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Landlord Association newsletter library |
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Landlord Association newsletter library |
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Volume 7 Number 6 Jan/Feb 2003 |
LIBRARY |
contents
From The President
BUYING RENTAL PROPERTY
TEST
BOOST YOUR IMMUNITY
By Catherine Houch
Cost by NET INCOME
METHOD By Phil Duckwall
TENANT LATE RENT WARNING
AND EXCUSES From Mr Landlord
Calendar
Next Meeting,
Agenda and Lunch
contents FROM THE PRESIDENT - Patty Hofer Dear Members & Friends, Greetings of the New Year and extended carnival season. May we all have a peaceful, prosperous and healthy 2003. Treasurer Mary DeMierre reported a balance of $2,436.91 at our November 2002 meeting. Current officers Patty Hofer, President, Don Schmidt, 1st Vice-President, Ron DeMierre, 2nd Vice-President and Treasurer, Mary DeMierre were re-elected by acclimation. Jane Quartuccio and Tom Chau were elected to open seats on the board of directors. Our thanks in advance for all the work they are going to be doing. The city is sponsoring their 5th Annual Landlord Conference, "Steps Toward Success" on Saturday, March 1, 2003 at Forest Park Community College. This is a "must do" educational event for landlords. The exact price has not been determined yet, but regardless of the cost, the mass of information one gets makes the price a bargain. Please save the date and attend. We will have a booth to showcase our newsletter and web site, so I will be calling on members to volunteer to staff it. Our November speaker, Phil Duckwall was so interesting that a summary of his talk is in a separate column. One issue that Phil mentioned aside from his talk was that an organization such as ours could form an Insurance Buyers Group. If the members have enough interest, we could talk about doing something like that. Several of our members have called saying, "I have a well qualified family/individual, but no vacancies, do you know any landlords who would like to interview them?" Tom Chau suggested we email the names and telephone numbers of the potential renters, but many of our members do not have email. Do you want me to telephone the rest of you? It is January, which means our dues is due. Forms and envelopes are enclosed in the newsletter or bring your check for $20 to our next meeting. The membership form has a space to list the number of units one has. We ask for this information so we have a number to give legislators when we are lobbying for or against proposed laws. Saying we represent members with four hundred plus rental units is more impressive than not having any number at all. Obviously, no one is required to give us the exact information, we will just assume each member who does not list a figure has at least one rental unit. Our numbers have been dwindling from just over 100 members to about 60. The board has discussed doing a mailing like we used to do, but we want to better target our letters especially with postage up to 37 cents. Don Schmidt proposed that we actually drive the streets of our area and record the addresses of multiple family buildings. Those of us that are computer literate could look up the names and addresses of the building owners on the city tax rolls. Thus recruitment letters would only be sent to landlords. Some people have already volunteered to do the street work, but we need more computer people and a whole bunch of people to do the mailing. Frankly I was overwhelmed in December because we had a tenant walk out with no notice. We spent the whole month including Christmas getting the house ready for the new family to move in January 1st so I did not do any volunteer work. The board will conjure some kind of plan as soon as possible and we will do this. The Honorable Matt Villa, 11th Ward will be our January speaker. He will give us an update on the neighborhoods. New board member, Tom Chau will also give a short talk on skip and trace. Hope to see you on Monday, January 20th at Southern Commercial Bank about 7: PM. XXXX Buying Rental Property; How Much Should I Pay? Phil Duckwall, a well-respected local landlord and developer was our guest speaker. Phil uses two questions to guide his projects; 1)Am I making money? and 2)Is the property adding value to the neighborhood? He continued his personal thesis by explaining that one should not be afraid to put money into a building because rental property is always a good investment which becomes the owner's annuity. The improvement of one building on the block (he tries to choose the worst one) creates a ripple effect that leads to more enhancement of the neighborhood. Get to know the alderman and Neighborhood Stabilization Officer, look for problem properties that offer opportunities for development. Each building must be purchased on its own intrinsic value and earnings. What will it cost to fully develop? What will the net income be? How much cash can it generate? Short term? Long term? On Buying: Sellers always overstate value and understate expenses. Don't overpay, use capital for development. The business has to pay its own way. Never buy a building on rents that it is generating today. Prices of other buildings don't matter. Before you buy, walk friends and others through the building to share ideas. Stained glass transoms and bathroom windows (created with kits) are always coveted by potential residents. Columns separating rooms are rich looking. Reproduction mantels are another amenity that residents really want. Opening walls of closed stairwells enhance natural light. Floor tiles layed diagonally are the newest look and easier to lay in older buildings. Extra mirrors in the bathroom are appreciated. Oak kitchen cabinets, islands in the kitchen are all enhancements that attract the best residents. Construction caveats include; 2" x 6" framing makes plumbing easier to run, 6" x 6" posts for porches are attractive and substantial. Awnings or pergolas are attractive additions. Hard-wire smoke alarms, but don't bother with the battery back-up. (Residents disable the whole system, rather than replace the battery.) Waterproof and paint basements white. Label utilities with extra large signage so residents can easily turn off water or other utilities in emergencies. Use maintenance-free landscaping: plant perennials, use ground covers in lieu of grass whenever possible. Plant trees to provide shade, clean the air and reduce utility use. The centerpiece of Phil's talk was the net income approach of compiling costs to determine to financial viability of a possible investment building. "The net income method is the only valuation method that reflects a true assessment of value for an owner, as it is based upon the long and short term cash inflows and outflows of the property. In short (if that is possible) according to the net income method the Present Value of an (any) investment is the forecasted net future cash flows generated by the property during the ownership period, those net cash flows each discounted at a given internal rate of return acceptable to the investor allowing for those risks associated with the property ownership (such as market or neighborhood deterioration). In my analysis I have projected both the short and long term costs of property ownership over a 10 year period. Ignoring the longer term costs will result in a serious overvaluation of the investment - a mistake commonly made by buyers not using proper financial discipline." "Especially important, and unfortunately most often ignored, is the allowance for depreciation of the structural items... Although the utilities, tax and insurance expenses may be more apparent due to their check writing frequency, depreciation is a more insidious and often larger expense over the long run. Roofs, furnaces, mortar, window sashes, gutters, soil stacks, parking pads, decks, water heaters and sewer lines do deteriorate with time. Failure to set aside funds from current rents for their eventual replacement results in an underestimation of expenses, an overestimation of property value and, in the long term, deterioration of the building due to an insufficiency of funds for its preservation." "The sales price may be fully financed, partially financed, or not financed at all (cash purchase) - it makes no difference in the determination of investment property value. Whoever provides the capital for the purchase, whether yourself, the bank or both, will be paid the current market rate of interest for the use of the money. If part of the capital has been provided by yourself, the bank or both, will be paid the current market rate of interest for the use of the money. If part of the capital has been provided by yourself, then you should receive the same percent return on your money as the conventional lender. Remember your money has a time value also as you are depriving yourself of other investment opportunities. Do not make the mistake of considering your capital "free" money which deserves no Return on Investment." Mr Duckwall goes on to explain that "The most important point to remember, however is to NEVER confuse the terms Profit, Cash Flow and Net Income. Profit is an elusive number because it can only be calculated after the investment is sold and with full consideration of the net cash flows during the ownership period less the expenses of the sale (a 7% brokers fee, for example) and weighted for the period of ownership and the amount of capital committed to obtain the associated cash flows. The next most often misused and misunderstood concept in real estate is the term, Cash Flow. Probably the most often asked question regarding real estate finance is...'do you have a positive cash flow?' Regrettably, a totally useless and meaningless question unless, of course, the answer is ‘no' - and then you know you are in real trouble. If the answer is ‘yes' the response discloses no information of value whatsoever. The question should have never been asked in the first place since the focus of the question is to concentrate only on the short term cash flows of the property and also ignores the amount of capital required to generate that cash flow. The proper question to ask is, ‘What is the Net Income of the property and what is the associated Return on Investment'? The Net Income approach recognizes both the short and long term cash flows associated with property ownership in each accounting period by accruing for the cost of those capital items (roof, plumbing, appliances, etc.) As they age even though there may be no actual cash outlay associated with their deterioration in the period. The Net Income approach is the only realistic basis upon which to account for all of the costs of property ownership. Comparing the Net Income to the Investment (the equity contained in the property) results in a percentage relationship, i.e., the Return on Investment which is generally the preferred yardstick for investment decisions." For an example of calculating costs by the Net Income method turn to page 6. Please telephone Patty at 314.352-9140 for a complete copy of Mr Duckwall's paper, which explains his accounting at length. XXXX A juggler, driving to his next performance, is stopped by a police officer. "What are those knives doing in your car?" The officer asks. "I juggle them in my act," the juggler says. "Oh yeah?" The cop replies, "Let's see you do it." So the juggler starts juggling the knives. A man driving by sees this and say, "Wow, am I glad I quit drinking. Look at the test they're giving now!" XXX Boost Your Immunity by Catherine Houch Save your sick days with our stay-healthy guide to cold and flu season Help, they're everywhere! Those odious winter viruses that hang out on doorknobs, money, fingertips... even in the air. Yet we all know people who seem never to get sick, no matter how much others around them sniffle. What's their secret? A strong immune system, say the experts. "Of course you should try to avoid germs, but it's hard to succeed entirely," says Keith Berndtson, MD., medical director of Chicago's Integrative Care Centers and author of The Immune Advantage. "What is possible is to keep your body's own natural defenses in top form." How can you boost your body's immunity? Here's what immunologists, nutritionists, psychologists and other cold experts advise. EATWELL : , Immune cells flourish on a diet high in fruits and vegetables, and moderate amounts of protein, nuts, seeds and low-fat dairy. But just as important is varying your selection. "Eating a variety of foods is the surest way to achieve peak immune function, since each component of the diet contributes to immune response in a different way," says Simin Nikbin Meydani, D.V.M., Ph.D., director of the Nutritional Immunology Lab at the Jean MayerUSDA Human Nutrition Research Center at Tufts University. "Resist eating the same old favorites all the time. Substitute crab meat for your chicken filet. Have a mango instead of an orange. Try a Korean or Moroccan restaurant." One mineral that's thought to be crucial for immune health is zinc, a possible problem for women, since some studies show that taking extra calcium may block zinc absorption. "We aren't to the point of recommending that women who take extra calcium also increase zinc, but the findings point in that direction," says Tufts research scientist Richard J.Wood, Ph.D. Some foods high in zinc are oysters, beef, whole-grain wheat, walnuts, liver, poultry and pork. STAY HYDRATED Your throat and nasal passages are covered by a layer of mucous membranes that traps viruses before they cause infection. But to work efficiently, the membranes have to be moist. "Even slight dehydration compromises their function" says Dr. Berndtson. "In dry indoor air especially reticulated airplane air drinking plenty of noncaffeinated, nonalcoholic liquids can make all the difference between whether you catch something or not." HAVE A GOOD LAUGH Several studies show that laughter significantly increases the activity of different components of the immune system. So serious has laughter research become that so called "jollytologists" now have an association (Association for Applied and Therapeutic Humor), a society (International Society for Humor Studies) and a journal (Humor and Health Journal). "Daily chuckles are just 'as important for the immune system as daily vitamins," says laughter expert Lee S. Berk, Dr.P.H., assistant professor of family medicine at the University of California, Irvine's College of Medicine. "The government should establish an RDA for laughter," he says. DON'T BE AFRAID OF A LITTLE STRESS Here's a surprising finding: Grinding, ongoing anxiety, the kind you feel when you're unemployed or getting a divorce, does suppress the immune system. But short-term stress, such as asking the boss for a raise or racing to make a flight, seems to give it a boost. Ohio State University researchers report that the saliva of people exposed to short bouts of stress show increased levels of a protein that protects against infection. "Stressful incidents may also help redistribute immune cells to areas where they're needed," says Firdaus Dhabhar, Ph.D., assistant professor of medicine and dentistry at Ohio State. BE A HEDONIST What's the worst thing you can do to your immune system? "Live a life devoid of pleasure," says Carl J. Chametski, Ph.D., professor of psychology at Wilkes University in Wilkes-Barre, Pennsylvania, and author of Feeling Good Is Good for You. A study of 100 men at the State University of New York at Stony Brook found that the immune system boost from a pleasant event persists for as long as two days. "On the basis of results from an earlier study, a drop in the number of pleasant events more strongly predicted susceptibility to a cold than did a jump in stressful events," says lead researcher Arthur Stone, Ph.D."Pleasurable events" are whatever little everyday activities you enjoy: getting together with friends, bird watching or playing tennis. MINGLE MORE The wider your social network, the less likely you are to catch a cold, according to a study published in the Journal of the American Medical Association. When Carnegie Mellon University psychology professor Sheldon Cohen, Ph.D., put nasal drops containing cold viruses directly into healthy volunteers' noses, 40 percent of them developed colds. The probability that they would develop a cold decreased with increases in the number of social connections: relatives, friends, neighbors, coworkers, classmates or fellow volunteers. The emotional support received from others is thought to lessen the effects of stress, in turn strengthening the immune system. Churchgoing may be especially beneficial. A Duke University Medical Center study of 1,700 people found that regular churchgoers were 40 percent more likely to have healthier levels of vital immune system substances. "Church communities provide strong friendships, reduce hostility and anxiety and help people handle the unexpected upsets that life often brings," says lead researcher Harold G. Koenig, M.D. "That, in turn, can strengthen immunity." GET YOUR SHUT-EYE No surprise here: A good night's sleep has a restorative effect on the immune system. But don't worry if you're awake for 20 minutes after you get up to go to the bathroom. "In our studies, we found that it was losing three or four hours of sleep, half your normal amount, that suppresses immune system function," says Michael Irwin, M.D., Norman Cousins professor at the UCLA Neuropsychiatric Institute. If you're having trouble sleeping, Dr. Irwin recommends decreasing caffeine, getting adequate amounts of light exposure and making sure medications aren't interfering with sleep. STAY REASONABLY WARM Turns out your mother was half right. While getting cold will not give you a cold, it can make you more susceptible to viruses already lurking in your respiratory passages. "We're exposed to viruses every day, and a strong immune system takes care of them," says Dr. Berndtson. "But being cold causes the body to divert resources away from the immune system and into generating heat." So take mom's advice and bundle up. STEER CLEAR OF SNIFFLERS When are colds most contagious? It's not the day before symptoms appear, despite what many people believe. "Colds are by far the most contagious the first three days after symptoms begin," says Ronald Turner, M.D. "There's no way you can efficiently spread the virus if you're not sniffling and coughing." If someone in the house has a cold, using paper towels and liquid soap, rather than shared hand towels and bar soap, in the bathroom is a good idea. Also, wash hands frequently, especially after touching telephones, pens, keyboards, doorknobs and other communal objects. "Don't Touch" After she read somewhere that touching your nose and eyes with your fingers is the surest way to give yourself a cold, Lois Russin, 44, set about training herself not to do those things. "Every time I catch myself, I give my arm a vicious pinch," says the Sharon, Connecticut, hairstylist and mother of four. "If my nose itches, I rub it with a knuckle, not a finger. I'm around plenty of snifflers, including a toddler, and I haven't come down with a cold for two winters now."Is she on to something? Yes, says cold expert Ronald Turner, M.D."Cold viruses are transmitted mostly by touch, and they always begin their assault on the body in the upper passages of the nose. To get there, they enter either directly through the nose or through the eyes, as tear ducts empty into nasal passages." Frequent hand washing is another smart ploy for avoiding colds. In fact, a recent Canadian study found that people who wash their hands frequently (at least seven times a day) dramatically reduce their risk of catching a cold. wd Monthly Net Income Available to pay .the Mortgage Optimum Monthly Gross Rent (4 units * $550/unit) $2,200 less; Vacancy/Referral fees/bad debts (10%*Gross Rent) 220 Net Monthly Rental Income $1,980 Monthly Operating Expenses. Property Tax ($700 yr,/12 months) 58 Property Insurance ($550 yr./12 mo.) 46 Private Mtg. Ins. (approx.-004 x loan amt,) 0 Sewer ($l1unit/mo * 4 units) 44 Water ($9/unit/mo * 4units) \ 36 Mowing & Snow removal - averaged ($420 yr/12.mo) 35 Management Fee (7% * Gross Rent) , 154 Dusk to. dawn light, UE pole at parking pad in alley 8 Heating & Electric during vacancies ($100/yr.) 8 Vacancy Advertising $120 yr/12 mo,; 4 wks costs $66 10 Vacancy Repainting, Repair & Rep. ($800 yr/12 mo) (damage, to screens, locks, plaster, windows, appl.) 67 City Building Inspection ($80/yr./l2 mo) 7 Routine Maintenance ($1800 yr/12 mo) (HVAC, plumbing, painting, carpentry) 150 Legal/Accounting fees ($300 yr/12 mo) 25 Total Monthly Operating Expenses. 648 Funds set aside for Capital Replacement (depreciation); Gutter Rep. & tuckpointing ($120 yr/12 mo) 10 Roof Rep. w/tear off ($4000 yr/15yr/12 mo) 22 Hot water heater repl-($400/10yr/l2mo * 4 units) 13 Parking pad, sidewalk, concrete maintenance ($120/yr 10 Exterior code compliance ($120 yr/12 mo) 10 HVAC replacement ($2500/15yr/12 mo * 4 units) 56 Facia/exterior trim paint & replacement ($180/yr 15 Stove & Refrig. repl ($800/unit/10yr/12mo*4 units) 27 Kit & Bath Cab. & Fix. ($2000/15yr/12mo*4. units) 44 Supply & DWV and lateral line: System repl/repair ($2000/unit over 20yr/12mo*4 units) 33 Exterior windows. & doors ($120/yr/12 mo) 10 Tree trimming/lands cape maintenance ($360/yr./12 mo) 30 Allowance for oversights (15% of total expenses) 135 Total Depreciation Reserves 415 TOTAL Monthly Operating Expenses and Depreciation Res. 1063 MONTHLY NET INCOME AVAILABLE FOR DEBT AMORTIZATION $917 TENANT LATE RENT WARNING AND EXCUSES (Note: To be given to new, renewing, and late tenants) Dear Resident: Your rent is due on the _________________ day of the month. I'm sure you fully understand that we must start eviction proceedings instantly once a payment is late (no matter the reason) and report your late payment to both local and national tenant/credit reporting agencies. We still request, however, that you submit your reason for late payment for our records. For your convenience, and to avoid lengthy explanation, you may simply check the appropriate reason below and submit this form with your late payment. Hopefully, this form and your payment will be received before you're evicted. Even better, your payment will arrive on time and you will not need this form. I'm sorry my rent is late but... _____ A. The check I've been waiting for did not come in the mail or was late. _____ B. I was in the hospital/jail and I couldn't get to you. _____ C. I missed a week's work because I had to take care of my sick mother/son/daughter. _____ D. I had to have some teeth pulled, and the dentist wouldn't start work until I gave some money. _____ E. I was in an automobile accident and I won't have any money until my attorney works things out with the other guy's insurance. _____ F. I had my billfold stolen when this guy jumped me on my way to the bank/post office/my office. _____ G. Someone broke into my apartment and took my money. No, I didn't file a police report. Should I? _____ H. I had to have my car fixed so I could get to work, so I could pay you. _____ I. My mother/sister/uncle hasn't mailed me my money yet. _____ J. I couldn't find your address. I put the wrong address on the envelope. _____ K. I got laid off from my job, and I won't get unemployment for a couple of weeks. _____ L I was unable to get a money order, and I know you didn't want me to send cash. _____ M. You didn't come by when I had the money. _____ N. My husband/wife/boyfriend/girlfriend/roommate left, and I didn't have all the money. _____ 0. They garnished my check, and I don't understand it, because the guy told me it would be okay to just pay so much per month and I only missed a couple of payments. _____ P. I told my friend to bring it or send it to you while I was out of town. _____ Q. I haven't received my tax refund yet. _____ R. I got a new job, and I had to work three weeks before I got my first check. _____ S. I didn't pay the rent because my__________________ is not fixed. No, I'm sorry I didn't tell you there was a problem before now. I didn't think about it until now. _____ T. My car is broken, and I didn't have a ride to your office/the post office. _____ U. I had to help my brother/sister/friend who had a serious problem. _____ V. My grandmother died, and I had to go to the funeral. _____ W. I didn't have, or I forgot to put, a stamp on the envelope. _____ X. The check's in the mail. Didn't you get it? _____ Y. I ran out of checks. _____ Z. I'm dead! _____ Please briefly explain if your excuse is not listed above: COLLECTION AND VIOLATION NOTICES 105 Calendar: Tue, 18 Feb Dutch Treat Lunch, Feasting Fox, Grand & Meramec, 11:30 a.m. Sat, 1 Mar 5th Annual Landlord Conference "Steps Twoard Success" For more information Call Christopher Howard 314.552.7669 XXXX The Articles contained in this news letter and on the stlouislandlord.com web site are included for the informational, educational and occasional amusement value the might provide. Articles are not included to represent the definitive answer to any situation. They are not intended to provide legal advice. And they are not intended to represent the views of any board member or general member of the Carondelet/Holly Hills Landlords' Association. Read, Enjoy. Use what you can and leave the rest. If you have any questions, comments or story ideas Please contact Patty at 314-352-9140
Place: Southern Commercial Bank
- 5515 S. Grand
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