What services, tools, resource, supplies, innovations, changes in laws, grants, education, support from fellow owners etc. do you find lacking, unavailable, too expensive, too difficult to obtain, change etc.?

You get the idea…what do you see as the three, four or twenty things that would make your business more successful? Skies the limit. If it has to do with landlording or real estate investing throw it on the list.

Don’t worry if you think it is “doable” or not, Wild Ideas welcome and encouraged. But also don’t put off posting the more pedestrian needs and wants either.

You can leave comments, here or via private email to me at Tim [at] JustAlandord.com (makes sending the truly wild and innovative stuff easier for shy folks like me.)  I’ll compile the list for all to see.

Some will have readily available solutions that will be posted and shared, I’m sure.  Others are things our industry should be working on finding, changing, designing etc.

Some rather thought provocative comments below. Many of these were sent via email or posted on one of the list serves and reposted here as a central collection place. Please throw yours into the mix — Thanks Tim

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And you will need a lot of them

CO detectors must be within 75 feet of all fuel burning device and within 15′ of each bedroom. One is required in the basement if there is a “fuel burning device” down there.  They are also  required in common hallways spaced no more than 75′.  So a 149′ hall could get away with one, just as a 6 foot hall would need one.

There is an exemption if there are no attached garages and the only ”fuel burning device” is a sealed combustion chamber unit, i.e. 90+ furnace or high efficiency water heater, that is under warranty or inspected annually.

Battery and plug in units are okay.  Mount them on the ceiling or wall.

Laws such as this and lead paint are never reversed so preparation is the order of the day.

This is an area that we should collectively work on pricing.  I’ve gotten them down to the mid thirteen dollar range for my volume.

Reference resources for Wisconsin’s CO detector Law:

Wisconsin Department Of Commerce CO detector Pamphlet

Installation Requirements For Carbon Monoxide Detectors as outlined in 2007 Wisconsin Act 205

2) INSTALLATION REQUIREMENTS. (a) Except as provided in par. (b), the owner of a residential building shall install a carbon monoxide detector in all of the following places not later than the date specified under par. (c):

1. In the basement of the building if the basement has a fuel-burning appliance.

2. Within 15 feet of each sleeping area of a unit that has a fuel-burning appliance.

3. Within 15 feet of each sleeping area of a unit that is immediately adjacent to a unit that has a fuelburning appliance.

4. In each room that has a fuel-burning appliance and that is not used as a sleeping area. A carbon monoxide detector shall be installed under this subdivision not more than 75 feet from the fuelburning appliance.

5. In each hallway leading from a unit that has a fuel-burning appliance, in a location that is within 75 feet from the unit, except that, if there is no electrical outlet within this distance, the owner shall place the carbon monoxide detector at the closest available electrical outlet in the hallway.

(b) If a unit is not part of a multiunit building, the owner of the residential building need not install more than one carbon monoxide detector in the unit.

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A month ago Jeff, a buddy of mine who also uses an iPhone, tells me to try out a new app called Red Laser.  This $2 app allows you to use the iPhone/ iPod Touch camera as a barcode scanner.  The application then looks for the best price for that product locally as well as on the Internet.

I have since used it to price out both business supplies as well as stuff we personally use.  Some of the better prices I found were more than 30% less than what I was going to buy. The first few day’s savings exceed the $200 that the phone cost.  Over the rest of the month the savings well exceeded a year’s worth of cell phone service.

And the savings that you can achieve with the iPhone and other similar technology  isn’t limited to purchasing.  Using your phone’s camera to document tenant damage and be able to support your deposit claim. Take another photo to show a contractor or employee what you want fixed and save the hassle of miscommunications. I even use the camera to take quick notes  such as taking a picture of a for sale sign to get the broker’s number or while shopping to text a photo to my wife to make sure that I am getting the thing she wanted.

All of this makes you more efficient. If utilized to its potential tools such as an iPhone saves you, rather than costs you.  I would make the same argument about hiring employees, but that is another story for another day.

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This is the first of a handful of ideas that you could use to make 2010 more productive than 2009.

Document Imaging / Scanning instead of paper files

One of the biggest changes in the operation of our business occurred at the end of 2007 when we went from paper filing systems to full document scanning and digital storage.

The scanning project is so cool that I couldn’t help but share it with the readers of the ApartmentAssoc email list.  It is a project that a mom and pop operation working from their kitchen table to large multi person offices.  And it’s relatively cheap. You can get into it for under $200 and quickly save more than that in time and aggravation.

By the time 2008 was done we had imaged 16,000 receipts, 21,000 job pictures, 11,500 pages of tenant documents and 8000 pages of property documents.  Today we have 35,000 receipts, 45,000 job pictures and 15,000 pages of tenant docs and it still backs up onto a 16 GB keychain drive. This was one of the best organizational projects we’ve ever undertaken. All this with a few $350 scanners

Here is an updated version of that original 2007 post:

Paper documents are always a problem for businesses. They get misfiled. Some documents really belong in more than one place. They get lost. They take up a lot of space. They can be stolen. If something happens to your office, like a fire, a pipe breaks above your storage area or…, they are gone forever. Worse than the fear of loss is the time paper records consume. Before they can be misfiled, they must be filed. Filing takes time. Searching for even properly filed documents takes time, especially in a multi person office where there is a central storage away from your desk.

Document imaging is a solution, but it is expensive and reserved for the big guys, like law firms and banks, or at least that is the perception. With the cost of the equipment starting under $200 this is doable no matter what size your business is, from the mom and pop working from their kitchen table to the large company with big office staffs.

Back around 2005 I started to become interested in the idea. I looked into imaging using consumer grade scanning equipment. The test failed. The scanners were painfully and impractically slow, indexing and searching the results were difficult.  The commercial grade equipment appeared to work but cost thousands or even tens of thousands of dollars. Too much for our little company

Fast forward to 2008 when a friend and fellow AASEW member, Jeff Chitko, bought a Fujitsu sheet feed scanner. The machine held a lot of promise. I read a bunch of reviews and the Fujitsu looked like the scanner of choice.  In December 2007 I decided we would integrate imaging into our management software and purchased a Fujitsu S510M ($365) scanner for a test run. It arrived just after I came back from the Christmas holiday. A day into the the test I ordered two more.  They were that good.

I set a goal of having all receipts and current tenant docs entered by the end of January 2008 and then stay current thereafter. Things went so much better than expected that by the end of our first month we had not only scanned and indexed receipts and tenant files but also insurance papers, WE energies letters, owner files (we do some management work for others), maintenance workers daily work sheets… We used to photocopy rent checks before depositing them. Now they are scanned and can be instantly looked up by deposit.

16,000 plus pages, most entered and indexed by a single staff person starting on the 4th of January.  By the end of that first month almost every piece of paper had left our office and placed in secure storage.

I anticipated that there would be a slow down in the ordinary processing of receipts and invoices due to scanning. To my surprise the process is now faster. The staffer that enters these items likes having the receipt image right in front of her on the screen rather than looking down at a stack of papers, looking up, then entering the data. Filing the paper copy is done by scan date, rather than property – so there is almost no time expended there.

We import the images into image  fields in the database that we run our companies on, but there are many ways you can use this equipment even with off the shelf software. The computerized storage is easily password protected, something that the $15 file cabinet lock can’t achieve. It really limits who can steal your information in a useful form. The paper records are archived by date, rather than record type and address, and moved to secure storage.  To date we have only pull a handful of originals and in every case it took only minute.

It is great to be able to look up a record from any workstation rather than having to get up from your desk and dig through paper files. Anything that reduces the barrier to doing something helps insure that it gets done.

The Fujitsu scanners are very fast, scan both sides of a two sided document at the same time with very few paper jambs. I bought my scanners at Scantastik.com. They delivered the units within a couple of days, even though I opted for the free shipping rather than pay for faster shipping. Scantastik also had the lowest price. The “M” model is Mac specific and includes Adobe Acrobat Professional 8.0, a product that sells alone for $259 at Amazon. With Acrobat Pro you can convert scanned docs into searchable pdf text. Fujitsu also makes a S510 for Windows users with similar spec, but different software. Both scanners are rated at 18 pages a minute, color or black and white. Although we have XP and Vista machines, we have not tried the Windows version of the scanners, so I really can’t vouch for the performance on that platform but the online reviews seem comparable to those of the Mac version.  Fujitsu also makes a highly rated portable version, which is a bit slower but also highly regarded.

2009 Update: The latest Fujitsu scanners are the S1500 and S1500M selling for $432. The speed has been increased to 20 pages per minute and the paper handling is even better than before.  There is also the portable, but slower S300/S300M for $258

You may be saying to yourself  ’Yea, that is good for Tim. But, his business is a lot larger than mine. He has office employees. Here it is just me and my husband.’  To that I would say ‘ You may be wrong!’ Given the cost of the equipment and the great improvement in efficiency I think that even part time real estate investors whose kitchen table doubles as their desk could benefit from this technology.

A scanner… a few hundred dollars. Having all your documents instantly available without leaving your desk and backed up safely offsite … Priceless. (Apologies to MasterCard)

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Each Year

On or about this time of the year you should be thinking of strategies that take advantage of the “straddling-effect” that occurs every December 31st.

This will be worth thousands (maybe millions) to you and your corporations, if you simply TAKE ACTION!  With that—lets talk deductions and straddling strategies . . .

Tim’s Disclaimer:  I am “just a landlord,” NOT an attorney or accountant. If you need legal advice, tax advice or have appendicitis, Please don’t rely on something you read on the internet and do it yourself. Rather, hire a competent professional.

Strategy #1..  Invest Marketing Dollars on or about December 31st every year. Invest as many marketing dollars as we can spare.  You can do the same thing.  Mail lots of letters on December 31st.  Pay cash for ads.  In essence, use this strategy to invest marketing dollars in this tax year—knowing that returns cannot possibly come in until the following tax year.  This “straddling” is a good and easy way to defer payment of tax.  Use this strategy every year and you defer the tax indefinitely.

Calculate the present value of not paying the tax many years into the future.  You will see that the longer  you postpone paying, the less you are really paying in today’s dollars. And remember, you are using those same dollars in other profit-making ventures and investments.

For example, it is obviously smart to use these now-available, “saved-dollars” to buy discounts on other items you want to pay early and in advance.  Consider this: Other corporations and suppliers may need that added cash flow, so you can make a deal to pay “in-advance-at-a-discount.”  They get the cash flow;  you get the discount and write off this year.

Strategy #2.  Adopt an MRP. A Medical Reimbursement Plan (MRP) is provided for in Section 105b of the Internal Revenue Code.  Contributions are 100% deductible to the corporation.  Benefits received by employees and officer employees in the form of medical expense reimbursements are not taxable to the employee.

An MRP is not insurance so there are no scheduled payments but all the money allocated to the MRP is tax deductible to the corporation.  This allocation is usually related to the tax planning decisions of the corporation.

Clearly, the MRP must be formally adopted by the board of directors of the corporation, and once it has, it can be flexible.  It is completely controlled by the corporation.  The corporation determines what funds are to be placed in the MRP account during any given tax period. Therefore, look at year-end tax liability and seek to offset it by electing to allocate sufficient money to the MRP to zero-out that tax liability. Then invest in health related items like running shoes, mountain bikes, skis and maybe even an ab roller.

Strategy #3.  Pay For Deferred Maintenance. Do lots of cosmetic work on real estate in December.  Winterize.  Insulate.  Do preventive maintenance.  Bleed water heaters.  Clean furnaces.  Patch roofs and gutters.

It is wise to borrow this money even on a credit card because: (a) the first payment will not be due until next year, (b) the interest on the loan is deductible and (c) so is 100% of the improvement and/or repair.  That’s a neat hedge. (Psssst…and btw, this process maintains and often increases the property’s value.)

Strategy #4.  Make Prudent Charitable Contributions. Give to your favorite charity so at least that money will go where you put it, instead of the tax man (oops,) that’s tax “person.”

Strategy #5. Buy a College House. Then pay your college age child up for management, accounting, advertising and clean up.  Your kid can lease the house from you and sub-lease the house to his/her school chums.

There are lots of interesting benefits here.  (a) You get the deduction. (b) You lower your tab for college because he has no dorm fees.  (c)  Your kid learns the management game along with lots of responsibility.

Strategy #6. Pay Payments In Advance—at  a Discount. Write the following letter to everybody you owe.  We have used this format year after year with excellent results.

Dear Mr. and Mrs. Smith:

We  really appreciate the opportunity to do business with  you.  You were really kind to finance the property for us and  we wanted to express our appreciation.

At the present time the mortgage balance is $10,000. There are 120 payments remaining on the mortgage.

If you need some money for the holiday season, let us know. We can possibly make some payments in advance.

If you pay six months in advance at a 10% discount you will buy an investment in your own payments that will yield you a 37.15% return. For example, suppose you were making payments of $100 a month.  You might offer to pay $540 (in advance) in lieu of paying your regular payment.  Watch what happens when you put the following into your financial calculator and solve for “I” (interest or yield).

Notice that the yield is 37.15%.  You can make this even better if you got a 15% discount because a 15% discount equates to a 58.21% yield.  Use the same formula as above except you invest $510 in advance, which is $600 – (15% x $600) = $510. Watch the effect.

The good news is that you can do this on any installment payment you are making.  You can make advance lease payments (at a discount) when you are in a sandwich lease position.  You can make advance payments on the seller financed note you used to buy your business. Really, you can offer to make any installment payment in-advance-at-a-discount.  Every time you get 10% off you earn 37.15% and every time you get 15% off you earn a whopping 58.21%!

Strategy #7. Invest in IRC Section 179 Assets. Computers, copiers, fax machines, typewriters, cellular phones, pagers, cameras, VCRs, furniture, fixtures, file cabinets and lots more. Again, it is wise to borrow this money (even on a credit card) because: (a) the first payment will not be due until 60 days into next year, (b) the interest on the loan is deductible and (c) so is 100% of the cost of the asset in the year of the purchase.

Strategy #8.  Pay sales taxes and income taxes.

Strategy #9. Pre-pay subscriptions and seminars.

Strategy #10. Pay annual retainers.

Strategy #11. Pay your children.

Strategy #12. Pay your spouse.

Those of you that implement these ideas (even some of them,) will prosper greatly.

Happy New Year

Ray Como

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I am always looking for a new ways to use ideas from other industries for our rental property business.  Affordable Rentals’ cafeteria style management was lifted from the concept of farmer’s co-ops.  I read scores of USDA info on farmer’s co-ops before putting the plan in place. Individual farmers could not afford many of the capital intensive tools and resources, but a collection of farmers could and thereby compete with or supply the corporate agribusinesses.

Well the latest idea is similar.

What if we were to create a buying group or at least a buyers forum?

I have kicked this around for probably a decade. Back in ’01 I had written out a fairly detailed plan, but scrapped it as it would either be logistically impossible or capitally intensive.

Fast forward eight or nine years.   Today there are online models that get around the issues that made this a foolish  dream just a decade ago.

Here are my thoughts on how landlords working in concert could achieve lower supply costs today.

Crowdsourcing.

The is the basis for the concepts laid out below. Wikipedia has a pretty good overview, but basically groups of people, typically unknown to each other, work together to find a solution to a problem for the mutual benefit of all participants. Sounds a lot like fancy schmancy term for the idea behind a farmer’s coop, doesn’t it.

Group buying

This has been around forever, but until recently had such a high transactional cost that much of the benefits were eaten by overhead.

Today companies like Groupon have neat business models wherein the subscribers commit online to buying goods or services. The vendor makes an offer to sell a certain minimum quantity at a better price than the market price.  If enough people sign up to satisfy the amount the vendor wishes to sell to offer the discount – game on.

To put it in landlording terms:  Let’s say latex semi-gloss of a certain grade sells for $14 a gallon.  But you negotiate with ABC paint to sell a thousand gallons of the paint at $9 a gallon. But what the heck are you going to do with a thousand gallons of paint?  Using this model the paint offer would be put out to many property owners who could commit to buying none to unlimited  pails.  If the thousand gallon offer was reached, everybody’s credit cards get charged and you go pick up the cheap paint.  If not, oh well it wasn’t a good enough deal to motivate the participants..

On line bulk purchases

Our company is doing this on a small scale, for example buying 300-500 smoke detectors at a time and often paying less than half retail.  But even at $3.25 a detector, a price we have paid recently, I had to lay out $1650 for a six month supply to get the price.

Most owners don’t have the capacity to avail themselves of such deals and those that can don’t like to buy six months of stuff at a time.

Aggregators

Companies like prontohome.com do this, but they don’t focus on our market.  You wade through too many $400 toilets before you find the $60 toilet you are looking for.

How would this work?

A couple of ways I envision this. They are not mutually exclusive, we could do both.

The easiest (with perhaps the lowest reward)

We start an online discussion group to share pricing recommendations.  The participants update the lists.  Maybe submitting something once every X would be a condition of membership.

Local and online sources are game here.

Software could be a Google Group, Twitter or whatever else you see out there and like.

Here is an article on grocery group pricing efforts using Twitter and Google Groups.  You can look at the Google Group, Price Check for an ida.  If you click on the topics list, I think this could be workable.

Something like IdeaScale may also be fashioned to work

A bit more difficult/more rewarding

We create a model like Groupon (here is an outside perspective on how Groupon works) and go the the manufactures and distributors for bulk purchased direct shipped bargains.

Another version of this is the Chinese model of Tuanguo Alice.com while not exactly the same as it is more of a business than a group effort, it is worth looking at for ideas.

As far as software perhaps Pikaba (although they don’t appear to be very vibrant today) or a similar service could be used for such an effort. Another site aimed at Mazda car hobbyist, but an interesting model is at Flyin’ Miata.

The legal considerations

Buying Groups by Attorney Harry B. Ray

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