About Adams County, PA

In 2006 I bought my first rental property, followed by another about 3 months later. It was not only my first year in real estate, but these were my first properties. If I could start over I think I'd do things differently. I'd like to share with you a few things that I learned.

When purchasing verify expenses so that you have a predictable net operating income (income after expenses are paid). This way you know what you are able to pay toward a mortgage and hopefully have some profit left over.

Expenses I didn't calculate into my purchase price:

1.) not enough money toward maintenance

2.) I didn't take into account the cost of an accountant for my LLC

3.) Want to pay yourself a little? Build in a fee for management

4.) Advertising expense

It's easy to add a few thousand dollars of additional expenses to what you, the buyer, think they actual expenses might be.

If you're starting out, start out small so that you get used to dealing with the common issues of owning investments. Grow from there. I bought a 7 unit as my first property and it was more than I could chew at the time. I've seen stabilized the property but it made for a tough 2 years.

Stay tuned for more tips about rental property ownership and the right way to invest and how much to spend.

We hear the term "cap rate" thrown about all the time. What is cap rate or what is the cap rate in your area? I don't think most Realtors even know what cap rate is, or how it helps someone assess a property. I think most Realtors just say 10% by default.

Very Basically cap rate is defined as the following

Capitalization Rate = Net Operating Income / Value (Selling price)

If we assume a 10% cap rate then we should be able to solve for whichever variable we are looking for. I think most commonly we use the two known variables of Net Operating Income and Value to come up with cap rate.

What if we want to establish a desired cap rate...surely investors don't default to 10%. So to figure out a desired cap rate you would consider the following three items.

1.) Return of Investment (how long it will take the investor to to recoup their initial investment)

2.) Return on a low risk or safe investment (bonds, savings account etc)

3.) Return for the added risk on this investment (percent you want to earn per year on your investment)

So lets put some numbers with this.

1.) You expect it to take 20 years to recoup your investment (1/20)x100= 5%

2.) Lets say for this example you can put your money into a savings bond at 3%

2.) You'd like to earn 5% per year on your investment = 5%

Add them all together and you have your desired Cap Rate of 13%

Now that you have your desired cap rate you can use that number to solve for either desired NOI or Value.

Check This Out Can You Find the Car In this Picture?

This past snow storm that dumped over 30" of snow in some places is not a usual occurance here in Gettysburg, Pennsylvania. Yes we usually do get snow during a winter season, however this is no usual by any means. Turned out to be a record snow fall for the Gettysburg, Adams County , Pennsylvania area. Digging out from all this gave us local residents new meaning to the term "The Battle of Gettysburg". Two days of shoveling and we finally got both vehicles out of the snow and roadworthy. Below is a good example of what we were up against, if you look at the bottom of the pile of snow, you can see my cars bumper, yes under all that mess is my car. Hope you all made it safely through the storm.

If you or a family member are thinking of buying or selling a home please feel free to contact me for assistance.

I'm not typically one to just paste a link in my blog, but this one worth passing along. The Central PA Business Journal recently posted this article. We are in the middle of an attempted housing recovery but we keep stepping on our own feet.

More expensive to build new homes (see article)

Forthcoming Changes to FHA

Possible limiting the mortgage interest deduction

Discussions of increasing the capital gains tax

I do realize that a lot of the above has not yet been approved, but the very thought of it holds people back. The positives of buying right now are

Tax credit

Low interest rates

Very competitive home prices

So much of what we are doing to protect people is a hinderance on recovery.

I received this email yesterday. I answered the email but I figured that I'd post it up and answer it here on AR publicly so that the info would be easy for anyone to find. I'd also like any other Realtors or lenders to add any addition information that might be helpful to someone in a quandary like this one.

Hello David,

I realize you are probably a very busy man, but if you have a little bit of time I am in need of some help answering a few questions. Throughout my process of buying a house through Bank of America and USDA, I have researched more information about the process and so far your website has been the most helpful. You recently answered a question on one of your blogs for me very quickly. I was quite impressed. I realize that you live in Pennsylvania, I live in Washington state. So, the question I ask may not apply to your state but any help guiding me down the right path would be very helpful.

Some background knowledge for you. My offer for a home was accepted on Sept. 1, 2009, finally on Dec. 16th I was told that my file was being submitted to USDA for their underwriting. This was after numerous delays from the bank and seller getting the actual house approved and then finally going to underwriting at B of A. After I was told the date, I kept checking the WA USDA website that stated what date of applications they were working on. In early January the mortgage processor called and said that more information was needed. I asked if my file had even been submitted and she told me that it had but that USDA had requested more information.

About 2 weeks ago I noticed that USDA was processing applications after the date my file had been submitted. I gave the bank a few days and then emailed asking if they had heard anything. After a few days wait the processor emailed my Realtor saying she was done covering up for her company, which was very strange to say the least. It was not until I emailed USDA asking if they had a file for me and found out that they never received one, did the processor finally admit that it had not been submitted. The fed-exed the file that day and is currently in line to be processed.

I currently have a meeting scheduled for Monday with my Realtor and B of A management.

My questions for you:
1. Have you had any experience like this in your time as a Realtor?
2. Is this basically bad business for B of A, or is this fraud? I have proof of their lies?
3. What would you do?

My Realtor has not completed a USDA loan before and has definitely not experienced anything close to this.

If you don't have time to answer my questions, I completely understand. I just don't know where to go from here.

Thank you for any help you can provide.

I'm will pass this link along to the person who asked the question as well, so lets see if anyone else can suggest anything beyond what I was able to offer.

1. Have you had any experience like this in your time as a Realtor? I have not had any trouble with a USDA loan closing. In fact we are closing all of them in less than 60 days. I even had a USDA direct get done in 60 days. This is partly due to a lender who is very familiar with the loan product. She does a great job keeping me up to date and getting things through USDA under writing in a timely fashion.

2. Is this basically bad business for B of A, or is this fraud? I have proof of their lies? To be completely honest I've had horrible dealings with BOA. I've done one deal with them and honestly cannot suggest their services to anyone at this point. The lender was decent, but there was a lot of hiccups in the process. They offered to pay all of these things on the GFE, but on the HUD none of it was covered. The company cost their lender over 1000 bucks that he personally paid out of pocket.

3. What would you do? At this point I'd do whatever it takes to get the deal closed. There is no way it should take from September until now to get a USDA loan closed. Even if you do have to make some repairs to the home to satisfy USDA that should be able to be done within the 60 day period from contract date to settlement. Make sure USDA actually has the file, because at that point, assuming they approve it, you're rounding third base heading for home. I would ask the bank to cover any additional fees accrued due to delays for settlement.