My Wealth Journey

This is why you should carefully screen your tenants, especially for Section 8.

I got back my tax return for my personal and corporation from my CPA and I’m getting money back this year instead of owing money! To be fair, I made more money from my affiliate marketing in 2005 than 2006 but I also was able to take advantage of my rental properties’ depreciation and added money to my SEP IRA to reduce my taxes I would have to pay. The CPA charged $600 for the corporate return and $250 for my personal.

For those of you who don’t have real estate holdings, see if you can pick up something that cashflows to take advantage of depreciation and build up equity. Finding properties that cashflow will be tough unless you head to the midwest and put down 5-20% on a property. Again, don’t buy a property solely for tax depreciation but if the deal makes sense, and can get a good deal, a rental property is great come tax time. Obviously, be careful about buying homes in warzones and areas you wouldn’t feel comfortable living in unless you feel you can handle it. My holdings are all out of state so I try to avoid those area. There are people who make a ton of money buying in warzones but I don’t think I have the heart for it.

The subprime market has officially imploded. Fremont General has physically closed its doors in their Orange County offices while looking for a buyer for their subprime lending unit. New Century is facing possibly criminal charges. Stocks of Fremont, New Century, Novastar, Countrywide and other subprime lenders have dropped like the world coming to an end. New Century went from a little over $30 to $15 to under $5 in less than a month.

Most experts saw this coming. Heck, it doesn’t take an expert to see this coming. It is only common sense to realize that someone making $30,000 a year can’t afford to pay for a $600,000 home. Even at $90,000, a mortgage for a $600,000 home will be tough.

I don’t think we have seen the worse yet as there will be certainly borrowers  with good credit will stretched the truth in their loan application in order to afford a $800,000 home.

A coworker that reserved a preconstruction home in the Phoenix area (even after my recommendation not to) told me that his real estate agent called and told him the home he signed a purchase contract at $350k is now being sold for around $280k. I’ve been telling him not to close, which was due for May and now he may actually listen. It is a good thing he only will lose 3k in earnest money.

That is some serious drop! Imagine being a homeowner who closed on the $350k price and now sees the $280k price for a new home!

Am I the only one not seeing the housing market bottom? More and more foreclosures are being filed, especially in the subprime market, prices dropping in areas AND incentives that are NOT factored into the prices. On homes around 300k in the Phoenix area, it is not surprising to see incentives of 25K or more in closing costs and upgrades.

The head guy at the NAR has officially called a bottom and they just released a national advertising blitz saying now is a good time to buy. Isn’t it always a good time to buy according to the realtors?

I fall in the category of those who are waiting to buy a home for me to live in (I do own out of state rental properties) because I think the price levels are insane and cannot be substainable. Just searching through ziprealty’s listings this morning shows some properties have dropped over $80k in a 3 month period and yet there are still no buyers. I have a feeling a lot of homeowners are reducing their prices too slowly or not reducing the prices and simply just relisting on the MLS will get burned within the next year.

I recall a few days ago coming to a listing that had a price reduction of 10K every week for the past 2 months. I kid you not. That is 80k drop in 2 months. Now I bet if they did this all at once instead of trying to get as much as they want (not as much as they can), the home would have been sold already. I’m guessing this homeowner was some flipper who bought the home as an investment and is trying to minimze how much he has lost.

I have a rental home in Saratoga Springs, Utah. For those not familiar with the area, it is a new booming town next to Utah Lake. I was there in the fall of 2005 even though the city was rather small, I could see a ton of homes being built there and the growth potential. I picked up a single family home preconstruction home there with the plan of holding it 3-5 years as I believe the market still has quite a bit of ways to go. I’m hoping for 5% appreciation or more over the next few years.

Anyway, I was able to rent out the home after I closed on it and now that tenant is expecting to move out at the end of this month. I’ve started posting ads on a few online classifieds and have gotten a few people interested but no applications yet. One person is suppose to call the current tenants to setup a time to check out the home so I’ll cross my fingers on that.

I originally filled this home by placing an ad in the local newspaper and am very fortunate that I haven’t had to use a property management company because these tenants are some of the best I’ve ever had! All my other homes, I do use property management.