The Importance Of Following Up

"Mind you own business" is always good advice. No one will ever care about your company or your finances as much as you will, so you need to be extra diligent in these matters and not assume people will get things correct, done on time, etc. A perfect example is my current issue with the Danbury Connecticut Tax Collector's office.

Yesterday, I faxed over a copy of my 1998 Connecticut state income tax return. This was a Part Year Resident return and showed I moved out of CT on January 21, 1998 and therefore could not have incurred any tax on my car from living there from October 1998 to September 1999. I included a cover letter and my phone number in case there were any questions.

I called again this morning to verify not only that they received the fax, but also that the tax return was sufficient proof for them. The first time I talked to them, they suggest a utility bill as proof. I only keep my utility bills for 5 years, so I didn't have any from that long ago, however, the tax return seemed like a good alternative.

This morning I spoke with the same person I spoke with yesterday. She put me on hold while she verified she got my fax. When she came back on the line, she said she did receive the fax, but since it only covered one year, she was not able to cancel the additional years taxes I owed. Huh? I didn't owe any other years. She said I owed tax on a Pontiac. I told her I never owned a Pontiac. She asked for my wife's name. I told her I wasn't married when I lived in Connecticut. It turns out, she was looking at the wrong record. I gave her my name, old address, and birth date and she found my record said she would be sure my account was credited correctly.

Had I just assumed the fax was handled correctly, I would still have a delinquency on my record and my credit report would get dinged.

Next step is waiting one week, then calling the collection agency back to make sure they have gotten the update status.

On a side note, I have to smile at the timing of this post - one day after Kenric made a post about following up too much!

Who Says Mobile Homes Are A Bad Investment?

Mobile home owners in a Florida beachfront mobile home park agreed to sell their park to a developer for over $510 million in 2009. If the sale goes through, most owners will get over one million dollars. The full story is here.

Potential Credit Problem - Update

This morning, I tried calling the collection agency that sent me a letter yesterday that said I owed the City of Danbury over $400. I got voicemail again, so I called the Danbury Tax Collector's office directly. Turns out, the bill is for a tax on my old car for the period from Oct. 1998 to Sep. 1999. I moved out of Connecticut in January of 1998, so this obviously doesn't apply to me.

The Tax Collector's office transferred me to the Tax Assessor's office. I told them the situation and they said I just need to fax them something showing I moved and they could cancel the fee. They also said the collection company is in regular contact with them and they would get an update of my account status.

To be on the safe side, I also told all this to the collection agency when they finally returned my call. He said the same thing, but suggested I also follow up with them about a week after I faxed my info to the tax office to make sure they have the updated status. Since I plan on buying a property shortly, I want to me sure my credit report isn't dinged.

Anyway, the cause of all this, according to the tax assessor, is that I did not cancel my license plates when I moved and registered my vehicle out here. I thought this was all handled by the DMV out here - after all, they confiscated my old plates! Apparently not.

Blast From The Past - Potential Credit Problem

One thing I dislike about living in the West is that many times the companies I have to deal with a headquartered back East and by the time I get home and check my mail, their offices are closed. As someone who likes to jump on problems and get them resolved right away, it frustrates me to be forced to wait until the following day to respond to something I received in the mail. Today is a good example.

I got a letter from a collection agency who claims that I owe the city of Danbury, Connecticut just over $400. This completely boggles my mind. I've never been late on any bill and have spent a great deal of effort to keep my credit spotless. I have no idea what this could be referring to. The letter references a city tax, not state tax, so it's not some error in my old income taxes. I left Connecticut in January or 1998. Furthermore, I never owned property there - I was a renter - so it can't be some sort of property tax that I owe. I don't know what other tax the city, not the state, might collect.

I called the collection agency and got a recording. Even though the recording said they were open until 8 PM, still no one answered, so it looks like I will have to wait until tomorrow to find out what this is about.

The Next Investment

I've decided to get a head start on my New Year's resolution to buy at least one rental property this year for my personal investment portfolio. I think I may even be able to do it with no or very little money out of my pocket.

Over the weekend, I heard an investor / businessman on a real estate investing radio program talk about filled lease option properties that his companies sells. Now, I've been aware of these for a while because I've been on his mailing list for quite some time, however, this was the first time I actually got to hear him speak about it in detail and take questions from listeners. In a nutshell, you can buy a property from his company for under fair market value. The property has a tenant in place who has an option to buy the property at your appraised price after 1 or 2 years. The best part is that, at the close of escrow, you get a year or more of pre-paid rent. This means you won't get cashflow since the tenant isn't paying rent, but instead you get all that rent money up front. And thanks to inflation, money now is always better than money in the future!

My plan is to buy one of these properties with hard money, then refinance to a conventional loan. If the purchase price is low enough, I may even be able to completely pay off the hard money loan, thus getting into the property for no out of pocket costs (except for the 1 or 2 months interest I may have to pay on the hard money loan). My investors in my flipping LLC have agreed to be my hard money lender and earn some interest while they wait for their other funds to because available.

Before I embarked down this path, I had a couple of nagging questions. How should I structure the purchase from a paperwork perspective? Should the hard money lender buy the property outright and have a private note between itself and my company for the loan (the easier route) or should an actual mortgage be created and recorded with my company as the property owner and the hard money lender as the mortgage holder? It's helpful to remember that the goal of this process is to refinance later with a conventional lender, so I need to look at the paperwork from that perspective. Is it easier for a bank to approve a new, cash out mortgage on a free and clear property, which would be needed in the first case, or a refinance of an existing loan?

This is the first time I've done a deal involving bank loans from the hard money lender's perspective, so this is fairly new to me. Back in 2002, I purchased my very first rental property using hard money and then refinanced through a bank to pay it off, so I went back and checked the paperwork for that deal. In that case, the hard money lender actually took title to the property and gave me a private contract stating he would sell the property to me for a certain price. So when I "refinanced," what actually occurred was a sale from the hard money lender to me.

I also called and spoke to my friend Les, a real estate investor and former mortgage broker and that call settled the issue. He said it is much easier to do a refi of an existing mortgage than to get a brand new mortgage on a free and clear property - the bank's lending standards are much lower. Additionally, he pointed out that, on jumbo loans (loans for more than $417,000), the most cash back you can get is $200,000. The properties I am looking at are less than that, but it is a good piece of information to know.

Now, it's just time to find a property!