King County Now Requires Septic Systems to be Inspected at Time of Sale

In the news recently, I found out that King County now requires all septic systems to be inspected at time of sale. Here is an excerpt from the bulletin issued by the Northwest Multiple Listing Service (NWMLS):

"January 16, 2009. In King County, the seller of any single or multi-family residential property served by an on-site septic system is now required to have a monitoring and performance inspection prior to transfer of title. King County will require the inspection and report to be completed by a King County licensed On-Site System Maintainer (OSM). A copy of the inspection report must be submitted to the Health Department and the buyer prior to transfer of title. The new requirement is set forth in King County Board of Health Code Section 13.60.030."

(Photo Courtesy: pottyon.com)

Here is in interesting factoid about septic systems from pottyon.com:

"Most septic systems are conventional systems that use gravity to distribute the effluent from the tank. When site conditions are not appropriate for a conventional system, other types of systems, such as low pressure distribution or mound systems are sometimes used.

Septic systems cannot dispose of all the material that enters the system. Solids that are not broken down by bacteria begin to accumulate in the septic tank and eventually need to be removed. The most common reason for system failure is not having these solids removed on a regular basis. When the holding tank is not pumped out frequently enough, the solids can enter the pipes leading to and from the tank. This can cause sewage to back up into the house or cause the drainage system to fail as the pipes and soil become congested. These problems are often costly to fix, pose a danger to public health, and are a significant source of water pollution. Seepage from inadequate or failing septic systems can contaminate both ground and surface waters. The industry recommends having a licensed company clean your septic tank every two years to perform preventative maintenance."

One thing I should note is that septic systems can be very costly to redesign and replace. According to Evergreen Septic Design, they can range anywhere from $5,000.00 to over $20,000.00 +. Therefore, regular maintenance is important. Some septic system companies recommend pumping the septic system every 2 to 3 years and others say every 5 years. I, personally, would err to the side of caution and do this every 2 to 3 years. The cost to do so is minimal and would be worth the money saved in having to redesign and install a completely new system.

I found a wealth of information about septic systems on Evergreen Septic Designs' website, so if you are interested in learning more about septic systems, this would be a good place to start. Other information resources include Amman Septic Designs Inc, and King County.

The Bust is a Boon: Buyers Across the US are Finding More Affordable Homes

From CNNMoney.com, the headlines read:

"From California to D.C., falling home prices and cheaper mortgage rates are making dream homes possible."

Yes, we are definitely in a buyers' market where homebuyers can find homes that were previously priced beyond their reach. This article from CNN features the stories of several buyers and their experiences in the current homebuying market. I thought this was an interesting article, so here it is.

Some Things are Worth Second Chances: My Return to NAEBA

As of this week, I officially reinstated my company with NAEBA, or the National Association of Exclusive Buyer Agents. The change of heart came after a few years of going it alone with the encouragement of peers who were kind enough to keep in touch with me. After speaking with a few peers and Kim Kahl, who is the executive director of the organization I learned that many things have changed for the better. I am excited to see all of the new changes taking place, and I look forward to joining a committee and contributing my energy to the goals of the organization.

Sound Advice from a fellow EBA: How to Get The Best Deal in a Buyers Market

I came across a blog post today written by an EBA peer in Nashville entitled "Buying Real Estate - How to Get The Best Deal in a Buyers Market." The blog post presented some good and very helpful advice for buyers in today's buying environment, so I decided to blog about it and point the way! :)

Here is a sneak-peak:

"First and foremost...decide how you will pay for it! Do you have cash...or you will be looking for financing? If financing is in your plans...be sure to arrange for it ahead of time. Be sure to obtain a copy of your credit report and correct any mistakes...NOW! If you plan to live in the home as your primary residence, it will require a smaller down payment. But, if this is an investment...you should plan on at least 20% down. AND always have a pre-approval letter from your lender in hand when you make your offer! It will greatly help your agent negotiate the best possible price for you.

Then, when it's time to start house-hunting...look for a good Exclusive Buyer's Agent who will help you find the right property...and buy it at the best possible price. A few tips to consider when buying real estate..."

(photo: activerain.com)

Seven Fundamental Keys to Building Cash Flow in Real Estate

Whether a person invests in real estate, paper assets (like stocks and bonds), or business opportunities, investment strategies are unique to each individual. This blog will focus on one particular type of income producing asset--real estate. While there are many ways to build an investment strategy around real estate, for example, buying fixers and selling them for a profit or purchasing bare land and developing buildings for sale or lease-the scope of this article will focus on seven keys to building a strong portfolio of cash-flowing properties.

1. Assess Your Situation

(a) Know What You Need and Want

The first item to consider is whether real estate is right for you. It is not for everyone, but if you find that real estate investment is what you want, then designing a real estate investment plan is the best place to start. From a cash flow perspective, identify what your current monthly expense requirements are and how much income you need every month to maintain your current lifestyle. Once you have this figure, consider where you want to be in five, seven, or ten years, etc. How much monthly cash flow will it take to support this future goal? Then add this to your current monthly expense figure and you will have a starting point for your cash flow goals. This figure will most likely change as you begin working your plan and making periodic adjustments to your goals.

(b) Assess Your Direction and Identify Your Preferred Property Type

Within real estate, there are different property types from which to choose from, for example, single-family rentals, multifamily rentals, office buildings, industrial office buildings, warehouses or public storage, retail properties, etc. Each property type has its own unique considerations and operational requirements.

Researching and learning how to operate that particular property type means having the knowledge to manage the management team from an informed position.

(c) Know What Kind of Financing is Available

While the mortgage market recovers from its recent meltdown, financing requirements will remain tight, but there are still options available to facilitate purchases, such as seller financing and lease options. Learning about the different financing options available is a key factor in planning a real estate investment strategy. Financing can mean the difference between a good and bad deal. Before the mortgage crisis, lenders commonly required a 1.20 DCR or "debt coverage ratio"--meaning, they would require 20 dollars of income for every dollar of debt that the property carries. With this information and a property's net operating income, you can calculate maximum loan amounts and minimum equity requirements (aka. down payment) for any income producing property. This can also help determine whether a property is overpriced and at what price the property will yield your required rate of return.

(d) Set Your Required Rate of Return

If you want your money to work harder than a savings account or a CD, then determine your required rate of return upfront and use this rate to calculate the investment value of a property based on its net operating income. This maximum amount will be the point where you will draw the line on any particular investment. When a seller is not agreeable to your maximum price, then it is time to walk away and find an investment that will fulfill your investment requirements.

(e) A Word About the Tenant Landlord Law

If you are considering single-family and/or multifamily rentals, then you will need to become familiar, if not well versed, in Tenant Landlord Laws. Having a set system that keeps you in compliance with the law is a wise investment of time and money. Management companies and real estate attorneys can be helpful in this area.

2. Set Minimum Property Requirements and Limits

From a cash flow perspective, the ideal situation is to start receiving rents the following rent period after closing. If you have to gut and rehab a building entirely, there will surely be a period of downtime and you may have to support the property until you are able to lease and begin receiving income. If your goal is immediate cash flow, then a major rehab project may not be the right project type to consider. Instead, a well-maintained property or one that needs a minor amount of cosmetic work with a steady tenant history is the ideal property from a cash flow perspective.

3. Assemble a Stellar Team

Assembling a team of professionals dedicated to your financial success in real estate is a key component in realizing your cash flow goals.

The Real Estate Broker - A buyer's broker who is also an experienced investor, if you want to avoid dual agency, then find an exclusive buyer's broker to work with.

The Mortgage Planner - A mortgage planner that specializes in investment and commercial properties

The Financial Planner - A financial planner with a positive perspective towards-and a full understanding of-real estate investments

The Real Estate Attorney - To review all loan and closing documents before signing, as well as any contracts or agreements-this is a CYA (Cover Your Assets)

The Management Company - A professional management company with a solid reputation will free your time so you can live your life and look for more properties to buy

The Property Inspector - This team member should have experience inspecting your chosen property-type.

4. Real Estate Investments Are About the Numbers

Leave Emotions at Home

Buying a real estate investment is about making money with property-not falling in love with property. This is especially bad, if the seller becomes aware of the infatuation. Investment real estate is about what it can do to bring you closer to your income goals, period.

5. Buy Properties Right

List Price Does Not Set Property Value

Regardless of the price, you see on a listing, a property's investment value will vary between investors because his or her required rate of return will be unique to each situation. Therefore, a list price is just an asking price. Set your required rate of return and make an offer accordingly. If meant to be, the seller will either accept or open up negotiations. If not, then it will be better to walk away than to end up with a property that does not meet your investment goals.

6. Periodically Re-Assess Your Direction and Make Adjustments as Necessary

If you started out with single-family rentals, you may decide to upgrade and own small multifamily buildings. If you own small multifamily buildings, you may decide it is time to buy your first 16 or 20 unit building, etc. The point is to keep your eyes on the horizon for new opportunities to grow your knowledge and portfolio of income properties. With experience comes confidence and with confidence comes new learning opportunities that will continue on a path of limitless growth. When it comes to learning, growing, and evolving we limit ourselves by the barriers we place upon ourselves.

7. Cash Flow Strategy: Buy Right and Hold Long-term

The key to building cash flow through real estate investments is to buy properties that satisfy your investment requirements upfront and holding them for the long term--a minimum of five years or ideally ten years. Have an exit strategy in place before the property approaches the end of its holding period. Start learning about 1031 tax-deferred exchanges and speaking to a specialist who can help guide you through the process well in advance. Being familiar with the process will ensure a smooth exchange transaction and preserve your wealth-building strategy when the time comes. Your accountant, tax attorney, or a financial advisor well versed in the area of 1031 exchanges can provide you with more information.

In closing, real estate investing can be a very rewarding experience. It requires planning and knowledge, but the end-result can secure your financial future. Education and motivation are key factors in building wealth and achieving financial independence.

(photo: http://www.singlepointerealty.com/)