Indianapolis, IN: Cash Flow SFH’s & Multi-Units

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How to Handle an Eviction and Why it Pays to Have a Property Manager

evictionWhat is the biggest fear for most first-time landlords you ask? The answer is usually along the lines of, “What happens if my tenant doesn’t pay the rent?”

We’ve all heard horror stories about long, drawn-out evictions. The good news is that evicting tenants for non-payment is rarely necessary with good upfront screening. There is the occasional loss of job, serious accident, or illness that may cause rent payment delay, but it is still very rare to have to evict. Properly executed lease agreements should be clear about the rent due date; specifying the penalty if not received by the 3rd and state the eviction will start on the 10th if not received.

Some states are more “landlord friendly” than others. For example: Texas, Arizona, Indiana, Florida, Tennessee and Georgia all have laws that favor landlords in the event eviction is necessary. Conversely, states such as Massachusetts and California have laws that favor the tenant. It makes sense for the beginning investor to only purchase in landlord friendly states.

The eviction process is normally triggered by a specified date in the lease where if for any reason the rent has not been received, for example by the 10th, the eviction process will begin. The property manager should be monitoring this closely for you and will contact the eviction attorney to proceed if it’s unavoidable. Before it gets to that point, your property manager will have already sent the tenant a notice indicating the intended action. Commonly referred to as a “3-Day Pay or Quit Notice,” this communication alone is often enough to encourage them to pay and avoid the additional costs of attorney’s fees and wrecked credit.

The amount of time the eviction process takes varies by state from 3 days to 3 weeks. Conversely in California the process can take on average 3 to 6 months. It is important to remember that the property manager is normally holding at least one month’s rent as a security deposit, so you will probably not be out any money aside from major repairs if any. The key to not having to evict is doing a good job of tenant screening up front. Typical fees for attorney eviction can run $350.00 or more.

We always recommend having a professional property manager in place for many reasons, one being that they will do all the work and you don’t need to even be there. Property managers normally have an attorney that specializes in evictions and assign all their work to them. The tenant is responsible for court filing fees and attorney fees. If they plan to stay, the tenant must pay the past due rent with late fees and any court filing fees on or before the trial date. Another major benefit to hiring a property manager is that they assume most of the risk by communicating with the tenant and not you, and they know the state laws like the back of their hand.

The upfront screening process that property managers use looks a lot like a loan application. It goes way beyond running a criminal/background check and credit report. Additionally, they will request copies of the last 2 paycheck stubs, verify employment, check previous landlord references, and look for any previous judgments or evictions. Property management will also examine debt-to-income ratios and the prospective tenant’s history of making on-time payments. Checking with the last 2 or 3 landlords is a common practice to determine tenant quality. If the debt-to-income ratio appears to be in line, they usually require a ratio of at least 3 times the rent compared to their gross monthly income to qualify the prospective tenant.

To recap, eviction is rarely a problem with proper upfront tenant screening. In the event eviction becomes necessary, it is best handled by professionals. Good property management is the key to successful rental property ownership!

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Boost Your Cash Flow with Multi-Units in TEXAS!

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How to Become the Bank and Collect “Mailbox Money”

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Introducing the Marshall Reddick Private Financing Program

mortgage approvedAvailable exclusively for properties advertised on, this new financing program offers an easy way for anyone to qualify for affordable financing on buy-and-hold investment property. Used wisely, this program will help countless people achieve their financial goals much sooner than previously possible.

This streamlined approach to financing requires no credit check, no verification of employment, no minimum loan amount, no limit to the amount of mortgages you have, no verification of income, no debt to income ratio, and even has no citizenship requirements. The program can be used to purchase buy and hold properties for the long term or to refinance existing properties.

Our private financing options require a 40% down minimum in order to ensure positive cash flow for the borrower. The secure feeling lenders normally gain through credit checks, income verification, etc. is replaced by the larger down payment and interest. These are also great loan options for people who already have 10 financed properties and find the doors closed at traditional lenders. It would also serve investors who have difficulty qualifying for a loan at a traditional lender due to being self employed and not showing enough income to qualify, or not having enough time on the job but have the investment capital and need the tax shelter write-off. These loan options will allow you to build the property portfolio of your dreams as quickly as you would like to.

All 3 loan options have fixed interest rates as shown below, no ARM loans. Also there is no prepayment penalty after the first 3 years, making them a very flexible investor loan choice.

Here are our 3 loan options available:

1) 15 year fully amortized loan:

  • 40% down
  • 7% interest
  • 3 points if the loan amount is less than $100k
  • 2 points if the loan amount is more than $100k

2) 10 year term, amortized over 30 years:

  • 40% down
  • 7.5% interest
  • 3 points if the loan amount is less than $100k
  • 2 points if the loan amount is more than $100k

3) 30 year fully amortized loan:

  • 40% down
  • 8.5% interest
  • 3 points if the loan amount is less than $100k
  • 2 points if the loan amount is more than $100k

You can see exactly how the cash flows and returns look by visiting the investments section of our website:

Simply click the link above then select any property, then click the tab under Financial Summary that says “Private Financing” and select the loan option of your choice. Qualifying for a loan on an investment purchase just got a LOT easier.

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Understanding Property Taxes

property taxesProperty taxes are calculated as a percentage of the purchase price and vary from state to state and often between counties. Some states have complicated formulas to arrive at the final property tax, but it still usually boils down to a percent of the property value. The county assessor’s website can give you the exact amount.

Taxes are usually re-assessed annually or when a major improvement that requires a building permit is issued, such as for a room addition or putting in a pool.

Here is an example: If the purchase price of the property is $150,000 and the tax rate for the area is 1%, the annual property tax would be $1,500.00.

How often are property taxes paid? The county where you purchase the property is normally the collector of property taxes and they usually bill twice a year, half in April and the other half in December. Property taxes are used to cover things like police, fire, schools, parks, roads and city administrative costs. If there are additional school bonds or other infrastructure taxes attached to the property, they will be billed together with the property taxes. Property taxes left unpaid can cause serious penalties and liens to be placed against your property. It is important to you and the mortgage company not to have a tax lien placed on the property as they are given a priority position over all other liens. Liens can lead to foreclosure if not paid.

Appealing your property tax:  If you feel that your property taxes are too high, perhaps because of a decrease in the value of your home, you may appeal to the county to lower your property tax. The appeal process will vary by county but the forms or information on how to appeal will be available on the county website or the assessor’s office. It is usually not too difficult to apply for and is usually granted if your claim can be substantiated.

How impound accounts work:  Most mortgage lenders will offer to set up a free impound account to pay the property taxes for you when they are due. They do this by collecting 1/12th of your estimated property tax each month when you pay your mortgage and distributing it when due to the county. Since it simplifies bookkeeping for you, and there is no extra charge, we recommend you take advantage of this service. The same can be done with your insurance payments. It helps you to streamline your bill paying.

Which states have the highest/ lowest property taxes? The 3 lowest property tax states are:  Alabama, West Virginia, and Louisiana.  Low property tax states often have lower population densities that require fewer governmental services.

The states with the highest property tax are:  New Jersey, New Hampshire, Connecticut and New York. Higher population densities require more county and city services, such as police, fire, schools, street repair, etc.

Pros & Cons of California Prop 13: As originally drafted by Howard Jarvis in 1978, Prop 13 was designed to assist the elderly on fixed retirement incomes to be able to afford to stay in their homes without fearing property taxes would escalate and force them out. The property tax rate was fixed at 1% of the purchase price with an inflation cap of 2% per year. The other part of Prop 13 requires a two-thirds majority vote in both legislative houses for any state tax rate increases. Local governments have gotten around Prop 13 to some extent by adding Mello-Roos infrastructure liens and/ or school bond liens to the property tax bills. Since most homes in California are re-sold after about 7 years, the revenue loss to the state and counties has been minimal.

It is recommended that you always research the property taxes for the city and county where you are buying. The tax the seller has been paying may or may not be the tax you will pay after purchase. Check with the county assessor’s office prior to purchase. Your agent or title company may be able to do this for you.

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Houston, TX – Market Data Packet

Download our pdf “Houston, TX Market Data Packet”

Houston Booklet Open

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Reddick Property Rating: How to Choose the Best Investments

Download our free eBook “Reddick Property Rating: How to Choose the Best Investments”

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Should You Pay Off Your Loan Faster?

paid loanThe answer to this question is not the same for everyone and is largely dependent on where you are in life and your finances. Typically when you are in your 30’s, 40’s and 50’s (the high income producing years) you benefit from the leverage and the tax shelter of having as many homes as you can afford and using the mortgage interest you pay the bank as a tax write-off. As you approach retirement, it usually makes sense to begin paying off the loans in favor of increased cash flow.

Many of us find it difficult to get ahead when the state and government takes so much out of our paychecks each pay period. As the saying goes, “The more you make, the more they take.” There are many investment opportunities out there, but only rental real estate offers the tax shelter benefits we all desperately need. Think of it as giving yourself a raise at work without having to ask the boss!

By investing in rental income real estate, you can legally create a tax shelter for your income, a way to re-coop some of the taxes they take out of your paycheck. While your employer will still take the taxes out each pay period, you will get a bigger refund when you file your taxes at the end of the year. The tax shelter benefit of owning as few as 5 rental income homes or 2-3 well located multi-units is often enough to legally zero out your income tax responsibility. Ask yourself if you could use an extra $15,000 or $20,000 dollars annually put back into your investing budget?

By purchasing rental real estate and using the tax code to your advantage, you can write off both the interest on the loans and the depreciation allowed by the IRS to help you build a tax shelter. Since it will vary based on your income tax bracket, we suggest you work with a CPA who is knowledgeable in investment real estate to prepare your taxes. Until you can put some of those tax dollars back to work for you, it is difficult to get ahead financially. Without tax shelter, you end up working the first 3 or 4 months of the year for the government. That’s 25% to 35% of your income gone forever.

During your high income producing years it makes sense to create shelter for your hard earned dollars. Create a plan with your Marshall Reddick Real Estate Advisor to purchase enough rental income property to shelter your income. Tailor the loans or adjust your monthly payments so they are paid off by the time you plan to retire. This will give you maximum tax shelter for your income when you need it and maximum cash flow for your retirement when you need it. Investing in rental income real estate makes a lot of sense from a financial planning perspective.  As a bonus, real estate in high appreciating markets can double in value every 10 to 15 years. For example, if you control a $500,000 portfolio of rental income properties in your 40’s and 50’s, you will very likely add $1,000,000 to your net worth by the time you retire.

If you are considering a 15-year fixed interest rate loan because you want a lower interest rate, be aware that the monthly payments will be close to double of a 30-year fixed interest rate loan. If you want monthly cash flow, it makes much more sense to go with a 30-year loan and when you are ready, start paying off the principle when and how you want rather than being forced to make higher payments because that was the loan you chose up front. If you are much more interested in tax benefits than cash flow, it might make sense to go with a 15-year loan so you can show a loss on your rental homes.

Investing in rental real estate is one of the best vehicles to create tax shelter while you are working. Your rental income will become residual income for you in retirement while building a lasting legacy of wealth for the future.

Do the math.  Use conservative figures.  Prove it to yourself.

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How to Buy Your 1st Investment Property

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