photo credit: JohnHallAssociates

This last week I was given some unfortunate news about a investment condo I was interested in purchasing for a rental property. My agent contacted the sellers agent and asked if any offers had been made on the condo. He learned no offers had been made, but the sellers agent did ask if I was going to be occupying the condo or make it an investment property. The condo has 100 units and only allows a small percentage to be rental units. The sellers agent is going to find out what the exact percentage of rental units is allowed under the current HOA restrictions. If the percentage is close, I could purchase the condo and sit on it until the numbers are lower, but risk my investment return. Also, if another unit doesn’t convert to an owner occupied condo, I could lose out on my investment completely.

Another option is to petition the HOA and show them that I’m willing to increase the value of the property and have them screen tenants. This process would take time and I might lose the property to someone who is planning on making the condo a primary residence. It’s looking like I need to move on to another property and put this one behind me. It has been a fantastic learning experience and I’ve learned much more about HOA rules and regulations. At this point I’ve invested nothing buy my time, so I feel fortunate compared to some recent stories shared by my Realtor.

I spoke to my Realtor about four potential investment condos when he shared an interesting story about a client of his. The client purchased a condo several years ago and decided to move to a bigger home nearby. He contacted his HOA for another set of keys for a common area for a new tenant that just signed a rental agreement. The HOA admin game him a shocker when they stated that he was not allowed to rent his unit under the HOA rules. The client had to petition the HOA for several months and meet with the current board to plead his request. To make matters worse, the HOA President was also his next-door neighbor and did not want his neighbor to become a renter. The client finally was able to rent out the condo, but lost out on 6 months worth of rent, or $8,000.

After hearing this story, my plan is to contact any HOA and receive a written letter authorizing the purchase of the condo for investment purposes. I can’t imagine buying a rental property and finding out it can’t be rented out. I feel that this has been a wonderful learning experience and another passive income investment property will be found. This week I’m going to be looking at several condos around the same part of town and my Realtor will pre-screen them with the sellers agent to make sure they are available to investors. But, I’m still going to demand a letter from the HOA if an offer is made.

Do you have restrictions on your condo HOA? Have you tried purchasing a condo for an investment property?

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photo credit: allaboutgeorge

This week I’ve been researching real estate in our local area trying to find an opportunity for an investment property. Three condos caught my attention as they were priced aggressively and were all under $100,000. I utilize Zip Realty and have a search setup to scour a 5 mile radius from my home for condos or town homes. Ideally, it would be great to find a single family home but the prices are out of range for an investment property. My goal is to find a property that can generate positive cash flow and also have the potential to increase in value. Every since I purchased my first home, I’ve had a dream of investing in an investment property that could provide passive income for my family. Real estate investments have the opportunity to earn passive income through rent paid by the tenant. Once the property has been purchased, the income derived from the property is mainly passive. My plan is to manage the property myself, so I do anticipate handling any repairs or tenant questions.

I met with a friend who is a local Realtor and we discussed investment properties and what to keep in mind when looking at a property. Much of the meeting was a sobering reminder of the current economic climate facing the real estate market today. He reminded me to be patient and not to get frustrated with banks, as the buying process can last for months. The property we looked at today, he explained, could take up to 5 months to close because it’s a short sale. He was going to contact the sellers agent to find out if it was a bank approved short sale. If not, it could take months. The property was listed at over 50% off it’s purchase price from 2003 and the bank might not want to budge on the price.

The condo has only been on the market for 6 days, and my Realtor expects that it might have several offers already on the table. I was surprised when he said that so calmly, as I thought the real estate market was soft in our area. He explained that the market for high end properties is soft, but very aggressive for single family homes and condos right now. Again, he told me to be patient and prepare to wait it out. The selling agent might have also priced the condo below market value to encourage multiple bids. I thought, wasn’t this the same tactic used during the real estate boom? Why not price a property at what the bank would approve? It seems that if a seller doesn’t get a banks pre-approval, the buying process will only become more complicated.

Just as with any other investment, have a walk away price. My friend told me not to get emotional amid the potential bidding frenzy and to stay focused. Plenty of properties will be coming up over the next few months and this condo isn’t the only potential deal. I’m sure glad my buddy is conservative as well. He explained, even if we bid on the condo, the bank could take several weeks or months to review the offers.

What about a normal condo sale? Actually, it’s difficult to find a condo in our area that is not a foreclosure or short sale. Maybe sellers are waiting to see if the market rebounds before trying to sell. I would like to look at other condos in our area, but have to do more research on HOA and neighborhoods first. I would like to find a condo near our home so that it makes the research much easier, as I know how to market the schools and shopping opportunities. Although, I might also find some better deals further out.

It’s has been an interesting week, and I’m anxious and excited to learn as much as possible about investment properties. Have you started looking at investment property recently? If you purchased a short sale, how long did it take?

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Rolling coins with your kids is a great way to deposit loose change into your savings account and it can be an opportunity to teach kids about managing money. Take the time to involve your children in this simple process and discuss what money represents and how it can be used to build savings. If you are looking for a great rainy day project, you can bring out a coin jar and get the entire family working together for a common savings goal. Many families have “vacation jars”, “pizza jars”, “clothes jar”, or even an “new furnace jar” for long term savings goals. Next time you have some loose change, get a jar and start a savings fund with your family. Once the coins are spilling over the jar, roll the coins and deposit them at your local bank branch.

Some reasons rolling coins can be valuable for yourself and your family:

1. Saving the 10% fee that Coinstar charges is another huge incentive. I made the mistake once of using a Coinstar at Safeway and the machine stopped working. I estimated I had deposited over $50 in coins and Safeway wanted me to prove that amount. How do I prove that the machine ate my coins? I had to deal with 2 managers before I was finally given credit.

2. Teach your kids to sort and count. Help your children sort the coins based on color and shape and educate them on the different coin values.

3. Treasure hunt. Finding Canadian Pennies or old silver coins can be exciting. Find a silver nickel or dime and you can take your kids to the local coin shop to find out the value.

4. Compound interest. Deposit those coins in your local bank and educate your children on the power of compound interest. Those coins aren’t earning anything when they are stuck in a jar. Deposit them in the bank and your money starts working for you. Compound interest is a source of passive income.

5. Saving money. Use this time you are rolling coins with your family as an opportunity to talk about saving money. Why do you need to save these coins and what can you purchase with them? Get your children involved in the savings process and start a family “savings jar” that will be for a common goal. Maybe you want to save for a family vacation or start a college 529 savings account for you kids.

Have you started a savings jar with your family?

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photo credit: MNgilen

Sometimes a passive income idea is looking at you and asking to make you some extra money. In this case we’ll look at taking ordinary items at your local store and turning them into cash for your family. You might look at your next shopping trip a little differently and you probably will be smiling the entire time you’re out hunting for passive income. Just to be clear, this will require your time to buy the items and also some up front cash. If you don’t have a savings account or emergency account established, I wouldn’t suggest you try this passive income idea. You can start out small until you have amassed a nice little savings account to use for this new source of extra income.

So what is it? It’s not as glamorous as investing in stocks for passive income and it doesn’t require you to spend hours writing an ebook. You will visit the same stores you normally visit during the week, but now you’ll add some items to your shopping list. The Sunday paper or your weekly ads from major retailers will provide all the necessary information you need for this passive income idea. This weekend I found a name brand flash drive that retailed for $19.99 that had a manufacturer rebate check for $19.99. Total cost for the flash drive was $1.70 to cover the 8.5% sales tax here in California. I then fill out the manufacturer rebate to receive my check in the mail for $19.99. At this point the flash drive has only cost $1.70 and I can list the item on ebay. Name brand items sell wonderfully on ebay and look for tech gadgets and software. I have been able to pickup copies of anti virus software and resell it on ebay for a nice $30 profit. Again, make sure you have funds to cover the time it takes to receive the manufacturer rebate check. You don’t want to be paying 19.99% interest on a credit card balance while you are waiting for your item to sell on ebay.

Look for ads in your local newspaper and circle items that have rebate checks from the manufacturer. Best Buy, Radio Shack, Rite Aid, and Walgreens all offer rebate checks. This weekend I even found a blood pressure kit that was free after a rebate at Rite Aid. This could be a great source of extra income to cover some of your household groceries or even a meal out once a week.

You will need to be organized and timely with your rebate check submissions. Don’t forget to read all of the fine print and what is needed for the rebate process. Do you need the UPC code and a copy of your sales receipt for the rebate? Some retailers offer electronic checks so that the process is much more automated. You might want to start with a Walgreeens or Rite Aid and research what they offer first.

How much can you realistically make doing this? We have an electronics retailer called Fry’s that has numerous manufacturer rebate offers during the week. The retail value for this weekend at Fry’s would equal between $100-$200. Rebates were offered on hard drives, anti virus software, books, and flash drives. See if you can find some passive income ideas in your newspaper.

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photo credit: HarshLight

Countless hours were spent as a kid playing my favorite board game, collecting rent on apartments and hotels while negotiating for Park Place and Boardwalk. What type of Monopoly player are you? Do you play with the properties you land on or do you like to barter and make deals? Playing Monopoly might seem like a childish game, but it definitely has some sound money managing principles that teaches you to stay within a budget and not stretch yourself thin. In Monopoly if you can’t pay your rent, you must declare bankruptcy. In the end the bank forecloses on your property and the other players can pay off the liens.

The game of Monopoly may have been the first time that you learned some basics about budgeting your money. The rules are easy to follow, but how you play the game is up to you. You can simply roll the dice and pay rent or you can build up a vast wealth of apartments and hotels.

Even though Monopoly is just a game, what are some money management tips we can learn from it?

1. Cash is king. The bank in Monopoly only accepts cash. Building up passive income through property rentals can help you achieve your goal of building apartments or hotels. Today, you are payed by your employer in cash and it’s up to you on whether you invest the money or just pay your landlord rent.

2. Negotiate. You won’t get anything unless you ask. That goes for a raise from your boss or Board Walk that your friend currently owns. Will they sell it for $300 or $1,000? It probably depends on how they are doing in the game at the time. If you don’t attempt to negotiate and make a deal, you might not win the game. If the asking price is $2,000 for your future wife’s diamond ring, will you ask to negotiate? Did you?

3. Pay your bills on time. It’s funny how Monopoly imitates life. When you land on luxury tax, you must pay it or start selling off properties. The game comes to a stop until you take action. You don’t have a chance to pay the minimum on a credit card and move money towards another debt.

4. Being a landlord can be fun. Owning hotels on Park Place or Boardwalk can be very lucrative when a fellow player stops on your property. Owning property can create a passive income stream that can pay for your retirement or children’s college. In real life you obviously want to charge a market rate and not something expensive like Boardwalk that has the potential to put your tenant into bankruptcy.

5. An emergency fund is always needed. One roll of the dice and you could wind up in jail or owing a huge luxury tax. If you’ve overextended yourself and purchased property without an adequate emergency fund, you’ll wind up having to sell something. Having an emergency cash fund or rainy day fund can help you navigate through tough times. Having an emergency account in real life can help you fix a flat tire or purchase a new washing machine.

Do you have a favorite game you played that taught you money management skill?

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