Flat Fee Vs Full Service Realty

I've got both of my houses listed for sale on the MLS through flat-fee listing services. The first (the fixer-upper) is listed through some outfit in NJ at a cost of $299. They do not do much, but their web site is easy to use and I can update information any time I please. I had about half a dozen calls from Realtors early on, but have not had a call on the place for over a month despite a price drop of $5k. I thought I had an offer through one agent from some women in NYC. But she proved to be a flake and never delivered the contract though we had agreed on a price.

I've listed my second property through a local flat-fee listing service which cost me $695. Their claim is that they are an upgrade to the cheaprer flat fee listers since an actual agent came to the house and took pictures. There's a lot of nice pictures on line and good write-up as well. They will advertise in the local paper as well, which @ $100 per week is a big expense. So far though I have not received a single call from a Realtor for that house.

My margins are pretty slim on the two houses and a 6% commission is going to take a big chunk of any profits I make. I've read some comments about Flat Fee Vs full service here and here. I'm really struggling with this. It would not surprise me if Realtors avoided these homes as people tend to want to punish what they see as competition. I'm sure Realtors deserve a good commission when they are working with clueless people, but I have bought and sold over 20 houses now and know more than many average Realtors. (I don't want to come off as cocky, but I am being forced to run a Short Sale offer through an experienced Realtor now and am finding that they are clueless in special circumstances like this.) So why should I pay $13,000 in commissions? A study in Madison seems to indicate FSBO sellers keep more profit but have longer holding times.

I think that by the end of the month I will switch to full service Realtors if I don't start seeing some action, but this sickens me to say the least.

Home Staging

Home staging seems to be the buzzword of the day for real estate. I heard 2 segments from local and national experts on talk radio this morning. One happens to be located only a couple of miles from me and attends my Church . TheHomeStylist.com is her website and she has a blog. She has co-authored a book - The Complete Idiots Guide to Staging Your Home. She also has a link to another home stager Terri Clark, who has written another book you can check at her website.

As you can see from the photos of our Cheektowaga home - its empty. Nice new paint, windows and flooring but nary a stitch of furniture. According to these staging experts an empty home is just as bad as a dirty, cluttered home. One of the first questions people ask when they have come to our open houses is "You've already moved out?", actually more of a statement hoping that we are desperate to sell. The Home Stagers state that a house sells in one-half the time if it is staged properly and for 6.9% higher price.

I contacted the woman with the business near me and she say that it is pretty pricey to rent furniture locally. She will consult with us for $100 and give some opinions about what to do. Considering how much we've already spent on the house, $100 is nothing, but if we need to spend $5000 to stage the home that is another storey.

Mid-year real estate slump

I haven't been too active the last couple of weeks in my real estate business, since work was completed on my Cheektowaga home. We have been holding open houses every Sunday and I did get the property listed on the MLS through a flat-fee listing service. I've had several calls from sellers wanting me to look at their properties but have not followed up.

So what is going on? Part of it may be burnout from working 7 days a week for 3 months rehabbing the Cheektowaga home. Part may be work related - I just was assigned a new Black Belt project in a process area I am unfamiliar with, that was supposed to take 40% of my time. Of course, the project is taking nearly double that amount of time and I am working at my job longer hours.

The other issue is cash flow. I am really hesitant to take on new properties at the moment because my cash could quickly be eaten up if the Cheektowaga house does not sell. It is costing me about $2k per month just in PITI to hold it and I do not have a lot of margin for price reduction. I was listening to the radio this morning and a staging expert stated that an empty house looked just as bad as a cluttered house, so I may have to spend money to put some furniture in the house.

Most of my calls from sellers right now are from less desireable Buffalo neighborhoods. Property in these areas has a 7 month average time on the market, so I rationalize that it is not worth my time to call these sellers back. I have a fixer upper for sale in Buffalo that is not getting any interest.

I had a home that was in a great suburb that looked like it would be worth buying even if the bank did not accept much of a short sale, but the seller has disappeared and I can't get the necessary paperwork signed to proceed.

One other property I worked on is about to go to auction next week. I nearly had a deal with the bank at ~ $50k when a real estate agent got the seller to put the house on the market for $84k. Of course, no one is interested in the property, and so the seller will get the judgement on their record. Ultimately, the bank will lose as well, so only the Realtor will benefit from this sale.

The last 2 Saturdays I have gone mountain biking and felt detached from real estate. I think that I need to come out of my mid-year slump and get to work again.

The Long Wait to Sell a Property

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.

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)

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.

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.

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).

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 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?

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.

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.

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:

"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.

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.

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.

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

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.

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.

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.

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,:

"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.

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.

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.

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.

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!

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.

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.

CO2 Levels rise after temperatures increase

One of the "lies" exposed in "An Inconvenient Truth" was that carbon dioxide levels throughout time have risen after temperatures start to rise. Another prominent meteorologist, Martin Herzberg, reveals the same data here. He also has the same scepticism as I do about computer models.

Meanwhile the religious environmentalists are buying indulgences for their high carbon generation sins.

Progress on House Rehab

Well, I found out this week that I will be travelling for work one week a month for the next 4 months, so I decided I better kick up my rehab work schedule. So I will take off all next week to see if we can finish the house in Cheektowaga that has been going on since February. The roof went on this week, the painting is done, new windows and bedroom doors are in. The main to do is the flooring and then we can reinstall bathroom fixtures.

I have someone coming in Monday to put in vinyl flooring. It's a new type of flooring I'm not familiar with - free floating - like the laminate floors. It's a little thicker than glue down vinyl and softer feeling. I'll have to see how it works. The main project I'll be working on next week is refinishing the hardwood floors. There are 3 bedrooms and the family room. This will be my first attempt at refinishing floors, so hopefully I won't screw it up. By week's end I hope to have the house 99% done.

Got some good news on the wholesale flip I am doing. I've got a purchase contract for $17,500. I got the offer through a Realtor after using a flat listing MLS service. Not sure the flat listing was worth it since the Realtor demanded 6% - so with the flat fee cost plus the commission my selling expense will be 7.4%. Anyway, I'm happy to have a buyer. And a cash buyer at that.

I'm still getting a steady stream of callers from our foreclosure mailings, but so far have not had luck with the banks. One bank came withing $5k of my offer but I felt my profit margin would be too thin. I will have some down time if I don't get an offer accepted soon.

Why Life isn't Fair and Predicting the Future is Impossible

There's an interesting article at OpinionJournal called Shattering the Bell Curve. If you've ever wondered why 1% of the population produces most of the income this article can help explain it. We are conditioned to think about random distributions like the Bell Curve where data is normally distributed. This works for finding the average weight or height of people, but lacks when measuring wealth or predicting future events. We will "never meet someone 14 feet tall, but... we might witness a market crash twice as big as October 1987".

The author (Shaywitz) claims that most changes in our society are unpredictable because change is not normally distributed. Things like the development of the Internet are only obvious in hindsight. This is why I wrote the post on Straight Line Projections.

Shaywitz points to 4 reasons why predicting who will be rich or what the future holds is contrary to our very nature:

• confirmation bias - our tendency to reaffirm our beliefs rather than contradict them (the rich get rich by stealing from the poor)
• narrative fallacy - our weakness for compelling stories (the media uses this to reaffirm a poor economy when the facts are contrary)
• ludic fallacy - our willingness to oversimplify and take models too seriously (think global warming)
• epistemic arrogance - our habit of overestimating our knowledge and underestimating our ignorance (global warming again)

One statement that rings so true to me is this:

"What is surprising is not so much the magnitude of our forecast errors, but our absence of awareness of it. we tend to fail miserably at predicting the future, but such failure is little noted nor long remembered."

Carnival of Entrepreuners

The Carnival of Entrepreneurs has been published with my post on Spouses in Business Together.

Environmental Trade-offs

The current hype among environmentalists is global warming but over the years they have hyped one non-sequitor after another- Alar, DDT, power lines, overpopulation, ice ages, famine, GMO's, ozone, ad nauseum. It's always an apocalypse for these people (which is why I think it's closer to religion than science).

Any solution to an environmental problem involves trade-offs. These could be economic trade-offs or environmental trade-off. The replacement of the horse with the horseless carriage eliminated the problem of manure in the streets and disease carrying flies but created a new set of problems. I wrote about the large environmental impact the Prius has. Here's another post about the impact of the new fluorescent lights. Some clamor for use of wind power while others fear impact of windmills on birds. The banning of DDT helped save some birds at the cost of millions of dead children in Africa.

There is no free lunch. The only good alternative to fossil fuels creates (a small amount of) hazardous radioactive waste. It seems the only solution the environmentalist really believe in is population reduction.

Exxon and Carbon Based Fuels

There's an interesting article at CNNMoney on ExxonMobil. I was offered a job by Exxon when I got my BS but decided to go to grad school instead. I was quite impressed with the company but as the article indicates "it is not a fun place to work". Exxon is the epitome of capitalism in my mind - the most profitable company in the world. Some call their attitude ruthless or arrogant, but it is just no-nonsense business. I would trust their assessment of the future far more than anything I read from outside "experts".

• Exxon doesn't think we are running out of carbon based fuels. They expect that even by 2100 carbon based fuels will account for 80% of our energy consumption. I think this is right on. Since 1973 the scarcity crowd had been warning we were running out of oil or that "peak oil" was occurring, yet each year new discoveries are made and new technology allows us to utilize more carbon based fuels.
• Exxon doesn't invest in the "popular" alternatives because they are not cost effective. This is one that the environmentalist just don't get. Further, the hypocrisy of not supporting nuclear power plants (the only viable alternative to carbon fuels and cleanest) forestalls a switch away from carbon based fuels. And even though my company is putting its future into bio-based fuels these will remain non-competitive with carbon based fuels and inflate food prices.
• Exxon sees the bigger risk that the price of a barrel of oil will drop, not that the price will go high and make alternative fuels competitive. The price of oil right now has nothing to do with the amount in the ground. It's all based on the political situation in the Middle East and the environmentalists ability to restrict domestic supply sources. The NIMBY attitude towards building refineries also contributes to the high cost of gasoline.

I had one commenter state that I was a "shill" for big oil. I have always been impressed by people or companies that create wealth for society. Even though I don't like to shop at Walmart, I am impressed by what they have done to create billions in wealth for our society and make route to market more efficient. Improved productivity helps us all lead better lives. Likewise, Exxon is so efficient that they keep the price of gas at lowest levels possible given the political situation. I have never been impressed by the critics that spend their time yapping about successful people and companies and failing to create wealth for society.

Real Estate Vs Stocks - Again

Many posts have been written in response to this CNNMoney article Stocks Vs Real Estate. Stocks come out the winner in this article - obviously written by a non-real estate investor (I don't consider a homeowner a real estate investor in the same sense one is a stock market investor). I also don't regard people who buy real estate on hopes it will appreciate rapidly as investors - these are more properly called speculators.

Here's the list and my comments:

1. Performance - yes stocks win, but the price is risk. The author ignores this very important fact. Individual stocks are a high risk gamble because of No.5 on this list. Mutual funds can reduce this risk, but year to year it remains high. What if you invested between 1965 and 1982?
2. Leverage - hands down winner for real estate here
3. Cost - certainly real estate has higher transaction costs
4. Taxes- the author only mentions the advantages of home ownership. She ignores the extraordinary tax advantages of having your own business. You can also use a self-directed IRA to grow your real estate investments tax free. A double win for real estate here.
5. Transparency - a big win for real estate. I don't have a clue what is going on in the company I work for, much less the Enron's and WorldComm's of the world. You can hire inspectors to check out your property pretty easily.
6. Effort - if you are a real stock investor, you need to do a lot of homework to investigate the companies you are investing in. She ignores this small caveat
7. Volatility - real estate is much less volatile. Not everyone lives in California.
8. Diversification - yes you can diversify in real estate without being Donald Trump. Single family homes, duplexes, different geographical areas, different demographics (why not invest in property geared to baby boomers or first time buyers?)

I only count 2-3 clear cut winners for stocks. In addition, I think there are a couple of other advantages for real estate I wrote about here.

1. The inefficiencies in the real estate market allow you to buy below market value. You cannot do this in the stock market very well.
2. You have control over your real estates value. I can't do much to change the direction of the companies I invest in.
3. You can pull money out of real estate tax free by refinancing.

I still invest in stocks, but in my mind real estate is the better investment.

Spouses in Business Together

There's been a lot written about the pro's and con's of starting a business together with your spouse. Sometimes the articles seem written by "professionals" with theory's, sometimes by actual participants in such a venture. Here's a few of my thoughts and experiences:

• Who makes the decisions? This is probably the most important decision of all when starting a business with a spouse. Often you read something like "we talk about it then decide together". Well, of course, for many decisions this is true, but in real life it doesn't always work out so easily. Sometimes you just cannot agree on something. This may be due to a different point of view, different belief systems, or one spouse may have an appreciation for certain business aspects. For example, I handle the money and worry about making a profit, while my spouse is more concerned about the appeal of the house to potential buyers. My spouse also has a belief that if you are going to do a job "do it right" while I want to do it cheaply. So this often creates stress and one of us has to give in to the other. One thing I have learned is that she gets upset if I make a decision without consulting her.
• How does work get split? This can create lots of stress if one spouse perceives that the other is not carrying their share of the load. We split our work based on who is more interested and skilled in the nature of the work. Sometimes it is not straight forward. My wife was an accountant in China and I thought she would do the accounting. I bought QuickBooks in December, but she has yet to enter our data. I don't have a clue when it comes to accounting and she does not want to pay to hire an accountant. Nagging doesn't work, so now I just have to wait to see how this plays out.
• How do you deal with your relationship? If all you do is work together is that sufficient to ensure a good marriage? I don't think so, but time is a big problem (especially when one spouse is still working full time). Last night my wife wanted to take a long walk, but I felt so pressured to get more done that I stopped short and she felt upset that I was making her a low priority.
• How do you deal with the stress and pressure of time and money? Sometimes I feel myself being very impatient about a particular task or with my wife. It may seem unrelated but inevitably boils down to a fear of loss - losing money or time to spend doing other things (for example, my kids spend only every other weekend with me and I end up spending all my time on the business and not with my kids). I find myself losing my temper more frequently than before we started the business (normally I am very mild mannered). We have been pouring out cash for 4 months now and have yet to see a cent of profit. I often find myself waking up at 4 am and being overwhelmed with anxiety about our finances and unable to sleep.

Starting a business is itself a very stressful undertaking. Starting a business with a spouse can add substantially to that. However, for many people, it is not an option due to the financial aspects of having to hire someone to replace your spouse. In the beginning my wife was thrilled to be working alongside me, I'm not so sure that thrill is still there. Is it worth it? Some say that the if you weather the storms together you will have a stronger marriage, some say you will end up divorced. For now, the final chapters have yet to be written

Carnival of Homeowners

A new carnival - Carnival of Homeowners is up. A post I did on Lock Bumping leads off the carnival.

Several interesting posts to check out - including this amusing one

Rehabbing Houses - breaking the rules

We purchased a house in February through a short sale and have spent 95% of my spare time renovating it since. Like most of the houses in foreclosure I look at, it was a wreck and full of stuff, so lots of things were hidden (and there was 2 feet of snow on the roof). I also just flat out missed some things (like an old hot water boiler). So after the the owners moved out and we started renovating we have discovered lots of additional items that need to be replaced - roof, boiler, windows, bedroom doors & frames. We also decided we needed to cover the ugly tub colors.

My original estimate for repairs was $5k for flooring and paint. Now it looks like we will spend about $12k. Fortunately, due the fact that we decided to do nearly all the work ourselves and the cost savings tips we got from Pete Youngs about contractor discounts we probably saved about $10k over what we would have spent for all the additional work.

The additional spending has really thrown off my economics based on a selling price of $185k I had estimated. Guessing at what the house could sell for has been a real challenge. There have been only 3 sales in the past 2 years within the neighborhood. One was the exact same size and style house which sold for $175k, another was a house with 900 sq ft more area that sold for $210k. The previous owners of our house had purchased it a year and a half ago for $182k. Similar houses 1/2 mile to the north in Amherst sell for $300k, while houses 1 mile to the west in Buffalo sell for $12k. Our house is located in a really nice neighborhood identical to the Amherst area, but a rotten Buffalo zip code (even though it is physically in Cheektowaga).

The "rules" of rehabbing indicate that you should not try to have the most expensive house in the neighborhood, and that you should buy a lousy house in a nice neighborhood. Well, we will have the nicest house in the neighborhood, in a bad zip code and need to sell it near the highest price ever sold. This will mean additional risk since our monthly payment of $1780 will eat up profits pretty quickly.

This looked like a great deal when we bought it, but could turn into a bad decision. We are hoping that someone will see a "move-in condition house that will make them willing to buy in this area. The house is nearly 2800 sq ft Colonial built in 1955 and would be a bargain at $200k anywhere else in the country (except for the $8000 annual tax bill!). Were it not for the school district we would move in ourselves.

Climate Change with Steven Hayward

Here's a link to an interesting video by Steven Hayward-part 2 was most interesting to me. Here is part 1.

Few people understand the difference between correlation and cause and effect. It's amazing how few know that rises in CO2 levels have historically preceded temperature increases. It's also amusing that Gore leaves out nuclear power as an answer to reducing CO2.

Where to Service Your Car

The Digerati Life has an interesting post discussing costs of owning a car and in particular the costs of a recent maintenance service. Some of her points regarding financing (I don't), depreciation (I buy when the car is nearly fully depreciated) and insurance (no collision for me), I have discussed in the linked posts.

One point I have not discussed is car servicing. One of the mechanical engineers I work with does all his own service. I don't have the time nor patience to work on cars. My first car was a 1968 Impala with a straight 6 cylinder. There was so much space under the hood that I could literally sit beside the engine! Today's cars are so crowded under the hood that just doing any work requires removal of other components. I owned a 1998 Intrepid that was a pleasure to drive and had great interior room, but servicing it was a nightmare. The front end had to be removed to change the drive belt and a tire and wheel well had to be removed to change the battery!

So when choosing someone to service your car who do you turn to? Most people just use their new car dealership (since they buy new cars. they think that it is to their advantage to to this). But my experience with servicing at a car dealership has been less than stellar. The typical modus operandi of the dealerships here is to comb the car for every imperfection and then try to "sell" me on why these repairs are needed. Since I have some knowledge of cars, I typically know when they are bluffing and when the repair is really needed. But I have found that their tactics border on the high pressure technique's that we dread from the proverbial used car salesman. Typically, I have found that it will cost me twice what I was anticipating whenever I have used a dealership.

My strategy has been to seek out local car repair shops with a good mechanic in charge. The shop I use now gives me a free loaner whenever they work on my car. They advise me about repairs that might be needed but don't pressure me to have work done that day. For example, I was advised during the annual inspection that I would need new brakes soon. But the mechanic stated that I would need new rotors so I should drive the car an additional 5k miles before changing the brakes. In another situation, there was a leak in an air intake manifold that would cost $500 to replace, but they found a way to patch it that worked.

This is not a unique situation for me. I have had several mechanics in different States who are honest and provide good service at a reasonable price. I would recommend that you explore alternatives to dealerships.

Chinese and Hugs

One of the culture shocks my wife had to undergo when she arrived in the US was our compulsion to hug each other as a form of greeting. I'm not sure if her experience is pervasive throughout China, but she has never seen people hug each other like they do here. In fact, she has never hugged either of her parents nor her brother. She remembers that there was a strong taboo against men touching their daughters when she was young to the point that she never remembers even touching her fathers hand!

We've all read numerous articles about how human contact is necessary but it certainly does not seem to be part of Chinese culture, so I wonder how true it really is. I've seen young Chinese girls hold hands when I've been in China and people in the city often spend a lot of time "touching" each other when trying to get onto mass transit systems. In the Chinese countryside, the likelihood of accidental touching is remote due to less crowded conditions.

So are Chinese mentally unhealthy because they do not hug? My wife is continually shocked (and scared for her daughter) when we get the annual update of sexual predators that live in our town. We have erased a lot of things that are taboo in China but from her standpoint we are the unhealthy society.

As I've learned since meeting my wife, there are many preconceived ideas that we have that we believe are true and right, but an opposite view seems to work just as well in China.

Carnival of Money Stories

The Carnival of Money Stories has my post on Retiring with a Mortgage. Check out all the posts.


My favorite was 10 Biggest Mistakes Poor People Make. There's been a lot of debate about the reasons for the rise in foreclosures. Few people blame the borrowers, but I know every one of the people that I have contacted who are in foreclosure have violated 8+ of the 10 reasons given for remaining poor.

Take Down of Conspiracy Kooks

Last week I had written about Rosie O'Donnell and the conspiracy kooks she represents. I found a great post today at a site called EjectEjectEject that takes down several of the prominent conspiracies including the 9/11 "hoax". The author says that these people are "too stupid to know they are stupid".

To a certain degree this is true, but it goes beyond that. I feel that people that buy into this type of crap (after being given the chance to hear the truth) must have some kind of mental dysfunction. For whatever reason they have given up all their personal power and attribute the government with unimaginable power to control the truth. In order for this to be true the government must have the power to control and silence millions of people who witness events. Even George Orwell's 1984 government did not have that much power and omniscience.

So why would a sane person give such god-like powers to an institution that is by its nature inefficient and incompetent? Only a god (or Satan) could pull off the hoaxes the conspiracy theorists attribute to the government. Have these people created in their mind a god out of government? If they dismiss logic and reason in favor of giving government god-like powers then I can only conclude, not as a put down but as a concern, that they suffer from some kind of mental illness.

It really troubles me that such a large portion of the population is beginning to buy into large conspiracy theories. I'm sure some is just ignorance, but too many reject reason altogether and bodes ill for the mental health of this country.

Financial Self-discipline

My wife and I have been looking at homes since we got married a year and a half ago. I had bought our present home before she came to the US. I bought it primarily as an investment because I was able to buy it well below its appraised value. My wife never has liked the house, so she has been unhappy living here. The primary reason I started my real estate business was a desire to have the financial where-with-all to buy her a nice home.

Most of the houses we look at are out of our financial reach at the moment. There are few homes in our school district that are both affordable and meet her desires. We find houses from time to time that come on the market that look great to her, but so far all are about $40-80k more than I think we can afford. So, inevitably her spirits are crushed after she gets excited about a house we have seen and I fail to match her excitement because all I can think about is the high price.

One of my financial weaknesses throughout my life has been making decisions on large money investments (usually homes) before we were financially ready. Until just this year I never had an emergency fund and used lines of credit to fund the odd emergency. I have usually been torn between living with an unhappy spouse or going further into debt (Before marriage we males used "If you loved me you'd have sex; after marriage I've often heard "If you loved me you would buy me a ..." - but, that's a subject for anther post). Usually I have chosen to go into debt for the short term payoff of a happy spouse. But in my view purchasing things hasn't led to long term happiness.

When a couple has a large divergence on financial matters it creates lots of friction. I've often read (but don't have data to confirm) that a large portion of marriages fail due to financial disagreements. My ex constantly complained that I was too "controlling" with regards to our finances. We were in constant financial difficulties thatI thought were due to her overspending. In my mind the proof came after our divorce when we were both able to live on half my income and maintain our lifestyles.

Buying a house right now would crush our ability to fund our new real estate business. I just hope that I have the self-discipline to keep the "must have a new house to be happy" outlook at bay.

The Hypocrisy of Global Warming Alarmists

Now that we have achieved "consensus" on Global Warming what will the environmental activists force down our throat? No doubt it will be something to hurt our economic growth and reduce our lifestyle. Few are advocates for nuclear energy and many even oppose windmills (like the Kennedy's off the shore of Martha's Vineyard). I don't see many screaming about the coal fired plants that China will build (expected to be double the number that the US has by 2011), even though China is already one of the prime emitters of CO2.

I have speculated that environmentalists are irreligious people that have adopted love of the earth as their new religion. But maybe:

• they are anti-capitalist Marxists who are bent on the destruction of the US economy because we consume "too much" of the worlds resources (even though we produce much of the worlds goods). Many just plain hate the US.
• they are naive and ignorant do-gooders who have no idea of the economics involved in reducing carbon emissions (gee, if we all replace our light bulbs that will solve the problem)
• they are radicals who advocate massive reduction of human population and a return of the earth to its "natural" state (i.e. the animals rule) [Don't think these people are that uncommon - my son's 9th grade science teacher was preaching this during his classes all last year]
• they are people that wish for a return to an agrarian society where each individual uses solar or wind power to generates power for their own needs and we grow our own food so there's no need to drive (in this case we better hope for global warming or we'll all have to move further south)

Here's a post with lots of interesting discussion on the topic. I'm not sure if all environmentalists can be lumped together, but most have one thing in common - hypocrisy. Al Gore flying around the planet and consuming 10x the normal household consumption of electricity, while his movie asks for you to sacrifice, is one prime example. Few actually live the minimalist lifestyle and often their actions create more pollution (e.g. Prius owners are worse polluters than Hummer owners)

I've written numerous posts about global warming. My opinions:

• There is not enough statistical data to determine if the planet is warming or not
• Even if the planet is warming, there is no evidence that the cause is man-made
• Even if the planet is warming and the cause is man-made, there is nothing we could do to change the trend. CO2 does will not go away and our contribution is but a small fraction of the whole.
  
• There is no evidence that a warmer planet is a bad thing. Temperatures during the Medieval Warming were higher and the population was better off

The reality is that carbon based fuels are abundant beyond what we will consume for the next hundred years and for transportation are the only source available for the foreseeable future. For electrical generation nuclear is the best alternative. Nobody has died in a nuclear power plant accident in the US, while hundreds have died in refinery explosions. Our fear of nuclear energy is irrational and counterproductive.

There's only one thing you can do if you are really worried about global warming; stop building your beach house so close to the ocean.

More great predictions

Here's another article detailing predictions that I remember clearly (and even joined in the chorus) - Dogs that didn't bark. A reminder that we know little and can predict almost nothing about the future

Rutgers Vs Duke and racial slurs

There were two stories this week that highlight the racial divide in this country. One that received the most attention was the remarks of Imus regarding the Rutgers women's basketball team. The second was the dismissal of all charges against the Duke Lacrosse players.

The Rutgers women's team's feelings were hurt by Imus' remarks. I find Imus repulsive and don't enjoy listening to angry people vent, so I have no concern about him being fired. On the other hand, the story where real harm was caused is being largely ignored. Those 3 Duke Lacrosse players have had their lives irreparably harmed by racism far greater than anything that Imus did. Their names will live forever on the Internet in infamy and they have over $3M in legal fees to pay off. Yet the press sees racism only in the Rutgers story.

I dated a black woman in college and when I later married, my ex and I adopted a black daughter and a Hispanic son. During the last 35 years I have never been subjected to racial remarks from whites, yet have been subjected to lots of racial slurs from blacks in regards to dating a black woman or adopting a black child (and by the way these remarks have come from the "tolerant" Northeast - not while I lived in the "racist" South).

The worst of the bigots in my mind is Al Sharpton of Tawana Brawley fame, with Jesse Jackson a close second. Sharpton inflamed the whole Duke episode and while demanding Imus' firing, has yet to apologize to the Duke players. And he never will, because there is a double standard for race in this country at the moment. No doubt in my mind that prior to the 1960's blacks were discriminated against, wrongly jailed and despised by many whites. But the pendulum has swung far past center at the moment and white males are paying the price today.

There is still lots of racial imbalance today but I believe, as does Bill Cosby and others, that it has more to do with black culture than white racism. A culture that celebrates gangsta rappers who denigrate women as "ho's" and refers to other blacks as "niggas" keeps blacks suppressed far more than what any white person is doing today. The Bible teaches us that "we are what we think about" and if the typical black male teenager is regarding women as ho's, it' no surprise that 70% of black women are single and that the same percentage of black children are born out of wedlock.

I don't believe in the whole victim culture that is gaining ground in our society. Everybody wants to be a victim and few want to take responsibility for their words or actions. No group plays the victim role better than American born blacks today (black immigrants don't - think Colin Powell). I'm often criticized by blacks because my daughter is not exposed to black culture. But the truth is black culture right now is sick and whites are complicit in enabling this sickness. It reminds me of alcoholics and co-dependents. Race relations in this country will only get healthy when both sides are able to speak and act truthfully about all of the problems - not just white racism.

Becoming a Jack of all Trades

I work with many PhD's that constantly tell me that they are not "handy" and just totally inept at fixing things in their homes. I don't buy it, I think they are just lazy - both mentally and physically.

I've owned real estate as an investment for about 11 years all together and have done just about every job imaginable in fixing the properties up. Before that I renovated 2 homes. I did not grow up as a skilled tradesman. My father went to school nights or worked and I spent most of my youth either babysitting for my 7 younger siblings or studying. (I attended a Prep school, so we did not have any shop or tech classes.) So I never did nor learned how to do any work that involved manual labor in regards to fixing houses.

These are the skills that I possess today:

• electrical - any kind of wiring
• plumbing - done it all
• furnaces - installed them and the duct work
• painting
• kitchens - installed complete kitchens starting from 4 empty walls
• replacement windows - piece of cake now :)
• installing insulation
• carpentry work
• drywall and mud work
• gutting - my favorite!

I could go on, but you get the idea. So how did I learn to do all these jobs? I remember the first house I bought. It needed an exterior paint job. After, wearing myself out scrapping old paint, I read about using heat guns to remove the old paint. I ended up catching the house on fire (the insulation under the siding caught on fire). Now I could have given up at that point and hired someone to paint all my houses, declaring myself as not "handy". But I persisted and learned how to do the job.

The same has been true with every job I have done since. In the early years of learning plumbing I constantly started fires when I sweat pipes together in tight quarter. And I am still making mistakes!! I have screwed up more jobs then most people have even tried. Then I fix it. (I see a lot of poor work that homeowners have done that they never bother to fix)

I think that the main difference between me and my colleagues that are not "handy" has to do with a willingness to figure out how to do something and to persist until I learn how to do it well. And this is a lesson for anything in life that I preach to my kids. You've got to be willing to do something poorly until you learn to do it well.

Flipping Houses

I found a new blog yesterday by an individual that works full time and is buying, renovating and flipping homes in his spare time - Flipthyhouse is his website. He provides lots of details about his activities, costs and financing. Hope that as he continues he will have lots more information.

As far as my own efforts go, I am in the 7th week of the renovation of a home I purchased in February and the punch list of items to do seems as long as when we started. I had originally budgeted about $7000 for repairs and planned on having contractors do a lot of the work. After the homeowners moved out and the 2 feet of snow melted I found lots of additional items that I had either overlooked or were hidden:

• the roof is at least 20+ years old and will be an obvious negative
• the hot water heat boiler must be the original from 1955, so I think I need to replace this. I'm debating whether to put in an 80% efficient furnace @ $1100 or a 95% efficient furnace which costs $3300. Will a homeowner pay for the high efficiency boiler?
• the windows were shot and leaking badly. I've written about my experiences replacing them here and here.
• The bedroom doors were full of holes and needed to be replaced. Iordered replacement doors from Lowes but after I started installing them I noticed they were wrong. So there is a 3 week delay here. Lowes will not be on my list of purchasing "special orders" in the future.

So we have been doing most of the work ourselves and it is taking a long time. The house is the largest one I have rehabbed at 2880 sq ft, so just painting everything has taken most our time. We are nearly done with the painting. Fortunately, with the techniques I learned from Pete Youngs, my costs to do jobs (like windows) are far below my estimates. However, I expect I will spend $10,000 on rehab which is over my budget.

On the other hand, I feel that we may be able to sell the house for more than the $182K that the sellers paid last year. Unfortunately, I don't have any good market data to support this. There has been only one sale in this neighborhood for more than $182k and that house had 3400 sq ft of living area. The house is in a really nice neighborhood, but a really bad zip code.

Last night I was utterly exhausted. I was painting ceilings the last 2 nights which is literally a pain in the neck. We have been working until 11pm for 5 straight nights. I need to get up at 6:20am every day for my day job. Maybe this evening I can take a night off and watch the Sabres play some hockey.

Future Predictions

In 1954 Popular Mechanics showed this picture predicting what the home computer of 2004 would look like. Dead on - like most future predictions of the future :) As I talked about in Straight Line Thinking people seem unable to think about the future in anyway that is different from the past experiences that we have. People are innately creative and solutions to "problems" that face us today are not obvious to us at all. That's why all of the horror stories about global warming make me laugh. In 1900 the "realists" predicted streets full of horse manure, causing disease and death. I'm still waiting for the Skycar to be commercial - it's been over 20 years since scientists told me that it was nearly ready for sale.