Wednesday, October 31, 2007

Ebay Sales

A big idea of mine, was pretty simple. Buy stuff on ebay at a discount, and then resell it properly for a profit. It wasn't supposed to be a huge amount of money, but I had hoped it would make up another hundred or two for the month.

Here's how it would work: Many electronic products are hot sellers, but improperly named. Or, it just so happened to fall under the radar for no particular reason. So, I chose a product that regularly sells for a specified amount, minus the expected profit, shipping, ebay relisting and paypal fees, then I am left with a ceiling price I can pay to buy it with. In theory, as long as I get a good deal, I should have no problem making money at it.

So, my first sale I shot for a Friday Listing and had it run through Monday 12pm PST. I was quite shocked when I did not get one bid. I immediately relisted it at a lower price, and shot for a Thursday sale.

As it turned out, I had twice as many views Monday to Thursday as I did Friday to Monday. I attribute this to more people either getting paid on Thursday, or looking forward to blowing the Friday paycheck before it even arrives. Anyway, I had 4 bids and ended up making about $10.00 or something silly like that. After looking at expired bids, it seems Wednesday was a super shitty day to sell (but great day to buy!)

While technically, not the windfall I was hoping for, if you change perspective it wasn't that bad as a dollar for dollar investment. Think about it this way, with a $401.00 investment on the 15th, two weeks later I had a 2.5% return on my money. To further put it into perspective, if I left that money in a High Yield Savings account (where it came from) it would have taken me 6 months to make that same $10.00.

If I left that $401.00 in the savings account, a year later it would be worth $20.00 interest. It's easy to see where I could make that on one sale. But, even if I follow the same schedule for the rest of the year, that same $401.00 would bring in another $260.

Now, sure, by itself it's not worth it, but if I put together 3-4 deals like that a week, that's another $200 per month income. Yeah, I know, it's nothing great. I'll admit it, I had hoped for better. Now it seems another company is flooding the marketplace with what I was going to resell next week. Figures.

Domain Registration

I would have been able to register a .com address for this site, but .ifo was on sale for $3.00 instead of $9.00. Sure, I know it's not much saved, but I really thought it was the principal of the matter. I would not be getting richer if I overspend when I didn't have to.

Monday, October 29, 2007

Positive Wealth

Something I learned a long time ago is that someone who makes twice my salary, likely has the same amount of money to spend that I do. If you take, for example, someone who makes $50,000/yr and owns a $250,000 house and compare them to someone who makes $100,000/yr and owns a $500,000 house. The first obvious thing is that the monthly payments on the house are twice as much. If you know human nature, you can assume he is driving a car that cost twice as much as the first person.

By using this rational, anyone can save money, you just need to downgrade your lifestyle a little bit when you can.

Sunday, October 28, 2007

Subprime Meltdown

I am really getting sick and tired of goverment comments, reporters, articles and common people all making comments about this real estate bubble. Everyone talks about it, but no one knows what the hell they are talking about. Since I do real estate investing, I know exactly what the problem is.

If you buy a house appraised at $250,000, you could get a 90% loan at $225,000 pretty easily, and make payments based on your income. When the ARM resets in 2-3 years, the interest rate spikes up so you simply need to get a new ARM. The ARM isn't the problem. The PROBLEM is that house buying slowed, so sellers lowered the price. Now, months later, that same house will only appraise at $225,000, which is what is currently owed. Now when you try for a new loan, you need 100% loan PLUS closing costs.

The issue isn't that ARMS are bad, or that the market slowed... BOTH happened at the same time, causing buyers to stop buying all together.

Now that foreclosures have begun making the way through the REO system, banks are dumping these properties back on the market for thousands less than homeowners. Now you have a $250,000 house selling next door to a $150,000 house. So, if that seller can't refinance it, he has to sell it, but he cant sell it. he may as well forclose too. Whether or not he can make payments or not, is irrelevant. Why SHOULD he, is the question.

Just wait though... the baby boomers have started to file for Social Security. Soon they will move into old age homes. Soon, all these houses will be willed to their kids, and then resold for much less than they are worth at that time, just to get rid of them in a market that doesn't need this much housing. Guess where i would like to invest my money? That's right, old age homes.

Thursday, October 25, 2007

Irregular Monthly Bills

Some bills only show up every three months or so. These have always been annoying to me because they don't fit into my regular routine. So what I did was add up everyone who wasn't regular monthly bills. In my case, it was Water $65, Sewage $65, propane $100, Taxes for my house $375/mo and Taxes for my rental $350/mo. Based on when they are due divided by four weeks a month. Whatever the exact numbers were, that total came out to be $225 per week. So I have that $225 automatically moved from Checking to Savings each week. I base the rest of my monthly bill schedule off what's left.

While this doesn't really save any money, it makes sure I have the funds available to me when the bill is actually due. Even big ones like Taxes will have the funds available. Just make sure not to spend the money, that's why I frequently move large sums of money from my savings into a High Yield Savings Account. That will also pick up a few dollars per year in interest.

Lower Cable Plan

I guess I had a "Platinum" plan which was everything up to HBO,Etc. I called up Comcast and had them drop my plan down to Basic with an extra Family Plan. Platinum was $65/mo but now, Basic is $13/mo and Family is $8/mo. You do the math. We only lost one channel that my wife watched. My baby lost one too, but I don't think he really cared. We lowered it like 3 months ago, and barely even noticed.

Lowered Cable bill from $65/mo to $25/mo and after the first week, no one cared.

Closing Escrows

Escrows, in my humble opinion, SUCK.

The basic idea, is that you owe taxes every 6 months, and insurance every year on your house. The extended idea is that you have extra money in this account just in case taxes or insurance goes up next time it needs to get paid. This way, you pay month to month, the mortgage bank makes sure it gets paid on time. Every month, you have to pay Principal, Interest, Taxes and insurance. If you don't pay it in full, they won't accept payment.

This causes several issues for the homeowner.

Let's say you owe P&I (Principal and Interest) of $1000. You also owe your Escrows T&I (Taxes and Insurance) another $300. So each month you must pay $1300 no matter what. However, if you closed your Escrows you would only owe the bank P&I of $1000. If you happen to be a little short on the due date, you only owe then $1000. You can come up with that extra $300 next week or even next month.

Another issue is that 'cushin' they build in for when the T&I goes up. If your escrows fall below a certain amount, they will automatically raise the amount due every month. So, every few months the computer looks at things and decides you need to pay another $50 "Just in Case".

Lastly, you know what the bank is doing with your escrow funds you give them? Of course, they are investing it and making money off your money. Since they are not giving you any interest rate like a savings account would, why let them make money at your expense?

So, here's what I did; I called Countrywide and told them to close the escrow account. We settled up on the funds left over. Now, I am responsible for paying my own taxes and insurance when they become due, on both my houses.

In order to make sure this happens, when my weekly paycheck is deposited into my local bank, money is automatically moved from checking into savings. The funds are then manually moved into my High Yield Online Savings Account. I manually do that part because I may want access to some of that money for some reason.

So what happens is that instead of Countrywide making money off me, I'm the one collecting the interest while it sits in the bank for six months. I also owe them much less per month than I did before, making the monthly payments easier to make. And lastly, i don't have some computer deciding I need to pay even MORE per month than i already am.

Think i am kidding about that computer? My final straw was when my payment went up again to $200 per month MORE than I actually owed anyone. So, instead of seeing how I owed $350/mo in T&I, it wanted $550/mo in T&I "Just in Case". So, all I had to do was take $3600 in taxes plus $600 insurance and divide by 12. That means that I only owe $350/mo. So if I divide that by 4 weeks, I shovel away $88 weekly into that savings account. For those of you who can do the math, yes, every few months there is a 5th week. That extra money can go toward any raised rates that may occur.

"Just in Case" went from $200/mo to $0/mo
I make 5.05% on the Escrow funds until they get paid every 6 months.

High Yield Savings

Once I started using a savings account with my bank, I realized it was offering me a whopping .15% Wow, way to give back, guys. So, after a quick search on Bankrate.com I compared different programs and easily settled on FNBODirect.com who were, at the time, offering 5.05% While this isn't the most earth shattering interest rate, it's a whole lot better than that paltry .15% Wachovia was offering me. HSBC had a better rate, but I HATE their company with a passion.

Opening the account was annoying, to say the least. Having to prove I was me, to deposit was bad enough, but when I had to prove I was me again to withdraw back to the same account, that was overkill.

However, now that it is said and done, I have a place to put my money, that I have 3-4 day turnaround access to. From what i read, the way they transfer money is old-school, so it's really slow.

Savings Interest Rate changed from .15% to 5.05%

Refinancing My Car

Somewhere in there we bought a 2007 Chevy Impala LTZ that cost us about $28,000 and a 6 year loan. This was an impulse buy that we never should have done. At the time, the goal was to sell this investment property and have the profits pay for half the car, then we would refinance it for a normal loan. The problem was that we were never able to sell the house, it turned into a rental. Now we had this $560/mo payment that we couldn't afford, not to even mention my own car which was another $489/mo.

My own loan for $489/mo was going to be ending in a few months anyway. However, I did have the funds to pay it off, if I chose to. At 1.9% it seemed pointless to pay it off. I would make more leaving it in the bank. So I decided to leave regular monthly payments, and pull the money from savings as needed.

I went to e-loan.com and had them bid for my wife's loan. I got two offers. One from RoadRules or some such nonsense, and one from Wachovia. Guess which one we went with?

They only lowered the payment by like $20/mo, so in that way it wasn't worth it. The thing is, since we lowered our interest rate from 10% to 8% it ended up shortening our term by two months. i also got to skip a month's payment as well.

Did I really skip the payment? Nope, put it into the savings account.

Lowered Interest Rate from 10% to 8%
Shortened Loan Term by 2 months
Skipped 1 payment worth $560

Refinaning My Rental property

Now that I was back in control of my day to day finances, it was time to correct this mortgage situation. My rental house was being rented out to a family that had a fire. I was being paid by the insurance company, and they were paying top dollar for temporary housing. The problem was that while I was taking in $2,800 i was still paying out $2,800 in mortgage, taxes, HELOC and Credit Card loans.

Because this was during the Housing Bubble, finding a refinancing mortgage proved to be very difficult. I had a bankruptcy, investment property, owned less than one year... Every odd was against me. What I ended up doing was finding a Mortgage Broker, who found a Mortgage Broker, who found a bank. Cost me a little more, but it got the job done that no one else seemed to be able to do.

What I did was skip two payments, and put that into the bank. Mostly, those two months paid for the refinance fees. I was also able to squeek another $1700 cash out at closing. this brought my Loan to Value at 80%. this made the bank happy, and me happy as well.

Skipping Two Payments: $3,400
APR went from 10.4% (at 95%ltv) to 7.8% (at 80%ltv)
Monthly Savings: $300

When all the dust had settled, I was left with the following:

Private Loan: $10,000
Private Loan: $4,500
Credit Card: $9,000

Savings: $5,300

Cleaning Up My Mess

I was swimming in debit owing dozens of companies, 29 days late on both my house payments, and now came my first small court claim. I had to come up with something to fix this mess I created.

I managed to borrow $10,000 from my aunt and uncle. The terms were that it would be a secured loan in that it was tied into my investment property. When I refinanced or sold, they would get paid back in full. In theory, I could have done a similar thing to my own house, thus making them feel better about loaning my that much money.

So, I paid off most of the people I owed, but there was a few left. I finally found a buyer for my old car bringing in another $4,500. I used that extra money to pay back the last few lingering bills.

Preface

When I was 21, I had graduated college for Graphic Design. I had already worked for Marvel Comics, and figured this life stuff was easy. I am going to follow in the footsteps of Todd McFarlane, start my own company, and be rich by 24.

11 years later, Todd McFarlane is rich 20 times over, and I am in debt up to my eyeballs. While I am not quite sure how this happened, but I intend to put an end to it.

Something seemed to happen to me when I turned 35. It was like, overnight, my whole view of things changed. I realized that not only have I had all kinds of money with opportunities, but now I lost all of it, and I had a new baby to spare. I think, somehow, he changed my views at just the right time.

In 2005, we were financially fucked with credit card debit, house debit, and car debit. So, we did what we had to, and filed for bankruptcy. This killed our credit, but it was the best move for us. I can't regret doing it. My only advise, in retrospect, seems to be that "You can't eliminate your debit by consolidating your debit." Taking out more credit cards with higher balances will only give you higher monthly expenses. You must accept responsibility for your actions and you can either borrow from a relative and PAY IT BACK, no interest, or file for bankruptcy and move on.

In 2006, while I was credit card free, I had a leak in my roof, and it couldn't wait. I evaluated my options, and decided I would kill four birds with one stone, so I refinanced. What this did was reset my mortgage ARM, fix my roof, consolidate some bills, and give me a boat-load-of-cash to reinvest in Real Estate. So, my ARM was reset, my roof was fixed, my old bills were gone, and I bought a garage door, outside doors, 50" plasma TV, curtains, vacuum, leather couch... you get the idea. When the time came for investing, I found a really messed up house and dumped the last $20,000 into purchasing it. Since this blog isn't about Real Estate, we will just skip past the financial disaster that house was. Four months later, I sold it, with an $8,000 profit.

In 2007, I took that $38,000 check I got when I closed the house ($20k down, $10k to fix and $8k profit) and set off to reinvest it into another house. While I was looking around for another good deal, I paid up some back bills, and I bought a really nice refrigerator, double-door dishwasher, new computer, tires and breaks for my car, clothes, oh, and did I mention the brand new 2007 Chevy Impala LTZ?... you get the idea. When it came time for the house, I only had $15,000 left to buy it and fix it with. I ended up having to put $10,000 onto a credit card, borrow another $4,500 from my Mom, and spent $3,500 security money I received on it just to get by.

At the same time my baby was born, bills were all backed up and I was forced into a situation where I would lose my investment AND personal house. The Baby's doctor bills were all backed up and it had gotten really bad for us. If i didn't do something smart, I was going to lose everything I worked hard for.
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