iStock_000004701496XSmall.jpgAppreciation and tax savings are legitimate contributors to an overall rate of return on rental real estate but what if you didn’t consider them at all. If you only looked at one or two, very conservative measurements, you might decide to invest especially knowing that there are more benefits that will accrue to your investment.

If we bought a property for cash, collected the rent and paid the expenses, the amount left would be called Net Operating Income. In the example below, if would generate $7,200 a year which would be a 7.02% cash on cash rate of return which is considerably higher than the current 10 year treasury rate of around 2.3%.

If we place a mortgage on that property, the rate of return actually increases due to leverage. After the principal and interest are paid, the net operating income obviously decreases but the cash on cash rate of return increases to 9.10% because the borrowed funds means less cash invested.

Another contribution to the investment’s rate of return occurs with the mortgage due to amortization: the principal reduces with each payment made which increase the investor’s equity. In this example, the equity build-up divided by the initial investment yields a 5.25% rate of return in the first year.

Single family homes for rental purposes offer the investor high loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with tax benefits, reasonable control and an opportunity to earn higher than normal rates of return. Call if you’d like to talk about what kind of rental opportunities are available.

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2014 Christmas letter

December 15, 2014

Each year I send out Christmas cards along with a letter which includes highlights from our year personally. This blog is primarily designed for real estate articles, but occasionally I add some personal posts. Merry Christmas to all our friends and family! 2014 Christmas card

Dear friends & family,
Hello to all! Just when you think things are going to be normal (whatever that is), they present more challenges and changes. As I type this letter, I am sitting with my mother-in-law slowly watching her improve. About 2-3 months ago she decided it was time for her to give up her independence at her own home and move in with us. She still drives and regularly attends social and cultural events around town. We began the process of distributing furniture and lifelong possessions to family members and then making room for her in our home. Bert got all settled in but had not been feeling very well for a few weeks. One trip to the doctor revealed congestive heart failure and after a brief hospital stay and many tests later including a heart catheterization, she had a triple bypass and valve replacement on November 20th. She remained in ICU with some complications until December 4th at which time she was moved to long term care at Jackson Hospital where she is currently and being weaned off the ventilator. We pray for her to be back home with us for Christmas, but will likely be in a rehab hospital by then instead of home. She’s making daily progress and we are hopeful for a full recovery.

I had some exciting and eventful news this year. After almost 13 years at Aronov, I ventured out with 3 partners and opened our own company, House & Home Real Estate in May. There are 13 of us there now and business has been bountiful and busy. I have the best partners ever! We bought a small condo in midtown and my partners worked literally day and night getting us up and running while I was recovering from a second neck surgery. This was a surgery needed after having suffered for nearly a year of continuous headaches. They replaced a third disc. I’ve not had the pleasure of an easy recovery as I did with my first surgery in 2012, but have finally gotten enough relief to manage most days. Learning to know my new limitations has been trying and aggravating. I was installed this week as treasurer of our local REALTOR® association and will be chairing our state association meetings and convention in 2015. Lots of fun and work planned for my volunteer efforts this year. I’m looking forward to it.

Boyd continues to plan for retirement in a couple of years. I’m just waiting for him to start giving me the number of days as a daily reminder. Hopefully he will realize true retirement at 62. We’ll see. He killed a deer already on opening day this year. He spends as much time as he can in Barbour County where he truly enjoys downtime outside of his busy work schedule. All of his work has been in Montgomery this year. I’ve got some more home projects for him coming up. Don’t want him to not have anything to do! He continues to be available to the kids and grandkids whenever anyone needs anything. That man has a true servant heart and I’m so thankful for him.

Eric & Casey bought a new home this year in Mathews in East Montgomery County on 7 acres. It also has an 8 acre pond on it and they couldn’t be happier. They have loads of room to roam both inside and out. It’s about 3 times the size of their former home which we were able to get sold very quickly. Eric even killed an 8 point deer a couple of weeks ago almost right in the front yard. Caleb and Maggie were so excited. It hasn’t taken much to turn them into country kids. They frequently ride around in their golf cart and go fishing. Caleb will turn 6 in January and started kindergarten this year. Maggie turned 2 in October and is just about the cutest little girl I’ve ever seen. Always has a smile on her face and happy.

Hillary is still working for The Cunningham Group here in Montgomery. She has a new puppy, Myrtle. Hillary has been a big help with Bert the last few weeks. She lives near the hospital and has taken lots of shifts visiting her. Having her here makes our life easy. She took over the Thanksgiving meal and I can always count on her to fill in where necessary.

My mom remarried in September to Joe Woodham. Someone she knew from Barbour County before marrying my dad over 60 years ago. She moved to McDonough, GA and is happy with her new life. It’s very different for all of us and was quite a shock when she announced this decision. Change is inevitable I suppose. Doesn’t make it easy. We had my family Christmas gathering at my brother’s home in Georgia on December 6th, mom’s birthday, with Joe joining us for the first time as a family. Jim and Carol’s home is like summer camp for all the great grandchildren. They had a blast and the fellowship was nice too.

2015 will surely be full of change as well. Just hope it will be a little less stressful than this year. Wishing each of you a happy and blessed new year!

Peace & Blessings,

Boyd & Carol

Being a Good Neighbor

December 9, 2014

iStock_000041025734Small-250.jpgA good neighbor might be characterized as someone who’ll look after your home when you’re out of town by picking up your mail and watering your plants. You’d most likely reciprocate for anyone who’d be so generous toward you.

In some cases, you might only be able to name one or two of your neighbors who would step up to that level of service. Wouldn’t it be nice if more people on your street would be happy to make that offer?

The solution may just start with being a better neighbor first. The following suggestions go a long way to improving your neighborhood and making new friends at the same time.

  • Meet your neighbors and exchange phone numbers and email addresses. Agree with each other that you’ll let them know if you see something strange going on at their home.
  • Slow down when driving through the neighborhood; it will make it safer and everyone will appreciate it.
  • Control your dog: keep it on a leash; pick up after it; don’t let it bark too much.
  • Don’t park in front of your neighbor’s home.
  • Notify your immediate neighbors when you’re having remodeling done and ask them to let you know if any of the contractors cause damage to their property.
  • Let your neighbors know when you’re having a party and that there will be more cars on the street than usual.
  • Maintain your home and yard so that it adds to the beauty of the neighborhood.
  • Put your garbage out for collection on the correct day and bring the containers back in promptly.

In reality, it is fairly obvious; you just have to think of the things that you’d want from your neighbors. Be friendly; don’t be noisy; offer a helping hand when available and respect each other’s boundaries. Having a sense of community and that you all share the neighborhood can be underlying principles that will guide your behavior.

A good neighbor would be aware of suspicious activity and would call their neighbors and the police if warranted. This might be something you can discuss with your neighbors. Click here for a template to record your immediate neighbor’s contact information and keep readily available if needed.

Holiday Tree Safety

December 2, 2014

iStock_000035874916-175w.jpgFresh holiday trees are beautiful, smell great and really add to the spirit of the season. Following some proven safety tips might help you avoid a disaster and keep the Grinch away.

  • Select a tree with fresh green needles that don’t fall off when touched or when the trunk is tapped on the ground.
  • When trees are cut too early, they have a greater risk of drying out and can become more dangerous especially with electrical lights.
  • Cut 1” to 2” off the base of the tree before placing it in the stand to facilitate it drawing water to the limbs and quills.
  • Trees require water similar to cut flowers or they’ll dry out. Tree stands should hold at least one gallon of water and it should be checked every day. A six foot tree could use up to a gallon of water every two days.
  • Position the tree a minimum of three feet or further from heat source like fireplaces, space heaters, heat vents or candles. Do not allow the tree to block an exit.
  • Lights should be labeled from an independent testing laboratory and intended for indoor use.
  • Follow manufacturer’s recommendations for how many strings of lights can be connected to each other.
  • Turn off all tree lights when you go to bed or leave the home.
  • If the tree becomes dry and begins shedding needles, it can be a fire hazard and should be removed from the home. Even if the holidays are not over, it is not worth the risk to keep it in your home.
  • After the gifts have been opened, don’t return the paper and boxes under the tree.
  • Remove the tree as soon as possible after the holidays.
  • Trees should never be burned in a fireplace. The trees will burn very hot and quickly when they are dry and could spread outside of the fireplace which could cause an unfriendly fire.
  • Check to see if there is a recycling program for holiday trees in your community.

The National Fire Protection Association reports that “one of every three home Christmas tree fires are caused by electrical failures and a heat source too close to the tree causes roughly one in every six of the fires.”

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