Moving up the property ladder

Recently, a current landlord asked advise about purchasing another income property and whether or not it was the way to go. I have always been of the opinion that property is a good investment. Moreover, profitable and reliable property investments are rarely based on just one property, and aren’t usually achieved by buying and holding just one property. Instead, investors should aim to move up the property ladder, whether to diversify investment, increase profit or increase the size of properties to accommodate pets, children, aging parents or all of the above.

If you have already bought your first property, you’ll still vividly remember how difficult it was to get up onto that first rung, however, the hard part isn’t over. It can often be just as difficult to move up to the next rung on the property ladder as it was to get up onto the first one, which is why you need to keep these tips in mind.

Buying and Selling at the Same Time in the Same Price Bracket

Property prices are fluid across time and across different sectors of the market – where the first home market may be experiencing a boom and properties in this price bracket are in high demand (and therefore highly priced) premium properties may be getting heavily discounted. Therefore, if you are looking to move up the property ladder, you have to keep in mind that if you are buying and selling at the same time, in the same price bracket that you are going to be experiencing both the good and the bad of the market at the same time too.

For example, if you are looking to sell your property which has gone up in price 10% in the last 12 months, that is great news as a seller. However, all the other properties in your price range have likely gone up 10% in the last 12 months too, so if you are looking to buy in the same bracket, your equity will have evened out. Luckily, when you are looking at moving up the property ladder, you are also usually looking to move up in the price bracket too so those differences and movements can work in your favour if you look for them.

Value Versus Costs

The value you would get from moving up the property ladder also has to outweigh the costs of that move, either now or in the future. Therefore, start by having your current property valued so you know the exact amount you have to work with in equity, and whether you can find the next property on the ladder which will truly increase your net worth. Unfortunately you may be unpleasantly surprised by the valuation of your current property as some areas of the market are still experiencing a downturn, so you may find a better path up the ladder if you wait out the downturn in your market.

When adding a new property to your portfolio there are also a number of fees and charges to consider, such as:

Stamp duty. Can be a percentage of the purchase price or a set amount depending on your state or territory and your price range.

Mortgage fees. When you buy a new property you’ll need a new mortgage which will come with new valuation fees, application fees, administration fees, legal fees and probably even some ongoing fees.

Deposit. Whether you use your own cash or the equity in another property, your deposit is going to cost you around 10% of the purchase price of the property. Remember that the larger your deposit, the lower your loan to value ratio and if you are able to drop your LVR to 80% or less, you can usually avoid paying lender’s mortgage insurance.

Repayments. Your move to a bigger and better property to move you up the ladder will likely also mean bigger repayments so make sure that your budget allows you to maintain your new position on the ladder, and that you don’t come crashing back down.

Interest. You also need to make sure that your new loan is affordable now and into the future because while interest rates are low while the economy recovers, you need to stress test your loan too, so see whether you’ll still be able to afford your new repayments if interest rates were to go up one to two percent.

Long Term Goals

Moving up the property ladder is not something you should try and do too fast, and you should set long term milestones to achieve in your path to the top. Therefore, remember that if you are already on the first rung of the ladder, you are well on your way, so be patient and don’t worry if your valuation hasn’t come back as high as you would have liked.

In the meantime keep saving and maintaining your current loan. This means keeping current on your repayments and paying more than the minimum where you can to increase the equity in your property. A great way to save when you have a home loan is an offset account, as you’re unlikely to earn more interest in a traditional savings account than you are paying on your home loan, but the funds in an offset account directly reduce the amount of interest you pay on your home loan at the same time.

What to include in a Rental Application.

If you don't already use a written rental application for your property, you should strongly consider implementing one right away. There are many reason on why you should have a written rental application perhaps such as offering you protection should

someone whom you did not select as a tenant decide to pursue a discrimination claim against you. If you have documented the entire application process and the reason/s for not selecting that applicant, you can produce the application and related paperwork to prove your innocence. A written application also makes it easier to check a tenant's references. You'll have all the information you need available in one place, making your job easier and less time-consuming.
Here are some important points to include in a rental application:

Start with personal information. Get your applicant's full name, current home address, work address, phone numbers, and Social Security number drivers licences number and email address.
Include emergency contacts. In the event of an emergency, you may need to reach your tenant's next of kin or another family member. This information also may come in handy if you need to track down a tenant who has skipped out without paying rent.
Ask for references. Ask for at least three different references from your applicants. You also may wish to ask for the contact information for a previous landlord.
Ask about past problems with landlords. Ask the applicant if he or she has had problems with landlords in the past or has had trouble paying rent on time. Aslo the reason for moving there present and past locations
Include a code of conduct. The code of conduct in the rental application must be signed and agreed upon by your applicants. This can help dispel any confusion as to what behavior is and is not acceptable and also should include expectations such as noise level, trash, and pet policy. It can also provide evidence of agreement to the code of conduct should you ever be called upon to produce it.
State the rent and deposit amounts. Include these amounts on the written application to eliminate confusion and accusations that a lower rent amount was promised. Include the length of the rental period, if any, and timing for any possible increased in rent.
Ask for permission to check their credit history or background.If you plan on running credit checks for your new applicants, you will need their authorization. This can be as simple as a paragraph within your application that can be signed or initialed to show acceptance. You can also use an additional document if you so choose.
Inform the applicant that while the home is insured however the policy does not cover their personal belongings and you would recommend the applicant to purchase rental insurance.

Exercise Caution when decking those halls

It’s easy to get swept up into the “spirit of the holidays” but when that spirit includes holiday decorating on rental properties, landlords can quickly fall on a slippery slope when it comes to Fair Housing complaints.
Remember, religious beliefs are protected under anti-discrimination laws. What that means on a practical level is far from clear, but here are some tips to consider:
Religious discrimination rules distinguish between “common” areas like the leasing office, elevators or lobbies, and private residences.
In common areas, avoid overtly religious symbols, like nativity scenes and crucifixes. Courts have found other familiar holiday decor to be “religiously neutral” and therefore a safe bet for decorating. These includes trees, menorahs, Santas, candy canes, lights, and wreaths.
Don’t create the impression that one religion is favored over others. Someone entering for the first time should not be able to pick up on a religious preference, and existing tenants should feel welcome to participate in any celebration or observance. For instance, if residents request equal exposure in holiday displays, include those symbols along with any others.
Within the private residence, allow tenants to display their personal religious symbols. That may include the outer face of their front door.
Call your lawyer if there is any doubt or question about what is appropriate. Fair Housing complaints are expensive to deal with, even if you win.

1099 Bill For Landlords Repealed

As you may or may not recall, there was a significant new tax consequence and reporting requirement introduced for landlords within the Small Business Jobs Act and the healthcare reform bill passed in 2010.

This new reporting requirement was introduced to help the IRS better monitor landlord property expenses by requiring a 1099 to be filed for all independent landlords for payments during the year to any vendor or individual exceeding $600. Examples of 1099 recipients would include: gardeners, landscapers, contractors, property managers and repair services.

Earlier this year with support from Realtors, landlords, and landlord associations such as the NARPM all contacting their representatives to object to this over-reaching reporting requirement; both Congress and President Obama got the message and decided the filing burden was too great for smaller landlords. The requirement for rental property owners to file 1099′s was repealed in May of 2011. The senate voted 87-12 to approve the repeal and it was signed shortly thereafter by Obama.

This is good news for landlords, your 2011 taxes just got a lot easier as you do not now have to collect tax information from your vendors, nor report it on the 1099-MISC form as proposed in the Small Business Jobs Act.

Tips for Lowering your Heating Bills by David Lowe

Farmer’s Almanac is predicting below average temperatures for 75 percent of the country.

Here are five things owners and landlords can do to get ready and reduce their utility bills — and they are easier to do now when it is still warm than wait until winter.
Caulk and seal all windows and doors. Ensure their is no outside air leaking into the house. Also, add insulation to your attic and crawl spaces.
Change your air filters.
Service your furnace or boiler now. Not when the first cold hits and the HVAC companies are the busiest. Also, many utility customers don’t realize that they have an annual service plan that includes a free annual tune up. Check with your utility company first.

Install a programmable thermostat. One of the easiest ways to save by setting back the temperature at times when the home is unoccupied. ControlTemp thermostats can run on a schedule to automatically adjust the temperature through the day and tenants are prevented from disabling the schedule.

Check www.energystar.gov for a list of rebates in your area for energy saving products. Some utilities and municipalities are offering great rebates.

Hurricane Irene Readiness Information

Massachusetts Emergency Management Agency information on Hurricane Irene


Hurricane Irene, a Category 3 storm currently located in the Bahamas is expected to impact Massachusetts as early as this weekend. As of 11:00AM today, the National Hurricane Center's projected track shows Irene passing by the Outer Banks on Saturday, making landfall on Long Island Sunday evening, and passing through Massachusetts Sunday night and Monday morning as a Category 1 or 2 storms, with the possibility of a weak Category 3. Irene is still several days out, however, and the projected track could potentially be off by as much as 200 miles and the projected timing by 6 to 8 hours.

Weather Forecast:

Precipitation: Some isolated thunderstorms are possible tomorrow afternoon and evening. Rains associated with Irene may begin as early as Saturday afternoon, with the bulk of precipitation coming Saturday night through Sunday night. A total of 5 to 10 inches of rain are possible in Massachusetts. There is a significant risk of stream and river flooding, but it is too early at this time to identify which basins are most at risk.

Winds: The most damaging winds will be located to the right of Irene's track. Winds in Massachusetts are forecast to be Category 1 (74-95mph) or Category 2 (95-110mph) but Category 3 (110-130mph) winds are not out of the question. Exact timing of the arrival of damaging winds is highly dependent on Irene's forward speed; Sunday through Sunday night are most likely, but an increase in Irene's speed could bring significant winds as early as Saturday night.

Coastal Flooding: The magnitude of coastal flooding will depend on the exact track, speed, and intensity of Irene, as well as its timing with respect to high tide. The most severe flooding will occur along south-facing coasts, but some flooding is also possible on east-facing coasts if Irene arrives near high tide.

Marine/Beaches: The risk of rip currents will increase starting tomorrow and is expected to remain high through the beginning of next week. Depending on Irene's forward speed, seas may begin building Saturday night and could reach 20-30 feet by Sunday, with the highest seas being to the right of Irene's track.

Online Resources:

For additional information and resources, visit:

Massachusetts Emergency Management Agency at www.mass.gov/mema

Federal Emergency Management Agency at www.fema.gov

National Hurricane Center Website at www.nhc.noaa.gov

National Weather Service – Taunton at www.weather.gov/boston

National Weather Service – Albany, NY at www.weather.gov/albany

Mass211 at www.mass211.org

An Ounce of Prevention .....

A seasoned landlord shared his experiences at the last move out.
His tenant had been in the property long enough to have two more children, and now was moving into a bigger property.
And this landlord could see what was coming next.
“Long-term tenants always seem to do a bad job when they move out,” he explains.
In fact, the longer someone has been a tenant, the harder it is to remember what the place looked like before they moved in, or what the lease says about the move out.
This case was no exception. “I was at the property a couple days before the move doing some repairs,” he continues. “I don’t think this tenant understood that cleaning was her responsibility.”
Of course, every tenant wants their deposit back. The move out can quickly lead to a landlord tenant dispute.
Here, our landlord asked the tenant if she would like to do a walk thru a little early–a “pre-walk thru” if you will, so the landlord could counsel her on what would need to happen in order to get the deposit back. “I really didn’t want to be the one cleaning this up,” he says.
Propping a baby on her lap, the tenant took copious notes, and then got to work.
In the end the unit was clean as a whistle, and the tenant will be getting her deposit back– a true win-win.