Welcome to Chez Cliff!

A year has gone by.

Much has changed.

At that time, my indifference to the pay raise I was given was prevalent.  My first tenant was paying rent and life was good.

This year, my attitude was different.

It is not with gratitude, irreverence or negativity that I face this augmentation.

It is with joy.

Sprinkled with a little greed.

There is always an ulterior motive . . .

It has to deal with debt to income ratio; the ratio lenders look at when evaluating the borrower.  Lenders look at the total monthly debt, then divide that by the gross monthly income.  The lower this ratio, the more money that can be borrowed.

By increasing my income, the ratio goes down.  But as fate would have it, my expenses were decreased significantly.  As the expenses decrease, the ratio goes down.  Because both conditions occurred this last month, my lending ratio changed significantly.

Of course this change only counts if I use it for good, not evil.

On a lighter note . . .

Chez Cliff is still with us.

Butternut Squash and Vanilla Soup

Life is good.

It is time once again for a "not so glamorous" story of the landlord life.

My picky tenant sent an email, saying the grass hasn’t been cut for a long time.

The last time I spoke with GrassGuy, I told him I wasn’t living at the house.  He would have to send me, via snail mail, a bill.  The payment would then be sent. 

Sound too complicated?

Apparently.

SFX:  Phone Rings
Grass Guy:  Hola.
Clifford:  GrassGuy, this is Clifford.
Grass Guy:  You no pay me.
Clifford:  That’s right.  You have to send me a bill.  Otherwise I won’t pay you.
Grass Guy:  You owe me money.
Clifford:  I know.  I can’t pay you if you don’t send me a bill.
GrassGuy:  I no cut grass.  You no pay me.
Clifford:  That’s correct.  I know I have to pay you.  But you have to send me a bill.
GrassGuy:  I no send bill . . . .
Clifford:  Is that a question or a statement?  Did you send a bill?
GrassGuy:  No no no no I no send bill.
Clifford:  I know.  I didn’t receive it.
GrassGuy:  huh?
Clifford (frustrated):  I no get bill.
GrassGuy:  I no send.
Clifford:  You send bill, I pay you.
GrassGuy:  You pay?
Clifford:  Yes.  I pay you, you cut grass?
GrassGuy:  Yeah yeah yeah.
Clifford:  You send bill?
GrassGuy:  Yeah yeah yeah
Clifford:  You send bill, I send money.

He cut grass now.

As predictable as gravity, Barrons this weekend had a lot to say about the subprime market.

Last week, I talked briefly about this here.  In this note, I stated that I lay the rise in defaults at the feet of the borrowers.  But in this post, I squarely pointed to the loan officers.

Someone pointed this out to me.

While the two articles may be at odds with each other, I don’t consider the "melt-down" of last week to be attributed to one party but both parties.  After reading the numerous articles written, the flow diagram for what is causing the problem is as convoluted as a plate of spaghetti.

Let’s narrow this point down: rise in defaults on mortgages.

I cannot absolve the borrower (customer) of responsibility.  Yes, there are sharks out there putting anyone with a pulse into any type of loan.  But ultimately, the loan is not funded until the borrower signs on the dotted line.

During my escrow process, my wrist was sore from penning my name on so many forms.  Even with two margaritas in me, the aches from my forearm caused my signature to become nothing more than a squiggle.  Even with all that, I still remember walking out of the escrow office with the monthly payment etched into my mind.

That and the horrendous bad breath of the escrow officer.

The only viable excuse one may have is when their variable interest rate adjusts in the future.  Yes, today it is locked in at the unbelievably low 1%.  But their paperwork says, in two years (or three) that the interest rate will be whatever the prime rate is.  No one knows what the interest rate will be in three years.  However that’s the risk of using these types of loans.

When the borrower (customer) inks their name onto the loan documents, they are accepting not only that risk but the responsibility that comes with it.  They know going in what today will be and, more importantly, that the future is a complete mystery.

Today’s Topic:  Managing contractors or herding cats

The last management book I read: "Who moved my Cheese?".  Now there is "The iceberg is melting".  Back in my college days, the book was "Dinosaur Brains".  Each one of these books deals with one central topic: management techniques.

None of them are worth the paper they’re written on.

Why?

I’m glad you asked.

None of these books addresses the key question:  How does one change their core ethic belief system?  No "managerial style" can change the work ethic.  The individual must change their own believe system.

All contractors understand one simple fact:  There is plenty of work out there to be done.  If the contractor disappears in the middle of a job, they probably already have another job lined up.

There is no personal accountability.  Because of this lack, the words "good work ethic" do not exist in their vocabulary.  They don’t answer to anyone and they certainly don’t answer to themselves.  This, in turn, generates a complete lack of self-interest to ensure that their work gets completed.

If you’re crying out "Yeah but Clifford, what can we do to stop this?!?"

I personally would like to attach a dog collar device to the contractor’s neck.  Using a remote control, the collar shocks motivates the slacking contractor.  The Contractor Motivator 3000. 

"You want to take a break?"  BZZZT!! "Wake up!"  BZZZZT!!! "Lunch?"  BZZZT!! "Where are you going?"  BZZZT!!  "Turn your cell phone off!"  BZZZT!!

Click to enlarge

Operators are standing by.

Maybe the Pharaoh’s had the right idea, cracking whips and all.  But alas, there is probably some law against the cruelty of people so let’s toss that to the side.

Until the laws are changed, there are several options for containing this problem.

First and foremost, find a contractor who has a good work ethic.  If you’re in the Southern California area, please feel free to contact WonderWoman.  She’s great.

Second, break the payment up into thirds.  One third up front, the second third at the half-way mark, and the other third on completion.  This option would at least minimize your risk if the contractor ran off.

Third, ask for references.  If the contractor hesitates, bid them farewell and call the next one.  If they can’t provide glowing recommendations, odds are you won’t provide one either if you hire them.  Add to that: call the Better Business Bureau.

Two things I would never do:

First, pay them upfront for the job.  You’ll never see them again. 

Second, pay them by the hour.  It will take them an hour to pound a nail into a board.

My financial responsibility continues to grow.

In the process of closing out the old credit union account, in favor of the new Wells Fargo Stuffed Pony Account, something occurred to me.

Why don’t I have a separate account for rental expenses and another for my personal expenditures?

With the direct deposit, ten percent of my paychecks goes into the newly designated rental account (formerly known as the "credit union").  This money will be used not only to pay my portion of the utilities bills but to take care of repairs and maintenance. 

As time passes, and the account grows, hopefully the next large expense won’t be so scary.

During tax season, the expenses on the rental property could be quickly ascertained.  They all come from one checking account.

Since the old credit union offers free checking and Twix, why not keep their services for a while longer?