By Alana Klein • Bankrate.com
It's time for less talk and more action.
Like most homeowners, you probably spent the winter months talking about the various home improvements you'd like to make. Now that's spring is here, it's time to act on those remodeling impulses. After all, spring is a time of renewal, change, and new beginnings.
Unfortunately, it's also a time when crooked contractors come out of the woodwork to prey on innocent homeowners. "Some are actual scam artists, while others are just incompetent or unethical," says Ellis Levinson, a consumer reporter and author of the book "Hiring Contractors Without Going Through Hell."
The good news is that you can protect yourself against these scams. In fact, many scams are easy to detect if you take the time to become an educated, savvy consumer. "Compare prices, call references, and research the project you're undertaking in advance," says Bruce Johnson, author of "50 Simple Ways to Save your House." It seems simple but many people find this process overwhelming.
Levinson calls it emotional laziness. "It's amazing to me how much time people will put it into buying a TV because it's fun. But when it comes to remodeling a kitchen, people have no time. They see it as drudgery," Levinson says. Ultimately, he says, doing the research to protect yourself is much easier than paying for the consequences.
To help you differentiate a scam from the real deal, Bankrate has compiled a list of the most common remodeling scams. Beware of the following key phrases, and remember, if it sounds too good to be true, it probably isn't.
Key phrases to beware of:
• "I just happen to be working in your neighborhood."
• "I have materials left over from another job."
• "I need the cash up front."
• "I have a special offer that's good for today only."
• "I can help you finance the project."
• "I want to use your home as a model."
"I just happen to be working in your neighborhood."This happens when contractors appear at your home unsolicited to inform you that they noticed some problems with your home's (insert: chimney, driveway, windows, plumbing, etc.) while working on a neighboring home.
For example, the contractor might say he or she was on the roof of your neighbor's home and noticed missing shingles on your roof. This may be the case -- but often no repair is needed.
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Saturday, April 21, 2007
Monday, April 16, 2007
Money Does Talk!
When buying something, you can buy in one of two markets. The first is buying on terms in the retail market and the second is buying in the wholesale cash market. This can be illustrated by referring to the biggest purchase we all make in our lifetime - Real Estate.
In recent years, when you are buying a house it is easy to get financing of the first mortgage, so the seller is not forced to finance the whole sale. What I mean is the seller doesn’t become your first mortgage holder, the bank lends the money and the seller get the cash. Moreover, he will most likely make some concessions if he doesn’t have to carry back a second trust deed.
Therefore giving the seller all cash, will usually get you a better deal than asking the seller to let you buy the house with a very low down payment, with him carrying back a sizable trust deed. The big savings come when you are buying real estate that doesn’t have easy institutional financing available. The purchase of vacant land can be the best example. My father was interested in buying industrial lots in the city of Montebello, just east of downtown Los Angeles. This was during the 1960’s.
In those days it was common for a buyer to put down 20% and the seller to finance the remaining 80% for 10 years at 8% interest. For example: a $10,000 lot would cost you $2,000 down with $97.06 payments every month. After 10 years the total of the principal and interest payments would be $13,647.45. If you wanted to build on the property you had to pay off the land loan, first. The sellers then would not have to wait the whole 10 years before getting all their money.
Many property owners sold their property because they wanted money and getting the $2,000 wasn’t much money to them. So, my father would offer $5,000 all cash to the sellers. More than 1 out of 5 would take the cash up front instead of waiting for payments over 10 years. By offering the extra $3,000 cash down, my father saved $8,647.45 on the sale ($5,000 on the price reduction, plus the interest on the note). Now that is buying wholesale!!
Buying cars can be done the same way. When you pay retail, the dealer talks monthly payments. If he lowers the price, he’ll raise the interest rate. When you are buying for cash, he can only talk price. When you are leasing an automobile, they don’t even tell you the price!
The major consideration in leasing a car or not, is made by the leasing company to be all about what the monthly payment is going to be and how much extra it is going to cost you when you drive over 12,000 miles per year. Ever financed a used car from a “no credit check” dealer? He gets you for 36% interest on the balance you borrow, after getting a 50% down payment from you. Then if you miss a payment he takes the car and sues you for the difference. Buy what you can afford in cash and save making the lenders rich.
I read a report once that said that the average man makes $1,500,000 over his lifetime. Of that amount, he uses $600,000 to pay the interest on his purchases. Let’s look at the purchase of a home, from a slightly different point of view. A man who makes $1,500,000 in a lifetime will be earning on average about $30,000 a year or $2,500 per month.
He can afford to spend 40% of his income on rent or a mortgage payment. This means that he can afford a $150,000 house. If he can qualify for a 90% loan he would owe $135,000 at 8% amortized over 30 years. That means he pays $221,609.58 interest plus the $150,000 principal to buy this one house and pay it off over 30 years. The interest alone is almost 15% of his lifetime earnings! Buying anything on credit can cost you more than the retail price because you must add the interest to the cost of the item.
My suggestion. Buy for cash and negotiate for the best price you can get. If you must borrow, pay it off in as short a time possible. Also, never borrow for personal consumption. Postpone the purchase long enough to pay cash. If you can’t afford to wait until you save the money, you shouldn’t buy the item. It is just too expensive. To buy on payments raises the cost even higher than the cash price, so it becomes even more expensive. So if you cannot afford the cash price, you definitely cannot afford the financed price. My suggestion is to pay cash and buy wholesale. BUY THE BEST, PAY CASH
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About the Author: Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other articles by Willard at http://www.kismetgroup.com
In recent years, when you are buying a house it is easy to get financing of the first mortgage, so the seller is not forced to finance the whole sale. What I mean is the seller doesn’t become your first mortgage holder, the bank lends the money and the seller get the cash. Moreover, he will most likely make some concessions if he doesn’t have to carry back a second trust deed.
Therefore giving the seller all cash, will usually get you a better deal than asking the seller to let you buy the house with a very low down payment, with him carrying back a sizable trust deed. The big savings come when you are buying real estate that doesn’t have easy institutional financing available. The purchase of vacant land can be the best example. My father was interested in buying industrial lots in the city of Montebello, just east of downtown Los Angeles. This was during the 1960’s.
In those days it was common for a buyer to put down 20% and the seller to finance the remaining 80% for 10 years at 8% interest. For example: a $10,000 lot would cost you $2,000 down with $97.06 payments every month. After 10 years the total of the principal and interest payments would be $13,647.45. If you wanted to build on the property you had to pay off the land loan, first. The sellers then would not have to wait the whole 10 years before getting all their money.
Many property owners sold their property because they wanted money and getting the $2,000 wasn’t much money to them. So, my father would offer $5,000 all cash to the sellers. More than 1 out of 5 would take the cash up front instead of waiting for payments over 10 years. By offering the extra $3,000 cash down, my father saved $8,647.45 on the sale ($5,000 on the price reduction, plus the interest on the note). Now that is buying wholesale!!
Buying cars can be done the same way. When you pay retail, the dealer talks monthly payments. If he lowers the price, he’ll raise the interest rate. When you are buying for cash, he can only talk price. When you are leasing an automobile, they don’t even tell you the price!
The major consideration in leasing a car or not, is made by the leasing company to be all about what the monthly payment is going to be and how much extra it is going to cost you when you drive over 12,000 miles per year. Ever financed a used car from a “no credit check” dealer? He gets you for 36% interest on the balance you borrow, after getting a 50% down payment from you. Then if you miss a payment he takes the car and sues you for the difference. Buy what you can afford in cash and save making the lenders rich.
I read a report once that said that the average man makes $1,500,000 over his lifetime. Of that amount, he uses $600,000 to pay the interest on his purchases. Let’s look at the purchase of a home, from a slightly different point of view. A man who makes $1,500,000 in a lifetime will be earning on average about $30,000 a year or $2,500 per month.
He can afford to spend 40% of his income on rent or a mortgage payment. This means that he can afford a $150,000 house. If he can qualify for a 90% loan he would owe $135,000 at 8% amortized over 30 years. That means he pays $221,609.58 interest plus the $150,000 principal to buy this one house and pay it off over 30 years. The interest alone is almost 15% of his lifetime earnings! Buying anything on credit can cost you more than the retail price because you must add the interest to the cost of the item.
My suggestion. Buy for cash and negotiate for the best price you can get. If you must borrow, pay it off in as short a time possible. Also, never borrow for personal consumption. Postpone the purchase long enough to pay cash. If you can’t afford to wait until you save the money, you shouldn’t buy the item. It is just too expensive. To buy on payments raises the cost even higher than the cash price, so it becomes even more expensive. So if you cannot afford the cash price, you definitely cannot afford the financed price. My suggestion is to pay cash and buy wholesale. BUY THE BEST, PAY CASH
--------------------------------------------------------------------------------
About the Author: Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other articles by Willard at http://www.kismetgroup.com
Tuesday, April 3, 2007
Death & Taxes
Have you ever owned a stock, or piece of real estate that you wanted to sell? You felt the time was right to take your profit and run. Did you then not follow through with the sale because “the taxes would kill you?” This is what I call “making a decision based on taxes.” It is not “Good Horse Sense.” What is horse sense? This is where the horse knows that a certain spot is dangerous and it will not step there. The rider, not seeing the danger, sometimes pushes the horse to move forward, but the horse refuses. People quite often will not trust their “sense.” Women are known for their “instincts” about people. Men are not always as “sensitive” of their instincts as women are. Lets get back to business instincts.
In the stock market the smart money always says, “Bulls make money. Bears make money. Pigs lose money.” What does this mean? It means, “Never be afraid to take a profit.” If it is time to sell, sell! Take your profit and wait until the time is right to get back in. Taxes sometimes make this very difficult. If you sell, the taxes may eat up 30-50% of the profit.
Then again, if you do not sell, when you think the timing is right, you may lose 100% of the profit and some of the principal. It is always smarter to make your business decision first. It is also very important to not consider the tax consequences while making this sound business decision. After you have decided what you want to do based on sound business strategies, then you see your tax accountant and figure out how to do the deal, so as to pay the lowest possible taxes. Do not do it the other way around. Which means, selling when you have a tax loss or a real loss because there would be no taxes to pay.
Many an investor, because of the fear of taxes, held an investment all the way up and then all the way down. The economy runs in 7 to 10 year cycles of boom and bust. Sell in the booms and buy in the busts. If you do not sell at the top, there is no money to buy at the bottom. If your accountant is worth his fee, he will figure out how to shelter the sale. Do call him before making the sale, so he can tell you how to structure the deal. If he can’t help you, get a new accountant. An accountant’s job is not to do your tax return. It is to advise you how to pay the least taxes using all of the legal tax avoidance techniques, allowed by the IRS.
I have a friend who owned millions of shares of Microsoft. He was worth millions of dollars. Microsoft was the only thing he owned. He was an employee of the company and received stock options. He came to me worried about the company and asked me what to do. I suggested that he sell some of the stock and buy real estate. He was afraid to change horses and paying income taxes worried him. He decided to stick with Microsoft. Two months later Microsoft lost a court case and the stock price crashed. He now tells me “After it goes back up I might diversify.” How much do you want to bet on him doing anything? “After the horse is out of the barn, it is too late to close the gate.”
I met a man who owned an apartment building in the worst part of San Bernardino. In 1991 he was offered $600,000 for his building, but he refused it because of his concerns for capital gains taxes that he would have to pay. Over the next 8 years, the San Bernardino economy went down hill along with the real estate prices. His building became so vandalized that it was eventually boarded up. He sold the building to one person who thought he could repair the building. He couldn’t and our man foreclosed and took the building back. Again he sold the building, for $280,000 this time.
This second buyer also couldn’t make it work and today the second buyer stopped making the payments. He is also going to give the building back. Our man has had lower cash offers but he keeps trying to get as close as he can to that old $600,000 price. Therefore he keeps selling and financing that property so as to get a better price. He hasn’t learned that sometimes it is better to take the money and run.
Never bet the farm on a sure thing. The only sure thing is death and taxes. Also remember that the bank is not going to be nice if you get in trouble. Always have enough cash reserves, and keep your expenses down so you can always have money for food, insurance, gas, etc, and the low house payment. Accountants may give good tax advice but it may not be good business advice. So, NEVER MAKE A BUSINESS DECISION BASED ON TAXES.
About the Author: Willard Michlin is a Business Broker, California Real Estate Broker, Accountant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other articles by Willard Michlin at http://www.kismetbusinessbrokers.com
Best long-term investment in today’s market?
The stock market is very unstable. At this time it is going up and down while interest rates are so low that you want to be a borrower and not a lender. Would you like some suggestions on how can you get the most out of low interest rates while being assured your principal will not disappear while you are trying to make some money? Of course, there is always the danger of borrowing the money and then spending it just because it is there.
So, would you also like to know what is the best way to borrow money at today’s low rates without spending it? Ok, here goes, buy real estate. Not any real estate but real estate that will hold its value, even if single family houses go down. It is apartment buildings. Because apartment rents are still going up, the value of apartment buildings have the best chance of appreciating while everything else goes down.
Low interest rates mean that you can have a positive cash flow at real estate purchase prices you would have lost your shirt on, even two years ago. Rates are currently 4.5% to 6.5% interest rates when we used to pay 9% for apartment loans just a few years ago. Apartments have become a better investment for two main reasons. First, carrying costs (interest costs) have been going down. Second, income has been going up, substantially. Can things be better than this? YES IT CAN.
I have developed two programs. One is to take people with a small net worth and build an estate or self directed IRA (tax free retirement plan) that is worth up to $800,000 in 15 years and that generates an income of $60,000 per year with both still going up after that.
For those that can put together $100,000 to start I have developed a second program where the numbers come in at $1,300,000 net worth, with a $100,000 annual net profit and in only 10 years. Unbelievable? Yes, and with low risk as well! This comes out to be a 25% annual return with no roller coaster stock market ride. I figured out how to do it and it really works. I have done it before and I know many now retired senior citizens that have done it in the past.
The problem today with most 50+-year-old baby boomers is that they never got started on building a retirement fund. So now, instead of having the normal 30 years to build a retirement fund, they need to be there in 10-15 years. It might take one year of financial hell to come up with some cash. (That means no money for anything except accumulating cash) But after that, it can be a sweet painless ride to wealth. The best part is the possibility of failure is less than 10%, if my steps are followed
First: The money is not touched for 10 years. That is why a trust fund, IRA or a self directed retirement plan is a great place to put this.
Second: I have taken my 30 years of real estate experience to develop exactly which properties will give the biggest appreciation and cash flow and also be the best risks. Interestingly, almost everyone I talk to picks the wrong locations to buy until they hear the whole list of criteria.
Now that I have told you the lazy man’s way to riches, let me tell you the downside. You have to have the correct timing on your purchase. In Dec 2001, everything was in place to do these two programs, in Los Angeles County. Unfortunately, by July 2002, the numbers didn’t work any more. They did still work in Florida, for example, but not in Los Angeles. What happens is that prices go up after the rates go down. The seller sees how good a deal the buyer can get and raises the asking prices. So! Your timing to start these programs is very important. Do not be discouraged, though. If the numbers do not work today, it will work sometime tomorrow. The system is sound, and since we are talking long-term wealth accumulation, a little patience can go a long way.
About the Author: Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetbusinessbrokers.com
Golf Course & Waterfront Living: Live, Play, Relax
With today’s planned lifestyle communities, golf and boating enthusiasts have an opportunity to purchase the home of their dreams just a chip shot away from the green or stone’s throw from the marina. In addition to an ideal home setting, golf and waterfront community residents enjoy an active and diversified lifestyle experience complete with first-class golf courses, marinas, beaches, spas, clubhouses, recreation areas, fine dining and countless other amenities.
Out of the 10,000 master planned communities across the United States, over 2,500 are built around golf courses and pristine waterfront property. Making sense of all the options can be mind boggling. If you are thinking about relocating to one of these golf and waterfront communities, it is imperative to be able to distinguish one community from the next and more importantly, know what to look for before you buy.
Community Types
In the past, golf and waterfront master planned communities catered to distinct segments of the housing market, namely middle to upper income empty nesters and retirees. Things have changed. Today, golf course and waterfront developments are designed to accommodate budgets of all levels and generally fall into one of two categories: multi-generational and age restricted.
The construction of multi-generational communities represents a recent trend in planned community home building. The underlying idea is to attract a diverse population of families including retirees and young professionals of varying income levels and backgrounds in order to establish a robust and vibrant community. After decades of building age restricted communities, builders and developers have recognized that the traditional elements of planned community living such as security, on-site amenities and low maintenance housing appeal to home buyers of all ages.
Most new communities are multi-generational developments. Vistancia situated in the beautiful Sonoran desert outside of Peoria, Arizona is a recently opened golf community attracting individuals and families of all ages. Since home sales began in March 2004, almost 500 families have moved into this scenic development with 1,700 total acres of open space and a 900-acre mountain preserve.
Conversely, age restricted planned communities are developed for the +55 home owner with amenities and facilities for today’s discerning empty nester and retiree. Typically, the age restriction requires one household resident to be at least 55 in order to qualify for home ownership. Over the last decade, an evolution has occurred with the age restricted community model of yesteryear making way for contemporary activity based developments complete with lavish amenities and world-class recreation areas, not to mention the conventional facilities required by the +55 demographic.
The undisputed leader in age restricted master planned community development is Del Webb. Since the 1960s, Del Webb has constructed numerous age restricted golf and waterfront communities across the United States. Del Webb’s Sun City developments are arguably the most recognizable line of age restricted communities stretching from coast to coast with Sun City Hilton Head in North Carolina and Sun City Lincoln Hill in California.
Location
The most important criterion in selecting a traditional home is location and the same is true when deciding on a golf and waterfront community. The old adage “location, location, location” aside, one has to consider whether the new property will serve as a primary residence, second home getaway or retirement abode. The final location decision is generally based on three primary factors: home use, surrounding area and local weather.
For most of us working folk, our primary residence is located within an hour or so of a major metropolitan center. Don’t fret, there are hundreds of golf and waterfront communities centrally located within driving distance from most major metropolitan areas. If by chance you live near Dallas, you have several options to choose from including Stonebridge Ranch in north Dallas and Black Horse Ranch which is only 25 minutes from downtown. Washington D.C. commuters are also in luck with conveniently located golf and waterfront communities in Virginia, Maryland and Delaware. Belmont Country Club, a Toll Brothers property, is a mere 40 minutes from Washington D.C. in Ashburn, Virginia. These examples represent only a fraction of the actual number of suburban golf and waterfront developments.
The location decision is a bit more complicated and not as clear cut when one considers purchasing a second home retreat or retirement residence. In this situation, other factors come in to play such as the activity and cultural richness of the immediate area and of course, local weather. If you are looking for a second home, would you like to be nestled in the woods away from the hustle and bustle of the city, located in a more suburban area or some in between?
Climate is also an integral factor to take into consideration when purchasing a home particularly if you are feeling abused by recent harsh winters. This may clearly point to a direction that takes you out of your home state or even to another part of the country. Conversely, the summer’s never ending heat may drive you to consider the cooler climates up north. Fortunately, there are 2,500 golf and waterfront communities spread out across the United States from Minnesota to Texas and California to Massachusetts.
What is clear in the case of retirement homes is that good local health care and transportation facilities are a must. For most retirees, living over 60 miles away from the closest hospital or airport is just not an option. In the end, it comes down to striking a balance between modern necessities and the beauty of the great outdoors.
Amenities
Once you have settled on a geographic location, the next area to focus on is amenities. These can vary greatly from one golf and waterfront development to the next. Typically, these expanded ‘goodies’ fall into two categories: conveniences and lifestyle enhancements. Conveniences include such things as security services, home maintenance, gardening services, concierge service, on-site retail and office space, cable television and high-speed internet.
Lifestyle enhancements relate to recreation activities and rest and relaxation befitting an enhanced life of leisure. One can find a mix of facilities at planned communities which support numerous activities like tennis, hunting, boating, skiing, and hiking. To balance the rigors of recreation, planned communities provide residents with rest and relaxation amenities such as spas, clubhouses, wilderness preserves, pools, beaches and fine dining.
With real estate opportunities for every budget, isn’t it about time you looked into moving to a golf and waterfront community that offers unbelievable vistas, year round activities, low maintenance living and first-class amenities?
About the Author: Robert Flournoy is a staff writer for Golf Home Connect. For additional information on golf and waterfront vacation and retirement homes visit Golf Home Connect© 2005 Home Connect LLC
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