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?

 

 

 

 

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!

   

 

 

 

 

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

 

 

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...

The Wealth Recovery Report

Want to recover and prosper from the real estate market crash? If so, download the Wealth Recover Report and learn how to...

-  Sell “underwater” properties using massive buyer incentives.
-  Use Zero Coupon Bonds to recover amounts lost and guarantee all of your future investments.
-  Get your tenants to pay higher rents, sign longer-term lease agreements and pay before your rent due date!
-  Turn EVERY new tenant into $25,000 of future wealth
-  To build a ladder of bonds that will supplement your retirement income.
- Why you should start investing now and what the best investments are in today’s market.

Download this 24-page report now at this link:

Download Wealth Recovery Report - PDF

Why CONTROL is Critical to Your Investing Success!

Over the last few weeks, I've been blown away by the biggest "Ponzi Scheme" to hit Wall Street. On December 11, Bernard Madoff admitted that he ran a $50 billion dollar fraud. Thousands of investors have lost millions of dollars. In addition, many charities have been destroyed from turning their money over to Bernard Madoff.

A "Ponzi Scheme" occurs when the money manager uses the funds contributed by new investors to pay existing investors. The scheme can continue for years, as long as new investors are investing new money. When new investors stop investing, as they did with Bernard Madoff, the Ponzi Scheme quickly folds because funds are not available to pay to existing investors.

I have preached many times over, within the Income for Life monthly newsletter, that investors should always control their investments. Control is extremely important in wealth building for many reasons. The investors who lost money with Madoff had no control over their investments. They had no idea where their money was actually being invested. Yes, they did receive account statements showing them where their money was supposed to be invested. However, these account statements were fake.

The one major lesson every wealth builder should take from this situation is that you must control the investments you make. Controlling your investment gives you the ability to have a direct impact on the investment's performance. In addition, it protects you from loss through fraudulent money managers. As an example, consider these different investment opportunities:

1) Investing $20,000 into a mutual fund.

2) Investing $20,000 as a down payment to buy a single family investment property.

3) Investing $20,000 to buy stock in a large company.

4) Investing $20,000 to start your own "side" business.

You can ask yourself many questions to compare these different investment opportunities. In fact, most investors ask themselves the following 3 questions when evaluating different investment opportunities:

Which investment offers the best return on investment?

Which investment contains the most risk?

Which investment is the easiest?

Notice that the majority of people don't even consider "control" of the investment as part of their decision making criteria? The only two investment choices presented that give you 100% control are the single family rental property and the "side" business. These two investments, in my humble opinion, are the safest. 

The problem is that most investors are typically attracted to investments that are easy. In fact, they prefer to turn their money over to someone else and then do nothing. It's these 100% passive investments that carry the most risk. 

Take some time to study the people who have acquired significant wealth. Look to see if they controlled their investments. I'll bet you'll find that in the majority of them do. Consider the following:

Bill Gates: Bill's wealth came from Microsoft. Did he control Microsoft?

Warren Buffett: Most people believe that Buffett is a passive investor who simply buys shares of stock in good companies. This is not true. Buffett typically owns businesses outright whereby he has 100% control. In the investments where he doesn't own 100%, he typically acquires enough shares to participate in management.

Sam Walton:  Sam's wealth came from Walmart. Did he control Walmart?

I could go on and on with many more examples of wealth people. Each example would have the same commonality - CONTROL OVER THE INVESTMENT. This also means that each wealthy person was "active" with their investments. They didn't build their wealth through passive investments.

As we head into 2009, please add one question to your criteria for selecting investments. The one question you should add is:

Do I control the investment?

Happy Holidays!

Rob Minton

 

How to Use Options to Protect Your Investment

After reading the new biography titled "The Snowball" about Warren Buffett, I became interested in learning more about the stock market. I went out and purchased 6 different books on the stock market. One of the  books I purchased was instrumental in Warren Buffett's education. This book is "The Intelligent Investor" by Benjamin Graham.

Mr. Buffett specifically suggests that investors read and focus on just two chapters in this book.

Chapter 8 - "The Investor and Market Fluctuations"
Chapter 20 - "Margin of Safety - as the Central Concept of Investment"

These chapters are very educational and required if you're serious about building wealth. The principles taught in these chapters apply to the stock market, real estate market and any business that you own.  Put this book on your holiday wish list!

In addition to "The Intelligent Investor", I also read several books on stock options. I've now put my toes in the water with options. Nothing too crazy. I'll share what I'm doing with you in today's post.

My strategy has been to buy shares in good companies when the price drops. This has been fairly easy to do lately. For example, I purchased shares of one stock at around $51 share. I then turned around and sold "covered calls" on the shares I owned. Basically, I sold an option to someone else giving them the right to buy my shares at $65 dollars a share. They paid me $3.50 a share for this right. So I paid $51 a share and collected $3.50 a share and still own the stock. This means my actual out of pocket cost on this stock is now $47.50. Soon after this transaction, the stock dropped again. As I write this blog post, the stock is now trading at around $48 a share. I'm still slightly ahead because I have $47.50 invested and the stock is valued at $48 a share. Had I not sold the option on this stock, I would be down $3.00 a share.

Here are a few things to consider:

1. In Income for Life, we buy a good home and then sell the home to a tenant/buyer on a rent to own program. The tenant/buyer pays us a fee upfront for the right to buy the home at a predetermined price during the rent to own program. This is the exact same thing that I've done with my stock. I've sold someone the right to buy my stock at a predetermined price for a set period of time. As you collect upfront payments on your investment home, your cost basis in the property decreases. So if you paid $100,000 for your home and you collect $5,000 upfront from your tenant/buyer, your cost basis has now dropped to $95,000.

2. If the stock I purchased does not increase in price, I'll be able to keep the stock and the entire option payment. I can then sell another "covered call" on this same stock and collect more money. The money collected would reduce my cost basis in the stock further. The same strategy applies to our rent to own home. If the tenant/buyer doesn't buy your home, you can collect another upfront payment and reduce your cost basis further. Depending on how many times you go through this process, you can continue to drive your cost basis down on your investment further and further. In my stock scenario above, the price of the stock dropped, but I'm still ahead because of the income received from the option sold. Selling options on your assets helps to mitigate against price decreases.

3. If the stock I purchased increases in price beyond $65 a share, I'll be forced to sell my shares. I'll collect a profit of $14 a share. I cannot see how this is a bad thing. Back to real estate - if the tenant/buyer buys out your home at the predetermined option price, you'll collect a nice profit on the home, too.

The strategy I'm testing with my stock options is basically copy what we do in Income for Life with real estate.  Buy an asset, sell an option on the asset to generate additional income from the asset. I never really thought much about it, but selling options on your assets allows you to hedge against loss. This strategy can be applied to real estate, just as easily as it can be applied to the stock market. The only difference that the stock market moves at a significantly faster pace.

To be clear, I'm not suggesting you go out and start trading stock options. Stock options are risky and you can lose money. I've read several books and I'm playing the game with a very small amount of money. Instead, I'm hoping that you see how powerful it can be to sell someone else the right to buy your assets at a predetermined price.Take some time to digest this blog post, because I've dropped a pretty big investing concept on you!

If you would like to become an Income for Life Member, apply at http://wwwIFLApplication.com

Rob Minton

Short-Term Thinking Destroys Long-Term Results

For this post, I'll share a story and then explain a BIG lesson for everyone.

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. In fact, the strategy to pay for this was part of my $4,000,000 Wealth Building Plan. This plan and all previous Income for Life Newsletters can be found in the member's only website!

We enjoyed the home some much that we reserved the home for 3 weeks in 2009. Because we reserved so far in advance and we were repeat customers, the owner didn't require us to pay a deposit at the time. We signed the rental contract and planned to send the deposit in December of 2008.

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.

The bad choice in this particular situation is canceling a 3 week rental with us to get a 1 week rental from someone else. The bad choice is magnified when you consider that we were repeat customers who took very good care of the home and paid as agreed previously. Even worse, we probably would have continued to rent this same home each summer going forward. This one choice would have cost this owner 3 weeks of rent each and every year.

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 that 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 is on instant gratification. What happens when the credit card bill comes in every 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. See the retirement test at this link for the details.

• 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. Try your best to make best long-term decisions, not the best short-term decisions. The best short-term decisions usually have the worst long-term outcomes.

Rob Minton

P.S. Everything ended up working out just fine with the summer rental. The owner decided to stick with us! We are very excited! We now have the opportunity to be long-term tenants for them!

Can You Pass This Retirement Test?

Last week I found an interesting quiz in the Wall Street Journal titled "Measuring Your Retirement IQ." I have included a few of the questions from this quiz for you in this blog post. Can you answer these questions correctly?

1. Among households age 50-plus, how much money is held in a typical retirement account?

a. $90,000
b. $140,000
c. $190,000
d. $240,000

ANSWER: A. The median balance was $89,300 as of Sept 30, according to the Urban Institute. Given that a typical household age 50 to 59 with a retirement account has annual income of $95,000, those savings are "not enough to replace one year's pre-retirement income," the institute notes.

2. What percentage of surveyed workers age 45-plus said they stopped contributing to their retirement savings in the past year?

a. 10% 
b. 15%
c. 20%
d. 25%

ANSWER: C. One in five workers surveyed last month said they stopped putting money into a 401(k), individual retirement account or related savings plans, according to a report published recently by AARP.

3. What percentage of the surveyed workers age 45 and older said that - based on recent changes in the economy - they have considered delaying retirement?

a. 24%
b. 34%
c. 44%
d. 54%

ANSWER: B. One-third of workers surveyed last month have considered postponing retirement, according to AARP. Women are more likely than men -40% vs. 29% to be weighing that step.

4. What percentage of surveyed workers age 45 and older think they are currently saving enough for retirement?

a. 36%
b. 46%
c. 56%
d. 66%

ANSWER: A. Only about one-third of workers think their savings plans for retirement are on track, according to the AARP. Fifty-eight percent said they aren't saving enough, and 6% said they didn't know or declined to answer.

5. Among workers age 65-plus, what percentage work full time?

a. 26%
b. 36%
c. 46%
d. 56%

ANSWER: D. From 1995 to 2007, the number of older workers on full-time schedules nearly doubled, while the number working part time rose just 19%, according to the Bureau of Labor Statistics. As a result, "full-timers now account for a majority among older workers, 56% in 2007, up from 44% in 1995."

6. The median weekly earnings of full-time workers age 65-plus in 2007 were:

a. $605
b. $705
c. $805
d. $905

ANSWER: A. That compares with median weekly earnings of $695 for all workers, according to the Bureau of Labor Statistics.

Do the answers to these 6 questions scare you?

Ponder this test until my next blog post...

Rob Minton

P.S. You can see the complete quiz in the Wall Street Journal dated Saturday, October 18th, 2008.

How to Pay for College/University...

I just read an article about how expensive children are to a family. Recent estimates indicate that it costs $204,060 to raise a child through the age of 18. This doesn't even include college. Rather expensive little buggers, aren't they?

If this isn't enough, college could add another $100,000 to $200,000. Yikes...

In today's blog post, I'll share what I believe is the best way to pay for college/university. The answer might surprise you. The drum roll please...

The best way to pay for college education is to not pay for it at all.

Yep.

Well, a better answer would be - to have someone else pay for it on your behalf. And I'm not talking about scholarships or grants either.

Let's say that you believe college will cost you $100,000. To save $100,000 for your child's education, you would need to save around $210 a month and earn around 8% a year on your savings. This effort would result in $100,818 twenty years from now.

Couldn't you simply buy a nice single-family home with a monthly positive cash-flow of $210 a month?

You could then invest this monthly cash-flow into a low cost index fund and bingo, your child's college education is paid for - by someone else!

You simply buy the rental property and use the rental income to save for your child's college education.

Now, the key to this strategy is that you must setup auto-withdrawal for your $210 a month college savings. Have this money automatically sucked out of your bank account each and every month.

At the end of 18 years, you keep the single family home and your kid goes to college. Not a bad deal if you ask me.

Or you could go the traditional route and scrap together $210 from your paycheck each month. This strategy gets harder and harder as the cost of living increases.

I used this simple strategy with my two kids and each year their college savings continues to grow. The best part is that it is being paid for by my rental properties.

In the past, it was a little challenging to find properties that generated $200 a month cash-flows. This challenge has all but eliminated in the States with the soft real estate market.

In fact, if interest rates go down any further, it would be fairly easy to generate this monthly cash-flow on multiple properties.

To get started, apply for membership in Income for Life at http://www.IFLApplication.com

As a member, you'll have access to the absolute best investment properties in your area. You'll also learn how to collect higher monthly rents, which will help you reach your college savings goals faster.

Remember the old saying:

Work smarter, not harder?

Well, this saying can be applied to saving for college too.

Rob Minton

P.S. The photo used in this post was captured from an online calculator at www.math.com.