Chapter Two - Real Estate - Start with Excellent Credit

Chapter Two – Laying the Groundwork

Your first goal – buy your own home as soon as you can. You can start making money right away just by owning your own home.

Story: My husband and I were just 26 and 25 years old. I was in graduate school (so I was a net loss for income) – my husband was fresh out of college and his salary was small. We had one baby born that year and we bought a small 1000 SF older home (2 BR 1 BA) in North Carolina for $48,000. I love being able to say that my first home cost only $48,000! We moved in, we liked doing home improvement projects and over the next 2 years we fixed up the place and made it better than it was. It was simple things like painting the dark cabinets white to brighten the kitchen and opening a pass through between the kitchen and living room to open up the house. Before we sold it, we put in new carpet also. We lived there for 2 years and then needed a bigger house – so we moved to a 1400 SF home in Apex. We decided to rent out our first home for a couple years. It was quite a distance from our new home. Since it was an older home, we had many calls from the tenants and it became a pain to go out there to fix things all the time, especially since we now had 2 young children (1 who was very ill). So, we sold the home after owning it about 4 years. Before we sold it, we did the most important thing (something that seems obvious but most sellers do not do) – we made it look incredible. We put in new carpet and repainted all the walls. The place looked great. We sold it for sale by owner and it sold within 2 weeks for $80,000! During the time we owned it, we had to replace the water heater, heat pump, wood rot on two floors, and the sill. That cost us about $10,000 – yet, even so our profit was $22,000!!!! We were floored. Wow, that was the easiest way in the world to make money.

Our second home in Apex was new construction. They were selling these homes pretty inexpensive for 1995 – we paid about $78 per square foot or $109,000 for a 1400 SF new home. We lived there for 3 years and sold the place to move into another bigger home. We were able to sell it for $122,000 and again we net $13,000 in just 3 years and we didn’t have to do anything on this place for improvements! Plus the $22,000 and the $13,000 were all tax-free since we lived in the home for at least 2 consecutive years of the last 5 years we owned it. We knew we were on to something!

Our third home was a little different – we got it for a good price, $92 per square foot but the market hit $100 per square foot and then it remained steady for about 4 years. It was frustrating – but that can happen and you need to be prepared for it. After the 4 years prices starting going up again and now are going up at a remarkable pace and have hit around $122 per square foot with people now asking between $135-$150 per square foot in some neighborhoods. If they start selling for those prices, I expect to see the prices here follow. Even at the $122 per SF, we are looking at over $60,000 gain right now – but, we finished our third floor and are adding a sunroom so we are adding another 500 SF to our home – which will bring in an even bigger return. We now have 4 children who have friends and schools they attend, so house hopping is no longer an option for us – I wish it was because house hopping is a great way to make free money! More on that later.

The point of this story is to show you how much we gained from doing nothing but living in our home. Appreciation is a great thing. When you rent, you are paying down someone else's mortgage and giving away your appreciation and tax advantages. Remember, you can write off all the interest and more from owning your own home! So, as soon as you can, buy a home. Even if you are only going to live there for 2 years and then want to move on – the gain is worth it. There are lots of great financial loan programs for first time home buyers too – so do some research, look into it, spending time doing that will pay you back! Find a good home – even if it is small and buy a home as soon as you can.

The second best thing you can do during this preparation stage of your life is to establish excellent credit. I cannot stress how important this will be to your success. It might take 2 or 4 years before you can start really investing but buying that first home and letting it appreciate while you work on establishing excellent credit is the start you need.

Here are some things that you should know about credit – it is not just about paying all your bills on time. It is about how much debt you have, how close to the limit of your credit cards your balance is, and how many times your credit has been checked. I have never paid a bill late in my life. I have always had excellent credit – but my score dropped when I did some heavy investing. I had to use creative financing to get started – more about that later – I had many credit inquiries because of all the loans I needed to apply for, and my debt ratio is high – all of these things decreased my score even though I have never paid a bill late. Still, starting with the excellent credit rating had allowed me to get heavily invested when it was my time to start investing. Now, I will need to take 1-2 years to pay down some of debt and not have my credit checked and I expect to be back to that excellent credit rating – then I can move forward again. Sometimes it can take time to do this, you won’t have instant riches – but you will be on your way to a good financial future if you have patience.

One more thing about credit, having a home to pay on will be a great start to your excellent credit rating – but you will need to have some credit cards that you charge on and then pay off without letting your balance get close to your credit limit. All these things will help improve your credit – you have to use credit to get “credit” for it!

To summarize, assuming you are ready to get started – maybe fresh out of college – or even if you just have a decent job and a high school diploma – your first goals should be:

1) Research First Time Homebuyer programs – many will allow you to put 0-3% down.
2) Buy your first Home
3) Spend 2-3 years getting an excellent credit rating.

Highlights of How to Make Money - Real Estate Investing

I have started writing a short ebook on how to make money by investing in real estate. This is intended for the average person who has little or no cash to start but has a desire to invest in real estate and start making money. Over time, I will post the entire ebook - a chapter at a time. Here is my introductory chapter.


Chapter One – Highlights of How to Make Money

Most people dream about how much easier life would be if they had money. They could work less, take trips, have nice things, and provide for their family. How does one create that situation? The lucky ones are born into money, but for those of us who are not, we have to work at.

So what can you do to make money? Well, the key to making money is having money – in most cases it is much easier to make money if you have at least some money to start with. Many of us do not – so then what? Well, here is your first big piece of information – you will not make it rich by going to work each day, bringing home a paycheck, and having a savings account. You have to be more proactive than that.

Some folks invest in stocks. If you are dedicated and learn the market so you invest in the right stocks and of course have the money to invest to begin with – maybe you could get rich that way. For me, it doesn’t work. First, you have to have money to invest – I didn’t. Second, you need to really learn the stock market and spend a lot of time investing. I am a smart person, I have a Ph.D. in the area of Mathematics – but stock market investing is still a challenge to me. It still seems like such a gamble and I don’t have any influence on the outcome. Sure, I do the 401K stuff for retirement but even with that, I have watched my money decrease over the years only to finally get back to the starting point 6 years later – what a waste of my money. I could have been much more successful investing in real estate for those 6 years!

So – yes, this ebook on making money is about investing in real estate. You hear it all the time – real estate makes money. Over the long run, history has always shown that you make money in real estate. How do you get started? What if you have no money? How do you know what to do with real estate? This short book will hopefully provide you with some information on what you can do to prepare for your investments and what to do when you are ready to get started. This book is designed for beginners, not for seasoned professionals.

There are many ways you can make money in real estate:

1. Flipping houses
2. Buying good deals, holding for 2 years and moving to another good deal
3. Buying and holding properties by renting them out
4. Combining #1 and #2 – buying and living in your flip and then selling 2 years later
5. Wholesaling
6. Lease / Options

There are more ways too but these are the ideas I will focus on. I will discuss how to get started including what you can do to prepare yourselves for this adventure. I will talk about financial options, how to flip, how to be a landlord, how to find the right property, different ways of counting your “income” from your investments and more. Tune in for more …

Snoof? No... Mom, Spoofee

I hate to give away all my great sites... but, since no one that I know even reads this blog yet, I guess it won't be a problem. I recently told my mother about a site that I have found great deals on for a couple years now. It is spoofee.com. She emails me later asking, "Lynne, what was that site again? Snoof?" It is spoofee.com! It has all sorts of great deals. Here are just a few that I have taken advantage of:

1. Christopher wanted a flat panel LCD monitor for his computer. I bought one that I saw on Spoofee. It was $229 with $100 rebate for a 19 inch LCD. That by itself ($129) is a good price but with it came - a free $100 DVD player, $90 MP4 player, and a $60 mini-fridge - all for free just because I spent $250 (I added in some DVD RW's). So once I got my free items (they came the next day) - I put them on Craigs list and sold the DVD player for $40, the MP4 player for $48, and the mini-fridge for $20. This returned $108.00 - making my purchase for the 19 inch monitor (assuming I get my rebate...) $21.00. Pretty good, huh?

2. I got a free subscription to PC Magazine - which I actually am enjoying!

3. I got a free (with rebate) 1 GB SD card for my Wii.

4. And more that I will list as I think of it....

Suffice it to say, if you check spoofee and don't mind rebates - you can get some great deals there!

Slingbox - what?

We got a new toy for Christmas. A slingbox. Let's backtrack for a minute. We went to LA on vacation. We had a nice hotel except for the lack of TV stations. No cartoon network - my 3 year old is saying she wants Dora or Scooby Doo - sorry no TiVo here... So, when I read about the slingbox, I thought this would be a good solution. Imagine this - where ever you are, you can watch YOUR TV - all the shows you taped on your DVR, your live TV - you would be taking YOUR TV with you wherever you go. The catch? You will need a PC with windows and be able to connect to the internet. The slingbox allows you to connect (stream the data) to your personal TV to the computer. Your remote sits on the screen next to the TV monitor - so you access your TV the same way you would at home - you can tape shows, watch live TV, watch taped shows, set up Season Passes - anything that you would do on your home computer. It is really a cool device. It costs about $180.00 although I found mine on sale for $108.00. You can buy it here at: Buy.com.

It also works on mobile devices (an extra $30 for the software) - our phones are not that advanced so I haven't tried it. Overall, I would rate the slingbox with 4.5 stars out of 5. It streams well and being able to have my home TV available to the kids while on trips (works anywhere in the world) is a big convenience.

Quest for a Wii

Searching for a Wii for Christmas

Late in the game, we decided to get the kids a Wii for Christmas. If we had given this thought earlier, we would have pre-ordered the system and avoided a lot of hassle. We also foolishly thought that after the initial rush on launch day, there would be systems to buy prior to Christmas. We didn’t need it on launch day; we just wanted it as a Christmas gift. Once we made the decision, I started to call stores. Everyone was sold out. Stores never seemed to even know what day more might arrive. They didn’t know what time of day to call. Basically, they said – if you happen to be here when they come in, you will be able to get one. I started calling more frequently and EB games told me thatthey had just gotten some in and it would be a week before they got anymore. I waited just shy of a week and called again – guess what ? Three days after I had called last, they had got a shipment of 10 in! So, much for believing what they say.

I started calling everyday. I started asking online. We got emails saying that another shipment was coming Dec. 17 to stores. I called EB games – they would not even commit to knowing that – “maybe they will come in,” they said. There was buzz everywhere that the 17th was THE day (and maybe the last shipment before Christmas). We decided that we would go at 6:00 am and wait before Target opened. The day before THE day, Joe went to Target to buy food at 5:00 pm – he called to say that there were already 20 people in line camping out! It became clear that waiting until 6:00 am was not going to work.

We drove to other stores, EB games was still saying they didn’t know if they would get any. Circuit City said they would be getting in 10 consoles. At 7:00 pm, there were already 8 people in line for 10 systems at Circuit City. I made the spur-of-the-moment choice to consider sleeping on the sidewalk outside Circuit City. I spent some time talking with the people in line.

First in line was a woman who was about my age. She had been there since 3:00 in the afternoon. She was really nice and encouraged me to join their group. She said that that they were a great group of people that were all looking out for each other, saving spots, and bringing food and supplies for each other. We agreed to wait. My 12-year-old son, Christopher, was with me. He was dressed like he always is, regardless of season or temperature, in a short-sleeve shirt and shorts. It was getting cold – probably in the high 40’s and he was cold as we sat on the cold sidewalk at the end of the line. Almost immediately, we were offered 2 chairs and 2 blankets. We sat down and began to chat with the group. Out of the 9 people (including us), about half worked for IBM, including Joe. Everyone there was a parent about our age, wanting to get one for their kids. Person, 10, who eventually showed up was the only one who didn’t fit in that category.

I stayed there for about 90 minutes, chatting with the group. It was a lot of fun. This group was a BIG reason why we chose to do this crazy thing. It was like being at a party and hanging out with friends. Eventually Joe came and took over, spending the night. He had a great time!

A few more notes – I was surprised at a couple of things – 1) Everyone who walked by asked what we were camping out for – most thought it was a PS3 – we said, No – Wii want the Wii. Even as we were waiting, someone came by with a PS-3 and was returning it to the store! No, we did not want a PS-3. 2) The difference in the group of people who waited for PS-3’s during launch from the group of Wii campers was surprising. Much of the older generation thought – you will get hurt or mugged if you camp out for a game system – after all – stories on the news show much violence associated with the PS-3 launch! The PS-3 fans are a different group from the Wii fans. The Wii folks are more likely to be families – adults waiting to get a system for their kids. Not only was there no violence, the group of 9 that we waited with were for the most part, just like us, very nice, and great fun to hang out with.

The end of my story is that wii are now proud owners of a longed for Wii system. Since we do the 12 days of Christmas at our house (opening gifts over 12 days instead of saving them all for Christmas day) – the kids have gotten their Wii. All we have played is Wii Sports – as we have no other games yet. Wii love it. Even Reilly, 6, who really has had very little interest in gaming (Gamecube) loves it and plays it often. My 3-year-old tries to hit the balls in baseball or will pitch the ball to her older brothers! I can’t wait to play more.

Thanks to Nintendo for breaking out of the mold and creating something different – pushing buttons to game was getting old!

VOIP - Voice over IP

What is it all about?
Is it worth it?
What are the pros?
What are the cons?

After rising phone costs - especially for all the "fancy" stuff such as caller ID, call forwarding, etc. etc. We decided to try VOIP. I researched all the providers and ViaTalk was ranked #1. My friend had Vonage and it was really lousy so I was skeptical. The problem I ran into was that we used Bellsouth DSL - so we had to have a Bellsouth phone line to get our DSL. I calculated a savings of at least $25 per month if I kept my Bellsouth line with only call forwarding on it and put it on the most basic plan there was. I signed up for ViaTalk's 2 years for $199 deal that they often have. If you divide by 24 months, you get a cost of $8.30 per month! On top of that I have FREE UNLIMITED LONG DISTANCE - which I did not have with my bellsouth line - I always had to make long distance calls with my cell phone. I also have *many* more features with ViaTalk than I had with my Bellsouth line - and I am still saving $25 per month when I keep BOTH my lines! I have my Bellsouth line forward all my calls to my ViaTalk line. So - what are the drawbacks? I will say that is not perfect - but I have had *very* few problems - once my voice sounded like a robot to someone for about 10 minutes during one of my calls - only has happened one time - don't know why. Occassionally I have to enter my password in more than one time to get to my voicemail, it doesn't always seem to recognize it the first time. If my internet is down, I can only used my Bellsouth line (but at least I still have a phone). The cons are few and far between and I will say that for the savings and the increased features plus free unlimited long distance, it has been a great choice for us. Check out ViaTalk and see all the great features - like taking your phone with you, all the online information about all your calls, getting voicemail over the internet as well as on your phone, caller hunt (if no one answers at your homephone, it will ring your cell for you if you would like), and many many more. So - is it worth it? Most definately, Yes! - The husband insists that I tell you that I have signed up for the affliate program on Via Talk - so if you decide to join Via Talk and do it through my link - they will throw a few pennies (okay, maybe $50) at me...