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MyQuo.com » 2006 » August

Archive for August, 2006

A Key To Making Money

Thursday, August 31st, 2006

There are thousands of people out there who are beating their heads against the wall trying to come up with the next big business idea.  The key to making money in business is knowing what is going to happen.

It’s a simple idea really.  Every time something happens on our planet there is an opportunity to make money off of it.  The key is to predict what will happen, before it will happen and to put yourself into a position to make money off of it.

The clues of future events are under all of our noses as we speak.  Although this is an easy idea, it can be a very hard thing to do.

Let’s look at some examples:

#1 - If you knew that oil demand would surge and that supply would not keep up, you could have made a killing.  The clues have been here for years.  It was no secret 10 years ago that China and India’s economies were growing quickly and predicted to grow for years to come.

These economies run off of oil.  Therefore demand for oil is going to go up greatly.  OPEC and other oil producing countries love the fact that oil is at $75 a barrel instead of $25.  They make 3 times as much money with the same amount of work.

If you saw this happening 5-10 years ago, you could have put yourself into a position to profit from it.  You could have bought oil stocks or oil on the commodities market.  People who did this have made a ton of money.

#2 – If you knew that most people in America would own a cell phone, you could have made a killing.  The clues were there.  If you take a look at history you would have seen how the telegraph fell victim to the telephone.  Well history repeated itself and the telephone fell victim to the cell phone.

Once again if you knew this was going to happen, you could have invested in the baby cell phone companies, which are now huge players in our economy.

The moral of this story is that instead of beating your head against the wall trying to think of ways to make money in today’s market, you should be trying to figure out what is going to happen next.  What is going to be the next big thing.  Look for the clues.  Study where the market is heading and what has happened in the past.

Most importantly, put yourself into a position to take advantage of where we will be in the future.

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Our First House – You Get What You Pay For

Wednesday, August 30th, 2006

It seems that my fiancée and I may have set our requirements too high for our budget.  Originally we were hoping to get a 2000 sq ft house with .5 acres of land for around $125,000.  There are houses out there that fit the bill, but are issues with these properties.

These big houses are only $125k for a reason.  That reason is that they have issues, major issues.  Here are some of the issues that the 1st house had:

- the unfinished basement was counted as part of the 2000 sq ft
- the house sat 5 feet away from a wet weather creek (in rain became a river)
- the house would likely need expensive flood insurance ($500 -1500 a year)
- there was a huge old ugly mint green barn on the neighboring property
- there was a 15-20 unit mobile home graveyard across the street

None of these issues are good for resale.  And none of the problems were mentioned in the listing.  Here are the issues with the 2nd house:

- the foundation was only 2 inches thick
- there were support beams through the middle of the living and family rooms
- the walls had poorly patched holes (looked like they had been punched out)
- the ceiling in the master bath was extremely low
- the roof had been re-shingled 3 times
- the deck felt like it was going to collapse
- the driveway needed to be repaved
- the house seemed like it had been abused by the owners

The problems with this house are that it needs $10,000 or more of work to be put into it.  Our budget is $125k, so the total cost of the house needs to be that amount.  These two houses are potentially nightmares.

In the first one we would be wondering if we were going to get flooded out every time it rained.  In the second one we would wonder when the foundation was going to crack.  These are not things that I want to have in the back of my mind.

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Are Buying Lottery Tickets A Waste Of Money?

Tuesday, August 29th, 2006

Has someone ever told you that buying a lottery ticket is a waste of money?  I’ve been told that by a lot of people.  Although I do think most gambling is a waste of money, I do not think buying lottery tickets has to fall into this category.

Let’s go over how buying scratchers and other forms of gambling are a waste of money.

The odds are in the house’s favor.  Which means on average you will end up losing more than you win in the long run.  Now if you’re gambling for recreation and are having fun, then you can argue that it is not a waste.  But financially, it is a waste.

Let’s take the best case scenario with a typical “big” win .  Let’s make it $10,000 to simplify things.  I’m pretty sure most people would be thrilled to win 10 grand on a scratcher or at the black jack tables.  However, this big win is not life changing in any way.  Sure you might be able to go on a nice vacation, or pay off some bills.  But your life will change very little.  In fact, you will slowly lose that money back to the house if you continue to gamble.

Now let’s look at the big time lottery games and why they are not a waste of money.

If you win one of these you will win millions if not tens of millions of dollars.  Yes, the odds are astronomical.  For example, your odds to win the Mega Millions jackpot are 1 in 176 million.  Not very good odds in anyone’s book.

Yes, you are likely throwing away a dollar each time you play the game.  But, it’s not as simple as that.  You have to look at the utility that that dollar would give you if you spent it one something else or invested it.

You could buy yourself a big chocolate chip cookie.  It would taste amazing for the couple minutes you are eating it, but the pleasure doesn’t last long.  You could invest that dollar and turn it into $17 in 30 years.  I hate to tell you, but $17 isn’t going to go very far in 30 years.  So you’re not going to get much enjoyment out of that one either.

Or you could spend it on a shot in the dark and possibly win the lottery, which would drastically change your life.  Being able to quit your job, buy a dream home, and travel the world are life changing.  I don’t think that anyone will challenge that.

When you look at the utility that $1 can bring to you, it is apparent that a lotto ticket is not such a bad buy.  Of course there is a limit to this reasoning.  If you are buying $100 worth of lottery tickets a month or more, then you are wasting your money.

This is because $100 a month properly invested can turn into tens of thousands of dollars, which can affect your standard of living when you retire.

However, we are not talking about buying $100 of dollars of lottery tickets a month.  We are talking about buying a ticket a few times a month or less.  And when you look at the utility of those dollars, 1 in 176 million doesn’t seem too bad after all.  Remember, someone has to win that jackpot.

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How To Find An Apartment Guide

Monday, August 28th, 2006

Moving is a fact of life in today’s society.  People move for jobs, to be by family, and to get away from family.  Finding an apartment that fits for you can be challenging.  You can fumble around to find a place to life.  Or you can have a plan.  Hopefully this guide will help save some time and help you make a sound rental decision.

#1 – Find some apartments listings

There are many listings on the Internet today.  There are a lot of rental sites out there that redirect to another site or have very few listings.  Here are a couple of the most popular rental source sites:

http://www.apartments.com/
http://realestate.yahoo.com/Apartments_for_rent
http://www.livingchoices.com/

#2 – Look up some apartment reviews

There are a lot of apartment review sites out there.  Unfortunately there are not a lot of reviews.  Here are a couple of review sites to check out:

http://www.apartmentratings.com/
http://www.apartmentreviews.net/

#3 – Check the demographics in the zip code the apartment is in.

You should also check out the area you are planning to move to.  Living Choices has an outstanding demographics tool at:

http://www.livingchoices.com/community/community.aspx?mid=7920

Just type in the zip code of where the apartment is and you’ll get all kinds of information.  Some types of information they provide are: median household income, geographical risks (earthquakes and the like), pollution, and crime rates.

Remember, you don’t have to go find an apartment without a plan.  The Internet has a ton of information on it, use it!

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Getting Married Over The Weekend

Friday, August 18th, 2006

This week I took part in the Carnival of the Vanities #204.  It was really well done and he made excellent use of pics in the post.  You can check it out here:

http://spookyaction.blogspot.com/

I won’t be updating myquo.com until next Friday, as I will be leaving for my honeymoon on Monday morning.  My wedding date has been a big secret, but if anyone I know has stumbled across my blog, now you know.  I look forward to writing about my financial experiences while in las vegas when I get back.

See you in a week.

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Deceptive Practices By My Cable Company

Thursday, August 17th, 2006

Having wanted to get a DVR for the past year, I finally took the DVR plunge 4 months ago.  I excitedly hooked up my DVR and began to record my favorite tv shows.  Even better is the ability to pause live tv when my fiancée wants to discuss something in the middle of my favorite shows.

Imagine my surprise today when I looked at my cable bill statement online; my bill was $18 higher than it should have been.  After looking at the details, it seems that I had been charged with a HBO/Cimemax package.  A package that I did not sign up for, one that I did not even know that I had…

At first I thought they made a mistake and mistakenly charged me for the package.  After all, mistakes do happen.  But upon further digging, I saw that I was signed up for a “free” trial of the package when I signed up for the DVR.

The representative who signed me up mentioned nothing of the “free” trial 4 months ago.  Of course, it may have been in the fine print of the paperwork that I had to sign, I’m not sure.  I scanned through it and don’t remember anything about it.

Needless to say, I’m a little annoyed.  I guess it is common practice for the cable company to deceive its customers by sneaking “free” trial packages into their products.

When I called my cable company and explained the problem, they were happy to make a “one time credit” to my account to reverse the charges.  Which of course I thought was sweet of them since they were the ones who created this mess in the first place.

Let this be a lesson to you.  Be sure you carefully watch what the companies you are dealing with are trying to pull.  Don’t assume that they’ll just sign up for what you ask for because it’s likely that they’ll try to sell you everything that they can.

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Top 5 Keys To Success

Wednesday, August 16th, 2006

I am working on a new writing project which covers the top 5 keys to success of people that I know.  I’m lucky enough to have family and friends who run successful businesses.  Which of course means that I get to pick their minds for information.  I’ll start the project off with my top 5, with theirs following suit in the coming weeks.

Ian’s Top 5 Keys To Success

I run a small business out of my home consisting of 17 websites.  I have been doing this for the past 2 years and living fully off of the profits for the last 8 months.  Below are my top 5 keys to success:

#1 – Hard Work

People out there who are trying to make it rich with as little work as possible are setting themselves up for failure.  There is no substitute for hard work.  Even if you have the best idea in the world, if you do not put everything you have into it, it will fail.  It’s good to know that no matter how much things change, some things always stay the same.

#2 – Refuse To Quit

One of the main reasons people fail is that they allow themselves to fail.  When things get tough, they give up and make excuses why things didn’t work out.  The successful person however, refuses to quit.  They are stubborn and will diligently work towards making their idea successful.

#3- Seeing The Trends

Correctly guessing the trends of business is a key to success.  If you can see where anything in life is going, you can make money off of it.  If you know everyone is going to need a new gadget or service, then find out how to make money off of it.  Come up with something complimentary to the product or something that does the job better.

#4 – Know How Your Idea Stacks Up In The Market

You absolutely need to know where your idea stands in the market.  If you don’t know, then you will have no idea how much of a chance your idea has to succeed.  Maybe the market is not ready for your idea yet.  Or maybe your idea is too late and you already missed the ship.  Make sure you know!

#5 – Keep Thinking Up Ideas

You need to constantly be coming up with ways to improve your idea and think of other ideas.  This is because there are a million other people out there doing the same thing.  Business is cut throat and people will have no problem putting you out of business.

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Thinking About People’s Motives

Tuesday, August 15th, 2006

Yesterday I talked about why you should think about people’s motives.  Today I’m doing to give an example of how you can apply this to your everyday life.  You may be surprised at how beneficial this can be.

Recently my sister decided to sue her former property manager for screwing her over.  The lawyer is telling her that she can get all kinds of damages for lost rental income and lawyer fees.  Although he has a good reputation, it is still important to think about what he gets out of this.

Obviously he hopes to make money.  After all, suing people is his profession.  In this case, he is getting paid by the hour.  That means he gets paid no matter what the results of the trial are.  This is important to recognize.  If she doesn’t realize that he gets paid no matter what, she opens herself up to being screwed over by the lawyer.

What can she do about this?  There are a number of things she can do.  She can make sure things are moving along so that she is not paying endless legal fees.  She can get a second opinion from another lawyer to make sure her case is a strong one.

Another thing she can do that I particularly like is to offer the lawyer a percentage of the winnings from the case.  Say the settlement is likely going to be around $10k.  Offer the lawyer 30% of that.  If you win, you get $7k and the lawyer gets $3k.  If you the lawyer gets paid by the hour and you win, you would get $8k and the lawyer gets $2k.  You would make $1k less on the deal.

However, let’s look at if you lose.  If you have a 30% deal, you lose nothing.  On the other hand if your lawyer is getting paid by the hour and you lose, you are out the $2k in legal fees.

By going with a percentage deal, you lower the risk to yourself.  There would be no benefit for the lawyer to talk up the case or drag the case on.  It’s win win for both of you.

This is but one example of how looking at people’s motives can help you out.  Don’t sit there and just take their word for it.  Think about why they are telling you what they are telling you.  Finally think about how you can protect yourself.  Because nobody else is going to watch out for your welfare.

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Be Careful Who You Trust

Monday, August 14th, 2006

Have you ever had a friend who suddenly disappeared when things got rough?  Or how about one who stole your girlfriend or boyfriend?  I bet you have and it’s important to realize that these same people are the ones who you are doing financial matters with on a daily basis.

People get ripped off, either personally or financially, because they put their full trust into someone who wasn’t fully trustable.  For this reason, it is important that you be vigilant not only on the financial goals you go for, but for whom you decide to work with.

There are less than 10 people in my life that I really trust.  There are less than 5 who I fully trust.  I can sit here right now and name them off.  Can you?  If you can’t, take a minute and sit down and mentally make a list.  If you don’t, you may very well find yourself getting burned later on in life.

For every other person on the planet who is not on that list, you must take everything they say with a grain of salt.  Ask yourself these types of questions: Why are they telling me this?  What is their goal?  What do they get out of this?

People always have agendas.  Most of the time they are selfish in nature.  Which does not mean that they are bad for you, but it is good to know what they are.  Sometimes they can also be good.  On occasion people do things because it is the right thing to do.

Most often this is not the case however.  So in order to protect yourself, you have to be diligent thinking about people’s motives for their actions.  If you don’t watch out for you, who will?

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Our First House – What A Difference A Good Buyers Agent Makes

Friday, August 11th, 2006

As I mentioned a week ago, I had to fire my first buyer’s agent after 5 days on the job.  It seemed like all she was doing as little work as possible, while sitting there waiting to collect a fat commission.  Needless to say, I wasn’t having any of that.
 
Our new agent was assigned by Navy Federal from the same agency.  And let me tell you, what a difference a good agent makes.  On the first day that I spoke with her, she went out and looked at a property I was interested in.

She made insightful comments on the property and ultimately recommended that we not consider that particular house.  The communication, while a little slow, is good.  I get the feeling that things don’t move very fast in the market they are in.  Either that or my agent is extremely busy.

The agent made some suggestions on other parts of town that I might want to look at, but I stuck to my guns.  I’m confident in my research and am sticking to the areas that I selected to buy in.

There is an important lesson to take away from this.  Don’t be afraid to pull the trigger when making a decision.  Some people might say 5 days is not enough time to see if the agent is good or not.  I disagree.

When comparing the 1st 5 days of both agents, the differences are clear.  It would have been a big mistake by me to stick with the original agent and waste weeks or months of my time.

Remember that the buyer’s agent works for you.  If they are not performing, find someone who will.  They will make thousands of dollars on the transaction, make them earn it.

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My Fiancee’s Truck Was Broken Into Over The Weekend

Thursday, August 10th, 2006

If you think your vehicle is safe sitting outside your home, think again.  Over the weekend my fiancee’s truck was broken into between 3pm and 5pm.  Not only that, the truck was parked right outside our apartment and we were home at the time.

The radio was stolen, and oddly enough, so was the owners manual to the truck.  The thief went through the glove box and the center console looking for other things to steal.  Thankfully, she does not keep anything important in her truck.

Here are a few lessons from this experience:

- Your vehicle is never safe from theft, even during the day.
- Your radio doesn’t have to be expensive to be a theft target.
- Never leave anything of value in your vehicle.
- An alarm may be a good investment even if you don’t own a BMW.

There was no sign of forced entry, so they must have used a Slim Jim or a Ford master key.  And yes, we are anal about locking our vehicles at all times.  So it was definitely locked at the time of the break in.

We went out and bought a new $45 el cheapo radio.  We had it installed along with a Viper alarm system on Monday afternoon.  It is important to recognize that a car alarm is only a deterrent.  There is no way to theft proof your vehicle.

Personally, at least I’ll know nobody is breaking into her vehicle while I am sitting in my own home.

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Understanding The Renting Out A Room Game

Wednesday, August 9th, 2006

Today while I was checking the mail I ran into a neighbor of mine.  He lives in the same apartment complex as I do and has been trying to rent out his 2nd bedroom for the last 3 months.  Every time I see him, I always make sure to ask him if he’s rented out his room and give him some advice on how he could rent it out quicker.

When I asked him today if he’d rented out his room, he said that he hadn’t again.  I decided to dig a little deeper into his situation and try to help me out.  After all, I like to help people and he obviously needed some help to get his room rented.

Here are the pertinent facts:

- his rent is $1100 for a 2 bedroom, 1 bath apartment
- he is trying to rent out the smaller room for $500
- the room has gone unrented for 3 months

Hopefully you see a major problem with one of these facts.  The room has gone unrented for 3 months!  He has cost himself a lot of money by not renting out the room.

There are two financially important things to think about when renting out a room in your home:

1. To get the highest rent possible for the room
2. To keep the room rented as much as possible.

Most people get so stuck up on trying to get the highest rent for the room, that they forget half of the game.  It is just as important to keep the room rented.  You get $0 rent when nobody is in there.  My neighbor is committing this common mistake.

Why should you be concerned about keeping the room rented as much as possible?  Let’s look at some numbers:

Scenario #1 – getting as high a price as possible

$500 Rent
6/12 Months a year the room is rented
Total Rent: $3000

Scenario #2 – keeping the room rented as much as possible

$300 Rent
12/12 Months a year the room is rented
Total Rent: $3600

Scenario #3 – maximizing your income through both price and occupancy

$400 Rent
10/12  Months a year the room is rented
Total Rent: $4000

As you can see, changing the rent price has an effect on how rented the room stays.  This is simple supply and demand.  If your room costs a lot of money, it will be hard to get people in there.  Plus they will leave when they find something cheaper.  If your room is a bargain, you will have people knocking down the door trying to rent your room and it will stay rented.

According to my scenarios my neighbor would make $600 more by dropping his rent $200 a month.  I guarantee the room will rent for $300.  You can’t find a bedroom this cheap in San Diego. 

Somewhere in the middle is where your maximum income lies.  In my neighbor’s case, I suggested that he drop the price if he wanted to rent the room.  He is losing out on hundreds of dollars as the room sits unoccupied.  Personally, I would rent the room for $400 and pick the cream of the crop from my potential rentees.

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Your Money Is Actually Shrinking In Your Bank Account

Tuesday, August 8th, 2006

So you have a $20,000 fund stashed away in your savings account for a new car.  Good, but did you know that this fund is not growing by the 1% savings rate in your account as you think it is?

It is actually also shrinking by 3% per year.  This is because of inflation.  Every year inflation eats away 3% of your money’s buying power.  Let’s look at how this works.

5 years from now your $20,000 will grow to $21,020 in your savings account.

5 years from now prices on goods and services will grow by 3% per year.  So in 5 years it will cost $23,185 to pay for the same goods and services that you could have gotten 5 years earlier.

Confused?  So am I.  Let’s break this down an easier way.

Say you had the option to buy a new car today and in 5 years with your $20,000 in your savings account.

Today the new car costs $20,000.  You write a check out for the car, which empties out your bank account.

Now say you leave your money in the savings account for 5 years.  5 years from now that money has grown at 1% interest to $21,020.  You go to the dealership only to find that an equivalent new car now costs $23,185.

As you can see inflation has raised the cost of this car by 3% per year for 5 years.  This is why the car now costs $3185 more dollars.

Your money on the other hand has only been earning 1% interest in the bank account for the last 5 years and is now worth $21,020.  You are now $2165 short for the same equivalent car you could have gotten 5 years ago.

Does this mean that you should go out and buy things with your money so that it doesn’t lose its purchasing power?  Of course not.  The point is that you have to be aware that of the fact that inflation is eating away at your money while it sits in your bank account.

Therefore you have to be earning at least 3% interest in your bank accounts or your money will be shrinking and not growing.

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The Arguments Against Prepayments

Monday, August 7th, 2006

The two most common arguments that I get against paying off your home as quickly as you can are:

#1 – The interest you pay on your mortgage payments are tax deductible!!!

#2 – You are better off investing the prepayment money into other higher earning investments.

I received one such e-mail today from a MyQuo.com reader.  Let’s look at the first argument.

Yes, the interest payments on your home are likely to be tax deductible.  Often people use this rationale to justify their 30 year mortgage or their house they are living in beyond their means.  However, many people over estimate how much these interest payments are actually worth.

Let’s look at someone who is in the 25% federal tax bracket and 8% state tax bracket.  And let’s assume they are purchasing a $125k house with no money down at 6.5% interest on a 15 year loan.

The tax savings will be $1,467 a year over the life of your mortgage.  That adds up to $22k in tax savings after 15 years.  On the other hand, if you made double payments on the same home you would save $48k in interest payments.  This represents a $26k savings in favor of paying your house off with double payments.

Now let’s look at the second argument.

Yes, you “can” earn more money on other investments on your money instead of making prepayments on your home.  But, you “can” also earn less money or even lose money.  There are few guaranteed returns on your money, and making prepayments on your home is one of them.

It all comes down to the amount of risk you are willing and more importantly, can afford to take.  Personally, I am treating my first house as a safety net.  My family will always have a roof over their heads once I pay off my home.

Once I have that safety net set up, I will more aggressively invest in other areas.  I have a few product ideas that I’m working on, as well as real estate and stock ideas.  The piece of mind knowing that I have a paid off home will help me greatly when pursuing these ideas.

Of course every person’s situation is different.  People who make more money will get more tax break benefit from interest deductions.  Which of course means that people who make less money will receive less tax break benefit from interest deductions.  For the majority of Americans however, prepayments will often save them more money than the tax breaks.

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This Week’s Festivals

Friday, August 4th, 2006

I’ve participated in a few of these festivals and carnivals now and I have to say that I am glad that I am doing it.  There are tons of good information on the blogs that participate.

You can check out the latest Festival of Frugality here:

http://www.myfinancialjourney.com/index.php/archive/festival-of-frugality-33/

Also be sure to look at the latest Carnival of Personal Finance:

 http://allthingsfinancialblog.com/?p=988

MyQuo.com is developing quite nicely.  I’m well into the Buying Our First house series and I’m learning a lot about the process.  As always, I’m taking the weekend off.  You should do the same.  After all, what is the point of living if you’re not enjoying life?

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Our First House – Choosing Our Representation

Thursday, August 3rd, 2006

I’ve been a member of the Navy Federal Credit Union since I was a child.  My dad made it a point to open up an account so that I would have access to the institution when I grew up.  It was a wise decision by him, as Navy Fed is an outstanding credit union.

One of the programs that they offer is Member Move, which is a house buying and selling program.  The program is offered free of charge and offers cash back on your home transactions.

Personally, I will be getting $700 cash back if I use the Member Move program and finance through Navy Fed.  Since I was planning on using them already, this was just icing on the cake.  Note: that you do not have to finance through Navy Fed to use the program and to get cash back.

Once I signed up for the program I was assigned a buyers agent through an agency in Springfield Missouri.  Which, of course, is where I plan to buy my house.

Unfortunately I have hit my first snafu of the process.  Although I was assured that any buyers agent that I was assigned would be top notch, I found out otherwise.  Maybe I am expecting too much out of my agent.  But for me, if the agent stands to make a 3% commission on a $125k house, they better be ready to work for me.

I have a laundry list of things that the agent did wrong and I won’t go into the details.  Let me just say that she made a very poor first impression when she got my name wrong on her first call to me.  That and all future interactions had given me major concerns with her attention to detail, and ability to get me the best deal possible on a house.

So after having my first agent for 5 days, I decided to fire her and ask Navy Federal for a new agent.  I should be getting the agent in the next day or so.  Hopefully this new one will be ready to get to work.

If you can open a Navy Federal account, I highly recommend that you do so.  It really is a fine institution that you will be glad you are a part of.  If you are a member and have small children, make sure you make it a priority to open an account for them.  They will thank you for it when they finally have a need to use it.

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Disclaimer

Wednesday, August 2nd, 2006

The information provided on this site are the owners opinions and are not a substitute for the advice of a qualified professional.   While this web site attempts to reveal accurate information, there is no warranty on the accuracy or viability of the ideas expressed in the articles or e-mails of the owner.

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Our First House – Do I Need A Buyer’s Agent?

Wednesday, August 2nd, 2006

I happen to know many people who work or have worked in the real estate field.  One of them recommended that I skip the buyer’s agent for this purchase.  I’m a pretty sharp guy, so I know I could if I wanted to.  In addition, I would be able to get advice along the way to make sure that I didn’t make any major mistakes.

I weighed the pros and cons of his suggestion.  The following is what I came up with.

Pro:

What my friend meant when he suggest that I skip the buyer’s agent is that I should have the seller’s agent work both sides of the deal.  All the real estate information out there totally recommends against this however.  That is because the agent ultimately represents the seller’s interests, leaving you on the short end of the stick.

What these people do not tell you is that you can ask the agent to give you a rebate on your half of the commission.  Since he is working both sides of the deal, he will be making 3% from the seller and 3% from the buyer.
Note that the seller pays both percentages, but that is not important in this discussion.  What is important is that the agent has the opportunity to make an extra 3% on the transaction.  That also means you have the chance to get a piece of that action.

What you can do is ask the agent to give you 2% of that commission as a rebate on your closing costs or to knock it off the price of the home.  That leaves the agent with a total commission of 4%, which is still 1% more than if you bought the house from him using a buyer’s agent of your own.

This is a classic win-win situation.  You both get more money out of the deal.  2% of a $125k house works out to $2500.  Not a bad deal at all.

Con:

Since you don’t have a buyer’s agent, it is up to you to figure out how much the home is worth.  Since I wouldn’t have access to a CMA (more on this later), my best bet would be to check out comparable properties in the neighborhood.

Not only would this take me a lot of time, but it would require me to fly to Springfield from California to do the research.  The time and money involved would quickly eat into my $2500 savings.

A comparative market analysis can be your best tool for finding out how much a home is really worth.  It takes comparable properties in the area and compares them to the property in question.  From this information you can tell how the house you are interested in stacks up to other similar properties.  Is it overpriced?  Is it a bargain?  A CMA will help shed some light on these questions.

My Decision:

Ultimately, I decided to go with a buyer’s agent through the Navy Federal Member Move program.  The $700 cash back, the savings of time and money from not taking a trip out there, and the less stress I will have by having a buyer’s agent makes this a no-brainer for me.

For others however, this may save them a lot of money.  If you live in the area and the market, finding an agent who will work both sides of the deal makes a lot of sense.  Who would have thought you could get a rebate from the agent’s commission?  This only goes to show you that in business, everything is negotiable.

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Our First House – Identifying Areas To Live

Tuesday, August 1st, 2006

Everyone has their own list of criteria of where exactly they would like to live.  Some people prefer to live in the country; others prefer to be in the city.  Of course, one of the main reasons people live in the area of town that they do is the price of the property.

Here is the process that I went through to choose the areas of Springfield that I wanted to live in:

We had to live within 20 minutes of Springfield Missouri.  There are a few towns to choose from that fit this criteria.  After I narrowed down the towns that my fiancée and I were willing to live in, we started comparing them.

Comparing the following 3 qualities of an area will help you make an informed decision on where you want to live.

1. Crime Statistics

Look up the crime statistics in each zip code that you are considering.  You will find that the crime rate can change dramatically from one zip to the next.  I have found that places with higher incomes tend to have less crime.

There are many sites on the internet that you can look up crime statistics.  Try:

http://www.census.gov/main/www/cen2000.html
http://www.fedstats.gov/
http://www.livingchoices.com/community/community.aspx?sid=298198e3fcaf44c0ab17a2c623fb4ec8&refer=yahoo&mid=7920

2. Growth Trends

It is essential that you know the statue of the city.  Cities are living entities that are born, grow, shrink, and die.  Here are some questions that you should be trying to find the answers to:

Is the city growing overall?
Are the surrounding cities growing?
Which way is the city expanding?
What parts of the city are growing and which ones are shrinking?
Are people leaving the city for the suburbs?
What types of people are living in the areas you are looking at?

Ideally you want to buy a house that is in the growing part of the city.  After all a house should be an investment.  Don’t turn it into a nightmare by choosing a poor area to live.

You can find information on growth trends below:

http://www.census.gov/main/www/cen2000.html
http://www.fedstats.gov/
http://www.ersys.com/index.htm
http://www.city-data.com/

Be aware that not all the data you will be collecting is up to date.  Make sure you look at when the data was last updated.

3. Schools

This is an important consideration for buying a house.  Although you may not have kids, keep in mind that you will likely sell your house one day and your potential buyers may have kids.

Here are some links on schools in your area:

http://www.greatschools.net/
http://www.publicschoolreview.com/
http://www.boardingschoolreview.com/
http://www.privateschoolreview.com/

There you have it.  Doing a little research up front will help ensure your happiness in your new home.  And when it’s time to move, it will help you get a good selling price because it’s in a good area.

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