Income for Life

The Cashflow Boost

Right now every real estate "expert" is blabbing on about how horrible the real estate market is...

The problem is they aren't saying who the market is horrible for, because it's definitely not horrible for real estate investors.

As an example, back in the early 2000s I bought a small two-bedroom condo for $33,000 as an investment. This condo rents around around $550 a month and I still own it today. It has provided a few hundred dollars of positive cash-flow each month since acquired.

Right now, I'm helping an investor acquire a 1,964 square foot 5 bedroom single-family home for $25,000. This home is a foreclosure and needs about $10,000 in updates. Once updated, it will easily rent for $975 a month.

This investor is going to have a beautiful 5-bedroom home for around $35,000 and will enjoy monthly positive cash-flow of around $700. His annual cash-flow will be around $8,400 and he will have his entire investment back in less than 5 years. He is paying cash for the property and will not have a mortgage payment.

This investor "sees" the real estate market as the best investment opportunity in the last 10 years.

Its easy to see that his investment is far better than my investment. I paid $33,000 for a small two-bedroom condo. He will invest $35,000 for a 5 bedroom single family home. I paid $36.66 a square foot. He will pay $12.72 a square foot.

Where else can you invest $35,000 and receive $700 a month for life?

This investors annual return on investment will be around 24%. Of course, there will be vacancies and repairs throughout his ownership. These costs will probably pull the return on investment down to around 15% a year.

This investor could simply use the monthly net income to offset his living expenses. However, this is not what he is planning to do. Instead, he is going to use the cashflow boost strategy...

The Cashflow Boost Strategy

Believe it or not, the weatlhiest people in the world (including Warren Buffett) use this strategy with their investments. It's nothing new or crazy.

The idea is to simply reinvest the cashflow received into new income producing assets.

It's the same thing as reinevsting dividends back into stocks or mutual funds. Well, this investor is going to do the same thing with his real estate cashflow.

As an example, he might decide to use the $700 monthly cash-flow to buy shares of AT&T stock. This stock pays dividends of around 6% a year.

The dividend income is additional cashflow and actually boosts his annual income and return on investment.

On a high level, he is having someone else buy $700 of AT&T stock for him each month. This little process can continue for life - as long as he doesn't sell the home.

To accomplish the same thing without this real estate investment, he would have to invest $700 a month out of his paycheck each month, year-after-year. His annual income would only be around 6% - the annual dividend yield from the AT&T stock.

However, his annual return will be well over 15% a year when combining the income from the real estate and the dividends earned from the stock.

There you have it - the "cashflow boost!"

The only question that remains is - will you use the "cashflow boost" to your advantage?

 

 

 

 

Could an "ugly" notebook change your life?

Recently I realized that some very famous and/or wealthy people share a very unusual commonality. This commonality is "journaling." Journaling is defined by the Free Dictionary as...

"A personal record of occurrences, experiences, and reflections kept on a regular basis; a diary."

Now I realize this might sound a little foo-foo to some.

However, you might be surprised to know that Richard Branson, Oprah Winfrey, Michael Masterson and Jim Rohn are all known journalers. Jim Rohn's reasoning was as follows:

"Life rewards the serious student."

In fact, Jim Rohn used to spend a lot of money on high-quality leather journals. He was onced asked, "Why do you spend so much on an empty book?" His reply, "I intend to put something very valuable inside." I sure do miss Jim. Here's a picture I had taken with him several years ago:


Most people think of journaling as writing daily in a diary. This could be one use of a journal, but there are several more ways that journaling may transform your life. Here are ways you might use journaling to your advantage:

1. To track your progress towards goals you've set for yourself. In Michael Mastersons recent book, "The Pledge" he shared that he journals daily. One of the things he tracks monthly in his journal is his net worth. The reason why is because he knows that what you measure improves. By consistently tracking his net worth in his journal, he is able to make better decisions that lead him closer to his financial goals.

2. Keep a record of great business or investing ideas. If you're like me, you come across great business and investing ideas on a routine basis. Unfortunately these great ideas slip through our fingers if we don't write them down and review them regularly.

3. Sort out problems or challenges. Facing a big problem in your life? Spend some time writing about it in your journal. List everything you can do to improve the situation and track your progress.  I promise this little process will relieve a ton of stress and keep you focused on progress.

4. Document mistakes made and lessons learned. It's obviously not a good idea to make the same mistake twice. You can use a journal to detail mistakes you've made and what you've learned from these mistakes. More importantly, you can make notes about how you can prevent this mistake from happening again.

5. Record things you want to teach your children. Our main job as parents is to prepare our children for adulthood. This isn't an easy task. I've found it helpful to document lessons I want my children to learn before they're on their own. I also list various ideas that I might be able to use to help them learn the particular lesson.

6. List things you want to do in your life (aka...your bucket list). What do you want to do? Where do you want to go? What to you want to see? What do you want to learn? Use your journal to document all of these things and make sure you review them regularly. You don't want to get to the end of your life and regret something on one these lists.

7. Capture special life moments. One of the coolest benefits of journaling is what you leave behind for your family. Your children, grand children and great grandchildren will be able to read your journals and "see" who you were as a person. They'll be able to relive your special moments. More importantly, they can learn from what you share in your journal. Maybe, think of your journal as a "Life Book", which may help future generations.

8. Detail quotes that inspire you. Wouldn't it be cool to have one place to record every inspirational quote  you read? Guess what, simply add them to your jounral and you can quickly get your hands on them when needed!

There are numerous ways you can use a journal to enhance and improve your life. The trick is to just get started. You don't need an expensive journal like Jim Rohn used. You can simply use a spiral notebook like this one I used to detail all of the lessons I learned from the real estate market crash and the "great" recession.

Or you can open a new document in Microsoft Word, or a Google Document and use it as your journal. The type of journal you ulimately use  doesn't matter.

What matters is who you become when you journal.

What matters is that you review what you've written periodically and use your journal to your advantage.

A Kid in the Candy Store...

Over the last few years, we've all been bombarded with news stories and predictions about what will happen in the real estate market. As I type this, the real estate market in 2011 is predicted to falter again. Believe it or not, these predictions may not be helpful for you if you're thinking of buying or investing in real estate.

The reason why is because we have a tendancy to make decisions about what we should do after listening to the news or reading a news article. These news stories may lead us to incorrect decisions.

A better option might be to actually get on the street and see what homes are selling for in your area with your own two eyes. Physically walk through homes listed for sale.  This is exactly what I've been doing for the last few weeks. In fact, I've probably walked through 75 homes for sale in our area.

To be perfectly honest, I've been blown away by some of the "deals" available right now.

As an example, I walked through a home listed for sale that was 1,914 square feet, had 4 bedrooms, 2.5 bathrooms, a two car garage, and on top of this, the home was situated on half an acre. The asking price for this home is $80,000.

This is an unbelievable deal.

The asking price per square foot is $41.80. Now, I'm not a home builder, but I would have to think it would cost between $153,000 ($80 per sq. ft.) and $191,400 ($100 a sq. ft.) to have this home built today.

Next I studied recent sales of homes surrounding this one and I found homes that sold in 2010 for $150,000, $175,000, and higher.

Finally, if you're an investor you might apply the 1% rule to see how the property is valued. For the most part, great rental properties typically rent for 1% of their value. Consider these examples:

Market Value of Home $80,000  - Monthly Rent $800 (1% of Market Value)
Market Value of Home $150,000 - Monthly Rent $1,500 (1% of Market Value)
Market Value of Home $200,000 - Monthly Rent $2,000 (1% of Market Value)

You know you've found a good rental property investment when these numbers are in your favor. To find out, start with the extimated monthly rent for the property and see what it would be valued at by working backwards.

This home would rent for $1,300 a month based on its size and location. $1,300/.01 = $130,000

By every measure, this home is a fantastic deal. I cannot understand why it's still available. There is absolutely no way someone buying this home could lose money.

It's really that good.

Let's assume an investor paid cash for this home and planned to keep it for long-term monthly income. Here's how this would look for them:

Annual Rental Income ($1,300 * 12)                         $15,600
Less Annual Property Taxes                                        ($2,800)
Less Repairs/Maintenance/Vacancy                         ($3,500)

Annual Income After Taxes                                        $9,300

Annual Return on Investment                                    11.6%  ($9,300/$80,000)

The investor buying this property would receive an annual return on investment of 10 to 12% after taxes, repairs, maintenance and vacancy costs. This would continue for life. If the real estate market continued to stumble for the next few years, it would have zero impact on this investor because their rental income wouldn't be impacted. Actually rental rates have actually increased since the real estate crash as the demand for rentals has increased.

More importantly, the investor would have an asset that was purchased significantly below value. When the real estate market eventually rebounds, they would have the opportunity to sell the home at a significantly higher price point.

So back to the question, why hasn't this fantastic deal sold?

Well, I guess it's because everyone is fearful because they are bombarded by news storied and predictions on the real estate market. The takeaway from this article is for you to shut off the "noise" about real estate and get out there and walk through some homes for sale.

I'll bet you'll be surprised at some of the deals you find available. I found several homes that were fantastic deals like this one. For someone thinking of buying or investing in real estate, it's like being a kid in the candy store.

By the way, if you'd like to walk through some of the homes I identified as a great deal during my tours, send an email to me at [email protected]. We can schedule a little "candy store" tour for you!

   

 

 

 

 

Advice from Warren Buffett...

Market Update:  MUST Watch 3-Minute Video...
Feature Article: Lessons from Warren Buffett
Critical Reads: A 60 Million Dream Home - Best or Worst Investment?
The Funnies: Amazingly Simple Home Remedies! 

A MUST Watch 3-Minute Video

Instead of an update on the market, I suggest watching this powerful 3-minute video from the National Geographic. Think about the future implications of what will happen when these trends turn into reality. What will be in greater demand? Will you be prepared? How can you position yourself to benefit?

To be honest, I've included this video for you because it fits very well with this week's feature article, especially "GEM #1."

A Few Lessons from Warren Buffett

In this article, I'm going to share a few lessons learned from Warren Buffett's biography titled "The Snowball: Warren Buffett and the Business of Life."

I'm calling these lessons "GEMS." These GEMS are not in any specific order. I'll put quotes around sentences directly from the book. I'll also put direct quotes from Warren Buffet in Italics. In some cases, I'll add my two cents, too.  

GEM #1
Buffettt is known to say: "In the short run, the market (stock market) is a voting machine. In the long run, it's a weighing machine. Weight counts eventually. But votes count in the short term. And it's a very undemocratic of voting. Unfortunately, they have no literacy tests in terms of voting qualifications, as you've learned."

Right now, the voting machine is down on real estate as an investment. Is this the time to buy? Possibly.

Buffett's company Berkshire Hathaway acquired shares in the second largest real estate brokerage. He must believe that the weighing machine will win as the real estate market rebounds over time and has positioned his company to profit from this rebound. Or maybe he has studied the expected population growth and realizes the demand for housing will only increase over the long-term.

Watch the National Geographic video about our population and the estimated growth for the next 10, 20 and 30 years. Sooner or later, the weighing machine will reward those who bet against the voting machine.

GEM #2
Buffett liked to ponder the reasons for (business) failure as a way of deducing the rules of success. You can learn a great deal from failure. Study business failures and learn from each one. Adapt your investing based upon the lessons you learn.

Also, you should definitely study your own investing failures. What did you invest in that didn't turn out as expected? What can you learn from this investment? How can you adjust to going forward?

GEM #3
Buffett's grandfather was known to say: "Try to be punctual in all your dealings. You will find it difficult to get along with some men, deal as little as possible with such...Save your credit, for that is better than money...If you go in business, be content with moderate gains. Don't be too hasty to get too rich...I want you to live so as to be fit to live and fit to die."

This advice from his grandfather was priceless. It looks like Buffett has followed it throughout his life.

GEM #4
Warren realized he wanted money early on in life. His reasoning was as follows: "It could make me independent. Then I could do what I wanted to do with my life. And the biggest thing I wanted to do was work for myself. I didn't want other people directing me. The idea of doing what I wanted to do every day was important to me."

Gem #5
As a young boy, Warren stumbled across a book at his library that changed his life. The book's title was "One Thousand Ways to Make $1,000. A million dollars in other words!

In the original book, one of the ideas had something to do with pennyweight scales. Warren thought that if he had a weighing machine, he would weigh himself fifty times a day. He was sure other people would pay money to way themselves too. Here is the opportunity Warren saw:

"The weighing machine was easy to understand. I'd buy a weighing machine and use the profits to buy more weighing machines. Pretty soon I'd have twenty weighing machines, and everybody would weight themselves fifty times a day. I thought - that's where the money is. The compounding of it - what could be better than that?"

Are your investments compounding like Warren's weighing machines?

GEM #6
"Since a young age Warren had studied the lives of men like Jay Cooke, Daniel Drew, Jim Fisk, Cornelius Vanderbilt, Jay Gould, John D. Rockefeller, and Andrew Carnegie. Some of the books he read and reread. One of them was special - not a biography but a paperback written by former salesman Dale Carnegie, enticingly titled How to Win Friends and Influence People." He had discovered this book at age eight or nine."

Warren read, studied and applied the concepts in this book before becoming a teenager. Warren went on later in life to take the Dale Carnegie training course. He learned how to give a speech in this course. He has said that his Dale Carnegie degree is the most important degree he has ever received. He felt that public speaking was required to gather investors for his partnerships. The Dale Carnegie training allowed him to overcome his fear and move on to grow his business.

The book How to Win Friends and Influence People should be required reading and if you haven't read it yet, get to your library this week and check it out! It will change your life.

GEM #7
Buffett was delivering papers when Franklin Roosevelt died; he saw this as an opportunity to sell more papers. "Newspapers put out special editions, and he hustled himself out to the street corner, hawking papers while everybody mourned."

Warren learned how to turn adversity into opportunity. Right now, there is a lot of adversity in the economy and real estate market. How can you turn this adversity into opportunity?

GEM #8
Warren developed a sideline to his newspaper route. "He asked all of his customers for their old magazines as scrap paper for the war effort. Then he would check the labels on the magazines to figure out when the subscriptions were expiring, using a code book he had gotten from Moore-Cottrell, the publishing powerhouse that hired him as an agent to sell magazines. He made a card file of subscribers, and before their subscriptions expired, Warren would be knocking at their door, selling them a new magazine."

Warren had created a "side" business to his paper route. He sold different products to the same customers. Do you have a side business? In not, how come?

GEM #9
One of Warren's biggest problems with his paper route was a customer who skipped out on their bill. To combat this problem, he began tipping elevator girls to let him know when people were about to move. He would then knock on their door at 6am before they moved to collect the outstanding balance.

What problems or challenges are you struggling with right now? Is it possible that a simple change might have a big impact?

Critical Reads

12 Tips to Make Your Move Simple & Stress Free
Let's face it, moving is NOT fun and can be very stressful for your family. Check out these 12 moving tips that will help you get to your new home with less stress. You can read the article and tips at this link.

The 7 Most Bucket-List Worthy Destinations for 2011
Have you seen the movie, "Bucket List?" If not, add it to your Neflix que. It's a great movie because it helps put things into perspective. Your "Bucket List" is a list of things you want to do before you kick the bucket. Seeing interesting places is typically on everyone's "Bucket List." Well, Paul Eisenberg recently shared what he believes are the 7 most bucket-list worthy destinations for 2011 at this link.

A $60 Million Dollar Dream House - Best or Worst Investment?
Check out this Wall Street Journal article profiling $60 million dollar home built on speculation by a group of real estate investors. Candance Jackson reports:

"Three years into the housing bust, at a time when home values are hitting new lows in many markets, a small group of developers has plunged into the risky business of betting millions on high-end speculative homes. They are erecting amenity-rich mansions for wealthy buyers that they hope will materialize. While the vast majority of the "spec" market remains moribund, some developers, pointing to a handful of big sales and the recent recovery of the stock market, believe the world's wealthiest buyers are out again shopping for trophy mansions, often as second, third or fourth homes."

You can read this article and see the home at "this link.

Amazing Simple Home Remedies!

1. Avoid cutting yourself when slicing vegetables by getting someone else to hold the vegetables while you chop.

2. Avoid arguments with the females about lifting the toilet seat by using the sink.

3. For high blood pressure sufferers ~ simply cut yourself and bleed for a few minutes, thus reducing the pressure on your veins. Remember to use a timer.

4. A mouse trap placed on top of your alarm clock will prevent you from rolling over and going back to sleep after you hit the snooze button.

5. If you have a bad cough, take a large dose of laxatives. Then you'll be afraid to cough.

6. You only need two tools in life - WD-40 and duct tape. If it doesn't move and should, use the WD-40. If it shouldn't move and does, use the duct tape.

7. If you can't fix it with a hammer, you've got an electrical problem.

A Little-Known Way to Cut Your Mortgage Payment

Tuesday, January 4, 2010

Market Update:  Congrats - You Got a 2% Raise for 2011!
Feature Article: How to Be a Miserable Investor
Critical Reads:  A little-known strategy to cut your Mortgage Payment
The Funnies: Are Helmets Really Necessary? 

 

Congrats - You Got a 2% Raise in 2011!

Did you know the recently passed tax law may have given you a raise for 2011? Believe it or not, your payroll tax withholdings will decrease in 2011 to 4.2% from 6.2%. This is a 2% savings and will translate into more take home pay for your family throughout the year.

Most experts suggest using this tax cut to increase your 401k contributions. Why not turn this tax savings into additional retirement income? Talk to your employee benefits administrator and simply raise your 401k contribution amount for 2011 by 2%. You can read more about this idea on Fidelity's website at this link. Scroll down to the section titled "How It Affects Your Take-Home Pay" for steps you might take with this 2% raise!
 

How to Be a Miserable Investor

The late Johnny Carson (Tonight Show) once gave a commencement speech to a group of students graduating from Harvard. His speech was titled, "Prescriptions for Guaranteed Misery in Life" and he said that he couldn't tell the graduating class how to be happy, but he could tell them from personal experience how to guarantee misery. Carson went on to list three ways to guarantee misery based on his own experiences in life. These three ways were: 1) ingesting chemicals in an effort to alter mood or perception, 2) Envy, and 3) Resentment.

Well, in this article, I'll try and share how you can be a miserable investor.

1. Go All In - When many investors see a good investment opportunity, they quickly decide to "go all in" and invest the majority of their capital. This is because they hope to make more on the investment. "Going all in" is a recipe for disaster for two reasons. The first is quite obvious - which is you stand to lose a great deal if the investment tanks. If you stand to make a lot more, you also set yourself up to lose a lot more, too! The other reason "going all in" is not the best strategy is because you won't have funds available to investing into other opportunities. Always try to keep a certain portion of your capital in cash so you can move quickly, if you see a great investment opportunity.

2. Believing Greed is Good - Gordon Gecko was wrong when he said, "Greed is Good" in the movie Wall Street. Greed is definitely not good and has caused many investors to get crushed. Greed pulls you into wanting more and this desire causes you to take additional risk. Risk is your enemy as an investor. In fact, your main objective as an investor is to preserve capital, not increase your investment returns.

3. Borrow Money to Increase Your Investment Returns -  Some investors borrow to invest hoping to increase their returns. (Good ole greed!) This would include buying stocks on margin or any other investment where money is borrowed to buy the investment. Borrowing works wonders in a rising market. However, in a falling market, debt or leverage will take you down quickly. Since we cannot forecast with accuracy rising and falling markets, debt should be avoided or minimized.

4. Thinking You Can Make Huge Returns as a Passive Investor - It's virtually impossible to have huge investment returns as a passive investor. Warren Buffett who is arguably one of the best investors in the world averages over 20% a year. On the surface, it seems as if he is a passive investor. Nothing could be further from the truth. Buffett is a very active investor and devotes a significant portion of his time into studying various investment opportunities. In addition, he typically participates in the management of the business for many of the stocks he owns. To increase your investment returns, you've got to become an active investor. This includes learning everything you can about the specific investment. It also means investing in a way where you can control the actual returns on the investment.

5. Not Protecting Your Assets - It's not fun to plan for rainy days when the sun is shinning, but it's critically important. As noted above, the main goal is to protect capital, not increase investment returns. Protecting capital includes all of your assets, not just your investments. In fact, the most risky asset you have is your car. You've probably read about car accidents and multi-million dollar law suits. Most people think that something like that could never happen to them. But it can. It's always better to be safe than sorry!

Tiny Apartment Transforms into 24 Rooms

Do you sometimes feel as if you're home is too small? Well, check out this 4-minute YouTube video highlighting how a tiny apartment transforms into 24 rooms. Is it possible to do more with less?
 
A Little-Known Strategy for Cutting Mortgage Payments

Lynnely Browning recently wrote an article for the New York Times highlighting the strategy of "recasting" or "re-amortizing" to cut your mortgage payments. According to her article...

"It involves paying off a lump sum of the principal amount and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal, so your new monthly payments decrease slightly and you save on interest paid over the life of the loan.

Lenders typically charge an administrative fee of $150 or more for this service, though borrowers are not required to pay closing costs or submit to another credit check, because they are not asking for a new loan.

Recasting works well for those unable to qualify for refinancing amid the ever-toughening credit guidelines perhaps because they are self-employed or have less-than-stellar credit as well as for those with extra cash, like a year-end bonus."

Paying down debt is one of the best investments you can make and this strategy might help cut your mortgage payment. You can read the full New York Times article by clicking here.

Former US Treasury Chief Loses ONE Million on His Home

Former Treasury Chief Henry Paulson recently sold his three bedroom home for $3.25 million. Paulson purchased this 2,260 square foot home in 2006 for $4.3 million. The home sat on the market for 8 months before it's sale on December 21, 2010. You can read the full Bloomberg article at this link.

Are the Helmets Really Necessary?

 

I think I'd go for a parachute instead!

What Will I Be When I Grow Up?

 

 

Father Forgets

Tuesday, December 28, 2010

As this is a holiday week, I have something special for you. It's a short story written many years ago by W. Livingston Larned titled, "Father Forgets." I also have an amazing video for you that seems to fit perfectly with this story. You can find a link to the video at the end of the story!
 

Father Forgets by W. Livingston Larned

Listen, son: I am saying this as you lie asleep, one little paw crumpled under your cheek and the blond curls stickily wet on your damp forehead have stolen into your room alone. Just a few minutes ago, as I sat reading my paper in the library, a stifling wave of remorse swept over me. Guiltily I came to your bedside.

There are things I was thinking, son: I had been cross to you. I scolded you as you were dressing for school because you gave your face merely a dab with a towel. I took you to task for not cleaning your shoes. I called out angrily when you threw some of your things on the floor.

At breakfast I found fault, too. You spilled things. You gulped down your food. You put your elbows on the table. You spread butter too thick on your bread. And as you started off to play and I made for my train, you turned and waved a hand and called, "Goodbye, Daddy!" and I frowned, and said in reply, "Hold your shoulders back!"

Then it began all over again in the late afternoon. As I came up the road I spied you, down on your knees, playing marbles. There were holes in your stockings. I humiliated you before your boyfriends by marching you ahead of me to the house. Stockers were expensive - and if you had to buy them you would be more careful! Imagine that, son, from a father!

Do you remember, later, when I was reading in the library, how you came in timidly, with a sort of hurt look in your eyes? When I glanced up over my paper, impatient at the interruption, you hesitated at the door. "What is it you want?" I snapped.

You said nothing, but ran across in one tempestuous plunge, and threw your arms around my neck and kissed me, and your small arms tightened with an affection that God had set blooming into your heart and which even neglect could not wither. And then you were gone, pattering up the stairs.

Well, son, it was shortly afterwards that my paper slipped from my hands and a terrible sickening fear came over me. What has habit been doing to me? The habit of finding fault, of reprimanding - this was my reward to you for being a boy. It was not that I did not love you' it was that I expected too much of youth. I was measuring you by the yardstick of my own years.

And there was so much that was good and fine and true in your character. The little heart of you was as big as the dawn itself over the wide hills. This was shown by your spontaneous impulse to rush in and kiss me good night. Nothing else matters tonight, son. I have come to your bedside in the darkness, and I have knelt there, ashamed!

It is a feeble atonement: I know you would not understand these things if I told them to you during your waking hours. But tomorrow I will be a real daddy! I will chum with you, and suffer when you suffer, and laugh when you laugh. I will bite my tongue when impatient words come. I will keep saying as if it were a ritual: "He is nothing but a boy - a little boy!"

I am afraid I have visualized you as a man. Yet as I see you now, son, crumpled and weary in your cot, I see that you are still a baby. Yesterday you were in your mother's arms, your head on her shoulder. I have asked too much, too much.

Definitely puts things in the proper perspective, doesn't it?

And before I part ways for this week, check out this short video titled, "Which hand should I hold the baton in?" It will make you smile! Here's the link to the video:

http://www.choralnet.org/268945.html
 
Happy New Year!

  

Investing Lessons from a Winning Stock Market Trader

Tuesday, December 21, 2010

Market Update:  Property Taxes Keep Rising...
Feature Article: Investing Lessons from a Winning Trader
Critical Reads: 2010's Top U.S. Real Estate Sales
The Funnies: Cute Christmas Story

 

Property Taxes Keep Rising Even Though Home Values Have Dropped

Want to save some money next year? Consider petitioning to have the value of your home reassessed for your property tax valuation.

Turns out that property tax rates are set based upon the budgets of each local government, not based upon property values. Many local governments have dramatically increased their property tax rates because it's their only option to generate more revenue.

As an example, property tax rates in Northern Jersey have increased 12% while property values have fallen. If you have a few minutes, check out an article by Charles Hugh Smith at  this link. It almost makes you worry about what property tax rates will be in the next year or two...

 

Investing Lessons from a Winning Trader

Several years ago, Jack Schwager released a book featuring numerous interviews with successful stock market traders. In the book, he asked each trader about lessons they had learned and how they became ultra successful investors. This is a great book and strongly recommended for all investors. The title of the book is, " The New Market Wizards - Conversations with America's Top Traders", and you can find it at Amazon.com, including a Kindle version.

One of the experts interviewed was Randy McKay, who turned $2,000 into $70,000 in his first 7 months of trading. He went on to winning trades in 18 out of 20 years. This is an amazing track record in the stock market. The author of the book asked Randy Mckay the following question:

"You were a winning trader right from the start. Is there anything different you did that helps explain that early success?"

Here's Randy's answer:

"One of the things I did in those early years that worked was analyzing every single trade I made. Every day I made copies of cards and reviewed them at home. Every trader is going to have tons of winners and losers. You need to determine why the winners are winners and why the losers are losers. Once you figure that out, you become more selective in your trading and avoid those trades that are more likely to be losers."

 When Randy mentioned that he copied cards and reviewed them at home, he simply meant he reviewed and studied all of the stock trades from each day.  He analyzed why he made the trade, what happened with each trade and detailed lessons learned.

Maybe we could use Randy's strategy to evaluate our investments. What investments did you make in 2010? How did they go? What went well and why? What didn't go well and why? What can you learn from each investment? What mistakes can you avoid in 2011?

Believe it or not, we can apply Randy's strategy to just about any area of our lives including projects at work, family relationships, real estate investments, and progress towards our goals. The key seems to be analyzing what we've done and to looking for ways to improve.

The next question the author asked Mr. McKay was:

"What other advice would you have for traders?"

His answer was:

"The most important advice is to never let a loser get out of hand."

Are you holding on to some bad investments that you might be better off letting go? It's best to think mathematically about each investment instead of emotionally. Seems like Randy learned this lesson early on and it helped him become one of the greatest stock market investors throughout history. 

 

 Investors Buy 233 Unsold Condos in Michigan

An article recently appeared in Crains Business Detroit highlighting a large real estate investment of 233 condos. Two firms partnered to buy into a large unsold condo project in Ann Harbor that stalled out when the housing market sagged. They paid on average of $60,000 for each condo, which was $71,000 less than the last sale price of $131,000.

The most interesting part of the story is what the investors plan is for the condos. "For now, we plan to continue renting the units and create a community atmosphere," he said. "Then, depending on the market conditions, we'll decide in three-to-five years whether to change it."

Looks like the big time investors are buying properties at the bottom of the market with intentions to rent the properties for 3 to 5 years. Based on our research, 2011 looks like it might be the best year to invest as the real estate market bottoms out. Click here to read the article.

2010's Top US Real Estate Sales

If you've tried selling a home this year and were shocked at prices, take a few minutes to check out these top 10 home sales. Believe it or not, these sales might make you feel a little better. The "Le Belvedere in Bel Air, California was originally listed for $85 million and ultimately sold for $50 million. Ouch. Here's the link to the article which includes pictures.

Want to cook in Jessica Alba's Kitchen or Sleep in Mick Jagger's Bed?

A new article reported, "Many celebrities own two or more homes and a surprising number of these big-name stars will rent you their home -- as long as you can afford it. Yes, it may seem strange that a privacy seeking celebrity is willing to rent out his or her home, but it makes financial sense. The income from renting a house helps defray the high cost of a mortgage, property taxes and maintenance." Click here to see how much it will set you back to rent Mick Jagger's home.

Cute Christmas Story

There was a man who worked for the Post Office whose job was to process all the mail that had illegible addresses.
 
One day, a letter came addressed in a shaky handwriting to God with no actual address. He thought he should open it to see what it was about.
 
The letter read:
 
Dear God,
 
I am an 83 year old widow, living on a very small pension.
 
Yesterday someone stole my purse. It had $100 in it, which was all the money I had until my next pension payment.
 
Next Sunday is Christmas, and I had invited two of my friends over for dinner. Without that money, I have nothing to buy food with, have no family to turn to, and you are my only hope.. Can you please help me?
 
Sincerely,
Edna
 
The postal worker was touched. He showed the letter to all the other workers. Each one dug into his or her wallet and came up with a few dollars.
 
By the time he made the rounds, he had collected $96, which they put into an envelope and sent to the woman.
 
The rest of the day, all the workers felt a warm glow thinking of Edna and the dinner she would be able to share with her friends.
 
Christmas came and went.
 
A few days later, another letter came from the same old lady to God. All the workers gathered around while the letter was opened.
 
It read:
 
Dear God,
 
How can I ever thank you enough for what you did for me?
 
Because of your gift of love, I was able to fix a glorious dinner for my friends. We had a very nice day and I told my friends of your wonderful gift.
 
By the way, there was $4 missing.  I think it might have been those b@stards at the post office.
 
Sincerely,
Edna
 
I for one, don't think the folks at the post office get enough credit. They work their tails off during the holiday season and are forced to deal with a lot of cranky customers! I couldn't imagine having to deliver the mail 6 days a week throughout the winter months!

Merry Christmas!

Rob Minton

 

 

A Simple Strategy You Can Use To Make More in 2011

Market Update:  Team Hoyt & CAN!
Feature Article: A Simple Way to Make More in 2011
Critical Reads: Santa's Top 10 Favorite Cities
The Funnies: The Funeral Procession 

 

Team Hoyt & CAN!

I don't have a market update for you this week. Instead I have something even better...

Last week I had dinner with a few friends. We had competed in a few sprint triathalons this past summer and were swapping stories about who was better. You know, the typicaly trash talking guys tend to do! Before we changed topics, one of my friends, Dave Berrow, brought up Team Hoyt and suggested I watch the video. I grabbed my iPhone and sent myself a reminder email.

I'm glad I did, because I learned about Dick Hoyt and his son Rick. From TeamHoyt.com:

Rick was born in 1962 to Dick and Judy Hoyt. As a result of oxygen deprivation to Rick's brain at the time of his birth, Rick was diagnosed as a spastic quadriplegic with cerebral palsy. Dick and Judy were advised to institutionalize Rick because there was no chance of him recovering, and little hope for Rick to live a "normal" life. This was just the beginning of Dick and Judy's quest for Rick's inclusion in community, sports, education and one day, the workplace.

The story continues...

In the spring of 1977, Rick told his father that he wanted to participate in a 5-mile benefit run for a Lacrosse player who had been paralyzed in an accident. Far from being a long-distance runner, Dick agreed to push Rick in his wheelchair and they finished all 5 miles, coming in next to last. That night, Rick told his father, "Dad, when I'm running, it feels like I'm not handicapped."

This realization was just the beginning of what would become over 1,000 races completed, including marathons, duathlons and triathlons (6 of them being Ironman competitions). Also adding to their list of achievements, Dick and Rick biked and ran across the U.S. in 1992, completing a full 3,735 miles in 45 days.

Today Dick and his son participate in Ironman Competitions. Dick pulls his son through the water in a raft during the swimming course. He carries him through the transition areas, rides with him on his bike, and pushes him through the marathon using a specialized running wheelchair. 

It's one of the most inspiring stories I've heard in a long time and makes me want to work a little harder. If Dick Hoyt can do this for his son, what can you and I accomplish? Take some time to check out their story and make sure you watch the video. Here's the link to their site: TeamHoyt.com.

A Simply Way to Make More in 2011

A recent study from DayTimer.com found that workers with the highest incomes and most success in the workplace had written goals.  The study revealed these individuals had the habit of writing daily task lists with priorities associated with each task. The simple task of setting goals seemed to keep them focused on the most important activities, which allowed them to get more accomplished week-after-week.

You've probably experienced something similar in your life. Think about the last time you went on vacation. Did you get more accomplished the week before your trip than you had in the previous month?

Probably.

For some reason, were able to get twice as much accomplished the week before a vacation than in a normal week. This is true for almost everyone and it seems to happen for each and every vacation. Sure were motivated and excited about our upcoming vacation, but could there be more to this massive level of activity? Could our massive level of activity be the result of a detailed list of specific goals?

Yes!

Before a vacation, we typically have several "To Do" lists for work and home. These "To Do" lists include things we have to get completed before we leave. Maybe you have to get a report finished at work so it's ready while your gone. At home, you've got detailed lists of things you must do. These lists include everything from stopping the mail while your gone to what you need to pack.

When you stop and think about it, our vacation "To Do" lists are really specific written goals and these written goals seem to be the foundation of our high level of activity and accomplishment.

Maybe you've heard of the famous Harvard Business School study on goal setting performed some time ago where they studied a group of students 10 years after graduation. Here's what they found:

• 27% needed financial assistance. This group of students had absolutely no goal setting process in their lives.
• 60% were living paycheck to paycheck. This group of students had basic survival goals (having enough money to cover the bills)
• 10% were living comfortably. This group of students had general goals for the next 5 years.
• 3% were financially independent. And guess what? This group of students had specific goals that were written out including detailed steps.

I'm not sure if this study is legit or not, but it sure seems to make sense and it's pretty easy to test. Take a few minutes right now to list everything you accomplished last week. Will use this list in our little test.

Now, for next week, take some time to set specific goals you'd like to accomplish. Be as detailed as possible and include daily activities you must accomplish to reach your goals. Track and measure your progress each day by crossing off the things you've accomplished.

At the end of your second week, compare what you accomplished without detailed written goals to what you accomplished with detailed written goals. See if you were more productive with written goals. My guess is that you'll find you've accomplished significantly more with written goals than without.

Guess what?

This level accomplishment compounds from week-to-week when you consistently set written detailed goals as evidenced in the study highlighted above.

As a special gift, you can download my book "Achieve" on how to set and accomplish goals, without charge, at this link. You'll also receive specific worksheets you can use to set and achieve more in 2011. Links to download the book and workseets will be emailed to you!

I only have two items for you this week and they're definitely not critical. They're actually more on the fun side. Here they are..

Santa's Top 10 Favorite Cities

The folks over at Zillow published a list of Santa's Top 10 Favorite cities. Click here to see if your city made the list. Believe it or not, they factored in many variables to formulate this list including: weather, number of fireplaces, number of children, the number of single-family homes and more. It's fun read as head closer to Christmas!

Celebrity Homes (Including Pictures)

Did you know Miley Cyrus secretly bought a 1.9 million dollar beach home in Florida last year? Well she did! NYDailyNews recently posted pictures of celebrities and their homes which you might find interest. You can see these homes at this link.

The reason why we've included this as a critical read is to hopefully insire you to set big goals for 2011. Our feature article highlighted the power of setting written goals and maybe a new home might be on your list!

The Funeral Procession

A man was leaving a convenience store with his morning coffee when he noticed a most unusual funeral procession approaching the nearby cemetery.

A long black hearse was followed by a second long black hearse about 50 feet behind the first one.

Behind the second hearse was a solitary man walking a dog on a leash.

Behind him, a short distance back, were about 200 men walking single file.

The man couldn't stand the curiosity. He respectfully approached the man walking the dog and said, 'I am so sorry for your loss, and this may be a bad time to disturb you, but I've never seen a funeral like this. Whose funeral is it?'

'My wife's."

''What happened to her?"

The man replied, 'My dog attacked and killed her'

He inquired further, 'But who is in the second hearse?'

The man answered, 'My mother-in-law. She was trying to help my wife when the dog turned on her.'

A poignant and thoughtful moment of silence passed between the two men.

'Can I borrow the dog?'

The man replied, 'Get in line.'
 
Have a geat week!

Rob Minton

  

  
 

A book you MUST read...

Tuesday, December 7, 2010 Market Update: A Book You MUST Read This Month! Feature Article: Short-Term Thinking Destroys Long-Term Results  Critical Reads: Mortgage Interest Rates Increase 3 Weeks in a Row The Funnies: Funny Answers from Last Years GED Examination    A Book You MUST Read This Month! In early 2009, two friends suggested I read a book titled, "Guide to Investing Into Gold & Silver" by Michael Maloney. Based on their advice, I immediately ordered the book and spent the next few days reading every page. I'm very thankful for their recommendation! This book highlights the history of gold and silver and explains why we should consider adding these assets to our investment portfolios. When I read this book, gold was priced around $950 an ounce. Today it's valued at over $1,400. The numbers are even better for silver. Silver was priced at $12.50 in early 2009 and this week it crossed over $30 an ounce. There are many reasons why gold and silver are increasing in value and these reasons are critical for you to understand to protect your financial well-being. Short-Term Thinking Destroys Long-Term Results Last year, we rented a lovely home on Lake Norman for 3 weeks. I wrote about how I paid for this home, which is rather expensive, in one of our monthly Income for Life newsletters. You can test-drive the Income for Life membership for just 1 buck at this link. We enjoyed the home so much that we reserved the home for 3 again for next year. Because we reserved so far in advance and we were repeat customers, the owner didn't require us to pay a deposit. We signed the rental contract and planned to send the deposit this month for the next vacation. The owner received a request from another vacationer to rent the home during one of our weeks. Because we hadn't sent the deposit, the owner had decided to cancel our agreement and rent to the new vacationer. This isn't the end of the world, because there are many other homes available for rent. We would have simply found another home. However, we would have never gone back to this owner and their home again. Does it make sense to cancel a 3 week rental with a previous renter, to get a one week rental from somone else? Not really. The bad decision was magnified when you consider that we were repeat customers who took very good care of the home and paid as agreed. Even worse, we probably would have continued to rent this same home each summer going forward. This one short-term decision may have this owner 3 week rentals for years to come. Why do so many people make short-term choices without thinking about long-term consequences? If you stop and think about things for a minute, you'll see limited short-term thinking is the main reason so many people are struggling financially right now. Here are a few examples to show you what I mean: Do I buy the $3,000 flat screen TV on my credit card now, or save up and pay cash? Short-term thinking kicks in and we want instant gratification. What happens when the credit card bill comes in next month? Do I lease a new car because the monthly payment is lower, when I could buy the car and actually own it someday without having a monthly payment? Short-term thinking is going for the lower monthly car payment, instead of owning the same car long-term. Do I postpone saving for my retirement now because times are tough economically, or go make some extra income so I can continue to save? A significant number of people have decided to stop saving for retirement now.  Do I stop investing in real estate today because the market is flat, or do I think long-term and buy as many properties at discounted prices to maximize my long-term wealth? If everyone would think long-term before making any financial decisions, they would be much better off.  The best short-term decisions usually have the worst long-term outcomes. Interest Rates Increase 3 Weeks in a Row The Wall Street journal recently reported that mortgage interest rates have increased 3 weeks in a row. These rate increases were noted in fixed rate mortgages and adjustable rate mortgages making new homes a little more expensive. You can read the article by clicking here. For Home Buyers, A Season for Deep Discounts According to the New York Times, home buyers and investors can lock in some great discounts during the holidays. Historiically, December has always been a great month to buy a home. This is because there are fewer buyers looking and sellers tend to be more motivated. If you're thinking of buying a home or grabbing a great investment, now may be the time! You can read the article at this link. New Rules Require Rental Property Owners to File 1099s On December 31, new rules kick in requiring rental property owners to issue 1099 forms to service providers for payments of $600 or more during the year. These rules will now require you to issue 1099 forms at the end of 2011 for any repairs or improvements to your properties over $600. And as to be expected, there are penalties for not following the new rules. You can read the story at this link.   GED EXAMINATION Funny answers from last year's GED examination: Q. Name the four seasons. A. Salt, pepper, mustard, and vinegar. Q. Explain one of the processes by which water can be made safe to drink. A. Flirtation makes water safe to drink because it removes large  pollutants like grit, sand, dead sheep, and canoeists. Q. How is dew formed? A. The sun shines down on the leaves and makes them perspire. Q. What causes the tides in the oceans? A. The tides are a fight between the earth and the moon. All water tends to flow towards the moon, because there is no water on the moon, and nature abhors a vacuum. I forget where the sun joins the fight. Q. What guarantees may a mortgage company insist on? A. If you are buying a house, they will insist that you are well endowed. Q. In a democratic society, how important are elections? A. Very important. Sex can only happen when a male gets an election. Q. What are steroids? A. Things for keeping carpets still on the stairs. Q. What happens to your body as you age? A. When you get old, so do your bowels and you get intercontinental. Q. What happens to a boy when he reaches puberty? A. He says goodbye to his boyhood and looks forward to his adultery. Q. Name a major disease associated with cigarettes. A. Premature death. Q. What is artificial insemination? A. When the farmer does it to the bull instead of the cow. Q. How can you delay milk turning sour? A. Keep it in the cow. Q. How are the main 20 parts of the body categorized (e.g. the abdomen)? A. The body is consisted into 3 parts - the brainium, the borax, and the abdominal cavity. The brainium contains the brain, the borax contains the heart and lungs, and the abdominal cavity contains the five bowels: A, E, I,O,U. Q. What is the fibula? A. A small lie. Q. What does "varicose" mean? A. Nearby. Q. What is the most common form of birth control? A. Most people prevent contraception by wearing a condominium. Q. Give the meaning of the term "Caesarean section." A. The caesarean section is a district in Rome. Q. What is a seizure? A. A Roman Emperor. Q. What is a terminal illness?   A. When you are sick at the airport. Q. Give an example of a fungus. What is a characteristic feature? A. Mushrooms. They always grow in damp places and they look like umbrellas. Q. Use the word "judicious" in a sentence to show you understand its meaning. A. Hands that judicious can be soft as your face. Q. What does the word "benign" mean? A. Benign is what you will be after you be eight. Q. What is a turbine? A. Something an Arab or Shreik wears on his head.

Home Prices in Northeastern Ohio Post Slight Increase

Market Update: Home Prices in Northeastern Ohio Post Slight Increase
Feature Article: What You Measure Improves   
Critical Reads: Qualifying for a Mortgage May Get Harder in December
The Funnies: Night Vision Goggles & Other Hard-To-Find Toys     

 

Home prices in Northeastern Ohio Increased Slightly This Summer

Home prices in Northeastern Ohio have increased slightly (around 1.8%) during the summer months of 2010, as compared to the same period in 2009. This is not the case for home prices at the National level, which fell 2.4% for the same period. However, recent statistics suggest home prices might track downward again.

One trend those interested in real estate should pay attention to is the average price concession. A price concession is the amount the home sells for compared to the asking price. In 2010, the average price concession has increased indicating that sellers must be more flexible in their pricing and during negotiations to get their homes sold.

Interest rates remain at historic low levels allowing buyers to save a significant tens of thousands in interest. However, it's going to be impossible for the Federal Reserve to keep rates at these levels indefinitely. At some point, they will have to increase to fight off inflation. An increase in interest rates will be good for homeowners because home prices typically rise with inflation. When this does happen (and it will happen) buyers who locked in fixed interest rates of 4.55% will be sitting pretty as their home gains value and their monthly mortgage payments remain unchanged!

What You Measure Improves

Believe it or not, one of the easiest ways to improve any area of your life is to measure where you stand on a consistent basis. For example, if one of your goals is to increase your net worth, you have to measure and track your net worth on a monthly basis. Otherwise, you're not paying attention and you're definitely not making any progress.

You've probably heard all of this before, but it's true.

What you measure improves.

Want to lose weight? Weigh yourself every single day. A recent study from Brown Medical School and Drexel University ran an experiment to determine whether consistent "weighing in" would affect weight maintenance. At the end of the year, the subjects who weighed themselves every day lost more weight and kept more weight off than those who weighed themselves less frequently. The key to their success was to consistently measure their weight.

Other things you might consider measuring on a routine basis might be:

- Your monthly passive income
- Them amount of debt you have
- How much you save each month for retirement
- Your monthly living expenses (are they increasing or decreasing)
- The number of books you read on a monthly basis

If you stop and think about it, tracking and measuring is super easy to do, but chances are your not doing it. To make progress in any area of your life, you have to monitor and measure where you stand consistently. The good news is won't cost you a penny and the potential return is enormous. You don't need any fancy software. All you need to do is make the time and follow through.

Qualifying for a New Mortgage Will Get Harder for Some Buyers

The New York Times recently ran an article highlighting new lending guidelines by Fannie Mae, which become effective on December 13, 2010. These new guidelines will make it easier for some buyers to qualify and almost impossible for others. If you're thinking of buying a home, these new guidelines will have an impact on you and this article is a must read. Depending on your circumstances you may not qualify after December 13, 2010. You can read the article by clicking here.

30 Days and Counting to Grab The $1,500 Energy Tax Credit

The tax credits for installing energy efficient windows, doors, furnaces and more is set to expire on December 31, 2010. If you need to upgrade something in your home, now may be the time. You can read more about this tax credit, what's eligible and how much you can receive at this link.

End of Year Tax Moves for Investors

Another important deadline you might want to pay attention to is the deadline to convert to a Roth IRA. Roth IRAs allow you to withdraw funds in retirement tax-free. For 2010 only, you can convert a traditional retirement account, or IRA and spread the resulting tax liability over the next two years. Now may be the time to convert and you can read more by clicking here.

 

Hard to Find Toys

Since it's officially time to shop for Christmas, see if you can find these hard-to-find toys...