel so responsible about my future and that of my kids.
A huge plus on the income front is that I got a tenant for the duplex that was to be vacant this month. Whoohooo! My new single mom tenant is happy and unpacking her stuff. Tomorrow is the day she sends me her wish list---SIGH.

I will be happy to maintain my budget as it is this month. I will be fixing minor stuff in the duplex which takes me a little out of my budget. This blog is my best time investment for the year.

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Buying Shares in an Unlisted Company

I have just started drawing my "well thought" strategy on buying stocks and bonds. All I have been doing was what I really cant explain. I do have some stocks, which earn me a few dollars in dividends. With the end of the month fast approaching and me being so nervous about implementing my strategy. Then boom! someone I respect so much sends me an email, presenting an opportunity for me to buy shares from her unlisted company. 

I was excited but that seemed like I am back to where I was before drawing my strategy. More research, more strategies, etc. Her company is also in real estate. I believe in her business concept, I like her model but I needed to do a lot of thinking and hubby chat. This is about $60,000 of my family savings we are talking about. Let me summarize her initial email.

"I was asked today by *company A* if I would consider selling shares in my company. My first instinct was YES, but immediately thought…. With WHOM? Please let me know if you are ever interested to take up shares in my company..." 

 I was so humbled that this experienced business person thought of me when approached by someone I imagined to be a bigger business person than myself. I then thought too fast, like I always do when overly excited. I called the hubby---- its great being married, it kind of cools you down a bit and gives the well needed time lag. And the fact that my hubby is not as impulsive and more on the averse side of risk helps. This time he too was excited. More excited for me to get some recognition and first option to buy. 

A few emails to and fro later, I got some details on what the business is doing. This was still exciting but the costs were changing per email. I think its just inaccuracies with calculating. I do trust this possible business partner, but I think I need to think some more. I told the possible partner that I am definitely interested. I later tried to calm myself so I can think netter. All the risks involved in a transaction of this nature came tumbling down. All I could think of was:

• Its still bad economic times, how well can this company be doing? Aren't they trying to just raise cash because the company is in a tight financial corner?;
• Are the shares really worth what is asked from me? Would I be able to get the same dollar's worth or more, should I want to sell?;
• These shares are definitely illiquid. When I decided to get more stocks, I wanted more liquid assets and a more diversified portfolio. Am I not going backwards by tying my money on a business that I hope will do well, without an easy way out?;
• How much power/ influence will these shares give to me? I would love to be more hands on and involved in the decision making. The possible partner loves my ideas in general, but that doesn't mean that I will automatically have a huge say in what goes. My shares are a tiny percentage.;
• Is the information on performance of the company that I will get not biased?;
• Am I not moving backwards and dumping my beautiful plan of acquiring listed shares in and outside the country?

Why is it so difficult to take a decision. The thought of investing in the company is exciting and the risk so overwhelming. Its only two days before the implementation of my new "before this incidence" strategy and I think I should continue with it. I should probably take some time to think about this.

Would you consider buying shares in an unlisted company?

 

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Tenants Making too much Noise

Another complaint about one of my tenants making too much noise came via email this morning. What to do when you are this far from the problem. My neighbor who owns the duplex next door emails me

...there has been a lot of noise from your duplex recently. Its male voices mostly. I also get the impression that there are a few extra people living there now.

My great neighbor had to specify that its male voices because my tenant is a single mom with 1 child. Its difficult for me to just take this at face value as there may be some neighbor conflicts that exist. I thanked her and promised to deal with it. A huge sigh later, I sent my tenant an email to say "I dont say you did this, but this is a complaint I received, I just want to get your side of the story, Sorting this out immediately is good for all of us..." and a lot of other yada-yada. I dont want to unnecessarily upset an otherwise good tenant. Do you notice I was being overly polite and lacked some confidence???

My tenant didn't notice that. She was really pissed to say the least.

Yes we had some noise discussion with (neighbor). It only happened when I came in late with the car music. It stopped immediately she complained. There is no additional people, its me, partner (new fiance or hubby), daughter and person 4. And that is still in line with the agreement we have. If that is a problem I would ask for a month to look for somewhere else to live.

She went on to explain how other neighbors are making noise. How that is never addressed. Parties, etc. And at the end thanked me for letting her know. I do hope that she doesn't go confront and fight with the neighbor. I didn't mention the name of the neighbor but my tenant knew who she was. At the end, I am left with more problems to take care of. My tenant started listing the problems she has with other neighbors neatly. I am actually glad she did so that I try to have them sorted out. I only wish she complained earlier.

What it means is that I should add a clause about noise in my contracts going forward. I always have a separate sheet of the rules in the tenants' files. Ten years later, I learn how to work better. To think I have so much in my hands already with the one tenant moving out end of September and one moving in beginning of October. That means I have to prepare the duplex for tenants whilst it still has the outgoing tenants. The only positive thing is that, I didn't struggle to get a new tenant, and I didn't have to lower the rent.

I am now looking at buying a property I can convert into duplexes. I never did any property that needs structural changes like that. It will be a nice challenge shopping for a house with a good size land, changing it into nice duplexes with separate entrances. I cant wait.

Do you ever get complaints about tenants making too much noise? or its just my luck!

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Rocky Start at Stocks, Bonds and Funds

I am trying to get my claws deep in the alternative forms of investment. I know I actually waste a lot of time on the education part of everything, but it always pays off.  I think. For a long time, the words shares, stocks, funds, etc, scared me. That's the main reason I started to even consider them as an investment alternative, late in my life.

My very first glimpse at the stocks was when  was 28 or 29, just married and living in a 2 bedroom apartment with my new hubby. I remember how excited he was to start trading in the stock exchange when a guy who called and came for a visit to explain this to us. The guy was actually selling a software which made it "too easy" to be rich. The software does everything and actually indicates the perfect time for you to buy or sell shares. It was just a "miracle". Being gullible and naive, I never stopped and wondered why the guy is in my apartment in the early hours of the evening, teaching us how some software works, instead of using it in the comfort of his mansion, making money.

Hubby was sold and fascinated by this. I was too, but I was not about to play the "scary game", not unless I get some training. I know, I am stiff like that. I had my first apartment making me a comfortable rent check every month and a job that was taking me nowhere slowly financially. In all, this was a perfect solution for our young family to start on a journey to wealth. The software was not cheap, but it was worth it....so we thought at the time.

The Rocky Start
None of us understood the stocks well enough to actually be confident enough to let money go. We actually didnt have enough of money to be investing. I was pregnant and all I was thinking of, was having a house with the garden in the suburbs to be able to raise my child. And yes, it felt wrong to raise a child in that apartment, without a garden for my son to play. I look back and shake my head. We did buy the house with a huge garden, which was a pain to maintain. *side-note* But at the end we got good profits from the sale of the house when we moved to the smaller home.

The project failed but we still had to pay the software guys for 3 years, monthly. Can you imagine the pain. But we did learn a lesson. So bad learning from your mistake. By this time I knew that I have to give the playing in the stock exchange to experts.

My Tiny Stocks Portfolio
I then started buying into funds in 2005. Off course I wanted nothing to do with the day-to-day business of buying and selling shares. Actually it was so bad that, I have various accounts handled by various groups of financial gurus, but I never even bothered to check how the individual shares performed. I was not interested and it was not necessary because I was paying people to do it...so ignorant.

This blog is my personal finance conscience in black and white. The moment I started it, I woke up to my over-spending and relaxed investing attitude. I spent the whole decade focusing on my real estate investments. I am thrilled that it pays my bills, but I think I am ready for more.

My new "Stocks, Bonds and Funds"  Plan goes:
The plan for the emergency fund goes out the window... sort of. I reckon I have access to enough "cheap cash", which can serve as an emergency fund. I love liquidity but not that much. My access bond is great for that. **Access bond is a type of mortgage that permits borrowers to take out loans against extra capital paid into the account, home-loan interest rates being lower than interest rates on other forms of credit.** SO we have overpaid on our one mortgage so that we save on the interest, whilst the extra money is also available should we need it. That's perfect as a cushion for the property emergency fund. That's a lot more than I'll ever need at one time. So emergency fund, sorted.

The $300+ that I was planning to use to build the emergency fund will then be redirected to the stocks, bonds, funds, and whatever clever people call them. Watch me fly now and growing that net worth from October 1. No regrets for taking this long.

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Why I Dont Pay off my Mortgage

I am a PF blog hopper and I read blogs of people who are fighting student loans, trying to pay off mortgage, conquered debt, investing, living in financial freedom, etc. I am right in the middle, working my way towards financial freedom. The only debt I have is mortgage on two properties. I have no credit card, or any other debt.


This is why I don't pay off my mortgage:
When I started investing in property back in 2001, everyone was preaching the "pay your mortgage early" sermon. It was at a point where I was a sponge, absorbing any personal finance information available. I was buying books and books on investing and finances in general. I am very glad I did. However, not everything written is right for everyone. The heck, not everything is correct period.

I remember Suze Orman and her passion on this subject. It made perfect sense. It still does for one's primary home in my opinion. So why  am I not paying off my one errrrrr two mortgage debts quick? There are several reasons why its not always advisable to pay off the mortgage instead of saving or investing elsewhere. Before  get to the small list of my reasons, know this....I paid my first apartment off in just under four years. I was over the moon. Now back to the reasons I wouldn't dare:

• Leverage

I wouldn't even be investing in property if it were not for leverage. Why use my money when I can use someone else's (the bank's)? My sort of twisted thinking just doesn't allow me to prioritize paying off mortgage when I could be building my savings, strong emergency fund and investing elsewhere. There is a higher risk to me not having enough savings than paying more to my mortgage.

• Illiquidity

Think about what would happen in the unlikely event that all five of my properties become vacant? My cash flow would be hammered, I would not have money to pay for the two mortgages, and eventually, I would probably lose them all. The money paid into the property is gone. Cash is really king. One needs cash reserves for whenever there is a need and an emergency.

• Cost

It makes no sense paying the cheap debt when you have an expensive one. People who owe on high interest credit cards would be a bit foolish to pay on the mortgage with today's low interest rates. 

• Tax

There are tax benefits that come with a mortgage. Think about how those will put more in your pocket at the end of the year.

• Other Investment Options

With interest rates being this low, one can get a better rate by investing elsewhere. Shouldn't I be putting more money into my retirement plans instead of paying it into the property? Which is bringing in more interest. How about other investment options like stocks, bonds, etc?

I am not about to pay off my mortgages at the expense of my emergency fund. If anything, I will just invest elsewhere, or even get another unit. I do have cash flow to service property debt. This is also not a one size fits all. It depends on whether your property is your primary residence or an investment property, how much other debt you have and whether your portfolio is balanced or not. Think about your priorities. Should you lose your job/ main source of income, will you have enough insurance cover? How are you going to live, until you get your next job?

The bullet points above are reasons why I don't pay off my mortgage. I know most people, including my wonderful hubby, don't quite get it. He is uncomfortable with the debt. I say its a good debt.

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Multiple Tenants on the Lease Agreement

I hope I never deal with a sticky situation of multiple tenants on the lease agreement. When it comes to one of the tenants leaving, it can get very ugly. It reminded me of why I never had a roommate.

I was away from town when my new apartment was on the market. I hired my best friend to show it. This friend of mine is very much like me. If I wouldn't be the one who gets a perfect tenant for my newly remodeled duplex, she would. She showed a few prospective tenants and liked three young professional girls. They were going to share this three bedroom. She liked them a lot, and I did too. After doing the screening, that was it, my girls moved in. All three were having entry level office jobs. But I really didn't mind as they were sharing among themselves and together could afford the place.

Joint Tenant Lease
They signed a lease (one signed and two were just declared to be sharing the space) but I treated them as "a tenant" combined. I dealt with a deposit from one source and monthly rental from one source. One of them was the main contact but they all signed the contract as some "living with tenant" people. these tenants were a dream to work with until roommate X wanted out before the end of the term. I know better than keeping people because of the contract term. The question was more about the other two tenants. That was not my responsibility but I had to jump in to help out so that we get everyone happy.

Her original email goes:

Hi me

This is to inform you that i will be moving out 30 April

This is to hand in my 30 day notice as I have to unfortunately  move back home due to unforeseen circumstances

There is a person interested in taking over the room but I am not sure how serious they are

I will have to ask that we also eliminate my name from the contract as I will no longer be living at the apartment

Another reason for handing  the notice in is in case the person interested in the room does not come to the table; how would we work the deposit money situation

I have enjoyed having you as our landlord and is with total sadness that I have to unfortunately leave.

The other 2 girls will still be staying in the apartment.

Not only was I losing great tenants, I was also struggling to get a way to really handle this. I never wanted to do the joint rental, but tenant X was under the impression that, they were in joint lease. I had to point her at the contract and suggested that they all serve the notice and the two tenants Y and Z re-apply with the new tenant A. I hate tempering with the contract.

She off course naively decided to give her rights to the new tenant A, and stay in the contract. At this point I wanted to rather lose these girls than take on a new one. At the end we took the new tenant A, amended the contract to remove tenant X and added tenant A. All I was thinking about, was setting a bad precedence. What to do if this happens again. And indeed, only four months later, the other tenant, tenant Y wants out. I was not going to entertain anymore drama, I decided to deal with a vacancy instead. 


What I've learned from this is:

• I am not interested to know who stays with whom, I only deal with my one tenant and I know the number of occupants, and I monitor that,
• I stick to the terms of the lease agreement, no bending of rules to accommodate the tenant, unless absolutely necessary and legal,
• Never to entertain multiple tenants for one place.

Its always sad losing the best tenants but I suspect my one applicant will be my new favorite tenant. I am curious to know if other small landlords do sign on multiple tenants on the lease agreement. There has to be an easy way to handle it. I choose to stay out of it for now.

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Complaints Against Tenants

Yesterday, I got an email with the subject "complaints against tenants" from the homeowner association's administration. I knew that I am in big trouble.

Dear owner

 We have received complaints against your tenants

Their children have been playing in the estate and throwing rocks at the other units. 

They cracked a window at unit 5 , we have already notified the other children’s parents who were involved.

Please let me know who you wish to resolve this. We can either obtain a quotation from a contractor to fix the window and split the costs between you and the other unit’s owner or you can speak to your tenants and let them fix the window at their own cost.

Please get back to me regarding this on or before the 19^th of September 2011.

I've never had problems with this unit. Its in a very up market area. I could imagine how furious the owner is. What made me feel better, as I'm out of town/ country, was that this is one of the units that have the property manager. I responded to both the admin lady and copied the property manager.

I am very sorry to hear this xxx. I am copying *property manager*, my letting agent in this email. I never experienced problems in the estate before. I apologize. *property manager* will work it out with the tenant (his client).

These are the times that make me happy to have a property manager. At this point I thought I have transferred all the responsibility. The admin girl will just deal with the property manager to sort this out. The next email will definitely be to say "its sorted, at the tenant's cost". Oh well, the next email did come:

Thank you

The tenant of unit 5 did speak to the parents and they did apologize and agree to pay half of the expenses

This is the first incidence and clearly these tenants are not bad. Then I went on with my business. And then another email:

Thanks *admin girl*. I appreciate the great job *admin company* is doing in taking care of my investment. Let me know if we (*property manager* and I) need to intervene at any point.

I have to say things like this because I'm too nice you know! Well now I assumed that's over until the *admin girl* sent the last email:

Hi

 Could  you please arrange with your letting agent to speak with the tenant again, the contractor is their today for the quotation, will forward it to you as soon as I receive it

 Why am I in this business. If this were shares, I wouldn't even know there are problems with a property the fund has invested in. But I cant help it, this is my first love. I am still learning the share trading and for now, happy to have a broker taking care of my interests. Maybe next year.
 
The interesting part is that, my property manager didn't respond to any of the emails. Yes he paid attention to the problem but he never responded to any of the emails. My last email was that I hope he was following the conversation with *admin girl* about complaints against tenants. I then added that, its quite urgent. I still got no email back.
I think people need more communication skills. More so when they are in a services business. Everything is all about communication. I needed that for peace of mind. Everything was sorted, so I must get over it.

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Evicting my Tenant

the most popular of my rental properties

When I started investing in real estate, I hired a property manager. The whole rent and property management was too overwhelming. I had a full time job and thought its impossible to juggle my job, a small family and a real estate business. Besides, my property manager did get me my first rental apartment, then got me the one I was then renting out. He was and still is pretty easy to work with.

But what made me think he was the best manager I could get? I have no idea. It could be the instant client-service provider chemistry. Or the fact that I was young and naive and my apartment is low maintenance. I later learned that I have to do a bit of managing him, which I never found strange. I followed the trends in the market and informed him when there needed to be changes in my property. Even when the tenant sublet the property, I knew first and he didn't. I came with the solution to it, worked it with the new tenant and informed him to draw contracts. But still, I didn't feel like he is not doing a proper job. We flipped the second property we got and I bought my first 3 bedroom duplex.

Naturally, I gave my property manager a call. He worked on it, got tenants, etc. I got to know the tenants because they came in whilst we were doing finishing touches. They were two local, young professionals and an international student, sharing. These youngsters were great, and they kept in touch. Their relationship went sour and they left the duplex in great shape and my property manager got a new tenant. This tenant never complained at all, not about the place, breaking stuff, parking problems, nothing. It was such a breeze having her. I thought "having a property manager is the best investment of all", because obviously, he was handling everything with the tenant.

Evicting my Tenant
Whilst doing a routine property view for maintenance purposes, I visited the property by an appointment with the manager. The message never reached the tenant, and I was there with the maintenance company. The living area looked great I was so impressed. We then moved to the kitchen, which was in a bad state, the sink area was totally unhygienic, the bedroom carpets were worn out and so was the TV room, the bathrooms were a health hazard, the staircase was full of DIY awkward nails, the study room was turned fourth bedroom and I saw seven of them. The main tenant was still at work. We walked into the garden, it was so bad, never maintained, overgrown, the front porch looked bad. I couldn't wait to call the property manager. I wrote him to immediately evict his tenants as the place is "not suitable for occupancy". I gave them 1 month to be out of the place. That was it.

Remodeling the Property
Seeing that the property was vandalized by tenants, I had to remodel it immediately. I got a company to work on it and that was my worst nightmare. My contractors were worse than my tenants and I had to fire them with some of my money. I soon forgot about the tenant nightmare. Its now a year later, the place is looking better, and we kept it vacant as a holiday home for our family and our siblings. We do spoil our siblings. But we won't keep it vacant forever. But it suits us having it open for our personal use at the moment.

I learned a lot about property managers, contractors and myself in this process. And NO, I didn't fire my property manager because I left the city and didn't want to work with a new person. He manages 2 of my properties. Could this be separation anxiety? I really take better care of my units now whether I have a property manager or not. 

Did you ever have to evict your tenant? How did you do it? How easy was it?

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Enforcing Lease Terms

Let me the first to admit that I'm not always good with enforcing lease terms in the lease agreements with the tenants. I tend to be lenient, more so with the tenants I know. And yes, I rent properties to people I know, and other than the fact that they do negotiate sometimes, they are proving to be better that my average tenant. Anyways, I try to do a better job at screening to get the tenants that are unlikely to default on the contract terms. I still get late rental payments, but it can be worse, I count my blessings.

The Terms I never tolerate include:

• High Number of Occupants

A maximum of four people in a two bedroom (double bedrooms) is a general rule. That would be a couple with two kids. I hardly ever get maximum though. My new single mom applicant for a three bedroom duplex has four kids. But two are in college already. I had an overcrowded unit, which was sadly let by my property manager. I guess they didn't declare their room mates. I managed to evict them, nicely.

• General Neighborhood Rules

A tenant is your responsibility, not the neighbors'. I find the tenants in multifamily dwellings to be an even higher responsibility. There are always long lists of rules to ensure a harmonized life. Every time I get a new list of rules, I replace the old one in the tenant files, and email it to the tenant. These are simple rules like the keeping of pets, speed limit in the community, allocated parking spaces, or taking care of the gardens and porches. 


I find that playing my own part helps ease enforcing the lease terms in the agreement with the tenant. This is not a one sided process. One of the best ways to retain the best tenant is having a landlord take care of the property. The reliable and well paying tenants demand the best space. It is fair that way. I strive to keep the place well maintained. I am yet to find a reliable handyman though. I haven't been lucky in that department. 


I also keep the lines of communication wide open. My tenants email/ call/ text me anytime. They know they can. Their advantage is that I only have five units, unlike the property manager looking after tens of units. A friend of a friend was managing 40 units. That's a lot of properties to manage without an assistant, I think. I find that, if I communicate more with my tenants, they take better care of my properties. And this is not the case with properties that are managed by a third party. 


Continuous improvements on the place also add to the satisfaction of the tenant. I usually make a small improvement with every rent increase. When the rent went up in one duplex, I asked the tenant to give a list of things she would love to have changed. Its usually small things like the change we make in our own homes. It doesn't have to be costly. Sometimes we spend a lot more on repairing an oven than it would cost to replace it with a new one. 
Yesterday I shared my move-in and move-out tenant/ landlord check list. Feel free to edit and use it. From enforcing lease terms to the latest post.

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Move-in and Move-out Tenant/ Landlord Check List

Move-in and Move-out Tenant/ Landlord Check List for Property Condition

Property Name/ Adress ______________________________________________

A new tenant should complete the rental property checklist with the landlord within three days of moving in. That’s how I do it. If there are any defects and faulty appliances, that will be stated in the form in writing. This checklist is what helps both me (landlord) and my tenant when he/she is moving out. You will notice that it’s not complete; there are some of the appliances that are not included in some units. Feel free to copy it and paste in MS word and edit to your satisfaction.
 

Living Room	Condition on Arrival	Condition on Departure
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Kitchen
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Stove & Oven
Counters
Cupboards
Other
Dining Room
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Bathroom 1
Floor
Sink and Counter
Shower
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Bathroom 2
Floor
Sink and Counter
Shower
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Bedroom 1
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Bedroom 2
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Bedroom 3
Floor & Floor Covering
Walls & Ceiling
Light Fixtures
Windows, Doors & Rails
Other
Other Areas & Fixtures
Floor & Floor Covering
Windows, Doors & Rails
Wall & Ceiling
Heater
Air Conditioning (if any)
Lawn/Ground Covering
Patio, Balcony, Deck
Other

Completed and signed at the beginning of the tenancy

Date_____________________ by

________________________ Landlord and ____________________ Tenant.

Completed at the end of the tenancy

Date_____________________ by

________________________ Landlord and ____________________ Tenant.

Like I said, feel free to copy and paste it in MS Word and edit it if you like. Its basic and has a lot of gaps. Its meant for specific tenants in my portfolio. I also edit it with every tenant/ property. I also use this checklist when I am preparing the property for rental. It helps me as I check defects that need fixing before my tenant moves in.

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