Property Tax and Escrow tip…
Here is my tip of the week for you.
I have a fairly new house that I bought straight from
a builder back in 2007.
Originally intended to sell it on a lease option
and had someone already signed up for it before
purchasing the home.
Well, the guy was transfered out of state
before he even moved in.
So, we tore up the contract and I refunded
his option fee.
It was the right thing to do.
However, that house has been a tough pill
to swallow for the last year.
As you may know, when you build a new house
the property taxes are based on the price paid for the lot.
They are not readjusted for at least 1-2 years AFTER
the home is completed. At least that’s how it is in Ohio.
Well, I thought I already took the big hit on my
escrow payment last year, as it went up by nearly $300.
Not cool at the time but the property still cash-flowed so
I didn’t pitch too big of a fit since I knew it was coming.
Since then, I sold the home on a land contract and based
most of the downpayment on the First Time homebuyer tax credit.
A great deal by the way and I highly recommend it to help find
a buyer quickly.
If you need a resource to learn how to do that program,
shoot me an e-mail and I’ll send you some info.
(You only have until the end of April to take advantage
of the tax credit as an incentive.)
But I digress…
About a month ago I received my newest escrow analysis
from my lender.
Guess what, my payment is going up by ANOTHER approx $225/month.
Ouch!!! That is going to cause me to have negative cash flow
on that house. To quote Michael Scott, “Nope…Don’t like that…”
What do I do now?
Actually, 3 things could happen here.
I can go back to my buyer and adjust their escrow payment.
I can pitch a fit with my bank but they aren’t going to help much…
I can go bitch at the auditor’s office and try to get them to lower
my property taxes.
Or… a combination of all three.
Here is my game plan.
1) I will go back to my buyer because I clearly stated
in the land contract that this might happen.
However, that is NOT going to be my first step.
I will likely warn them this weekend about it but I will not give them
any firm numbers. I will probably tell them the current number
but tell them I’m going to do everything I can to get that number down.
2) I did call my bank and was a very nice, but confused guy for about 30 minutes with them. (I actually was confused because I couldn’t understand how they so grossly underestimated last years taxes to put me like $1600 behind in the escrow account). After my lengthy discussion, I managed to get them to agree to allow me to make it up over two years instead of one year. That will cut the increase in half, so that will help.
3) I will try to call the auditor’s office, but I sort of missed the deadline for that. Usually they cut those off in February or March. Oops. I will still call, as they may have some provisions to allow for exceptions with our current economy the way it is.
4) I am going to coach my buyers into how they can improve their credit score more quickly and get them qualified for a loan faster. That will get this deal closed quicker and give me the bigger payday faster.
I have about $40,000 of equity tied up in this deal right now that would be better off used elsewhere. 
Still taking a hit profit wise, but I will not take a loss on this house because I bought it right… sort of. I bought it with enough profit… but clearly not with enough cash flow. Otherwise, I would not be in this situation. 
My big lesson here for you is, when you have a problem come up in your business, map out who is involved and what ALL of your possible solutions are. Then, go down your list one by one and start negotiating.
You never know what ANYONE is going to say until you ask. That is why I will be calling the auditor’s office on Monday.
Back to the cash flow topic.
I have decided that I will not be focusing my efforts on single family homes going forward. Actually, I decided that about a year ago and have laid off them completely.
I’m only looking at multi-family properties where the cash flow is higher and I can more easily afford a property manager to take over the daily crap that I don’t want to do.
I have always known that this was the area of real estate I wanted to focus on, but felt I needed to build up a single family portfolio. Well, I’m busy trimming that portfolio down a bit now to free up cash and get less headaches. I’m subsequently boosting my efforts in the multi-family and small commercial markets where I can leverage my time and money MUCH more efficiently.
That is why I’m so interested in the Student Housing market.
It offers much higher cash flows in the right markets.
This is not something I’m going to just jump in blindly though.
I’m learning everything I can.
If you are interested in jumping into that niche, Doug Fath’s coaching program is closing down tonight from what I’ve heard. In fact, he only had about 19 spots left earlier today.
They already had their first coaching call yesterday.
If you don’t want to be left out of the coaching program,
go check it out here.
Not only that, he has a way for you to get in for just $299 today.
That will give you a chance to get in if money is tight right now.
Start learning the program and earn some money in it.
Have a great Easter weekend if you celebrate Easter.
If not, have a phenominal weekend with your family and friends.
To your success,
Marshall
P.S. Don’t forget about the guaranteed funding Doug has for you
(if it’s still available), the iron clad lease agreement, and the
opportunity to wholesale your deals to Doug’s network of buyers.
What more could you ask for in a coaching program?
P.S.S If you have been looking for your shot to really make it big
in real estate, perhaps this is why you joined my list. THIS might
be your shot… will you take it? At least go check out those
videos before he pulls all of them down. I hope I got this to you
soon enough and that you didn’t already miss them… If you did,
I’m sorry.
http://rapidreiresults.com
Disclosure: I am an affiliate for Doug’s program. I firmly believe
in this program and it gets my highest recommendation. I do NOT
recommend products lightly. This is a niche that I feel very
strongly about myself and thought you might be interested as well.
It’s clear to me that Doug knows what he is doing and this program
is strong. With that said, if you decide to purchase Doug’s
program through my link, I will be compensated for the referral.
Regardless of whether you buy it or not, you should check out the videos (If they’re still available) and learn from this guy. He is the real deal.
