The Original Liberalism Vs Islamism

When I was young I was a JFK "liberal". That is, I believed in the concepts of liberalism. Most "liberals" today do not know or understand what liberalism really was and today's liberals are really Marxists, or at the least, hard core socialists. Melanie Phillips writes an erudite article about classic liberalism and what radical Islam is trying to do to destroy it.

Islamists have no room for a liberal society and are intent on imposing Sharia law onus. Meanwhile, our PC liberal elites are so bent on imposing multi-culturalism on our society that they ignore the reality of good and evil to worship the god of tolerance.

This elite class of people feel that the problem of radical Islam is new and will go away if we just reason with these people. But history shows differently. One hundred years ago Winston Churchill wrote these words in the original edition of "The River War":

How dreadful are the curses which Mohammedanism lays on its votaries! Besides the fanatical frenzy, which is as dangerous in a man as hydrophobia in a dog, there is this fearful fatalistic apathy. The effects are apparent in many countries. Improvident habits, slovenly systems of agriculture, sluggish methods of commerce, and insecurity of property exist wherever the followers of the Prophet rule or live. A degraded sensualism deprives this life of its grace and refinement; the next of its dignity and sanctity.

The fact that in Mohammedan law every woman must belong to some man as his absolute property-either as a child, a wife, or a concubine-must delay the final extinction of slavery until the faith of Islam has ceased to be a great power among men. Individual Moslems may show splendid qualities. Thousands become the brave and loyal soldiers of the Queen: all know how to die. But the influence of the religion paralyzes the social development of those who follow it. No stronger retrograde force exists in the world. Far from being moribund, Mohammedanism is a militant and proseltyzing faith. It has already spread throughout Central Africa, raising fearless warriors at every step; and were it not that Christianity is sheltered in the strong arms of science-the science against which it had vainly struggled-the civilization of modern Europe might fall, as fell the civilization of ancient Rome.

Two hundred years ago Jefferson fought the Barbary Wars against the same Islamists. Here's what he heard from the Ambassador to Tripoli:

"Let us not call this view reductionist. Jefferson would perhaps have been just as eager to send a squadron to put down any Christian piracy that was restraining commerce. But one cannot get around what Jefferson heard when he went with John Adams to wait upon Tripoli’s ambassador to London in March 1785. When they inquired by what right the Barbary states preyed upon American shipping, enslaving both crews and passengers, America’s two foremost envoys were informed that “it was written in the Koran, that all Nations who should not have acknowledged their authority were sinners, that it was their right and duty to make war upon whoever they could find and to make Slaves of all they could take as prisoners, and that every Mussulman who should be slain in battle was sure to go to Paradise.” (It is worth noting that the United States played no part in the Crusades, or in the Catholic reconquista of Andalusia.) "

Those calling for us to withdraw from Iraq are woefully mislead about this religion and the consequences of a withdrawal. The irony is that it is the same people that think themselves superior thinkers that are willing to sacrifice our liberal society to terror and Sharia Law. Nothing has changed as to Islam's intent since its founding and certainly not in the past two hundred years. We are in a war that will not end no matter the battle field and Iraq is just one of many fronts in the war.

If you doubt my words, read those of a former jihadist.

Sell This House - Realistic?

I've been concentrating on staging my Cheektowaga house lately and while searching for the TV show "Flip that house" I found the show "Sell This House" an hour earlier on A&E. Interestingly, the house that was covered last Saturday was located in Orchard Park, NY - the town next to the one I live in. Orchard Park is one of the 2 nicest suburbs in the Buffalo area and unless a house is overpriced, homes there will sell about as fast as anywhere in Western New York. The house on the show hadn't sold in 18 months on the market, so (obviously) it had to do with "home staging" - the topic of the show. But, the show glossed over the main reason for the house not selling with little mention.

The show did provide some interesting insights into home staging. De-cluttering the sun room and the living room certainly helped. The main bedroom also needed to be rid of the flower theme as well, but the color they chose (lavender) seemed too bold from what I understand about staging. Otherwise, the painting and decorating they did seemed about right.

However, that being said the program glossed over the reason this house hasn't sold - the second floor is an apartment! The house looks like a single family home located in an area of nice single family homes. The type of people that live in OP are not interested in buying homes are looking for single family residential homes - not having a tenant live above them. This limits the potential buyers to a very small market segment. I've watched many of these homes and they do not sell in the better suburbs here. This type of arrangement is better suited to city dwellers. I think the best money that the homeowners could have spent was to convert the second floor to a large master suite.

As with "Flip This House" the show did not tell you the outcome of their makeover, but I doubt it helped much. I don't think a major flaw can be overcome by a coat of paint.

Flip That House review

Many of the people that have viewed my Cheektowaga property have made some comment about the TV show "Flip That House". I had never seen the program before, primarily because I had never had more than basic cable service before (and really didn't have time to watch TV). Recently, I had upgraded and now can see A&E and I got a DVR, so I recorded the program Saturday and watched it before bed last night.

To me the show did not jibe with the reality that I have been confronted with while trying to flip a house. For starters, the flip was in San Antonio TX which is a far cry from Buffalo NY - the area is growing in population! [I have never lived in an area with population growth :( ] So the idea that I could buy a house and make $95K was so unrealistic to begin with.

I have yet to find a house where I could afford to purchase and hire the job out completely as well. Contractors in NY have such high costs that they charge much more than the national averages for jobs (as estimated by RS Means), so I am forced to do a lot of the work myself. This adds time to holding costs since I cannot work full time and complete a rehab in 21 days.

The other problems I saw with some of the estimates:

• Purchase price was shown at $260k but no acquisition costs! It usually costs me several thousand dollars to get a property. The one I paid $5k cash for still cost me $3000 to close - it must be awfully cheap to close a property in Texas!
• Holding costs - the investor had $260k purchase price and $45k rehab costs but the show never did mention holding costs. Maybe it sold in 10 days and he only had one month of holding costs. Here it takes 2 months to close a property and average time on the market is 3 months - that's $12.5k in holding costs in interest alone (assuming 10% interest), not to mention taxes, insurance, utilities, etc.
• Selling costs - it looks like this guy does FSBO through his company but I think that may only work in hot markets. No mention is made of commissions or closing costs.

The other part of the show that I disliked was that there was no closure. Did he really sell the house at his estimate of $385k??? We'll never know so the information to me was totally worthless.

On the plus side, the show did put in a great plug for a certain counter top product which I do R&D work on.

Update: I've since watched several episodes of this show and my initial impressions have not changed. Every flip is in a prospering area of high real estate growth rates which makes it easier to flip at a profit, the "flippers" all seem to go over time and monetary budgets, which would cause them to lose money in a market like Buffalo. Selling costs are ignored and no indication of the ultimate outcome is given. Basically, this show is crap for a serious investor.

Chinese game our immigration system and one child policy

My wife reads lots of stories on China and I found one quite interesting in light of the current debate on immigration. It seems that as China's middle and upper class grows, these people have found a way around China's "one child" policy. Since entrepreneurship is way up in China, most successful Chinese start their own businesses. So, it is pretty easy to get a business visa to the US for most middle class citizens. Men are setting up their pregnant wives in business and they are coming to the US, giving birth and returning to China. Since the child was born in the USA it is an American citizen and not subject to Chinese laws. Of course, if the Chinese couple later decides they want to return to live in the US they have an instant loophole - their children are Americans!

Quite an ingenious use of our citizenship and immigration laws.

Can I make money in Real Estate in Buffalo?

I own 4.5 single family houses in the Erie County/Buffalo area at the moment. An article in today's Buffalo News describes the downward slide of population in most areas of the County. Buffalo and Cheektowaga (where 2 of the houses I own are located) have dropped 5.7% in population since 2000. Lancaster, which has grown 3.7%, is where I own my other investment properties. The other 2 locations where I own my home and share a home with my ex, are not listed.

The mantra of Realtors is "location, location, location" and I have had bad experiences buying and holding in bad locations before (i.e West Virginia where population of the city dropped 20% over the 19 years I lived there. My learning from that was to never buy and hold in an area of declining population.

I thought that if I "flipped" property quickly that I might get around that problem here. I've got one property as a "fixer-upper" at a really cheap price, while the second, in a nice neighborhood, has been renovated and is in "like-new" condition. So, in essence, I am conducting an experiment as to what kind of house will sell in a "bad" location.

At this point the houses in Lancaster and the town I live in seem to be have increased in value enough for me to profit by selling them (the one in Lancaster is lease-optioned at a $25k profit). The one in Cheektowaga could make a profit if I can sell it quickly, but I don't see that happening. The fixer-upper may stay on the market for months more (already 4 months with no one even looking these days).

I've had many calls from prospective sellers in the declining areas of greater Buffalo, but have not answered their calls. I know that many people make lots of money buying real estate in Buffalo. Out of town buyers see Buffalo as a great market, but I still am not convinced.

Update: another doom and gloom article in the Buffalo News about the number of vacant houses here - 39,000.

Another Short Sale falls through

I had been working on a short sale in the nice town of Amherst for several months but alas the auction is to be held tomorrow. The owner owed $179k on the house which the bank had appraised at $194k when they doled out the loan. During the short sale process the BPO (brokers price opinion) came in at $154K. The investor for the loan was willing to take $142k. Based on my analysis I thought that the house might be worth $186k after repairs. Due to the limits of my hard money lender I am limited to borrowing $130k, so I was reluctant to meet the investors price. My analysis was that the house needed $15k in repairs. I eventually offered $135k but was refused as of 3 pm today. The bank loss mitigation officer seemed determined to get the auction postponed 30 days but the investor would have nothing of it.

This is the second house I have lost by less than $7k. Both houses only had a first mortgage which makes negotiation harder. I'm sure the Amherst house will fetch more than $142k at the auction. In fact, if my kids lived in that school district I would move into the house myself, since I think it is a good buy for a homeowner. But, for an investor, the carrying costs make it unprofitable to hold for the 6 months it would take to repair and sell. My analysis spreadsheet showed costs for closing, holding and selling of $20k. Add $150k for acquisition and repairs and I am up to $170k. If my $185k selling price is wrong, my profit disappears. So someone will get a good deal tomorrow.

One mistake I am making with these short sales is not being with the appraiser when he does the BPO. This appraiser missed all kinds of problems (roof replacement, ceiling damage, exterior paint, etc.) and only noted a bad kitchen floor. I think had I been there, I could have gotten a lower BPO. But that is the dilemma of having a full time job and trying to do real estate on the side - I just can't get away for every little thing. Maybe next time I will reconsider and make it a higher priority.

China or US - Which is a freer Nation?

At Church last Sunday, a member spoke about his recent trip to China to distribute wheelchairs and mentioned his intimidation at going into a "Communist" country. His implication was that he didn't feel very free while in China.

My wife and I have had many discussions about the relative freedoms that we experience in our respective countries. She has more experience in the US than I have in China, but I have a pretty good flavor of what it's like in China.

Now, there are some basic differences in our laws due to our "Bill of Rights" which the Chinese do not have, but many of our so called "rights" have been eroded and I believe we have moved much closer to a totalitarian country while China has moved to increase individual freedoms.

Here's a quote that summarizes my observations:

"But today's China is, in some respects, less socialistic than much of Western Europe, with a moth-eaten social safety net and a wild free-market economy. Students in almost any urban Chinese school can look out their classroom windows and see just about everything but socialism being constructed: high-rise office buildings, shopping malls, movie theaters, luxury apartment buildings, fast-food restaurants, hotels, factories — the whole capitalist panorama."

There are many aspects of Chinese life that seem more libertarian than our society:

• There is no guaranteed social security - no work - no retirement benefits
• Health care is cheap and fast. No weeks or months waiting to see a doctor. I dread the move to European health care here
• Although you cannot own land yet, you have much less interference from the government. My wife is still angry with a local Zoning Board denying our petition to build a house on our property and the eminent domain ruling from the Supreme Court take away a lot of our property rights
• Starting a business in China seems much less troublesome than putting up with Environmental impact statements and other regulations here
• I never have seen a traffic law enforced in China and they don't ban talking on your cell phone
• The Chinese are not banning me from eating trans-fats nor regulating where I can smoke (I don't smoke but dislike the regulations)
• Our tax code so mystified my accountant-trained wife as to be unimaginable. This code is truly one of the most suppressive regulations in the world

Now China does regulate speech more than us (my wife had not ever heard of Tiananmen Square). But our society is moving to take away our free speech as well. McCain-Feingold was an attempt to stop criticism of Congress, the debate over the Fairness Doctrine is an attempt to silence talk radio and the worst is the creeping culture of political correctness. I have a subordinate that was fired for posting an article from the newspaper that simple reported election results on gay marriage amendments. If it's not PC, you better not discuss it at work.

When I first met my wife I was quite critical of the Chinese government, but now I am convinced that we are in a glass house of our own as far as liberty goes.

I wrote recently about the adoption of Environmental Religion by the elite and the need for religious belief. Most intellectuals in the West today would argue that religion will soon disappear as did Nietzsche. Looking at what is happening in Europe one could believe that Christianity will soon disappear. That is what makes this article about the potential cause and effect between religious beliefs and family size so fascinating.

Anyone who has taken statistics has been exposed to the story of the correlation of the stork population and the human population of Copenhagen after WWII. The myth of storks bringing baby's grew out of this misinterpretation of data. In fact, the increase in human population provided new places for storks to nest which increased their population.

Likewise, in the article noted above on religious belief and family size, Eberstadt argues that the decline in family size is the cause of decreased religious belief. I find this a very compelling argument. As a single person I had no interest in religion, but as I adopted children I re-examined my beliefs in this area and can correlate my religious belief as a consequence of having children.

Although the article is lengthy, I recommend a thorough read. Certainly we see the strongest religious beliefs in populations with large families. Why the US still has large religious beliefs compared to Europe also seems to make a lot of sense when viewed as the author suggests.

The implications for this are also fascinating. Will those without religious belief breed themselves out of existence? The replacement value to maintain population is 2.1 births per family. Europeans are well below 1.4 and Russia is even lower. The US is maintaining the 2.1 ratio but not in the Northeast or big cities, so the rural Midwest and South are probably much higher. While churches in cities or Europe may sit empty, mega-churches seem to be growing by leaps and bounds.

As a scientist, I accept Darwin's theory of evolution, but not the extrapolation that many people make from it. Just because we can prove that animals or plants evolve does not explain first cause. I cannot accept that consciousness sprung spontaneously from DNA and no one has explained the Big Bang. However, if the innate drive of our species is to survive, those that have children are passing on DNA that encourages religious belief. So, in the end religion will not only survive but become an essential part of that survival.

Something real to worry about

I used to read Rumi who practised Sufi Islam - a very peaceful sect of Islam. The works of Rumi are quite spiritual in my opinion and if the world practised this religion we would live in an idyllic world. An article yesterday by Tony Blankley reviews a book by a Muslim scholar who has gone around the world interviewing Muslims about their attitudes. The book he wrote "Journey into Islam" is extremely depressing due to the shift in attitude by a majority of Muslims towards an aggressive, hostile belief system.

Various surveys have indicated anywhere from 25-35% of male Muslims under the age of 30 are proponents of suicide bombing (the low number is in the US). Our President is deluded if he really thinks that today's Islam is a "religion of peace". It is nothing of the sort. The left is deluded because they think that Muslims can be reasoned with. Militant fanatics cannot be reasoned with any more than Hitler could be.

If the Muslim world was an isolated desert we could probably ignore it. However, it sits on most of the worlds oil. Environmentalists have hamstrung us by limiting drilling in the US, opposing nuclear and coal plants as well as oil refineries.

So is a economic disaster or global war inevitable? Nothing is inevitable, but it worries me a lot more than any 1 degree rise in global temperatures.

New Ice Age Coming!

The above is from a post about the coming Global Cooling coming after 2020. Whether this is true or not is speculation as much as global warming is. The point is the the science of climate change is still young and undeveloped. As I wrote earlier - we have been through this before! Reacting hysterically to a 0.8 degree temperature rise is fanaticism at its purist.

China is No1 - So is the US still the evil one?

China just passed the US in CO2 emissions and is building coal plants at the rate of one per week. At the same time The US is the only country complying with the spirit of the Kyoto Treaty actually reducing emissions despite our growing economy. Meanwhile the great blowhards in Europe continue to increase their emissions while criticizing the US for not signing Kyoto.

Will this cause the environmental crowd to turn their attention to China? After all, China is only one-sixth of the worlds population but emits 25% of the CO2. Don't bet on it. To them the US is the Great Satan because we are a capitalist country.

Scott Adams has the Inconvenient Truth - the Greens need to make the sacrifice. The rest of us can let market forces change the world.

Success in one area does not mean success everywhere

I read this article about Bill Gates remarks to Harvard graduates and was stunned by the mans ignorance of economics. But, I really shouldn't be. Just because people are successful in one area of their lives does not mean they know anything about other aspects of life.

I work with PhD's all day long and at first I gave their opinions high weight because of their expertise in one field. But after a few years I came to learn that though they may be brilliant Chemists or Physicists, that doesn't mean they know anything in unrelated fields. In fact, I am convinced that the more specialized a person is in one field of knowledge, often the less they seem to know in other fields. Bill Gates may have been brilliant in building a business, but only recently learned that he better get his company involved in politics and lobby's if they are going to be successful. His ideas to save the world sound great to a Marxist, but someone has to make the money first - you just can't print the stuff.

People can become millionaires but have trouble their whole lives controlling their weight (Oprah and Rush Limbaugh). Many of us can keep our weight under control but screw up our finances. Very successful athletes routinely blow millions that they earn and many die poor. How many CEO's do you hear about that can't stay married?

Most of the population gives too much credence to people with no credibility in the field they are speaking of just because they are successful in other fields. Movie stars routinely get accorded great respect for their views on global warming, yet most are barely intelligent in matters of science (ditto to Al Gore).

So, the lesson to learn is that you should not feel like a failure if you are not successful in every aspect of your life. And second, don't give too much credence to the opinions of people if they have no direct experience in the field they are proselytising on.

Update: After I wrote this post I read a post by Steve Pavlina How Your Mind Really Works. I was struck by what he said about how to become dumber. This fits my view exactly that people that specialize seem to be stupid in so many other areas. The routine of being focused on one area seems to decrease intelligence. A very insightful post by Steve.

Smart Couples Finish Rich

I'm spending the week in a training course out of town and so had some time to do some reading. A couple of months ago a blogger had listed Smart Couples Finish Rich as one of his top 10 books, so I spent my flight reading it. Overall, I would recommend this book and wish I had read and followed such a book 35 years ago. I hope I can impart the attitude of saving while young on my children. The power of compounding has to be one of the greatest discoveries of finance.

My spouse and I are in very different places financially. She grew up in China during the Cultural Revolution and knows poverty that I cannot even begin to imagine. Her focus on security is primary in every thing she does and debt drives her crazy. She started reading this book before I left and couldn't put it down. I'm sure she'll have a list of things for me to do once I get back to improve our finances, which is great.

I don't think Smart Couples Finish Rich is the best finance book I've read but it does have some good points that everyone ought to be aware of:

• starting to save when you are very young
• maxing out your 401k
• paying yourself first (the 401k contribution is the key here)
• making a written financial plan
• doing something towards your goals now
• having adequate life and disability insurance
• having your financial records organized
• having a dream that both you and your spouse work toward

When I was involved in Amway (now Quixtar), the leaders talked incessantly about having a dream. It's something I have always believed in. Many people won't voice their dreams for fear that they will be laughed at. However, I don't believe that you can be motivated long term just to reduce debt or have $1M at retirement. You've got to have something exciting that draws you as well.

There are some parts of the book that are weak, but it's worth going to the library and getting a copy.

Flipping Vs Speculating

I read a post from the Carnival of Real Estate Investing asking is Flipping Speculating?

Dough Roller makes a couple of good points that I agree with

• people that flip based on assumed rising prices are speculators, whether they do it by Day Trading Stocks or ala Casey Serin
• Speculators are looking for quick easy profits

He makes another point that I don't agree with in regards to leverage. If you use leverage you are speculating. I think most businesses use leverage to a large degree, so I don't think that this is true. Of course, I use leverage to a great degree as do most real estate investors. This is the norm in real estate - not many pay cash for an apartment or house as they would to buy stocks.

One of the commenter's (engineer) makes an excellent point about investing but fails to recognize how it applies to real estate. His comment is that investing involves buying equipment to improve the ability to produce. When an investor buys a house and rehabs it, he is doing exactly that. For example, putting on a new roof, new windows, a new furnace, painting and decorating all improve the income potential from that piece of property. So Engineer makes the point exactly that an person that buys a house and rehabs it is a true investor and not a speculator.

So the real question comes down to the time frame the property is held. If I hold the house for 20 years am I a real investor Vs selling the house in 6 months or a year? Rehabbing is by no means "easy profits" (we put in a helluva lot of work to rehab our Cheektowaga house). What about the house that I lease-optioned for a year? Was that an investment or speculation?

My definition of an investor is:

• Purchasing an undervalued asset and improving it so that it can generate more income

By my definition, people that buy stocks or mutual funds are not investors at all!!

I think that Dough Roller nailed what a speculator is.

Is religious belief evidence of evolution?

A great quote via TheCorner:

I studied anthropology in college, and one of the things I learned was that certain human social structures always reappear. They can't be eliminated from society. One of those structures is religion. Today it is said we live in a secular society in which many people—-the best people, the most enlightened people—-do not believe in any religion. But I think that you cannot eliminate religion from the psyche of mankind. If you suppress it in one form, it merely re-emerges in another form. You can not believe in God, but you still have to believe in something that gives meaning to your life, and shapes your sense of the world. Such a belief is religious.

Today, one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. Why do I say it's a religion? Well, just look at the beliefs. If you look carefully, you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.

There's an initial Eden, a paradise, a state of grace and unity with nature, there's a fall from grace into a state of pollution as a result of eating from the tree of knowledge, and as a result of our actions there is a \judgment day coming for us all. We are all energy sinners, doomed to die, unless we seek salvation, which is now called sustainability. Sustainability is salvation in the church of the environment. Just as organic food is its communion, that pesticide-free wafer that the right people with the right
beliefs, imbibe. Eden, the fall of man, the loss of grace, the coming doomsday—-these are deeply held mythic structures. They are profoundly conservative beliefs. They may even be hard-wired in the brain, for all I know.

I certainly don't want to talk anybody out of them, as I don't want to talk anybody out of a belief that Jesus Christ is the son of God who rose from the dead. But the reason I don't want to talk anybody out of these beliefs is that I know that I can't talk anybody out of them. These are not facts that can be argued. These are issues of faith. And so it is, sadly, with environmentalism....

— Michael Crichton

One of the most interesting things to think about in regards to the "elite" is the issue of evolution and religion. The "elite" are breeding themselves out of existence while the religious are populating the world. If evolutionary forces are at work this would argue that religious belief is a core to survival of the species and discount the beliefs of those who deem themselves of superior intelligence.

Lawyers Molding Society

I think we have fallen off a precipice - graduating too many law students and too few scientists. Lawyers now control all of the modern debates in our society while scientists remain quiet and their influence discounted.

And debate is exactly the right word to describe how our society is handling problems. The use of data and science is no longer part of the equation. Global warming is the primary example here, where the greatest propaganda war of our time has subdued the (lack of ) scientific facts to back up the hysteria. Politicians (i.e. lawyers) speak in terms of "consensus" - not facts. Communication is based entirely on emotional appeals rather then looking at data.

Businesses don't make decisions about how to bring to market products that will save lives or make our quality of life better. Instead, Boardrooms decisions are controlled by fear of lawsuits. As a business owner myself, I spend hundreds of dollars buying liability insurance, establishing Trusts and LLC's to hide my assets from scavenger lawyers. The damage the lawyers did to Dow-Corning in regards to false data regarding silicone breast implants is one glaring example of the damage lawyers do to society.

And lawyers create dumb laws because they focus on winning debates rather than using science and data to create good laws based on facts. The current "energy" bill that just came out of committee is full of idiotic regulations. Some, like the ethanol incentives, will actually harm the environment, hurt the poor (higher food prices) and make us less prosperous. The banning of DDT has led to the death of millions from malaria - but, hey, what do they care about Africans, when they can get cash from the environmentalists?

Even our war against the Islamofascists is being squelched by lawyers who advise the CIA and military about how to fight the war. So we fight a war of timidity to avoid scandal rather than fight to win.

People (lawyers) that think that they are right because they know how to debate are filled with righteous smugness that disgusts me. But our society is reaping what it sows. Science is not taught well or emphasized as a way to success in our country. But become a lawyer and you can be like John Edwards and live in the rich America. Who would want to struggle as a scientist when you can do that?

One Leader with Courage

Here's an article from the President of the Czech Republic - Vaclav Klaus - talking about the real threat to our way of life. Hint: it's not global warming

Stop Your foreclosure!

I have been "working" with one client to buy his home for about 2 months now. He has been dragging his feet every time I try to meet with him or get information from him. He stopped paying his mortgage March 1, 2006 - 15 months ago! How is it that he is still living in his house after such a long time? A foreclosure auction, even in NY, takes less time than this usually.

There's a huge industry of lawyers and other swindlers that have sprung up to help people "stop foreclosure". For a fee these people will do something that delays the inevitable. My client paid a law firm $1800 to stop his foreclosure and they did. The first foreclosure was stopped. Of course, when my client did not pay up the back interest and fees, the bank filed another lis pendens (lawsuit) to foreclose again. Initially my client probably had about $20k in equity in his house. Now a year later he owes far more than the house is worth. On the one hand he got something - he is still living in his house and he has been doing it "rent free" for a 15 months. Of course, it was not really free. He would have been better of financially selling the house, taking the cash and renting a cheaper place.

When I first spoke with him he was intent on getting some of "his equity". Despite being well educated he didn't seem to understand that his equity was disappearing every month that he hadn't paid the banks. When I finally told him what he owed he finally got serious about selling and avoiding the foreclosure. Now we have to hope that the 2 banks will take discounts on what is owed them, otherwise the house will go to auction and he will have 7 years of bad credit to look foreword to.

So do these "stop foreclosure" experts work? I guess to some extent they do if your objective is to stay in your house. But if you have no intention of re-instating your mortgage, they just buy you a little time. Maybe that is what you need, but it is not a recipe for financial success. Of course, if the people in foreclosure knew anything about financial success, they would not be in foreclosure to begin with.

Staging a House - Does Race Matter?

We had a home stager visit our Cheektowaga house last night - TheHomeStylist. In general, she gave us some useful information on putting some minimal furniture into our empty house. Some chairs, a table and lamp in the living room, a couch in the family room, bed in the Master suite and table in the kitchen. She thought the house had 3 big problems - the entryway/stairway has large mirrors (see the pics), black carpet on the stairway and dark red carpet in the master BR. All of these were there when we bought the house and in good condition, so we did not replace them. At this point, I'm not sure we want to tackle these features - the mirrors would be a very large job (They are 2 stories high and the wall behind would need to be re-drywalled and painted).

One question she failed to answer is whether there is a difference between what African-Americans look for Vs Caucasian buyers. After holding several open houses, it is apparent that the target market for this house will be an upscale African-American couple with children. I have been in a lot of homes of blacks and feel that their decorating tastes are quite different than for whites. Does this mean that when they buy, certain colors will appeal to them different than a white buyer? I don't recall ever seeing anything written about this. All of the Home Stagers I have seen pictures are of white women.

My other problem is how to market to this target audience? News paper ads are totally useless. I'm not sure if this market segment uses the Internet MLS and signs are very limited geographically. Ultimately, a good Realtor may be the only answer.

Why can't men do anything?

There's been several articles written recently about the incompetence of men to fix anything. I wrote about becoming a Jack of all Trades here. I really didn't learn any of the skills from my father - in fact I have far exceeded the number of things that he has done. But he never had the fear to try something, even if he could not do it well. That has been the same attitude that I have embraced.

It seems now that most younger men don't want to even try - they just hire someone. Are they afraid of failing or imperfection? If so that is a poor reflection on them. On the other hand, I suppose that means that we are becoming a very wealthy nation.

Common Sense Capitalism

John Stossel is one of the few in the media that I like to read or listen to. He seems to have common sense that few reporters are able to access. Here's an article called the Double Thankyou which speaks to the truth of what Adam Smith talked about 3 century's ago. It puzzles me so that the left clings to the Marxist ideas of government controlled health care.

Global Warming Deniers at it again

Global Warming Deniers at it again

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.