I've got my two purchases from this year on the market at the moment and am just sitting here watching the drip, drip drip of cash walking out the door as we wait to find a buyer. The drip seems more like a gusher at ~$2K per month so if we fail to sell in 6 months we will basically start reaching the break even point and could lose money. I'm hesitant to buy another property right now as I have less than $20K in cash reserves, although I do have a $20K LOC @ 16% available if I get desperate.
I've been watching the progress at Flip Thy House where that investor is doing what I am and has about the same goals.
I'm not sure if the foreclosure crisis has passed, but I have noticed that banks seem to be unwilling to take the large discounts in short sale packages that I have submitted in the last 2 months. The number of foreclosures in our area also seems to have decreased. I'd like to get a house under contract before I purchase another one so I am not overanxious to buy at the moment.
The lack of liquidity is probably the most difficult part of owning real estate. If the market is in a real downturn it can turn sure profits into losses if the property is not occupied. If I don't get some action, I may have to think of alternative exit strategies in the upcoming months.
Wednesday, May 30, 2007
Carnival of Real Estate
Posts of mine are up in two new carnivals - The Carnival of Real Estate Investing has my post on Is Using Real Estate investing for Retirement a Dumb idea?.
I found an interesting post at this Carnival that I want to check out - A new Way to Access Home Equity.
The Carnival of Personal Finance has my post on Rent Vs Buy - My thoughts.
A related piece is the post on Buying an Expensive House.
Since I will have 4 teenagers in High School this fall I was interested in the post on 4 secrets you should know about paying for college - I didn't know!
Finally - a pet topic of mine Investors Vs Speculators is covered. Most so called real estate investors are just speculators (I have a family full of them)
I found an interesting post at this Carnival that I want to check out - A new Way to Access Home Equity.
The Carnival of Personal Finance has my post on Rent Vs Buy - My thoughts.
A related piece is the post on Buying an Expensive House.
Since I will have 4 teenagers in High School this fall I was interested in the post on 4 secrets you should know about paying for college - I didn't know!
Finally - a pet topic of mine Investors Vs Speculators is covered. Most so called real estate investors are just speculators (I have a family full of them)
Tuesday, May 29, 2007
Working together in business - part 2
In another post I talking about the challenges of working with your spouse. I mentioned that we were unable to resolve an issue around QuickBooks. My wife has an accounting background but really is computer challenged. In China she did all her accounting manually - even using an abacus when she first started in the 90's (this was not unusual for Communist countries - when I went to Russia in 1997 there were no computers and the Court Reporter sowed our documents together because there were no staplers).
I made several veiled threats to hire an accountant if she would not enter the data - that really made her mad and it had become a big source of conflict in our marriage. Finally this weekend I just decided to do it myself, even though I am clueless about accounting. Fortunately, my wife could not bear to see me screwing up the accounts and she decided to sit in front of the computer and start entering the data. Even though she had taken a QuickBooks course, she struggled trying to understand the software. I was able to help her in this respect and over the course of the weekend we were able to make substantial progress. She gained some confidence in her ability to use the software which was really the hangup in not entering the data.
Sometimes when working with a spouse it is not immediately obvious why the other is not doing something or doing it differently than you desire. The solution might not be obvious but fortunately, if you are committed to each other and the business, you can find a way to resolve the issue.
I made several veiled threats to hire an accountant if she would not enter the data - that really made her mad and it had become a big source of conflict in our marriage. Finally this weekend I just decided to do it myself, even though I am clueless about accounting. Fortunately, my wife could not bear to see me screwing up the accounts and she decided to sit in front of the computer and start entering the data. Even though she had taken a QuickBooks course, she struggled trying to understand the software. I was able to help her in this respect and over the course of the weekend we were able to make substantial progress. She gained some confidence in her ability to use the software which was really the hangup in not entering the data.
Sometimes when working with a spouse it is not immediately obvious why the other is not doing something or doing it differently than you desire. The solution might not be obvious but fortunately, if you are committed to each other and the business, you can find a way to resolve the issue.
High gas prices headed higher - thanks to greens
Today's New York Times has an article discussing Ethanol and its implications on gas prices and global warming. The Greens like to promote this type of solution because its "renewable" and force it by fiat (like low flush toilets) onto the the consumer. In the end the consumer ends up paying a higher price for the product and the environment is in worse shape.
As a Chemical Engineer, I think forcing ethanol on the market is one dumb idea (this despite the fact that the company that employs me is pushing this and cellulosic ethanol). One of the key causes of high gas prices is the fact that environmentalists have restricted drilling for oil here and prevented oil companies from building new refineries for the past 20+ years. Last year industry executives were going to spend money to expand refinery capacity but the turn to build ethanol capacity makes that a poor business decision, so we will get little or no investment now and a continuation of high gas prices. Politicians don't belong in the market. Nixon's' price freezes in the 70's did tremendous harm to supply and price.
The federal ethanol mandate adds substantially to gasoline prices. Ethanol costs more per gallon than gasoline; it contains less energy per volume so a blend of 90 percent gas and 10 percent ethanol delivers 3 percent fewer miles per gallon; and ethanol has a higher vapor pressure which makes it even more expensive for refiners to meet EPA summertime vapor pressure maximums. The ethanol mandate also adds to costs for blending gasoline because companies now have to manage different two fuel supply chains.
As a Chemical Engineer, I think forcing ethanol on the market is one dumb idea (this despite the fact that the company that employs me is pushing this and cellulosic ethanol). One of the key causes of high gas prices is the fact that environmentalists have restricted drilling for oil here and prevented oil companies from building new refineries for the past 20+ years. Last year industry executives were going to spend money to expand refinery capacity but the turn to build ethanol capacity makes that a poor business decision, so we will get little or no investment now and a continuation of high gas prices. Politicians don't belong in the market. Nixon's' price freezes in the 70's did tremendous harm to supply and price.
The federal ethanol mandate adds substantially to gasoline prices. Ethanol costs more per gallon than gasoline; it contains less energy per volume so a blend of 90 percent gas and 10 percent ethanol delivers 3 percent fewer miles per gallon; and ethanol has a higher vapor pressure which makes it even more expensive for refiners to meet EPA summertime vapor pressure maximums. The ethanol mandate also adds to costs for blending gasoline because companies now have to manage different two fuel supply chains.
Friday, May 25, 2007
Home ownership costs questioned
Yahoo Finance has an article talking about whether you should buy a home and include this Table.
I wonder where in the world journalists get their data. I've lived in 10 houses over the past 30 years - all of them over 90 years old. The kind of homes that you think would need major renovations (and many have). I've kept pretty good records of what I have spent and I find this data really flawed. The most expensive rehab we did was a total gut (only the original walls remained) and it cost us $60k. Over the past 30 years I have spent less than $100k on maintenance as well as major improvements. In every case that I have made improvements, the homes' value has increased by more than 100% of my cost.
Most people that own a home do most of the repair work themselves and often take on large projects as well. Is this journalist assuming that people are spending $300k to remodel their 1990's home? I suppose a few people are foolish enough to over improve a home, but I suspect that is a minority. Is he a total incompetent that he can't change a light bulb without calling an electrician or so lazy that he hires out maid service and lawn mowing. Part of home ownership is having a do-it-yourself attitude.
When journalist present flawed data, their whole story line is questionable. And today journalism has extremely low credibility with any story that deals with data (especially science).
I wonder where in the world journalists get their data. I've lived in 10 houses over the past 30 years - all of them over 90 years old. The kind of homes that you think would need major renovations (and many have). I've kept pretty good records of what I have spent and I find this data really flawed. The most expensive rehab we did was a total gut (only the original walls remained) and it cost us $60k. Over the past 30 years I have spent less than $100k on maintenance as well as major improvements. In every case that I have made improvements, the homes' value has increased by more than 100% of my cost.Most people that own a home do most of the repair work themselves and often take on large projects as well. Is this journalist assuming that people are spending $300k to remodel their 1990's home? I suppose a few people are foolish enough to over improve a home, but I suspect that is a minority. Is he a total incompetent that he can't change a light bulb without calling an electrician or so lazy that he hires out maid service and lawn mowing. Part of home ownership is having a do-it-yourself attitude.
When journalist present flawed data, their whole story line is questionable. And today journalism has extremely low credibility with any story that deals with data (especially science).
Thursday, May 24, 2007
America's Chicken Little Media
Many grew up hearing the story of Chicken Little proclaiming "the sky is falling". A column by noted historian Victor Davis Hansen asks "Is the sky falling on America?" All of my life the mantra of the media has been "if it bleeds, it leads", so it is no surprise that the media is promoting the end of mankind due to global warming, disaster in Iraq, China's economy dooming ours, cultural deprivation ruining our youth, we will all die of bird flu, etc., etc. As they said in a classic Seinfeld episode...yada, yada, yada. I often wonder why the American public just doesn't commit mass suicide...life is bad and going to get worse (:
I shut down the nightly news broadcasts 20 years ago and rarely look at a newspaper except for the sports section. I lived through the eighties when Japan was going to dominate the world and buy the country up. China is a much weaker country than Japan in my opinion and I don't foresee them surpassing us (except as the worlds leading polluter). I still believe that our economy is going to continue to lead the world for many decades to come due to our underlying entrepreneurial culture. The students in China may study harder but they can't seem to think outside the box like Americans and after graduating from school Americans work harder and longer (my wife is shocked by how hard I work compared to her experiences in China and I think I am a slacker). We are living in the Greatest Economy Ever and though we may have ups and downs, I expect this will continue.
As far as I can see, our environment is cleaner now than it ever has been in my lifetime and getting better, our cars are safer, houses bigger and filled with nicer products. We can watch 100's of TV channels, blog on computers more powerful than the one that went to the moon, we live longer and healthier lives (my parents were never in shape to go mountain biking at my age). We travel freely and even though the price of gas is high, we drive Hummers and won't be scaling back our travel this Memorial Day weekend.
No - the sky is not falling, just getting bluer
I shut down the nightly news broadcasts 20 years ago and rarely look at a newspaper except for the sports section. I lived through the eighties when Japan was going to dominate the world and buy the country up. China is a much weaker country than Japan in my opinion and I don't foresee them surpassing us (except as the worlds leading polluter). I still believe that our economy is going to continue to lead the world for many decades to come due to our underlying entrepreneurial culture. The students in China may study harder but they can't seem to think outside the box like Americans and after graduating from school Americans work harder and longer (my wife is shocked by how hard I work compared to her experiences in China and I think I am a slacker). We are living in the Greatest Economy Ever and though we may have ups and downs, I expect this will continue.
As far as I can see, our environment is cleaner now than it ever has been in my lifetime and getting better, our cars are safer, houses bigger and filled with nicer products. We can watch 100's of TV channels, blog on computers more powerful than the one that went to the moon, we live longer and healthier lives (my parents were never in shape to go mountain biking at my age). We travel freely and even though the price of gas is high, we drive Hummers and won't be scaling back our travel this Memorial Day weekend.
No - the sky is not falling, just getting bluer
Wednesday, May 23, 2007
I want it now or delayed gratification - which will result in success?
Yesterday I criticized the conclusions of a Financial Planner who blamed a couples' investment in real estate as the cause of their retirement problems. My main point was that this couple had given themselves perks that they had not yet earned.
Today we live in an "I want it now" generation. Young people buy houses that are larger than their parents homes while still in their twenties. Most people will buy what they want on credit long before they can pay for it. The abundance of blogs on solving debt is an indicator of how well entrenched this mindset is. The current crisis in the sub prime loan market is also an indicator. People blame the banks, but in reality, it is the borrowers who are trying to finance properties that they cannot afford that are at the root of the problem.
Many studies have shown that the ability to delay rewarding ourselves until we have earned something is a key predictor of success. I have had this quality to a large degree since I was quite young. I am addicted to chocolate, but can keep a stock for weeks by doling out small amounts every day. I remember my first exposure to people without self control in college. This group of women would bake some sweets and binge on them, stuffing themselves until every crumb was gone and they were sick. If I were addicted to gambling or alcohol, I am sure I would drink half a beer a day or gamble away a dollar a day.
I'm not sure if delayed gratification is an inherent quality that some people have or something that can be learned. I remember when I had an Amway business that the successful people preached to their audience about the requirement for long term financial success had to do with delaying rewards until you had the money. None of my kids seems to have this trait despite my talking about it. Of course, none have my genes and their biological parents certainly did not have that trait.
I've often thought that people with weight problems also lack the ability to delay gratification - rewarding themselves with food without putting in the necessary exercise. The solution to many people is to blame the restaurants for their health problems or financial problems. Few seem to want to exercise the self-control needed to control their lives.
The title of this post is a rhetorical question obviously. But how do those who won't or can't engage in delayed gratification create success? I am of the opinion that this is a learned trait, but it is becoming a minority opinion where once it was a majority opinion.
Can you change?
Today we live in an "I want it now" generation. Young people buy houses that are larger than their parents homes while still in their twenties. Most people will buy what they want on credit long before they can pay for it. The abundance of blogs on solving debt is an indicator of how well entrenched this mindset is. The current crisis in the sub prime loan market is also an indicator. People blame the banks, but in reality, it is the borrowers who are trying to finance properties that they cannot afford that are at the root of the problem.
Many studies have shown that the ability to delay rewarding ourselves until we have earned something is a key predictor of success. I have had this quality to a large degree since I was quite young. I am addicted to chocolate, but can keep a stock for weeks by doling out small amounts every day. I remember my first exposure to people without self control in college. This group of women would bake some sweets and binge on them, stuffing themselves until every crumb was gone and they were sick. If I were addicted to gambling or alcohol, I am sure I would drink half a beer a day or gamble away a dollar a day.
I'm not sure if delayed gratification is an inherent quality that some people have or something that can be learned. I remember when I had an Amway business that the successful people preached to their audience about the requirement for long term financial success had to do with delaying rewards until you had the money. None of my kids seems to have this trait despite my talking about it. Of course, none have my genes and their biological parents certainly did not have that trait.
I've often thought that people with weight problems also lack the ability to delay gratification - rewarding themselves with food without putting in the necessary exercise. The solution to many people is to blame the restaurants for their health problems or financial problems. Few seem to want to exercise the self-control needed to control their lives.
The title of this post is a rhetorical question obviously. But how do those who won't or can't engage in delayed gratification create success? I am of the opinion that this is a learned trait, but it is becoming a minority opinion where once it was a majority opinion.
Can you change?
Tuesday, May 22, 2007
Is using real estate investments for retirement dumb?
Here's an article from CNNMoney about a couple that invested in real estate for their retirement income. Although I am not doing real estate investment full time, their path is similar to mine in terms of retirement planning. The financial planner is critical of their decision to depend so heavily on real estate for retirement. However, after looking at their income and assets statements I have a different take.
This couple has nearly $1.6MM invested in their home and a beach house. These are not investments, but perks they have given themselves before they had adequate finances to support such perks. This is their major problem , not their rehabs. They could sell the beach house but are letting emotional ties control their finances. Their home is probably too big an asset to own in proportion to their total retirement savings and 401k. This is another emotional issue.
So it seems to me that the main issue with this couples plan is that they are making emotional based decisions, not business decisions with regard to retirement. Now if they want to return to work to keep the beach house that is OK, but it is not rational for the Financial Planner to blame real estate investing Vs Stock market investing as the cause of their problems.
Unless you are planning on flipping your home or beach house, they are not really real estate investments. Many people fall into this trap with regards to how they regard their investments. If you are not willing to sell your real estate, its not an investment. Don't feel sorry for this couple. They are trying to live the high life without paying the price and got caught. Read Stanleys book on The Millionaire Next Door to see how the pseudo-rich spend their money Vs how the really rich build net worth.
This couple has nearly $1.6MM invested in their home and a beach house. These are not investments, but perks they have given themselves before they had adequate finances to support such perks. This is their major problem , not their rehabs. They could sell the beach house but are letting emotional ties control their finances. Their home is probably too big an asset to own in proportion to their total retirement savings and 401k. This is another emotional issue.
So it seems to me that the main issue with this couples plan is that they are making emotional based decisions, not business decisions with regard to retirement. Now if they want to return to work to keep the beach house that is OK, but it is not rational for the Financial Planner to blame real estate investing Vs Stock market investing as the cause of their problems.
Unless you are planning on flipping your home or beach house, they are not really real estate investments. Many people fall into this trap with regards to how they regard their investments. If you are not willing to sell your real estate, its not an investment. Don't feel sorry for this couple. They are trying to live the high life without paying the price and got caught. Read Stanleys book on The Millionaire Next Door to see how the pseudo-rich spend their money Vs how the really rich build net worth.
Monday, May 21, 2007
Do forgiven loans create a tax liability?
This weekend I read an article in the Buffalo News Real Estate Section (can't find link) which indicated that if your lender forgave part of your debt on your home that you would face a big "capital gains" tax from the IRS. The lender is required to send the IRS a list of forgiven loans and the IRS sends the taxpayers a bill according to this article.
My first thought was "holy $%^# I've screwed a couple of people here" (one bank sold me a property for $5k on a $71K loan). But my second thought was "what about the exclusion for homeowners?" There was no mention of that in this article.
So I did some research and it seems that my second thought was right. The homeowners exclusion gain will keep the IRS wolves outside. However, if you sell an income property using a short sale, you will probably owe lots of taxes even though you sold at a loss.
So, if you are concerned about tax consequences of selling your home - don't be.
My first thought was "holy $%^# I've screwed a couple of people here" (one bank sold me a property for $5k on a $71K loan). But my second thought was "what about the exclusion for homeowners?" There was no mention of that in this article.
So I did some research and it seems that my second thought was right. The homeowners exclusion gain will keep the IRS wolves outside. However, if you sell an income property using a short sale, you will probably owe lots of taxes even though you sold at a loss.
So, if you are concerned about tax consequences of selling your home - don't be.
Thursday, May 17, 2007
Is there a religion gene?
In ancient times people worshipped idols made of gold, the sun, moon and anything else they did not understand. Judaism, Christianity and Islam replaced much of that idol worship. Today's educated elite show disdain for these religions but have they really risen above this ancient tenet of human nature? I think not.
Today's environmentalist worship Gaia - Mother Earth - just as fanatically as any member of the worlds largest religions. Consider this blurb:
This is pure religious symbolism.
I've written several times about how global warming apologists are obsessed with the Apocalypse of environmental doom. Now they are obsessed with getting indulgences for their sins in the form of carbon credits. Are these really any different than what the rich paid the Church in the Middle Ages for their sins?
Then there is the question of morality. For the New Agers - sex, homosexuality, and abortion are no longer sins but personal choices. So we hear that morality has become relative. Not so. There is a new morality - smoking, driving SUV's, guns, fur, judgementalism are the new sins. Thought crime laws and hate crime laws are more intrusive than prohibition in our personal lives.
No, religion is not disappearing as we become more educated. It is just worshipping a different god.
Today's environmentalist worship Gaia - Mother Earth - just as fanatically as any member of the worlds largest religions. Consider this blurb:
"Environmental activists are building a replica of Noah's Ark on Mount Ararat--where the biblical vessel is said to have landed after the great flood--in an appeal for action on global warming, Greenpeace said Wednesday," the Associated Press reports from Istanbul:Turkish and German volunteer carpenters are making the wooden ship on the mountain in eastern Turkey, bordering Iran. The ark will be revealed in a ceremony on May 31, a day after Greenpeace activists climb the mountain and call on world leaders to take action to tackle climate change, Greenpeace said.
This is pure religious symbolism.
I've written several times about how global warming apologists are obsessed with the Apocalypse of environmental doom. Now they are obsessed with getting indulgences for their sins in the form of carbon credits. Are these really any different than what the rich paid the Church in the Middle Ages for their sins?
Then there is the question of morality. For the New Agers - sex, homosexuality, and abortion are no longer sins but personal choices. So we hear that morality has become relative. Not so. There is a new morality - smoking, driving SUV's, guns, fur, judgementalism are the new sins. Thought crime laws and hate crime laws are more intrusive than prohibition in our personal lives.
No, religion is not disappearing as we become more educated. It is just worshipping a different god.
Wednesday, May 16, 2007
No such thing as obscene profits
I've often received nasty comments from people critical of my posts on oil companies. As I mentioned in my post on random thoughts, people will scream about the profits of big companies but don't say much about the wealth of the Kennedy's, movie stars or athletes. Today I read a great article called No Such Thing as Obscene Profits.
As far as I am concerned profits are what motivates me to work long hours after my regular job. Will my profits be big? I sure hope so, but I have taken lots of personal and financial risk to achieve any profits and I risk all of that if I lose money. Big companies do the same thing. It can cost a billion dollars to build an oil refinery. Drilling for oil is not a sure thing. There is lots of risk involved, so companies deserve to be rewarded when they take a chance and win.
Big loses also happen to companies. There was an article in the WSJ today that talked about all the layoffs and salary cuts that employees have had to take due to excessive losses by the industry. Daimler had to pay to have someone take over Chrysler this week. In a capitalist society there is no guarantee that you will make a profit. Those who scream about obscene profits are, in my opinion, either naive Marxists or too damn lazy to work. Jealousy is one of the seven deadly sins and the critics have it in spades.
As far as I am concerned profits are what motivates me to work long hours after my regular job. Will my profits be big? I sure hope so, but I have taken lots of personal and financial risk to achieve any profits and I risk all of that if I lose money. Big companies do the same thing. It can cost a billion dollars to build an oil refinery. Drilling for oil is not a sure thing. There is lots of risk involved, so companies deserve to be rewarded when they take a chance and win.
Big loses also happen to companies. There was an article in the WSJ today that talked about all the layoffs and salary cuts that employees have had to take due to excessive losses by the industry. Daimler had to pay to have someone take over Chrysler this week. In a capitalist society there is no guarantee that you will make a profit. Those who scream about obscene profits are, in my opinion, either naive Marxists or too damn lazy to work. Jealousy is one of the seven deadly sins and the critics have it in spades.
Rent Vs Buy - My thoughts
I finally read a balanced report on the Rent Vs Buy decision at PFBlogs. It's certainly true that if you are young and single it might be smart to keep renting if you sock away the difference in an investment account. However, at some point most people marry and have children. I think that most people with children would deem it nearly a necessity to live in a home rather than live in an apartment. Besides the fact that people with children are sometimes discriminated against, the fact is that kids need space that an apartment won't provide. So if you are faced with renting a house once you have children, the buying decision should come as a no brainer.
The other part of the equation is buying retail Vs buying wholesale. If you are serious about being an investor, then your first big investment should be a home that you buy at wholesale prices. Most people hope to make money by buying a house and hoping it appreciates. Why not shop around for a desperate seller that will sell at a discount. This takes more time and patience and sometimes will take work if the house needs a lot of repairs. But this is ideal for a young single person or couple who spend their time on leisure activities. I've bought several homes now well below market value. Since there is little appreciation of houses here in Buffalo, its not been about buying at the right time.
So should you buy or rent? In my opinion, unless you are opposed to working for your money, buying is always the smart decision.
The other part of the equation is buying retail Vs buying wholesale. If you are serious about being an investor, then your first big investment should be a home that you buy at wholesale prices. Most people hope to make money by buying a house and hoping it appreciates. Why not shop around for a desperate seller that will sell at a discount. This takes more time and patience and sometimes will take work if the house needs a lot of repairs. But this is ideal for a young single person or couple who spend their time on leisure activities. I've bought several homes now well below market value. Since there is little appreciation of houses here in Buffalo, its not been about buying at the right time.
So should you buy or rent? In my opinion, unless you are opposed to working for your money, buying is always the smart decision.
Tuesday, May 15, 2007
Random Thoughts
- environmentalists are part of the group of people that want us out of Iraq, yet they are most opposed to energy solutions that would reduce the need for us to be in the Middle East like nuclear plants and drilling in ANWR
- the biggest anti-global warming leaders are the most likely to use the most energy in their mansions and flying around the world in private jets
- The National Organization of Women(NOW) screams about the slightest offense from men here but says nary a word about the way Muslims treat their women (stoning them to death, genital mutilation, etc.). Political correctness trumps real suffering.
- Speaking of political correctness - it seems that it will be the downfall of Western civilization. We allow people to incite hate in the name of freedom of religion and are soon going to be too afraid to speak up about anything
- Lawyers are the root cause of a lot of this fear. There's no defense against a lawsuit except to spend a lot of money no matter how innocent you are.
- People that think that global warming is the greatest threat to mankind are in the "denial" stage of life. There is nothing that could undermine our society more than having a nuclear device in the hands of suicidal terrorists
- those who are always attacking the salaries of corporate CEO's say nary a word about the exorbitant incomes of athletes or movie stars. Who really adds more value to the country? How many protest the inherited income of Ted Kennedy?
- young people who are idealistic are often Marxists in philosophy usually grow up and become successful capitalists, except for the 60's generation, which became rich Marxists bent on keeping the power & wealth to themselves
- people that think we can deal with evil regimes by being nice and having talks are more naive than 2 year olds
- people that think abortion is legal should look into the eyes of my 3 adopted children and tell them to their face. One was conceived as a result of a rape - did she deserve to die? I thank God for the young girls that chose life
Monday, May 14, 2007
Short sale updates
I haven't had much success negotiating short sales since I bought 2 houses in February. It's not been for lack of trying. I have about 6 short sale packages in the works at any given time. However, they have not been the ideal situation for a short sale. A short sale works best when you have 2 loans on a property and the senior loan is in foreclosure. The junior loan is generally willing to take a large discount rather than bid at the auction.
I was close to a deal on one short sale - about $2k difference when a sleazy appraiser/ realtor talked the woman into putting her house back on the market. He had appraised it for the bank at $70K and its now listed at $84k. The house had been on the market for 6 months previously with nary an offer. The house has no chance of selling before the auction and the woman will have a foreclosure on her record. As I referenced in a previous post the NY Home Equity Theft Act makes selling this type of property difficult plus the price is way too high for the location. The bank maybe thinks that I was trying to steal the property but the loser will be the homeowner here. The banks operate in remote areas of the country and have no clue as to the actual market and so give lots of credence to local appraisers. I have lost a lot of respect for appraisers during my time doing this business. They seem to suit the needs of their client rather than any reality based estimates.
I also got a call today from Litton loan on a SS offer. This company has to be the most disorganized loss mitigation company out there. I had faxed the offer 4 times over a 6 week period before they actually got the information to the right person. They gave me 3 different fax numbers and an equal number of account managers before it got to the right person. When I get back from my business trip I will have to see if they are flexible. This is a single loan so chances are not great.
I also found a great house in my town that my wife wants to move into. This will solve my problem of buying a house that I talked about since I feel I can get it far below market value and we can buy subject to the existing financing of the first loan. This one has the dual loan scenario. It's the first time I have gotten a response from someone in my town but I didn't get it from my mailings. I went to the house and put a post-it note on the door telling the owner I was interested in buying his house. This worked great and I may try it more often. I won't need to get much of a discount to make this work since it is in one of the best neighborhoods in town and the price per sq ft will be under $90 when other homes are selling at $120.
I was close to a deal on one short sale - about $2k difference when a sleazy appraiser/ realtor talked the woman into putting her house back on the market. He had appraised it for the bank at $70K and its now listed at $84k. The house had been on the market for 6 months previously with nary an offer. The house has no chance of selling before the auction and the woman will have a foreclosure on her record. As I referenced in a previous post the NY Home Equity Theft Act makes selling this type of property difficult plus the price is way too high for the location. The bank maybe thinks that I was trying to steal the property but the loser will be the homeowner here. The banks operate in remote areas of the country and have no clue as to the actual market and so give lots of credence to local appraisers. I have lost a lot of respect for appraisers during my time doing this business. They seem to suit the needs of their client rather than any reality based estimates.
I also got a call today from Litton loan on a SS offer. This company has to be the most disorganized loss mitigation company out there. I had faxed the offer 4 times over a 6 week period before they actually got the information to the right person. They gave me 3 different fax numbers and an equal number of account managers before it got to the right person. When I get back from my business trip I will have to see if they are flexible. This is a single loan so chances are not great.
I also found a great house in my town that my wife wants to move into. This will solve my problem of buying a house that I talked about since I feel I can get it far below market value and we can buy subject to the existing financing of the first loan. This one has the dual loan scenario. It's the first time I have gotten a response from someone in my town but I didn't get it from my mailings. I went to the house and put a post-it note on the door telling the owner I was interested in buying his house. This worked great and I may try it more often. I won't need to get much of a discount to make this work since it is in one of the best neighborhoods in town and the price per sq ft will be under $90 when other homes are selling at $120.
Saturday, May 12, 2007
House Rehab Completed!
Finally, after 85 days of non-stop work we have finished the rehab of our Cheektowaga house! It's the largest rehab I have ever done. Open house is advertised for next Sunday. There's still some cleaning to do inside which my dear wife will have to handle since I will be traveling on business all week. You can read details at www.JinnaProperties.com of all the features.
The house came out really nice and we are hoping to sell it for over $200K. We are going to start at $225K which is only $80/sq ft. Hope to get some feedback at the open house and then will take a stab at listing it at a flat fee listing service if the FSBO doesn't work quickly.
Friday, May 11, 2007
NY Home Equity Theft Law Hurting Sellers
I had written earlier about the NY Home Equity Theft Act and its possible effect on my business. The main problem seems to be hesitation of Title Insurance companies to write policies. The main intent of the law was to protect the homeowners from having their equity "stolen" by unscrupulous investors. However, after dealing with this for nearly 4 months the law of unintended consequences is hard at work.
What I have found is that Realtors are not generally aware of this law and properties for sale where the homeowner is going through foreclosure are difficult to sell. There are specific requirements for contracts that the NY Realtors contract does not have incorporated yet. Things like font size, Notices about the law and Right to Cancel are missing. Consequently, any buyer purchasing a property in foreclosure is setting themselves up for $25K fines and potential for jail time. So who is going to buy such a property? Only a sophisticated buyer with a good lawyer.
In the end this law has stopped the homeowners ability to sell once they receive the lis pendens notice and given investors the upper hand. It hurts those it intended to help. Our politicians seem to have an uncanny ability to do more harm than good.
What I have found is that Realtors are not generally aware of this law and properties for sale where the homeowner is going through foreclosure are difficult to sell. There are specific requirements for contracts that the NY Realtors contract does not have incorporated yet. Things like font size, Notices about the law and Right to Cancel are missing. Consequently, any buyer purchasing a property in foreclosure is setting themselves up for $25K fines and potential for jail time. So who is going to buy such a property? Only a sophisticated buyer with a good lawyer.
In the end this law has stopped the homeowners ability to sell once they receive the lis pendens notice and given investors the upper hand. It hurts those it intended to help. Our politicians seem to have an uncanny ability to do more harm than good.
Wednesday, May 9, 2007
Humans - A virus?
One of the things that I have always strongly believed is that the creative minds of human beings can solve just about any problem that we find. From what I've read in the Bible mankind was instructed to "go forth and multiply". Today's environmentalists believe the exact opposite.
We are increasingly seeing stories like this one discussing how having children is contributing to global warming and intimating that we should limit the number of children that we produce. Then there are the increasingly common views of people like Paul Watson,:
This is a continuation of the Paul Ehrlich Population Bomb nonsense. The population since Ehrlich wrote his book has tripled yet there has been no widespread famines. In fact, the standard of living of the world has increased, especially the third world. Anybody that has travelled to China can verify this with their own eyes. My wife stood in line as a little girl waiting for her weekly ration of meat but left China as an upper middle class citizen.
So ,despite the constant apocryphal predictions of the environmentalists, the planet has gotten cleaner (our air and water quality are all greatly improved since the sixties), richer and safer as the population has increased.
No, humans are not a virus that has to be wiped out, but the hope for the future. It used to be the religious fanatics that stood on the street corner with "The End is Near" signs, now it is the environmentalists - the new religious nuts.
We are increasingly seeing stories like this one discussing how having children is contributing to global warming and intimating that we should limit the number of children that we produce. Then there are the increasingly common views of people like Paul Watson,:
"Humans are presently acting upon this body [the "biosphere"] in the same manner as an invasive virus with the result that we are eroding the ecological
immune system.A virus kills its host and that is exactly what we are doing with our planet's life support system. We are killing our host the planet Earth.
I was once severely criticized for describing human beings as being the "AIDS of the Earth." I make no apologies for that statement. Our viral like behaviour can be terminal both to the present biosphere and ourselves. We are both the pathogen and the vector. . . .
Curing a body of cancer requires radical and invasive therapy, and therefore, curing the biosphere of the human virus will also require a radical and invasive approach."
This is a continuation of the Paul Ehrlich Population Bomb nonsense. The population since Ehrlich wrote his book has tripled yet there has been no widespread famines. In fact, the standard of living of the world has increased, especially the third world. Anybody that has travelled to China can verify this with their own eyes. My wife stood in line as a little girl waiting for her weekly ration of meat but left China as an upper middle class citizen.
So ,despite the constant apocryphal predictions of the environmentalists, the planet has gotten cleaner (our air and water quality are all greatly improved since the sixties), richer and safer as the population has increased.
No, humans are not a virus that has to be wiped out, but the hope for the future. It used to be the religious fanatics that stood on the street corner with "The End is Near" signs, now it is the environmentalists - the new religious nuts.
Tuesday, May 8, 2007
How to set a price on your house
We are a couple of weeks away from putting our second house on the market. The first is a wholesale flip while the second was a major rehab which we put $19k into. My wife and I are in opposite corners on how to price a house. She follows the market very closely and observes that people routinely drop their prices after a few months on the market. Somehow she is certain that no one is getting the initial list price. So she thinks that it is important to set the initial price high so that there is room to drop the price later. This is obviously the way to get the maximum price for the house, since you won't leave any money on the table by setting an initial price that is too low.
I would like to set the initial price at a level that is slightly below what I think market value is in order to move the house quickly. After 3 months on the market we have not sold our "wholesale flip" because I believe it is priced too high to be a wholesale flip. Since we bought it for $5k cash the holding costs are not an issue so I am not willing to argue the point on that house. On the other hand there are lots of holding costs associated with our Cheektowaga house - $1780/month in payments. Six months on the market can eat away profits pretty quickly if we price it wrong. That's OK if you are living in the house and need to make a mortgage payment anyway but difficult for a vacant house.
So what's the best way to set the price? If there is lots of market data it is pretty straightforward, but getting comparables is more difficult than you might think. Only 2 houses have sold in the Cheektowaga house neighborhood during the past 2 years that are similar in size to ours. If you choose wrong the bargain hunters will be out after 6 months trying to low ball you, after you've already dropped the price. We initially set the price of our wholesale Buffalo house at $25k and dropped it to $22.9k. We've had a verbal offer of $17k which we agreed to, but have not gotten a written contract yet. We may end up going lower before we sell.
The Cheektowaga house would sell for $115/ sq ft in the town I live in but probably less than $80/ sq ft where it is located. The 2 comparables I have are less than $65/ sq ft but some smaller houses have sold for $75/sq ft. The most difficult cost for home buyers to swallow will be the $8k per year property taxes. We need to get $73/ sq ft to make our $20K profit goal.
Before we list the house we are planning an open house "for sale by owner". I hope to get feedback on the price from that to help us price the house when we list on the MLS.
I would like to set the initial price at a level that is slightly below what I think market value is in order to move the house quickly. After 3 months on the market we have not sold our "wholesale flip" because I believe it is priced too high to be a wholesale flip. Since we bought it for $5k cash the holding costs are not an issue so I am not willing to argue the point on that house. On the other hand there are lots of holding costs associated with our Cheektowaga house - $1780/month in payments. Six months on the market can eat away profits pretty quickly if we price it wrong. That's OK if you are living in the house and need to make a mortgage payment anyway but difficult for a vacant house.
So what's the best way to set the price? If there is lots of market data it is pretty straightforward, but getting comparables is more difficult than you might think. Only 2 houses have sold in the Cheektowaga house neighborhood during the past 2 years that are similar in size to ours. If you choose wrong the bargain hunters will be out after 6 months trying to low ball you, after you've already dropped the price. We initially set the price of our wholesale Buffalo house at $25k and dropped it to $22.9k. We've had a verbal offer of $17k which we agreed to, but have not gotten a written contract yet. We may end up going lower before we sell.
The Cheektowaga house would sell for $115/ sq ft in the town I live in but probably less than $80/ sq ft where it is located. The 2 comparables I have are less than $65/ sq ft but some smaller houses have sold for $75/sq ft. The most difficult cost for home buyers to swallow will be the $8k per year property taxes. We need to get $73/ sq ft to make our $20K profit goal.
Before we list the house we are planning an open house "for sale by owner". I hope to get feedback on the price from that to help us price the house when we list on the MLS.
The IPCC - another useless UN group
Here's a lengthy article from the German Speigel which discusses the influence of politics on the IPCC report as well as bias of the IPCC itself. The IPCC is supposed to be composed of unbiased scientists but it appears that politicians have a large say in the final report. The head of the IPCC is not above emotionalizing the issue of global warming to suit his own biases.
Here's a lengthy article debunking the famous Mann Hockey Stick data which was first used by the IPCC and set off much of this hysteria. Just like the fraudulent data about the harm caused by power lines and Alar, these "scientists" give us a bad name.
Here's a lengthy article debunking the famous Mann Hockey Stick data which was first used by the IPCC and set off much of this hysteria. Just like the fraudulent data about the harm caused by power lines and Alar, these "scientists" give us a bad name.
The "Roaring Twenties" are back!
As most people who read financial news know the stock market is on the longest bull run in 80 years. Analysts are trying who to give the credit to - was it the Bush Tax Cuts or the Fed or the election of Democrats to Congress?
I think all of these ideas are incorrect because they lack long term perspective. As I wrote in the Greatest Economy Ever, and here the real reason for our current economy have to do with macro trends. The stock market boom in the 1920's was due to fundamental changes in our economy caused by the Industrial Revolution. Great companies like Ford, GM and DuPont were creating wealth by developing new technologies that increased productivity. Likewise, today technology is driving improvements in productivity that are increasing our prosperity.
The triumph of capitalism is the greatest unreported story of the last 100 years and it amazes me how the socialists still want to cling to the dream of Marx.
I think all of these ideas are incorrect because they lack long term perspective. As I wrote in the Greatest Economy Ever, and here the real reason for our current economy have to do with macro trends. The stock market boom in the 1920's was due to fundamental changes in our economy caused by the Industrial Revolution. Great companies like Ford, GM and DuPont were creating wealth by developing new technologies that increased productivity. Likewise, today technology is driving improvements in productivity that are increasing our prosperity.
The triumph of capitalism is the greatest unreported story of the last 100 years and it amazes me how the socialists still want to cling to the dream of Marx.
Getting Multiple Quotes
I mentioned yesterday that I had been trying to get a new boiler installed to replace the 60 year old one in my Cheektowaga rehab. All the quotes had been around $4k which I could not understand since I had gotten a quote for $1150 for the boiler itself.
Pete Youngs had recommended that you get 3 quotes and then take the lowest quote and get more quotes using the lowest as the starting point. I usually give up after getting only one or two quotes but finally decided to keep trying since I could not fathom why it cost so much to get a boiler installed.
I finally found a contractor that was willing to go through step by step all the work that needed to be done with me and his quote ended up $1500 cheaper than any other. Between getting contractor discounts and using multiple quotes Pete has probably saved me $7k on this job alone. I guess his course was worth the price!
Pete Youngs had recommended that you get 3 quotes and then take the lowest quote and get more quotes using the lowest as the starting point. I usually give up after getting only one or two quotes but finally decided to keep trying since I could not fathom why it cost so much to get a boiler installed.
I finally found a contractor that was willing to go through step by step all the work that needed to be done with me and his quote ended up $1500 cheaper than any other. Between getting contractor discounts and using multiple quotes Pete has probably saved me $7k on this job alone. I guess his course was worth the price!
Monday, May 7, 2007
Will We Destroy the Earth with our SUV's?
Here's an amusing website discussing ways to destroy the Earth and humanity. I feel environmentalists are somewhat arrogant that the presume that mankind can somehow destroy life and or the earth by our feeble actions. Compared to the awesome power of creation we are but ants. As I stated before the environmentalists and especially the global warming fanatics border on a religious cult prophesying the Apocalypse.
"Destroying the Earth is harder than you may have been led to
believe.
You've seen the action movies where the bad guy threatens to destroy the Earth. You've heard people on the news claiming that the next nuclear war or cutting down rain forests or persisting in releasing hideous quantities of pollution into the atmosphere threatens to end the world.
Fools.The Earth is built to last. It is a 4,550,000,000-year-old, 5,973,600,000,000,000,000,000-tonne ball of iron. It has taken more devastating asteroid hits in its lifetime than you've had hot dinners, and lo, it still
orbits merrily. So my first piece of advice to you, dear would-be Earth-destroyer, is: do NOT think this will be easy."
House nearly done
Well, after a weeks "vacation" of working 14-16 hours a day to finish rehabbing our Cheektowaga house, I'm back at work. I don't think I've ever worked so hard before. Work will be like a vacation now.
The house is about 98% complete and looks really great. We had 3 couples knock on our door over the weekend wanting to see the house and a "We Buy Houses" sign in front has attracted callers as well. I worried whether we could recover our investment because there were few comparable's and it was difficult to imagine getting good price. But now that people are seeing the house I feel quite confident that we can make at least $20k in profit.
Last week I refinished wood floors for the first time and also installed ceramic tiles first time as well. Both jobs came out looking great. I could not figure out how to cut a square notch in a tile without shattering it with the tile nippers, so we ended up making straight cuts and piecing tiles together around the outlets. With the grout in place it looks OK.
I'm still waiting to get a new hot water boiler installed. I'm not sure what costs so much to put one in. The boiler itself only costs $1100 but the quotes I've gotten have been around $4k. I've installed forced air furnaces and there's not much to that job, but I haven't tackled a boiler. Maybe it's about time. I think the problem here is the stranglehold the plumbers union has here in NY. I think I am correct that PVC is still not approved for water lines here.
Our goal is to have the house on the market within 2 weeks. Hope it sells quickly.
The house is about 98% complete and looks really great. We had 3 couples knock on our door over the weekend wanting to see the house and a "We Buy Houses" sign in front has attracted callers as well. I worried whether we could recover our investment because there were few comparable's and it was difficult to imagine getting good price. But now that people are seeing the house I feel quite confident that we can make at least $20k in profit.
Last week I refinished wood floors for the first time and also installed ceramic tiles first time as well. Both jobs came out looking great. I could not figure out how to cut a square notch in a tile without shattering it with the tile nippers, so we ended up making straight cuts and piecing tiles together around the outlets. With the grout in place it looks OK.
I'm still waiting to get a new hot water boiler installed. I'm not sure what costs so much to put one in. The boiler itself only costs $1100 but the quotes I've gotten have been around $4k. I've installed forced air furnaces and there's not much to that job, but I haven't tackled a boiler. Maybe it's about time. I think the problem here is the stranglehold the plumbers union has here in NY. I think I am correct that PVC is still not approved for water lines here.
Our goal is to have the house on the market within 2 weeks. Hope it sells quickly.
Tuesday, May 1, 2007
Wood Floor Refinishing
I haven't posted much since I took a vacation week and have been working 16+ hours per day trying to finish up the rehab of my Cheektowaga house. This week I have been tackling wood floor refinishing for the first time - another part of becoming a handyman.
I rented an orbital sander from Home Depot to do the job. Traditionalists use a drum sander but the HD guy talked me into the orbit and it worked really well. It has 4 - 6" rotating disks which use hook and loop paper. One of the surprising parts of refinishing the floor is that the most expensive part was the cost of the sandpaper. I had a desire to be skimpy with the paper and this cost me about 4 hours of wasted time. The HD guy had urged me to buy more 24 grit paper but I thought I knew better and didn't take his advice. As a result I ended up wasting 2 hours sanding and then had to go back to HD for some 24 grit and 36 grit to finish the job. I had lots of extra 80 and 120 grit to return.
I had a total of 4 rooms to sand 3 bedrooms which had varnish and the family room which had polyurethane and stain on it. The 3 BR's went fast and I thought I was going to write a post about how easy this job went, but alas, the stained family room took 6 hours to finish. I didn't have the correct grit paper as I noted above and the stain took a while to remove. I ended up doing a lot of hand sanding with a small orbital sander to remove dark spots.
The HD guy had recommended that I remove all the quarter-round molding since he thought the sander would get right to the edge and I wouldn't need to edge sand. However, we had painted it and I didn't want to redo it. I suppose a purist would remove the quarter-round and paint it off-line. In this case I'm glad I did not follow the advice of the HD guy. The sander did not get closer than 2" to the edge and I had to edge sand all the rooms anyway. But this wasn't difficult.
I was prepared for lots of dust, but the vacuum on the sander worked really well, as long as I emptied the bag after every 3 sanding pad changes. However, we ended up filling the house with sawdust after running the shop vac without the filter properly installed. So much for keeping dust down :(
All in all the floors came out really nice and the cost for the job was less than $350 for about 1000 sq ft of flooring. I didn't price this job professionally but have heard it cost upwards of $1.50 per sq ft so I think I saved a lot of money.
The vinyl floor installer also was here yesterday and installed a "floating" vinyl floor. The installer had recommended that type of floor as lower overall cost (higher material cost but lower installation). It seems to work really well in large rooms like the kitchen but for a small bathroom it doesn't sit well and seems like it is not installed at all (the floor is like hardwood laminate and no glue is used).
The house looks transformed in two days after looking like trash for 2 months. Still lots of punch list items to do but at least I feel like we are making good progress.
I rented an orbital sander from Home Depot to do the job. Traditionalists use a drum sander but the HD guy talked me into the orbit and it worked really well. It has 4 - 6" rotating disks which use hook and loop paper. One of the surprising parts of refinishing the floor is that the most expensive part was the cost of the sandpaper. I had a desire to be skimpy with the paper and this cost me about 4 hours of wasted time. The HD guy had urged me to buy more 24 grit paper but I thought I knew better and didn't take his advice. As a result I ended up wasting 2 hours sanding and then had to go back to HD for some 24 grit and 36 grit to finish the job. I had lots of extra 80 and 120 grit to return.
I had a total of 4 rooms to sand 3 bedrooms which had varnish and the family room which had polyurethane and stain on it. The 3 BR's went fast and I thought I was going to write a post about how easy this job went, but alas, the stained family room took 6 hours to finish. I didn't have the correct grit paper as I noted above and the stain took a while to remove. I ended up doing a lot of hand sanding with a small orbital sander to remove dark spots.
The HD guy had recommended that I remove all the quarter-round molding since he thought the sander would get right to the edge and I wouldn't need to edge sand. However, we had painted it and I didn't want to redo it. I suppose a purist would remove the quarter-round and paint it off-line. In this case I'm glad I did not follow the advice of the HD guy. The sander did not get closer than 2" to the edge and I had to edge sand all the rooms anyway. But this wasn't difficult.
I was prepared for lots of dust, but the vacuum on the sander worked really well, as long as I emptied the bag after every 3 sanding pad changes. However, we ended up filling the house with sawdust after running the shop vac without the filter properly installed. So much for keeping dust down :(
All in all the floors came out really nice and the cost for the job was less than $350 for about 1000 sq ft of flooring. I didn't price this job professionally but have heard it cost upwards of $1.50 per sq ft so I think I saved a lot of money.
The vinyl floor installer also was here yesterday and installed a "floating" vinyl floor. The installer had recommended that type of floor as lower overall cost (higher material cost but lower installation). It seems to work really well in large rooms like the kitchen but for a small bathroom it doesn't sit well and seems like it is not installed at all (the floor is like hardwood laminate and no glue is used).
The house looks transformed in two days after looking like trash for 2 months. Still lots of punch list items to do but at least I feel like we are making good progress.
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