For those of you who have not been around for the past three years, I now own to rental properties containing three units.  These homes are located in an economically depressed area in Pennsylvania.  Did I mention that I live in New York City?

I decided to buy both of these homes strictly as investments.  In order to do that, I raided my 401(K) to finance my purchases since I did not have the cash on hand and because it’s incredibly hard to find financing for homes valued at less than $50,000.  You can read more about that decision in Why I’m Buying Rental Property While Still In Debt. Anyway, it’s time to get to the finances.

Let’s review how each house is doing separately.

House #1

Purchase Price: $19,500
Annual Taxes: $1,617 a fricken 50% increase in ONE damn year
Annual Insurance: $600
Sewer & Garage Collection: $360
Annual budget for repairs: $575
Annual rent: $ 6,900
Net annual cash flow: $3,748

After a few initial hiccups with bad tenants, I found the perfect set of tenants last year.  So far, they’ve always paid on time and never called me for repairs or anything.  I did make a few upgrades to the home even though they did not request them.  Their lease is up for renewal at the end of July and I hope to keep them forever.  I would kidnap them and tie them in the basement if I could.  Alas, I hear that kind of thing is illegal.  Instead, I’ll keep the rent as is in the hope that they choose to stay.  Plus, they’re both chefs and baked me the most awesome pumpkin cookies for the holidays.

House #2

Purchase Price: $36.000
Annual Taxes: $ $1,663
Annual Insurance: $725
Sewer & Garage Collection: $720
Annual budget for repairs/incidentals: $1,100
Annual rent: $ 13,800
Net annual cash flow: $9,592

Now, keep in mind that the numbers of all assume a 100% occupancy rate. I purchased that home less than a year ago and will now be on my second set of tenants.  The tenant with the horrible credit score will move into the second floor apartment on June 1, and I’ll be going to court for final eviction proceedings for the first floor tenants tomorrow.  If all goes well I will have a new tenant downstairs for July 1.

Since purchasing home number two I’ve completed a gut-renovation of one bathroom, and replaced pretty much all of the flooring in the entire house.  I’ve also made some minor updates as well.  In total, since purchasing the house, I’ve spent about $4,500 on renovations.  I had budgeted for half that amount, but you never know what you will find when you open up walls or floors in an old house.  I do hold a mortgage on this second house which I track in my monthly debt updates.

If we use the best case scenario numbers above (which is pretty much what I call them), then the payback period on the initial purchase price of each home is a little over 5 years and a little under 4 years respectively.  Assuming that I hold on to each property until those periods elapse, any rents received after those time periods (minus expenses of course) pretty much goes straight into my pocket.

Now, if I were employing a different strategy I would be more concerned with the value of each home.  Based on the improvements that I had made to each home and recent comparable sales I could probably sell each house for $25,000 and $45,000 respectively.  If I use a website such as Zillow to check home values, the numbers are $45,000 and $85,000 respectively.  Apparently Zillow is on crack which would be normal in this area. So, if I wanted to cut and run I would still make a profit.

Before you go thinking that everything is rosy, the numbers don’t exactly match what I had expected when it purchased homes.  A few things impacted my calculations:

1. Property taxes have gone way up.  The tax on the smaller house went up by 50% in the last year alone.  WTF man!  How greedy can the local government get?
2. My insurance premiums are much higher than the previous owner’s because this is not my primary residence and because I live out of state.  Double whammy.  The insurance premiums would be  one third lower if I lived in the house.
3. Obviously, I have not had a 100% occupancy rate.

This is pretty much why you must plan for a worst case scenario.  As long as the homes have a five year repayment period or less, I’m very happy.  I could not do this in New York City, where I live.  Based on the price of homes in New York, I would face a minimum of 15 years before I would break even.  Yes, the rents are higher but so are the home prices.  There’s a much bigger risk associated with a more costly home.  So, I dabble at the bottom end of the market because everyone deserves a decent place to live…and someone has to provide them with those homes.

Before you go thinking that I’m a slum lord, these are actually really nice homes.  The bottom just completely fell out of the real estate market in that particular area.  Homes were being sold for less than 50% of their values in 2008.  The home that I purchased for $19,500 had previously been sold for $75,000 only a few years ago.

The question that you’re going to ask next is, was this worth it? Absolutely!  I firmly believe in having a mix of different types of investments within your retirement portfolio.  Here I am at age 35.  These homes will have paid for themselves well before I turn 40.  Having both property paid off this early gives me a decent income stream for years to come.

Is this something that you should do? I can’t tell you that you should.  There are a lot of risks and headaches involved with owning rentals.  My initial strategy was to buy one home every 2 years, however, I am seriously thinking about revising that strategy for something else.  When I decide what to do, you’ll be the second to know.

Stock Up On Cash

No matter which country you move to, money talks.  Now, keep in mind that you can’t take excessive amounts of physical cash with you through the airport (typically no more than $10,000 unless you like being detained for hours while the government checks to see if you are laundering cash), so plan to take just what you will need to sustain you for about one week.  By taking this cash you will be able to pay for food, shelter and whatever incidentals you incur upon your initial move. 

Set Up Your New Bank Account

A wise decision would be establishing a bank account within the country to which you are moving beforehand.   Many major U.S. based banks have branches in countries around the world, or may have partnerships and relationships with international banks, thus allowing you to have an International bank account.   Establishing a bank account in another country ahead of time will allow you to wire money into your new bank, thus mitigating the need for carrying cash.

You may also want to consider leaving the cash in your new account in U.S. dollars depending on the volatility of the currency of your new country.

Find Appropriate Housing

When I visit a new city or country, I tend to g off the beaten path.  That’s typically where you find the best deals, but they might always be in the greatest neighborhoods.  This can have long-lasting implications if you happen to be moving to a new country.

Doing as much research as possible before a permanent move will ensure that you are in the most ideal neighborhood for your particular situation.  This might mean having a shorter commute to work, being centrally located, access to school, and f course, the cost of living.

You may need to make a trip ahead of time to scout neighborhoods, or to hire a local realtor who specializes in international moves to make this transition easier.

Learn the Culture

Some might argue that this is the most important thing to do prior to your move.  Learn everything you can about the culture in your new area so that you don’t offend any of the locals. To them, you are the alien, and it’s more likely that without prior knowledge, you may unintentionally offend your new countrymen.  For example, the “okay” hand gesture might be innocuous in U.S. culture, but might be offensive in Greece, Turkey or some countries in the Middle East.

Showing a willingness to learn your new country’s culture, especially when done respectfully, will endear you to the individuals with whom you interact.  My Japanese friends always giggle at my pronunciation, but love the opportunity to teach me new words and phrases.  Plus, I get the added benefit of them taking me to awesome Japanese restaurants that I would not have discovered on my own.

From the adventurous to Baby Boomers, more adults are choosing to live in a place outside of their native countries.  Moving to an entirely new country can be extremely exciting, and if enough preparation is done ahead of time it can be relatively seamless.

While there are more than 29 million individuals worldwide with a net worth greater than $1M, there are 3.1 billion people with a net worth of less than $10,000. With a net worth just abut breaking even, I’m in the latter group. Today I’m sharing an infographic showcasing the wealth gap.

If you’ve every received a phone call or letter in the mail demanding payment for a debt that is years old, you might have unfortunately have zombies knocking at your door. Some debt collectors have a way of resurrecting debt that is so old that is might actually be outside of the statutes of limitations for collection. We call that zombie debt.

A tactic that is often used is trying to reset the clock on an old debt. How do they do this? By trying to get you to make a mistake. If you acknowledge the debt by admitting that you owe, make a partial payment, or ignore a lawsuit, you might have just given a debt collector ammunition against you.

For more about this practice, check out the video below.

An initial way to start is with an authority in credit fix. In many cases, it may happen that there might be some incorrect entries or duplications. You would be amazed that this fix has worked for a number of people and gave their FICO score a significant boost.

The tip that most people don’t know is that you should get your credit report from at least three credit bureaus of major repute (Transunion, Equifax and Experian). Each report should have some detail that isn’t present in the others. It gives you a larger scope for checking out any if there’s any inaccurate entry. In the case if there is; a claim can be filed for a dispute.

Your credit report also has the list of creditors, whom you can contact for a feasible payment plan. Many of them would be willing to make a plan in which you would be able to pay a certain amount which is less than the original one you owe. By making these payments on time, it is possible to rectify your credit score.

In the case you own a business, a risk assessment like Lexis Nexis Receivables Management or any other of the same nature is a good option since it allows you analytical control over your business. This solution is for those who want to keep their credit in check. The workflow optimization includes strategies for debt management.

The good thing about the system is that your credit is never too bad to be repaired. If you have resumed a job and it is not mentioned in your credit report, you can ask the bureaus to add it. The credit report is directly dependent upon stability.

A wise strategy would be to get a credit card. If you don’t qualify, it’s possible to get a secured one. The idea is to maintain your balance of spending and saving at the same time without adding to your interest. It makes your credit report look good. You can also look for common mortgages mistakes that people can commit.

A credit report is also harmed by late payments. Sometimes, late payments are not due to the absence of cash, but due to mere negligence. Jot down such payments, and make sure that they are on time. Don’t get late on your account payments by a time period of 30 to 60 days.

Remember that at least 30% of your FICO score is through your debt. Try to keep your credit card balance and credit limit within check. The rule of thumb is that the balance should be within and below 30% of the credit limit. So, to improve your credit score, target the over balances to come below the limit. This would work dramatically on your score. Another option is via the payday loans (http://financenize.com/loans/bad-credit-go-for-payday-loans/).

Through this proactive approach, it is possible to rectify your credit report in less than two years. How have you improved your credit score?