Don’t Feed the Alligators

A Personal Finance Blog from a Small-Scale Landlord’s Perspective

Archive for December, 2008

12.27.2008
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Creative Commons License photo figure credit: tifotter

Since I’m currently out of work and home during the day I get tasked with tenant turnover and must wear the Property Manager hat. I have to say it’s been fairly successful this time around and I haven’t been too discouraged by the potential tenants. One thing that has been nice is the feedback I am getting from the people at the showings. They are impressed with the apartment and find it to be clean and welcoming. They also have indicated that what we offer for the price is reasonable.

This is the third time we have listed our unit on Craigslist and we also have a simple yard sign for the second time. We found that advertising in the newspaper was expensive and didn’t yield great results. We found that by being able to post photos on the internet, people know what they are getting before they take a look thus saving everyone’s precious time. I have shown the apartment about 9 times. More than half had seen the Craigslist ad and the rest were drive-bys.  I had only one person fill out an application so far and a handful of people take an application. In contrast, last year we had 4 applicants and ended up with the 4th one for a variety of reasons: bad credit, decided not to move, and vanished into thin air! 

We have found in the past that unless someone is willing to fill out the application on the spot, he is probably not interested. This is not always the case. I did have one person view the apartment twice and our current applicant took the application and dropped it off the next day.

Until today everyone who scheduled an appointment has shown up. Today I have had 2 no shows which makes me very angry. Although I did not have any plans, if we did not live in the building it would be annoying and time consuming to have come to show the apartment and have a no show. Common courtesy is a good quality in a tenant. These people, if I hear from them again, now have red flags.

For our applicant screening we have been using a service called Clear Screening to conduct credit and background checks. I have found Clear Screening to have great customer service and they provide a good product for a fair price. We can run credit reports for $14.95 and criminal reports for $21.95 (plus court fees).  Criminal reports do take a lot longer to process than credit reports, which are instantaneous. To qualify to pull someone’s credit, I initially had to prove I was a landlord by providing them with information on me and my property. After approval, all of my applicant checks are conducted online.  We also ask the applicants to fill out a credit report authorization form.  Even though I had not used the service since last year they were able to reactivate my account so I could screen the next round of candidates.  As we have learned in the past credit checks are invaluable tools to screen perspective tenants. We have had to decline an applicant for less than satisfactory credit. More recently we have had instances where perspective tenants operated on a cash only basis making it more difficult to screen. I have to commend them for living a credit-free life in our increasingly credit-full world. Two methods we have used in these cases are verification of bank balances and verification of past payments to various creditors.

Another often overlooked aspect of tenant screening is reference checks. It seems obvious to verify employment, but it is often difficult to call a complete stranger and ask for a personal reference. I have found that although these calls are often awkward to make, they do speak volumes about people. Although your friends may not say a lot if they think you may be a less than satisfactory tenant, people tend to speak volumes about people that they trust and feel are upstanding citizens that would work out well in your building. I have found this part to be very rewarding because these references are typically very telling of how a tenant will work out.

Despite the fact that some people will set up appointments and not show, there are other people that you can get a sense for, from the first meeting. Obviously some part of this job involves your gut feeling. In some sense by having me personally screen the tenants and MITBeta only seeing the written screenings it gives us a balance and objectivity. On paper someone may be questionable but the way they conduct themselves, their dealings with others, etc. are also a great measure of the way they will live in and treat your property.

Epilogue: I believe we have made the right decision with our next tenant and they are moved in as I write this. The end goal of every landlord is to have a longterm tenant that is respectful of her property and pays the rent every month on time.  I hope these new tenants are very happy here for a long time. I know they hope to be and are very excited about the move. I’m happy to be offering housing to someone who is as excited to live in my house as I am. People who are happy to be where they are tend to treat their aparment as if it were their own. But as is the nature of the business… only time will tell.

12.19.2008
Days 'til Christmas

Creative Commons License photo figure credit: aussiegall

Despite our best efforts we still didn’t sit down to do our shopping until about a week later than I would have liked. Unfortunately, with a work trip for MITBeta, a new baby on the way, and an apartment to be rented, we were preoccupied earlier this month. Because of my frugality and my past experience with Amazon I still choose to use Free Super Saver Shipping, even though they warned things may not reach us by Christmas. I will have to wait and see if this was a prudent choice. We are buying multiple gifts for most of the kids so my hope is that at least some of the gifts arrive on time and in a perfect world Amazon is managing expectations and everything will be in on time anyway. I haven’t had problems in the past and everything usually arrives in the nick of time. As of this post a lot of items have already shipped despite the late estimates. Amazon does a really good job of managing expectations.

One regret I have is not using the click thru option for shopping with Amazon. MITBeta and I are big fans of public radio and like to support it when we can. I obtain almost all my news from this source and feel like it’s nice to give a little back. Our local station has an option to click thru from their site to do your Amazon shopping. Although I remembered this fact while we were shopping for gifts, when I actually placed the order I forgot to click thru. I will try to remember this for next year.

I have decided it would also be a good idea to add Christmas cards to the budget for next year. It may not change the overall total since we came in under budget but it is an anticipated cost that can add up. I ended up buying 75 photo cards from Costco which had the best prices around for around $20. I think I typically spend about $40 for a similar amount of cards. In order to mail these cards I bought stamps, 100 for $42. So I think a safe budget number for cards would be around $60 and it pays to look around for the best deal.

Another thing that no one probably thinks about is swaps and charitable giving. Swaps are a great way to cut down on the amount of gifts purchased, while still sharing in the tradition of giving. If you are involved in a few different swaps each year it is probably a good idea to add those to your budget. If you have a couple of swaps with friends and work this could account for up to an additional $100.  It’s also nice to donate to charity at this time of year and MITBeta’s work has organized giving for Toys for Tots.

We do not want to forget our readers who may celebrate other holidays this season. I’m sure budgeting for Hannakuh gifts would be no different. Both holidays have anticipated expenses and are something to add to your yearly budget in order to avoid the holiday shopping crunch and credit card run up in January! But let us not forget that the most important thing this holiday season is spending quality time with friends and family.

We like to extend our warmest wishes to all our readers this holiday season!

Editor’s Note: All of the gifts that we ordered from Amazon.com last week have arrived and are wrapped. Hooray for Amazon and free shipping.

Furnace Flame 

Creative Commons License photo figure credit: Unhindered by Talent

By day, I am a mild-mannered employee of a company that manufactures heating appliances.  One of the ongoing challenges that we face is helping people understand how to compare the cost of heating with one fuel versus another.  After all, natural gas is sold by the therm, heating oil and propane are sold in gallons, and electricity is sold by the kilowatt-hour.  What people really want to know is: If I spend $1 on heating fuel, how much heat does that give me?

The math for figuring this out is relatively straightforward:

(Heating Value of Fuel per Unit) X (Heating System Efficiency) / (Cost per Unit of Fuel) = Heat per Dollar

Let’s use a real example to see how this works.  In my part of the world, the average price for a gallon of home heating oil is currently $2.41.  A quick Google Search reveals that there are approximately 140,000 BTUs per gallon of fuel oil.  A typical oil fired heating system is probably going to have an efficiency in the low 80s, and to be generous, the most efficient fuel oil heating systems are about 86% efficient.  So:

(140,000 BTU/gal) X (.86) / ($2.45/gal) = 49,959 BTU/dollar

The two factors that can change in this calculation are system efficiency and cost per unit.  The system efficiency can be determined in a number of ways:

  • Many service companies, especially those servicing oil equipment, will run a combustion analysis during the annual service.  Often, the results of this analysis will be left on a printout or written on a service tag that’s attached to the heating appliance.  This is a very good number to use.
  • Newer equipment is required by law to have a label indicating either the cost to operate the equipment or the efficiency and its relation to similar equipment.  You’ve have more than likely seen these yellow labels on new refrigerators, air conditioners, washing machines, heating appliances, etc.  If an efficiency is given here, this is also a good number to use.  With heating equipment in particular, this label shows the results of a specific test used to determine the Annualized Fuel Utilization Efficiency (AFUE).  This number is not necessarily the same as the actual combustion efficiency of the appliance, as it takes into account factors such as standby losses, and is closer to the real world efficiency.
  • If neither of these are available the next best thing to do is to use a rule of thumb.  If your heating system:
    • uses PVC pipe to carry the exhaust gases away, use 92% for the efficiency
    • has a fan that comes on before the burner lights, use 85% for the efficiency
    • has a standing pilot light that has to be lit periodically, use 75% for the efficiency
    • is between 25 and 40 years old, use 70% for the efficiency
    • is greater than 40 years old, use 60% for the efficiency
    • is oil fired and tuned up every year but no service tag is available, use 80% for the efficiency

If you are comparing your current system to a new system, then you’ll have to decide what efficiency system you will compare to.  A new natural gas or propane fired system can range from 80% to as much as 95% efficient, but an oil fired system can only achieve a maximum of 86%.  Electric resistance heaters are 98% efficient, but any kind of wood fired systems generally don’t get much better than in the high 70% efficiency range.

The other variable is the pricing of fuel.  I’ve found that I can pretty much find the cost of all major fuel types with some Googling.  Natural Gas prices can be a little tough to find if you’re not already a customer, but with a little digging I was able to come up with a unit cost.  With Natural Gas and Electricity, you have to be a bit careful in making comparisons if you are already a customer since there are often different rates for different types of service.  Residential Heating is often the lowest rate available.  When all else fails, a quick phone call to a local utility or service provider will be enough to turn up the going rate for the fuel you are comparing.

Let’s look at the best cases for some other fuels at the highest available efficiencies for each:

Natural Gas:

(103,000 BTU/therm) X (.95) / ($1.70/therm) = 57,558 BTU/dollar

Propane

(91,200 BTU/gal) X (.95) / ($2.54/gal) = 34,110 BTU/dollar

Electricity

(3,413 BTU/kWh) X (.98) / ($0.20/kWh) = 16,724 BTU/dollar

Cord Wood

(20,000,000 BTU/cord) X (.77) / ($225/cord) = 68,444 BTU/dollar

Wood Pellets

(16,400,000 BTU/ton) X (.83) / ($300/ton) = 45,373 BTU/dollar

So if I was in the market to replace my heating system, based on the present fuel prices in my area, the cheapest to the most expensive fuels would be:

  1. Cord Wood
  2. Natural Gas
  3. Fuel Oil
  4. Wood Pellets
  5. Propane
  6. Electricity

The clear winner here is natural gas, since I have no desire to stoke a wood fired boiler, furnace, or fireplace. 

What are your thoughts?  Have you considered switching fuels lately?  How do prices in your area compare to these?  Let’s hear your thoughts on this in the Comments Section below.

 

If you liked this article, you may be interested in seeing some related articles:


Christmas Tree

Creative Commons License photo figure credit: SleepingBear

This week ScrapperMom and I started and finished our Christmas shopping.  This was rather easy given that we don’t have many for whom to shop, we budgeted for Christmas just after LAST Christmas, and we already had the money set aside for these gifts.

Several years ago, we agreed with our adult siblings that we would all concentrate our buying efforts on the children in the family.  Prior to this point, we, like most families, would simply trade a bunch of items that we thought others would like.  Sometimes a hint or two may have been dropped over a Labor Day barbeque or Thanksgiving dinner, but for the most part we were left to guessing.  As a result, we all often ended up with well intentioned gifts, most of which never quite lived up to their full potential.

Some might argue that the whole point of gift giving is to know enough about the person to whom your are giving the gift to give something that will truly be appreciated.  This is a great idea in principle, but my experience is that it rarely happens in real life.  Others might argue that it’s not about the gift itself, but rather the thought that counts.  This is also a nice sentiment, but results in a pile of “stuff” that may create guilt on the part of the recipient and resentment on the part of the giver.  Instead, we prefer to share experiences: watching the kids open their presents, sharing a nice meal, and just being all together.

A few years back, we also started setting a pretty strict limit on what we would spend per gift recipient.  The obvious and immediate reason for this is that it limited how much we could spend in total and kept us from going into debt to finance Christmas.  The longer term reason, however, is that it allows us to anticipate how much money we’re going to need to cover Christmas all year long.  Knowing this allows us to begin saving for Christmas next year almost as soon as Christmas is over this year.

Christmas Club” savings accounts are not a new concept, but have fallen out of favor lately with the more prevalent use of credit cards.  Christmas Clubs are simple savings accounts that allow you to allocate a certain dollar amount per paycheck, week, month, or some other period.  The key to the success of this type of account is that the money is automatically deducted from your regular income stream and set aside in an account that is relatively difficult to access.

Many banks and credit unions still offer Christmas Club (and Vacation) savings accounts.  Our Christmas Savings account resides at ING Direct as one of our sub-accounts.  This is not truly a traditional Christmas Club account, and it has some advantages and disadvantages.  The ING account allows us to make it automatic.  Every month, ING automatically transfers 1/12 of our total Christmas budget for the year to the Christmas account.  The ING account also pays interest, which many Club accounts don’t.  Many Club accounts also restrict access to the money in the account, forcing you to leave the money alone or pay a penalty.  This is good for forcing you to save, but bad if you really need to get access to the money for a dire emergency.  The ING account allows me year round access to my money, but since it does not sit at a bank that is involved in our day to day financial business, the temptation to tap into it is very low.

This year we budgeted $800 in total for Christmas, and deposited $66.67 per month at ING.  By early December we had $800.04 sitting in our account, ready to be spent.  We used our new reward card of choice, the American Express Blue Cash card, to make all of our purchases, and will pay off the balance in full when the bill arrives.  Since we actually came in a bit under budget, we will probably not adjust our budget for next Christmas, and will begin paying for it in early January.

How do you pay for Christmas?  Do you take on debt to do so, or are you a Christmas Club user?  Do you set a Christmas budget or spend as the mood strikes?  We’d like to hear about it in the Comments Section below.

Lunch

Creative Commons License photo figure credit: kevincole

The last several weeks have been tough and/or busy for us in several ways: the passing of our dog, Thanksgiving, a 4 day business trip combined with ongoing busyness at the office, the hustle and bustle of preparing for Christmas, and — as if that wasn’t enough — preparations for the soon-to-be imminent arrival of Child #2.

So, for my trickle of posts at this space over the last couple of weeks, I apologize.  I give a lot of credit to all the bloggers out there with bigger families than mine who are posting something every day — sometimes on multiple topics and several blogs.  In any event, I want you all to know that I have neither forgotten about, nor abandoned my desire to write about personal finance topics.  So while the near-term schedule really doesn’t show any signs of lightening up, I pledge to at least post more often than I have been.

Now, to get back into the swing of things, I would offer links to several articles that I have been collecting over the last few months:

Juan’s Happy Wife posts here about the economics of home schooling.

Here’s an interesting article that claims an inverse relationship between the age of retirement and ultimate lifespan.  Yikes… I think I’ll retire next week!

Yesterday Boston.com had an analysis that was right up my alley in determining whether it made more sense to borrow from a 401k for a down payment on a house versus paying Private Mortgage Insurance (PMI).

J.D. had a guest post about The Irritation Threshold as it relates to Lifestyle Inflation.

The New York Times had an article on why it’s temping to want to switch to cash, but that risks remain in that strategy.

Lastly, the Wall Street Journal ran a story banks that pay credit card holders to pay off their balances.