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What is PITI?It is an acronym that stands for “Principal, Interest, Taxes, Insurance”. These four elements commonly make...
01/08/2020

What is PITI?

It is an acronym that stands for “Principal, Interest, Taxes, Insurance”. These four elements commonly make up a homeowners mortgage payment which is why they are often grouped together. When speaking with a mortgage lender or your real estate agent they may say “your PITI on this property if you buy it for $200,000 is $1500 per month.” They are basically telling you that your total payment per month at that price point is $1500 and are trying to sound fancy when they do so.

Principal

This is my favorite part of the PITI acronym because it is the only one that helps me grow wealth. Your principal payment gets applied directly to the money you borrowed from the bank. So each month with your principal payment you are paying down your loan which creates more and more equity as the months and years go on.

Interest

Interest payments on a loan are how the lender makes money over the life of the loan. You will pay more in interest and less in principal at the beginning of your loan term and as the years go on you will pay less in interest and more in principal payments. At first though you will get sticker shock on how much of your payment is going towards interest as opposed to principal. At closing you will be provided an amortization scheudle which will outline this horror show.

Taxes and Insurance

Your lender has a vested interest when it comes to you keeping current on your property tax and insurance payments. If you are late or default on either it puts both you and the bank at serious risk. How do they make sure the payments are made? They pay them for you. This is what is commonly referred to as “escrowing your taxes and insurance”. The cost of each is worked into your monthly mortgage payment.

5 Key Dates You Should Be Aware of in a Real Estate Purchase & Sale Contracthttp://ourrealestatebiz.com/2020/01/07/5-key...
01/07/2020

5 Key Dates You Should Be Aware of in a Real Estate Purchase & Sale Contract

http://ourrealestatebiz.com/2020/01/07/5-key-dates-you-should-be-aware-of-in-a-real-estate-purchase-sale-contract/

Fully Executed Contract Date – This is the date the contract becomes official. The purchase and sale contract is not considered fully executed (official) until both sides sign. If you sign as the buyer on the 9th and the seller signs on the 10th your fully executed contract date is the 10th. A lot of the other dates in the contract bridge off this date so it is important to save your contract somewhere where you can easily refer to it.

Inspection Contingency Date – Assuming your contract has an inspection contingency this is where the amount of days you have to complete the inspection will be outlined. On most contracts you have a certain amount of days to not only get the inspection completed, but to also make a list of any repairs you want to request that the seller complete before closing.

Earnest Money Deposit Date

The earnest money is typically due to the sellers within 48 hours of the contract being fully executed. Earnest money is held in escrow typically by the sellers real estate brokerage, lawyer or title company until closing. At closing that money goes towards the buyers closing costs, prepaids, and escrows.

Mortgage Commitment Date

This is the date that the bank officially commits to lending to the buyer. They will issue a mortgage commitment letter that you will then give to the sellers in order to satisfy this part of the contract. Your lender should be well aware of the mortgage commitment date, but you may want to remind them of it when it is approaching so they can be on top of things. Typically the mortgage commitment date is 7-10 days before closing.

Closing Date

This is pretty self explanatory. The transaction closes on this date and the property officially changes hands from the seller to the buyer.

ORB 1/7/2020
01/07/2020

ORB 1/7/2020

Inspire Apartments in @ Las Vegas, Nevada
01/07/2020

Inspire Apartments in

@ Las Vegas, Nevada

We discussed the first five rental property operating expenses yesterday so be sure to check that out along with this bl...
01/06/2020

We discussed the first five rental property operating expenses yesterday so be sure to check that out along with this blog to get a firm grasp on all of the expenses you want to be accounting for. Here are the final five…

Property Management

Do you have someone manage your property? If so, they charge you fees associated with their services which qualify as operating expenses. A good property manager will provide you with a P&L for the property they manage for you and their fees will definitely be included in there.

Landscaping/Snow Removal

Are you responsible as a landlord for removing snow and coordinating the landscaping needed at your rental property? If you are you know those expenses add up and you might have already figured these are most certainly an operating expense. Be sure to hire legit professionals who will invoice for you for these services. It makes accounting and organizing things easier for tax time.

Legal and Accounting Services

Do you have a CPA prepare your taxes? Did you have a costly eviction that your lawyer was involved in? Save their invoices because both are operating expenses. There will be some years where these costs are more than other years, but you want to get in the habit of accounting for them nonetheless.

Advertising Vacancies

Did you incur expenses when you filled your vacancy? Any of those costs should be documented. Even though most online advertising services are free, in some markets in order to get in front of good candidates you may be forced to pay for marketing.

Repairs/Maintenance

This isn’t breaking news but your tenant will call with repair requests from time to time. Add to that preventitive maintenance that you will choose to do at your rental property to prevent small repairs from blossoming into big issues. Although these can be a major inconvenience to deal with in the moment you want to have the presence of mind to save your invoices/receipts because they are all operating costs that you can write off.

ORB 1/6/2020. Have a good .
01/06/2020

ORB 1/6/2020. Have a good .

AMLI on Maple luxury apartments in . That pool scene looks like 🔥. ...
01/06/2020

AMLI on Maple luxury apartments in . That pool scene looks like 🔥.

@ Dallas, Texas

10 Rental Property Operating Expenseshttps://ourrealestatebiz.com/2020/01/05/10-rental-property-operating-expenses-you-w...
01/05/2020

10 Rental Property Operating Expenses

https://ourrealestatebiz.com/2020/01/05/10-rental-property-operating-expenses-you-want-to-keep-track-of-as-a-landlord/

Property Taxes

This is one of your single biggest expenses as a landlord and thus one of your biggest deductions come tax time. Make sure to keep accurate records of any property tax payments you make even if their payment is included in your monthly mortgage. Keep track of them separately. Check your local town/city assessors website or even city/town hall and they should be able to let you know exactly how much your property taxes are and you probably get the bill mailed to you once a year also.

Home Insurance

This is another expense that may be paid with your mortgage, but you still want to account for it as a separate operating expense line item for your rental property. Your entire insurance premium is eligible to be deducted.

Landlord Paid Utilities

What utilities are you responsible for as a landlord? Let’s say you are responsible for common area electric, water, and sewer. All of those are operating expenses and should be kept track of accordingly. These are just examples, but any and all utilities you pay for as an owner would qualify. Note: you cannot write off the utilities your tenants pay. Hopefully that goes without saying.

Trash Removal

Some municipalities include trash removal cost in their property taxes and if so you just account for it that way. In places where your trash is picked up by a private company any money they have charged you for their services is an operating expense.

Homeowners Association (HOA) Fees

Is your rental property a part of a HOA? Those pesky fees coming out of your pocket every month are most certainly an operating expense. If you have never noticed, these fees may be one of the biggest costs you take on as a landlord so you do not want to miss them in your yearly P&L.

These are the first 5, the next 5 we will delve into tomorrow…

ORB 1/5/2020 from the legendary John Wooden.
01/05/2020

ORB 1/5/2020 from the legendary John Wooden.

Equinox Apartments in . Beautiful rooftop views.
01/05/2020

Equinox Apartments in . Beautiful rooftop views.

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