How to Deal with Your Escrow Shortage & Increase Your Cash Flow

Property taxes and insurance are increasing every year.  If your mortgage requires an escrow account to cover taxes and insurance, this will increase the payment.  Often it results not only in an increase in mortgage payments but an additional payment due for a shortage in the current mortgage escrow account.   This quickly decreases cash flow; however, there is a way to get some relief! 

Typically, mortgage companies will allow two options when there is an escrow shortage.  One option is to pay the escrow shortage in full with one payment.  The other option is an increase in the mortgage payment spreading the escrow shortage over a twelve month period.  The mortgage statement will come with a notice to either pay the shortage payment in full or start paying your new (increased) payment amount. 

 It is not unusual for real estate investors to receive several of these increases each year on multiple properties.  Even if you only own one property, your primary residence, the additional monthly expense is no fun.   However, for real estate investors owning multiple properties, these payment increases can really hurt cash flow.  Even if the increase is only $20 – $40 per property, it adds up fast when you multiply the increase by 5 or 10 properties or more.  

Most mortgage companies are willing to spread the escrow shortage over a longer period than twelve months – if you request it.   Some mortgage companies will spread the escrow shortage over a 36 month period, which can really lighten the burden and increase your cash flow if you have multiple properties.  All you have to do is send in a written request asking them to spread your escrow shortage over a longer period of time.  It is helpful to explain that the increase in payments is creating a hardship.  After all, it is always hard when your cash flow goes down, right?  You may want to call the escrow department ahead of time and ask how long they are willing to spread out the escrow shortage; and then make your request for the length of time you want the payments spread out based on the information they give you. 

Estate Planning for Real Estate Investors

Traci Ellis, my wonderful real estate attorney friend in Atlanta,  was the guest of my teleclass today on Estate Planning for real estate investors.  Among other things, Traci shared , “Although our mortality may not be our favorite subject, it is an important subject to address because what we leave behind is our legacy.”   By doing a little estate planning now, it can save those you love so much grief in the future.  Without that planning, the state ends up choosing how your assets are handled.  You are not working this hard for the state, are you?

At a minimum, we should all have the following:

1) Will  2)Power of Attorney 3)Living Will or Advanced Directive

If you have children, choose a guardian to raise your children should something happen to you. 

The important information regarding your estate and your wishes should be documented.  A family member or other person you choose should have a copy of the documentation and your attorney may also hold a copy.  There are also online services now to upload these types of documents so that they can be retrieved from anywhere.

Don’t miss our next teleclass with Traci when we discuss the use of Trusts for real estate investors.  Visit www.tranformit.net/eventscalendar to register.

Also, Traci offers an information packed blog of her own -visit it at www.traciellis.com.

Tips for Selling Your House in a Tight Real Estate Market

Erica Whitney, real estate investor and agent joined me today on Real Estate Reality Radio to talk about today’s real estate market. 

Erica’s best tip for selling your house in a tight real estate market: Give them the Wow Factor.  The “Wow Factor” includes making the house look top notch & pricing it right. 

To make the home look top notch, clean it up, give it a fresh coat of paint, clean or replace carpets and add some new light fixtures if necessary.   Stage the home with furnishings and accessories to make it look inviting.  Give the buyer a reason to think, “Wow -right features, right price!”

Price the home at or below the most recent comparable sales.  Erica shared some interesting information on pricing.  She said, “If you’ve had 10-12 showings and no offers -You’re 5-10% over priced.”  “If you have no showings you’re 10% over priced.”

Other topics discussed:  where to invest, cash flow, tenant management, the new GA Purchase and Sale contract, short sales, and more!  Here’s what one listener had to say about the show, ”

“I very much enjoyed listening to your broadcast. You helped me better understand the options around management of properties after the purchase is complete.” 

Thanks, 

Giulio

Listen to the show.   

Asset Protection -Real Estate Investors & Corporate Governance

So, you’ve heard that you need asset protection as an investor and you’ve even set  up your entity.  But, have you properly managed that entity?  Unfortunately, entity structuring for the purpose of asset protection can be absolutely useless if you are not properly handling corporate governance.  Yes, that’s the side where you have to keep up with minutes, paperwork, meetings, etc. It is really not that complicated if you understand what you need to be doing.   Listen to Traci Ellis, real estate and asset protection attorney,  on my radio show, Real Estate Reality Radio,  to learn more about how to use corporate governance to  protect your assets.  http://www.blogtalkradio.com/RealEstateRealityRadio