Nathan Miller

So nearly twenty years ago I setup my first banking relationship with a small local credit union. Granted I was 14 at the time and it was really my parents that set it up for me, but I think there's something to be learned from this. As I ventured out on my own I decided it best to use a big well known bank such as Wells Fargo to bank with. I was thinking it provided me more security for my assets and a bigger bank knew what they were doing better, right?

I've recently come to some conclusions which are pushing me to re-think my decision. Granted a lot of this has to do with the current credit crunch, and banks just tightening down in general; however, here's what I've found.

My big bank sucks! Not only that, they are expensive. And not only that, they treat their customers like dirt. I walked in the other day to cash a 3rd party check, as I had done on many past occassions. Whenever there was any question about who I was or what the bank was going to do for me, a teller might call over the manager, who had visited my business a year prior and knew me well. I also maintained balances in all my accounts well enough to cover the check if for any reason it didn't clear. Well my story starts right here. The teller said No. It wasn't a "I'll check", or a "Let me get approval for you", it was a flat "no, we don't do that any more". Naturally, having done this many times previously I asked to speak with her manager. It was also an urgent matter.

Here's where the second bit of change comes in. The manager I knew and liked was no longer there. The new manager says "the teller is telling you the fact, we don't do that anymore". I pointed out I had enough funds to cover any problems, and reminded them I could take my banking elsewhere. It didn't matter, they refused to serve me. Keep in mind, I'm a very long term customer at this point who has not once ever bounced a check or had even a single late payment with this bank.

It must have been within a week after this issue that I got a letter from the bank. I really wasn't expecting anything, but upon opening it my 2nd bit of big bank news arrives. It went something like this: "the credit card you have with us is going up to to 18% interest". Wow, are you kidding me? I maintain decent balances in my accounts for money you can then use for investing and loaning. The bank then pays me virtually nothing in interest. I think Wells Fargo currently pays right near .2% interest; it might and probably is even lower. All this and for a person who has excellent credit, and has never ever ever had a late payment to them or any other bank, they are raising the rate up nearly 10 points. Why? Simple answer is they are greedy, and because they can.

So my days of doing business with this bank are certainly numbered, especially since I discovered an alternative. Taking a lesson from my parents twenty years ago, and having heard local radio advertisments for them for years, I decided to step into one of our hometown local banks. Here's what I found:

1. The 3rd party check is no problem, so long as I have the balance to cover them until they clear.

2. The same people have worked at this bank for 10-20 years. They don't have high employee turnover such as my old bank.

3. They pay me to put my money there! Currently they are paying 1.5% on money just sitting in a checking account, which honestly is the most convenient place for it for me for ultimate liquidity. They pay more on CDs and other savings vessels too.

4. The people are friendly and want to help, in contrast to Wells Fargo's policy of quoting corporate scripture.

The only downside thus far about banking local are a couple conveniences which I've come to rely on over the years. This is making the transition take a bit longer.

1. Their ATM doesn't accept deposits. They do take deposits at the teller or nightly drop box. So now I print a deposit receipt from my favorite property management software, and just drop an envelope in the night drop box.

2. I haven't been able to successfully tie my bank accounts in with my personal finance software. I am told it is possible; however, it's clearly not as easy as it was with the old bank.

So to you AR members. Where do you bank? Big faceless policy driven bank, or a local one?

--- about the author ---

Rentec Direct provides property management software free to landlords and property managers. Because of the importance of thorough screening for prospective tenants, we have integrated tenant screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.

I posted a few weeks ago Google Voice Opens the Flood Gates Today which generated a lot of discussion. I've been asked both online and offline about what I thought about it now that I've had a chance to use it. So here it is.

First thing, although I signed up for Google Voice a very very long time ago, it still took weeks to get my invite, so this indeed is a fresh opinion because I've been using it now for about a week.

Here's what I like about Google Voice and they do well (The Good)

1. Simplicity - There's a lot to be said today for building an uncomplicated system. So many web and software app designers are out there to cram every last feature into an application so it caters to everyone, and equally confuses everyone or requires training. Not the case with Voice. The interface is extremely clean and shows only what is necessary and nothing else. I really like this. The interface is similar to Gmail in many ways, only even cleaner.

Going further on the simplicity topic. Setting up Google Voice took all of about 10 minutes. I took my time, and could have easily done it in 5. You pick a number from their list of available numbers, add your other phone numbers (cell, home, work, etc). It's easy to add numbers later and the call routing is very (almost too) easy to tell it which phone to ring when.

2. Transcription & Call Routing - It only stands to reason that computers are capable these days of reading voices and converting them to text. While others have done this before (youmail, etc), Google makes the process seamless and perhaps most important FREE. While the transcription quality could use some work (read more on this later), Voice will do some really nice things with the transcribed message. Namely they will email it once it's transcribed and/or SMS it to my cell phone.

This opens up a whole new idea to me. It's not advertised as an option by Google, but I've found it very useful. My personal cell gets way too many calls, and most of the time I have to let them go to voicemail. It's always been a chore to call in, get my voicemails, write them down, and call them back. I certainly am not (at this time anyways) going to give everyone a new number to reach me at. What I've done is told my cell phone to forward unanswered calls to my Google Voice number. As a result my cell never receives voicemails any more (YAY!). Voice takes the call, transcribes it, and SMSs me the message. Reading the message in an email or SMS tends to take me just a few seconds, and also lets me know how important the message is without the time consuming process of calling in and listening to all the messages. I absolutely love the time savings.

3. Call Recording - I actually haven't used this feature, but I assume it works as advertised and it looks very simple to use. Click a button and the call gets recorded for future reference. I guess my only word of caution here is some states legally require both sides be aware that the call is being recorded, so use with care.

4. Call Widgets - Hidden in the Settings of Google Voice is a little feature called 'Call Widget'. It's a simple click-me icon that can go on your website that says "Call Me". Google then calls the person first, then calls any phone I specify and connects the two calls. Google provides the long distance at no cost both ways. What an absolutely cool feature, that I haven't yet tried but am excited to.

5. Free Calling - Most people take this for granted these days with cell plans, etc; however my Google Voice account lets me call anywhere in the country for free. Doesn't cost a single penny. Even Skype would charge 2c/minute and they used to be the cheapest solution. I think Google is paying for this with reciprical compensation from the phone companies, and I applaud them for providing these connections anywhere in the US for free.

Here's what I don't like (The Bad)

1. Transcription - I have a love/hate relationship with the transcription. If I call in and speak very clearly it's darn near 100% accurate. However, it seems I don't leave myself very many voicemails, go figure. The typical caller speaks quickly and in their own inflections, which aren't necessarily completely understood by Voice. I'm going to give their transcription a C- for effectiveness. Even so, generally even when I get a transcribed voicemail that's totally wrong, I can often still make-out the topic and get a good idea if it's an important message or not. Here's an example of my test call, speaking clearly it only got one word wrong. However, clickin the Play button within Voice is simpler than pretty much any voicemail system *ever*, so it's easy to listen to messages that don't transcribe well.

I do like how Google highlights the words it's more certain about, and when playing the message it underlines the word it's on.

2. Only one phone number - Google must realize people are going to use this service not only for their personal but for their business stuff as well. As such, I would really like to have a single Voice account, with multiple inbound numbers, one for each business and one for personal and be able to sort and route accordingly. The only way around this I see is to setup two separate Voice accounts with 2 separate numbers. It's somewhat complicated to manage 2 separate accounts though. I certainly would be willing to pay for the extra numbers for this added convenience.

Google keeps track of the phone numbers tied to each account. I can't tie my cell phone into both accounts as Google will spew an error (phone already in use on another account). Therefore I'm restricted to receive my voicemails as SMS on my cell from one or the other. This is a silly limitation IMHO.

3. Privacy - Google has a pretty solid privacy policy. I bet, right behind Microsoft, they've spent more money on making their privacy policy solid than about anyone else. Even still, Google is amassing an unthinkable amount of data. They possess and index billions of emails, searches, and surfing habits. Now add in that they will be storing transcribed voicemails, which (while they say they aren't just yet) could easily be indexed. It's somewhat scary to know that one single company possesses most of the world's information, and really could do anything they want with it.

Finally.. The Ugly (or not)

Some might ask why Google continues building interfaces with so little graphical flare. Some say their interfaces are "Ugly". I'm in total disagreement here. The lack of graphics make the page load fast, not use much memory on my computer, and make it possible to navigate on a mobile device. I'm going to throw out a big BRAVO for Google on keeping the interface clean and simple. Thank you Google.

---

So my big question for Google. They make 98%+ of their billions on advertising. I'm not seeing any advertising here in my Google Voice mailbox, anywhere. It would be really nice to know how Google plans to make money off this product. I'm sure it won't be free, useful, and ad-free forever.

Overall, I'm going to give the entire Google Voice experience a C+. If they allow multiple phone numbers, and improve on the transcription it could easily be an A, but those are big ticket items for me. I'm going to continue using it, and even be purchasing an Android phone here really soon (HTC Hero I think), which has a Google Voice application for true visual voicemail far better than Apple/AT&T's attempt.

Finally, I wrote my review purposely before reading anybody elses. Here's some links to what some other AR members think about Google Voice:

I JUST got Google voice (I feel like I hit the lottery!!) NOW WHAT????

Google Voice for Real Estate Pros - So Far, So Good

OMG I got my Google Invite Finally!

--- about the author ---

Rentec Direct provides property management software free to landlords and property managers. Because of the importance of thorough screening for prospective tenants, we have integrated tenant screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.

I posted a recent blog, and while it didn't get a lot of comments I did receive one about how property management is so crazy difficult. Frankly it surprised me because, while there weren't many comments on this post, the one comment explaining how difficult property management was was a large percentage of overall comments. It makes me think, there must be a lot of people out there with the same opinion.

So that leads me to wonder why. We all know the general pitfalls of property management.

• Dealing with poor tenants
• Maintenance & repairs
• Anything "legal"
• Showing the property when it's vacant
• The possibility of negative cash-flow
• Taxes

Now that those are out in the open, are there any more - anyone? These factors above can be significantly minimized if not eliminated, well except taxes, that's a fact of reality.

Addressing the items:

Poor Tenants - This boils down to being choosy in the first place. If you rent to that single mother who really really needs a place to live because she got evicted from her last place you're asking for trouble. Granted it might be really nice of you to let her rent from you even though we know she can't afford it, but in the end it doesn't do her any favors. Eliminate poor tenants by thoroughly screening, verifying references, and doing an analysis on the tenant to see if they can afford your property. No more than 50% of their paycheck should be going towards rent as a rule of thumb.

Maintenance & Repairs - I've heard this a lot, and yes older properties require a lot of maintenance and repairs regardless if they are rented or not. Newer properties (which there are a lot of on the market really cheap right now) don't have so much maintenance problems. Repairs are going to be there whether somebody is renting or not, and if the tenant caused the problem, the tenant pays for it typically. The hassle is eliminated if you have a reliable handy-man, which is very easy to find on craigslist these days.

Legal Stuff - I agree here, if anything legal comes up it puts a dent in the pocketbook. Stay far away from lawyers. Their job is to create conflict to keep themselves in business. If you can spend $2000, even if it doesn't seem fair, to stay out of court, by all means do it becuase it'll amount to a substantial savings in both dollars and time. But the point is to avoid legal issues in the first place, and that all begins with tenant screening. Be sure to run a comprehensive criminal as well as bankruptsy, lien, judgements, and eviction reports on anyone you place. This information will help you select a tenant who isn't litigious or a general troublemaker.

Showing the Property - This is a necessary evil. I typically show our properties 5-10 times before I find a renter I'm OK with and who likes the property. It's about 30 minutes a pop and happens on average about every 18 months. While it's a big deal when it's going on, it ends up being an actual 2-3 hours per year total per property which all in all isn't that bad. This process alone can be hired out to a property management company for about $150 also if the 2-3 hours are trouble finding. I believe it's a far better option to meet the prospective tenants in person than sub it out to a property management company though.

Negative Cash-flow - This all begins with the purchase. You are deciding whether your going to have positive cash-flow on a rental at the time of purchase. You don't have the option later. So choose wisely. I have an excellent formula for picking investment properties I would be happy to share to anyone who wants.

Taxes - We all hate them, we all have to pay them, and they will never get any cheaper. The good news is, you have to make money to pay taxes. So if you're complaining about your tax bill it means you are making money which is better than a lot of property owners these days! If you are using a good property management software application to track the ins and outs, taxes take a matter of minutes for each property instead of hours. In general, accounting is quite simple for rentals given the proper tools.

That covers the uglies of property management. Perhaps my experiences are different than others, but property management in itself is actually pretty easy. A well chosen single-family property can bring in around $4800/yr profit (just from rent) at a cost of 2-3 hours of your time. That is $1600/hr.

I would love to hear about your experience/opinions on property management. Please comment.

--- about the author ---

Rentec Direct provides landlord software free to property managers and property owners. Because of the importance of thorough screening for prospective tenants, we have integrated tenant background screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.

There are still a lot of areas that haven't recovered and still have 12+ months of inventory sitting around. It truly is a buyer's market, but.. wait.. nobody's buying hardly (at least not at what many sellers want/need to sell for). Inventory continues to grow and sellers continue to compound their frustrations. I'm there myself. I have a house I want to sell, but it's taken such a beating in this downturn that I would just lose too much. I would rather sit on it for a while, but not without making anything.

Where I'm going with this, is there may not be many buyers out there but there are a TON of new renters. For every foreclosure property that pops up on the MLS there's a new family renting. Sad though it may be, it's true. If you have a vacant house that won't sell right now, or your client has that vacant house, help both of yourselves out and assist them in turning it into some postive cash-flow.

Some owners don't want to hassle with the troubles of renting, and that's where you could come in and help. Assumingly you are already in an office downtown with every capability in the world to help them manage their properties. Most property management companies charge 5-10% to manage a property on behalf of the owner. So for a $1000/mo rent house that's $50-$100 per month income for you and $900+ for the owner. That sure beats a sharp poke in the eye.

It's not as hard as it sounds either. Many real-estate firms are diversifying into property management because there's real money in it. 20 properties could mean $2000/mo additional monthly cash for your firm. Each state is different and this may not be the best idea for a recovering market with less inventory but I think it is worth serious consideration for those markets that are having a difficult time recovering.

--- about the author ---

Rentec Direct provides property management software free to landlords and property managers. Because of the importance of thorough screening for prospective tenants, we have integrated tenant screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.

I think that our buddy uncle sam wants us to believe that he believes in family and at least claims to support families. Why though is it that they continue this $50,000 tax penalty on married couples?

Not sure which penalty I'm referring to? (are there that many? lol). I'm talking about the passive loss penalty.

The technical read is here: http://www.irs.gov/businesses/small/article/0,,id=146341,00.html

In a nutshell, as a taxpayer filing unmarried and single I have the benefit of taking up to a $25,000 loss on my "passive income" (investment properties) against my active income provided I make less than $100k/yr. This includes all the standard deductions investors take on their properties - repairs, mortgage, taxes, depreciation, etc. My $100k active income can be reduced to $75k if I had $25k in losses on my properties thereby directly affecting my tax bill.

OK, that's easy enough to understand and makes sense. It even seems pretty fair. What happens if I get married though? Penalties up the wazzoo is what happens.

First, this benefit is only applicable for those making $100k/yr or less. It phases out and is completely eliminated at $150k. But wait, we're two people instead of one right, so all the numbers should be doubled. It makes sense that for a joint return the benefit would begin losing it's value at $200k/yr, similar to most every other benefit in tax code for joint returns. But sneaky sam has never modified this particular credit to account for joint return. A joint return has the same $100k limit as a single application. If my wife brings home $25k/yr we only get half of the benefit or $12,500. If she brings home $50k/yr we completely lose out on the benefit.

To make things worse, what if I come into the marriage with 4 properties that have a $25k loss, and she comes into the marriage with 4 properties with a $25k loss and our combined incomes now exceed $150k. This is a worst case scenario because prior to marriage we both were able to take a passive loss deduction of $25k. After marriage, neither of us can take the passive loss deduction. That's $50k additional income we would be taxed on, or roughly $15k in taxes. Over a marriage lasting 40 years that's $600,000 extra we've been forced to pay sneaky sam because of this "glitch" in the tax system.

Now I know nobody wants to get started on taxes, it's a sore subject no matter what way we look at it; but I keep hearing about this particular issue with property investors who have passive losses and it's a big sore subject that keeps coming up year after year.

So what do CPAs have to say about this? I've interviewed several, and the same conclusion is that uncle sam does what uncle sam does and his purpose is to increase taxes, not reduce them. How to avoid the $50k penalty: a) don't have any losses, or b) don't get married

I, for one, hope some of our trusted(?) elected officials stand up to the IRS on this one someday and repair this flaw in the tax code. Since losses on a realestate rental are somebody elses taxable gain, as it stands now, it's double-taxation.

--- about the author ---

Rentec Direct provides property management software free to landlords and property managers. Because of the importance of thorough screening for prospective tenants, we have integrated tenant screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.