The Value of Education

Not long ago, I found out about a Real Estate Investing website called Bigger Pockets (.com, of course!). This was also posted on that site's discussions area.

Hello! David J. here again with more of the steps on my journey to financial independence.

Yes - it's been a while since last we met here on the blog. Things are happening and I'm just now catching up a bit.

This post is going to be a bit unpopular on Bigger Pockets because it's about education - Real Estate Investing education. The site as a whole has rather a strong sentiment against paying for education.

To some degree, that's understandable. Real Estate Investing education has rather a bad reputation. It's generally considered VASTLY overpriced and it's also considered to over-promise and under-deliver.

In fact, the thought which inspired me to write this post came from watching part of a Than Merrill ad on TV. He's talking about fixing and flipping which, in the current seller's market, is a bit more challenging than it has been. If that's one's primary - or only - strategy, seeking properties to fit one's strategy is equally challenging, whereas if one knows multiple strategies one can approach a property and be able to determine which strategy, if any, would be most suitable. After all, not every property can be done profitably.

Of course, education is about more than real estate investing. It's about the kind of education none of us gets in the school system: entrepreneurial education, business education (beyond Wall Street, that is) and, of course, financial education.

Of those, financial education is probably the most important.

One can scan these blogs and discussions and find lots of examples of those who are experiencing challenges which could have been avoided thru a modicum of financial education.

Some folks post about not being able to get another mortgage because lenders say they already have too many in their own name.

Some folks post about needing to find funding for their deals because they lack the resources on their own.

Some folks post about deals where the costs have mounted up to a point beyond the profit they calculated from the deal.

Some folks post about being overwhelmed by the accounting and bookkeeping demands of their real estate business.

Some folks post about how a deal went sour and they lost a good chunk of change.

Now, you can learn how to deal with all of these through the experiences themselves and from the experiences of others. Not the fastest or most economical method of learning, but certainly effective over time and there's no up-front expense.

Then again, how much money can you afford to not spend?

"What's that?", you may say. "How can I lose money by not spending it?"

Can you lose $50,000 or more on a deal gone bad? Of course you can! Easily, if you have not yet learned how to avoid it.

Can you make mistakes in the course of a deal that may lead to penalties or even serious charges? Of course you can! Easily, and some of those mistakes can lead to penalties on a par with some felonies.

Can you - and your partners! - lose your property or properties in a lawsuit, even your own and your family's personal possessions like your home, your vehicles, tools, bank accounts, and more? Of course you can! Easily. We unfortunately live in a society where litigation is viewed as a source of windfall profits.

So, the choice to go forward and do-it-yourself without advanced education is a personal choice. It is a serious choice and needs to be considered carefully.

Weigh the risks compared to the benefits:

• Learn to avoid common, simple mistakes and the penalties to which they can lead, some of which can be severe.
• Learn to protect your possessions and assets from lawsuits and liabilities.
• Learn to select the investing strategy appropriate to a property - even if the only appropriate strategy is to move on to the next property - rather than limiting your property choices to those suitable for the strategy(-ies) you know.
• Learn how to make your real estate investing a business which runs without you, even when you're sick or taking a well-earned vacation.
• Learn to make your real estate business profitable and how to keep more of your earnings rather than lose them to taxes thru missed deductions and other financial missteps.
• Learn how to turn your real estate business into an inheritable legacy for your loved ones.

Real Estate Investing Education isn't just about doing deals.

It's about finance, business and entrepreneurship as well. It's about being a well rounded business owner, a successful entrepreneur and a happier leader of your team and head of your family.

If you're interested in education which under-promises and over-delivers, drop me a note privately and we can talk "off-line".

We'll talk again!

Take care - be well!

Much Success!

Won the Lottery? (Part 2)

Learn How to Not Be Broke Again Three Years from Now!

Hello! David J. here again with more of the steps on my journey to financial independence.

When last we met, we started discussing what to do with lottery winnings, a big bonus, profits from a real estate deal, or some other large sudden windfall of cash. Even if you're only starting out with your own savings, these steps can help you protect and grow your savings into income for your retirement.

If you haven't seen the first part of this discussion yet, take a look at that, then continue here. Or, go back and review it if you have seen it, then come back here and we'll finish up.

Today, we'll continue our discussion with Steps 3 and 4.

I am blessed to be connected to a group where financial education is available - education of a calibre about which the average college student can only dream. This is from my learning, not my experience.

I'm going to propose a four(4) step process:
Step 1: Asset Protection
Step 2: Debt Reduction
Step 3: Income Production
Step 4: Wealth Preservation

Note that I am not a licensed financial professional and am NOT authorized or qualified to give financial advice. This is, again, from what I've been learning. Please take it as such.

I may cite numbers over the course of what follows. Please do not take them as either accurate or "gospel". I'm typing this entirely from memory - what I've learned as I understand and remember it.

We resume our discussion at Step 3.

Step 3: Income Production

After Step 2, you should still have the bulk of your new found wealth remaining. Here, we begin to create our new reality with it.

There are many vehicles available for income production. One of them is money lending. Most folks think that's just the province of wealthy bankers. History shows that, traditionally, this is not the case and that one of the ways people build wealth from modest holdings is by "renting out" their money.

It will help here to acquire some small understanding of how banks work in the 21st Century.

Banks don't actually lend out their depositors' money. Instead, the amount of money they have on deposit determines how much they can borrow from "the Fed", usually at a ratio of circa nine(9) to one. That is, for every dollar they have on deposit, they can borrow nine(9) dollars from the Fed. Sometimes, the ratio can be as high as eleven(11) or more to one. So The Fed's money is partially secured. Think of it this way: as a bank's depositor, you make the "down payment" on the loan the banks get so they have money they can lend out. This is the TRUE meaning of, "It takes money to make money."

The Fed charges the banks interest at a very low rate - on the order of 0.25% - relative to what banks charge each other for borrowing ("the prime rate") or what the banks charge to individual consumers who borrow from the bank - circa 4% to 5% for secured loans, and anywhere up to 30%+ for credit cards and other unsecured loans.

The banks borrow from "the Fed" at a very low interest rate, and lend it out to borrowers at much higher interest rates. This is sometimes called "arbitrage".

So, you will want to emulate the bank's model. That is, "arbitrage" your money: lend it out for more interest than you're paying on your combined debt load.

These investments will, therefore, be short-term investments - six(6) months or so, generally not more than twenty-four(24) months, though some loans may go longer.

A premier option for income production is self-directed tax-advantaged accounts like IRAs, 401(k)s and 403(b)s. Genuine self direction allows that you can direct your custodian to invest your funds in any non-prohibited transaction as defined by the U.S. Tax Code - the "I.R.S. Code".

Some examples of these investments would be a sibling's business, a nephew's financial endeavor, an associate's real estate deal (fix and flip, rehab, etc.), and so on.

Note that I specifically did NOT mention stocks or other "risky" investments. Most folks do not consider the stock market to be inordinately risky. These are some of the same folks who lost half or more of their retirement savings in the crash of 2008 / 2009.

Prohibited transactions are generally those which would benefit you personally, directly. This includes your own real estate deals and financial endeavors, those of your spouse or those of your parents, grand-parents, children, grand-children, etc. ... that is, anyone in a direct line of descendency from you or to you.

Your tax attorney, accountant or other financial professionals as well as your custodian should be able to help you avoid prohibited transactions. You may need to shop around for people sufficiently knowledgeable to assist you in these regards.

Money held in accounts without such retrictions CAN be used to invest in vehicles which WILL benefit you personally. So that's an option for lottery winnings and other sudden windfalls.

Something I would advise against is having dealings with anyone who will benefit financially from any transaction you may make even if you lose money on the transaction. Such people make their money by handling those transactions for you and are not motivated to help you make a profit. Apologies to any financial planners, stock brokers, etc. who may feel slighted by those remarks. No personal attack or offense is intended.

Step 4: Wealth Preservation

This where most lottery winners make their mis-steps and end up broke again in short order: they fail to distinguish between short term gains, and long term income and wealth preservation. Many people buy into the notion that, "If I could just get ahead I could stay ahead".

Wealth preservation is not about spending, it's about having your money working for you instead of you working for money.

Really, wealth preservation becomes a product of Income Production. The idea is to have your income-producing assets increase in value to the point that your income stream is assured for as long you can reasonably expect to need it. They should produce income in excess of your needs so their value increases over time in turn producing greater income to keep pace with inflation and your own needs, which may increase as you age and your health requires more and more attention.

It's not my goal here to suggest income producing assets, though one vehicle I've already mentioned in passing - being a private money lender - can be a strong part of any such strategy. Income producing real estate is another example. Among those who have achieved financial independence - the topic of this blog, the most common "denominator" is wealth produced through real estate holdings.

In summary...

Whether you win the lottery, inherit a fortune or sell a fix-and-flip or rehabbed home for a big profit, your wealth strategy cannot begin with "avenging" all the years of deprivation you've felt being a member of the workforce.

Your wealth strategy has to begin with protection, continue through growth and through debt reduction and be anchored in preservation and income production for as long as you need it.

Re-invest your profits to keep the value of your business growing.

We'll talk again soon!

Take care - be well!

Much Success!

Won the Lottery?

Learn How to Not Be Broke Again Three Years from Now!

Hello! David J. here again with more of the steps on my journey to financial independence.

Was just watching a show on Cable called, "The Lottery Changed My Life". This episode featured a Canadian family who won a fairly modest jackpot, $4.5 million.

Like most lottery winners, they first fed their feelings of deprivation by going out and indulging in luxuries like cars, outdoor recreational vehicles like ATVs and such, even a country home on multiple acres.

Something you never hear on these shows, though, is what they did to preserve their "wealth" after first satisfying their needs to no longer feel "deprived". So, I thought I'd fill in here with some suggestions.

Now, of course, I'm not a big lottery winner, and my personal fortune is still "under construction".

I am blessed, however, to be connected to a group where financial education is available - education of a calibre about which the average college student can only dream. So, this is from my learning, not my experience.

I'm going to propose a four(4) step process:
Step 1: Asset Protection
Step 2: Debt Reduction
Step 3: Income Production
Step 4: Wealth Preservation

Note that I am not a licensed financial professional and am NOT authorized or qualified to give financial advice. This is, again, from what I've been learning. Please take it as such.

I may cite numbers over the course of what follows. Please do not take them as either accurate or "gospel". I'm typing this entirely from memory - what I've learned as I understand it.

Step 1: Asset Protection

Upon any large burst of income or any windfall, the first thing to have in place is a plan for asset protection. As soon as you acquire something that someone else may want to take away, you need to put yourself in a position of control without the appearance of possession. That is, if someone wants to try and sue you to gain control of your wealth, you must first have put that wealth out of reach of such attempts.

On paper, you must look like you have nothing of value - nothing worth suing you for.

Control does not require possession. "Control everything, own nothing".

Step 2: Debt Reduction

When we get a sum of money like an inheritance or a bonus or some other payout, one of the first things many folks always want to do is to pay off debt.

Now, that IS a good thing. The trick, however, is to pay DOWN debt, and do it without imposing a sudden big change on your credit position.

By paying down big balances all at once, you actually paint a picture of yourself which, while it may appear to help you in the short term, in the long term may actually hurt your credit profile. Sure, your scores will surge upward, initially. However, they'll gradually slide back down if you stop using your credit and interrupt your history of payments. Your scores may end up being lower than before you acquired your windfall.

What you'll want do first is devise a pay-down plan for your personal unsecured debts like credit cards and personal credit lines. Exclude your home equity line for now - we'll discuss that later, and its a secured debt, anyway.

You'll need a financial calculator. One recommendable option is the official HP 10B-II emulator app for the iPhone, or the HP 10B-II calculator itself or its predecessor, the HP 10B. Actually, any calculator that handles financial calculations should do nicely. You'll be figuring out the payment amounts to pay down or pay off your personal credit accounts over a period of time which you decide.

For each account, calculate the payment amount for the time period you've decided for paying down your personal debts: 24 months (2 years), 36 months (3 years), 60 months (5 years), or whatever you choose. Use the current interest rate on each account, even if the interest rate is variable. At this writing, there is little indication of interest rates changing much in the near term (within five years) - subject to change, of course, since no one can predict the future.

Once you have the monthly payment amount for each account, multiply that times the number of monthly payments you've selected. Total all these numbers for all your accounts. This will be the amount you'll set aside for debt reduction and elimination.

What you want do so is set up all your personal credit accounts so that they get paid automatically every month out of a special account you set up just for that purpose. Actually, you will want two accounts: a money-market or other interest bearing account which pays more than an interest-bearing checking account would, and an interest bearing - or truly free - checking account.

Start the new checking account with the minimum balance to avoid monthly charges (if any) plus the total of a month's payments on your personal credit accounts.

Set up the money-market or other interest bearing account with the total of all the monthly payments, and arrange to have it transfer to the new checking account an amount equal to the total of your monthly personal credit account payments every month. Money-market and other interest bearing accounts usually have a monthly transaction count limit; so, this should work well - one withdrawal per month set up on an automatic transfer to your new checking account. Leave the money in this account solely for the purpose of funding those automatic transfers and making the automatic payments.

Some banks allow you to set up these automatic transfers through your on-line banking. Contact your institution for details if you need them.

That said, I must also say that I don't promote paying cash for some large purchases when credit will do just as well if not better. Remember: money you don't pay out until necessary is money that can work for you earning income.

So, for any new large purchases do the same thing: figure out how soon you want to pay it off, figure the monthly payment amount at that rate, the total number of payments and the total of all those payments. Add that amount to your money-market or other interest bearing account, and set up those monthly payments to be automatically drawn from your new checking account every month. Adjust the monthly transfer from your money-market or other interest bearing account to your new checking account, as needed.

Every month, the interest earned in your money-market or other interest bearing account can be transferred to another account and used to re-invest or fund purchases. This is an early example of income production - your money working for you, instead of you working for money.

The idea here is not to avoid interest, as most consumers might believe. The idea here is to repair and maintain your credit by setting up timely payments and reduce your credit utilization. This will enable you to get lower interest rates on new accounts, or even to reduce the interest rates on existing accounts.

As for home loans and home equity lines, I'm going to promote the same approach: as long as the interest you're paying on those accounts is less than the income you're making (as we'll discuss next), leave those loans in place and include them in your debt reduction plan. Leave their payoff term as is - 15/30 year or whatever, just allow for the automatic monthly payments which will grow your credit standing and repair your credit profile, if needed.

If your equity line's monthly payments are interest only, use your financial calculator to determine a payment which will amortize that line before it renews or resets the next time (not the current period, unless it just renewed/reset).

If your home equity line is a true "balloon" and does not renew or reset, then consider paying it off in full, if possible.

I've intentionally avoided mentioning transferring your debts into business entities for the obvious reason that I believe it is better for you personally to improve and fortify your own credit status so that you may more easily acquire credit for any business entity you may choose to set up.

It's entirely valid to transfer your windfall into one or more business entities - that could be part of your asset protection plan. All you need do, then, is to have that(those) entity(-ies) make your monthly payments for you.

That said, I would recommend you consider transferring your personal residence out of your personal name and into an entity such as a trust. Your legal professional should be able to help you do this. This further reduces your desirability as a lawsuit target. In fact, depending on your unsecured debts, it will probably push your net worth into negative territory.

You shouldn't feel negative about that - remember: the idea is to look as unattractive as possible as a potential lawsuit target.


*Whew*! This is getting a bit long! Let's break here, and continue in the next post!

Look for it in a week or so.

We'll talk again soon!

Take care - be well!

Much Success!

A Return to Blogging

Hello! David J. here again with more of the steps on my journey toward financial independence.

Well! It's been a while since last we met! Let me fill you in on what's been going on...

"Life Happens", it is said, and my life is certainly no different. Over the course of the past year - my last blog post was just about a year ago, I've been continuing to study my real estate investing and entrepreneurial classes, including the weekly study groups held at the office of the local group of investors and entrepreneurs with which I am connected.

Discussing the class material with others taking the same classes has been very helpful and has helped to reinforce both the class material and its relationship to my own life experiences in investing, sparse as they have been to this point.

Personally and professionally, my occupation in IT is actually reinforcing my choice to pursue entrepreneurialism. In fact, it has become abundantly clear that remaining a W2 employee is no longer an option for me. I've become what some folks call, "unemployable".

While I would not promote being financially irresponsible, I could easily see making my career change now, before my new income production systems are ready to "boot up". My current financial commitments, however, do not permit me that choice. So, I will continue my path of work and study while I develop my new income source.

The time to make the break is not yet, but is not far away now! I'm very much looking forward to the day when I can walk into the boss's office and say, "(Boss), I'm sorry man, but I gotta let ya go - you're costing me a fortune!".

That said, sit back, relax and watch for a new post to be published very soon. It's already written, it just needs a few points to be researched and confirmed before I release it to the world.

Sneak preview: The next post is rather long, and it contains information that can be helpful to anyone who suddenly acquires a large income or bonus, an inheritance or even a big lottery jackpot. After all, the Law of Attraction is all about being ready for good things so when they come your way, you'll be ready and they won't have to pass you by!

Thanx for coming back! There's good things coming, and you're welcome to be part of them with me!

We'll talk again soon!

Take care - be well!

Much Success!

Housing Shortage

Hello! David J here again bringing you more of the steps on my journey toward financial independence.


Well! It's been a while, hasn't it? Hope everyone has been working diligently on their real estate business, studying their classes ... taking those actions that lead us to our goals!

While we've all been busy, something surprising has been happening: the housing market has taken an interesting turn.

See, after the economy went down, almost all but the largest homebuilders went under as well. Thousands and thousands of contractors found themselves idle. Building supply vendors felt it, as well. Some analysts estimate that we're short some 5.5 million housing units from where we need to be just to meet the current demand.

...but, during the time since then, what didn't happen? Homebuyers didn't stop entering the market, did they? Folks were graduating college, looking to move away after school, they even went ahead and started their families while waiting for the housing and home finance market ships to right themselves. Some folks changed jobs or just decided they need a different home for any of many reasons.

Now, the economy is sputtering back to life, and home values are rising slowly. Mortgage lending is still tenuous, as best, but at least some lenders are beginning to "go back into business". Banks are flush with cash to lend, yet lending criteria remain so tight that qualifying for a home loan still remains the holy grail of the 75% of credit holders who are now considered to have "bad" credit (that number was 57% before Springtime of 2009: the banksters did it TO THEMSELVES!)

In this climate, we're seeing something we've not seen for years now: multiple offers on available homes, offers above the asking price, ... Yes! Bidding wars in some places!

The dearth of lending is still keeping home prices supressed by artificially dampening demand. So, the run-away increase in home prices we saw in the years leading up to 2007 haven't materialized yet. People have less cash available for down payments, lay-offs and other challenges have raised issues with peoples' credit, ... in short, the environment is very different from what it was, and yet very different from what it should be.

By rights, the dearth of housing should be pushing prices skyward, yet the weakness in the lending world keeps a lid on demand for both existing and newly built homes.

Some of my Facebook friends have posted that homes they find via the MLS on Realtor.com and other sites are often sold by the time the listings appear on line.

So, homeseekers, if you've also been a job seeker recently you'll need to apply those same networking skills to your home search, just as you did in your job search.

Where can you go to network your way into a new home? Well, there are some options you'll want to consider.

One might be to find the monthly meetings of the local REIA (Real Estate Investor Association) clubs in your area. Investors have been buying bank-owned homes as well as short sales. They've been rehabbing them and putting them back on the market, often without listing them with a broker or agent. The best shot you've got is to find homes before anyone else does and get first crack at making an offer on something that you like, especially if you find it before it gets listed on the MLS.

If you've been following my blog, you may know that the investor group I'm with meets weekly, every Thursday evening and holds a monthly workshop - GREAT opportunity to learn stuff you may not hear anyplace else, and also to network with active real estate investors over lunch. You may even find someone with a home for sale in your target area that no one else has heard about yet!

Speaking of classes, I hooked the laptop up to the big screen TV. Now, I can watch my classes in my recliner with a Pepsi handy and my notebook in my lap. Great stuff!

I'll keep my ear to ground and report back when something good comes along! LOTS of great stuff coming this summer, so we'll be back in touch more often.

We'll talk again soon!

Take care - be well!

Much Success!

Best Job In America: Real Estate Investor

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

I saw an article on Yahoo! recently about the best jobs in America and thought this would be a good way to express what being a real estate investor is all about. It's not a "job", of course, it's a way of life. Still the format seems suitable...

Real Estate Investor

1. Pay Scale: $0 - $300,000+ annually

The money one can make really is unlimited. The only real limit is you and your willingness to do what it takes to succeed.

2. What Do They Do All Day?

An investor's day can be as full as you want or as easy, depending on what needs to be done to achieve your goals at any specific time.

For example, to start your day, you might review various sources of property leads and find any you'd like to visit and analyze that day and then schedule your activities for the day. Then, make some phone calls to attend to the details of deals in progress, maintain contact with your network of fellow investors, title company agents, realtors, and others.

Then, visit the properties you selected earlier, sit down with a notepad and calculator and work the numbers, make decisions about the ones where the numbers look like they add up and decide how to prepare offers and letters of intent to acquire them.

In the late afternoon and evening, you might meet with your accountants and attorneys to discuss the deals you're working on, network some more, have dinner with your contacts, colleagues and friends.

3. How to Get the "Job"

There's no place to interview for this type of a "job", it's really a choice of life style, life course and life goals. If anything, you'll interview yourself to see if you're ready to embrace a paradigm very different from that with which most of us are raised from youth.

By far, the greatest challenge is letting go of one's comfort zone and embracing a new idea of what it means to be an employer rather than an employee, a leader rather than a follower, the one who determines the instructions rather than simply following them.

Only you can decide whether you can be comfortable determining your own income rather than trading your time for dollars, rather than depending on someone else to provide a salary or an hourly wage, rather than depending on someone else to provide work for you to do, supervision and management, a work place, and so on.

4. What Makes It Great?

Real estate investors today are contributors to society at a time when their work is very much needed to preserve and restore the available housing stock, to provide clean, safe, sanitary, affordable housing at a time when borrowers are crippled by credit all but destroyed thru no fault of their own - back in 2009, banks cut credit lines and closed accounts causing credit scores to experience a drop from which they have yet to recover - and crippled by job loss, loss of home equity, loss of retirement account value and economic conditions not seen in this country in almost a century.

Today's real estate investors have had to be creative about borrowing since institutional lending all but stopped. Now, investors can help people recover the value in retirement accounts and achieve returns on their retirement savings that banks, stocks and other options simply can't provide right now.

Real estate investors have been leading the creation of construction and rehab jobs since builders and developers folded up under the pressure of the collapsing economy.

Additionally, by taking foreclosed homes off of lenders' inventories, they're helping the lending environment heal itself and keep banks from failing and from costing the government money when banks fail.

5. What's The Catch?

Wow! That could be a whole series of posts in itself! So, let me summarize...

To start with, with the lending climate the way it is, almost the only available source of financing for real estate deals is private lenders and hard money. So, the investor needs to be not just a transactional analayst and engineer, the investor must be a diplomat, a team builder, a charismatic leader who can attract others to one's efforts to help provide housing where it is needed.

Few of us were taught about money or business at home, and most of us not even in school. So a major challenge is acquiring eduction on the topics surrounding the process of real estate investing.

Another major challenge is that so many less than scrupulous people have tainted the image of the real estate investing profession that one may face a great deal of skepticism from one's neighbors and family. Investors have a reputation as greedy people who take advantage of people in bad situations. This will require you maintain utmost integrity and honesty at all times. Deals must always provide a "win" for everyone involved.

So, there you have it. That's the "job description" for a real estate investor.

Have ya got the guts for it? Do you have "the right stuff"?

We'll talk again soon!

Take care - be well!

Much Success!

Your Recent Opportunity: Lay-off!

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Back in August of 2009, my "secure" position evaporated after just over eight years.

Yes, I was devasted. It wasn't the first major blow of 2009, but it was the coup-de-gras that sealed my transition into a new stage of my life.

Now, it wasn't the end of my IT career. Yet, it was the end of my career as an employee.

This event solidified in my mind the reality of the new economy that many of us face: our future no longer depends on finding someone else to accept our services and compensate us for them.

Our future is in our own hands now. Who else can we trust to take the best care of us?

A layoff notice is actually an acceptance letter for your new job — at Your Real Estate Investments, LLC with you as the President and Chief Investment Officer.

Your new job is full-time. You'll need to approach it with a seriousness of purpose and dedication to success befitting a professional.

And your new job has just one goal: getting yourself established at your new company getting paid in dollars, not promises or favors. That means activities which generate cash or cash flow.

When the breaks go your way, bank your plenty rather than fritter it away, and make a timely transition into your new job: finding money-making properties, finding funding, finding tenants and finding buyers, depending on your strategy.

For those of you on the Technlogy Ladders mailing list, yes: that's a shameless steal, albeit paraphrased a bit, from Marc Cenedella.

The point is, though, that even as you would make job hunting a full time job, make investment hunting your full time job. This includes hunting for buyers, private lenders, deals, partners, ... in short, replace everything you knew with everything there is to learn about being a real estate entrepreneur.

That's where I'm at now. I invite you to join me!

We'll talk again soon!

Take care - be well!

Much Success!

Credit Where Credit is Due, Update

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Quick update to the last post...

The LLC's credit card arrived today!

It only has a $3,000 limit, but that's $3,000 the LLC has access to that it didn't have before.

SO... NOW the question is, what can the LLC do to make the most of that? I have a feeling the answer is coming, but it's not here yet.

There's opportunities coming with my investment group that I don't quite have all the details on just yet.

That said, I can turn you on to this:

Have you ever heard of "Self-Directed Retirement Plans"?

That can be confusing. Some outfits may tell you that sure, you can self-direct your employee retirement plan! (401(k), IRA, whatever...) Just choose from any investment they offer.

That's NOT self-direction! Thus, when I talk about this I take an example from the folks who taught me about them... I call what I'm talking about "true" self-directed , or "genuine" self-directed. That means you've rolled your retirement funds into a plan where YOU select the investments from a list of anything in which your retirement plan can LEGALLY invest.

Now, again, I'm neither an accountant nor an attorney - please refer to your financial professionals for advice.

You'll also need to find a custodian for your SDRP(s). This might be an outfit such as American Pension Services, Equity Trust Corporation or the like. (Disclaimer: I am in no way connected with either American Pension Services or Equity Trust Corporation.)

Whether you have regular savings, retirement funds or a line of credit, you always have the option to invest in something which produces returns above and beyond the "cost" of your money. Heck, that's how the banks work! They borrow money from the Fed or each other - some even get it from depositors! What a concept! - and lend it out at higher interest rates than they pay to get the money to start with.

So, "be the bank". If you can acquire money at, say, an introductory 0% rate for a few months or you are set up to self-direct your retirement plan, and can lend money out at any positive rate of return, then you're making "free" money off of cheap or "free" money!

Where do you get high returns?

Here's a couple examples to get you started. Disclaimer: I am in no way connected with any of these other than as an "investor" or potential borrower:

o Prosper.com

o Lending Club

Read up on their terms and conditions, their introductory pages, etc. and find out what they're all about. Be advised that last time I looked at Lending Club there was no way to "join" without taking out a loan and, once you begin that process, there's no way to cancel it without contacting their customer service department.

There's also borrowers such as real estate investors who are very willing to pay above-market rates for short term funding, 3 to 6 months or more, secured by real property. Since banks aren't lending in that space right now - at least not at the volume the industry demands - it repesents YOUR chance to "be the bank"!

When you lend money out of your retirement plan, the returns have to go back into your retirement plan, of course, but hey - any positive rate of return is better than losing double-digit percentages every time something newsworthy happens in the Wall Street Casino!

Now, again, let me reiterate: I'm neither an accountant nor an attorney - I am NOT quailfied to give either legal or financial advice! Please refer questions to your qualified professionals.

Watch this space for an update. Stuff is happening here!

We'll talk again soon!

Take care - be well!

Much Success!

Credit Where Credit Is Due

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

We haven't talked about corporate credit for a while. I've been still working on that and now my LLC has been approved for its first credit card!

I did what we talked about earlier, including getting some Net-30 lines and getting a DUNS number. That's right - you can find the LLC on Dun & Bradstreet.

Now, marketing remains a major source of new revenue for the credit card companies, even in THIS economy, and even in the commercial market - corporate credit.

So, lo and behold, the LLC gets a solicitation for a cash-back credit card! I went to the URL listed in the mailing piece (yes, it came snail-mail!), filled out the application on-line, and - long story short - I got the reply that the application was approved!

This is so new that I don't even have the card in my hands yet. So, I can't even tell you what the credit limit is or any other details.

Obviously, I read and agreed to the Terms and Conditions on-line. So, I know about interest rates, billing practices and such.

...and yes, it is personally guaranteed by me. Now, my credit score remains good thru all my tribulations, but my credit utilization is VERY high. Remember from earlier posts I mentioned that when the credit card servicers started cutting credit lines back in early 2009, I lost some $50,000 in open credit including losing one $14,000 line entirely when the servicer lost their funding.

So, I can't get new credit lines in my own name, but my LLC just did!

Even if you can't complete the whole credit building program for your business entity as we discussed back in December of 2010 - I didn't, you can still build corporate credit for your entity. The key is going to be to build some kind of a good credit reputation for your entity, and ensure that D&B makes that information available to the world.

We'll talk again soon!

Take care - be well!

Much Success!

Perfectio, Perfectere, ...

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

I made that title up, by the way. No, it's NOT proper Latin.

I must confess myself disillusioned. After writing an entry on this blog called, "Nobody's Perfect", I have since viewed some more of these TV shows like "Flip This House", "Property Ladder" and such.

My favorite is actually Mike Holmes's "Holmes Inspection". He at least knows what he's doing and focuses on how to correct what he finds wrong when he's called in at a property.

In the other shows, they seem more like "(How NOT to) Flip This House" and "(How to Miss The First Wrung of the) Property Ladder".

Ok, I'm showing my colors here. Now you'll begin to understand a little bit of why my ex left me.

That said, maybe I'm missing the point of these shows. Maybe they're trying to convey the message that we should learn from the mistakes of others rather than repeat them.

THAT is a message I am behind, whole-heartedly. Many mistakes have already been made, many lessons have already been learned - we don't need to repeat them. These shows document the pitfalls to avoid so that we can benefit from others' missteps.

Still, too often, we go forth believing that since we've been successful as, for example, an IT problem solver or one example from "Property Ladder" was a hairdresser who believed that on a budget of only $10,000 she could pull off a rehab in six weeks on a house she'd bought sight-unseen... We go forth believing that we can accomplish a fix-and-flip or a rehab on sheer attitude alone, even if we have no building or "handyman" skills.

If something seems "easy", it probably isn't - until you learn how. That is, until you learn how to avoid the major mistakes people can make doing it, whatever it is. Often times, tasks we may attempt are "easy" once we have acquired some experience and certain basic skills, yet before then the mistakes we might make through inexperience or just not knowing can ruin us financially.

If you're contemplating undertaking a fix-and-flip or a rehab, consider your own experience when setting your timelines and budgets. The less experience you have, the more time and resources you should allocate.

Remember: Bringing a project in ahead of schedule and under budget makes you look a LOT better to prospective future partners than over budget and behind schedule.

Am I saying to "fudge" the numbers and over-estimate? Of course not. What I AM saying is that your first projects are your most powerful learning experiences. Expect stuff to go wrong. Expect the unexpected: material issues, structural issues, financial issues.

Go ahead and cut those crooked furrows when you can, but remember to call the utiity locating services first!

Even if you think you can do it yourself, try to avoid that. Hire it out! In fact, your trades people will be much better able to provide estimates of time, materials and cost until you've acquired some experience, seen what can go wrong and seen what kind of unexpected issues can turn up.

Remember: There's only one of you. If you can have two or more trades working your project at the same time the work gets done that much faster.

Oh, yeah - one more thing: try to avoid painting a brick exterior! People buy brick because it is relatively maintenance-free. If you paint it, brick immediately goes from low-maintenance to high-maintenance, and your likely selling price comes down by a BIG margin! Brick, regardless of its color, is never "dated" - it's timeless! Clean it up with acid wash, if necessary, but NEVER try to paint brick!

We'll talk again soon!

Take care - be well!

Much Success!

The Next Crooked Furrow - Pt 3

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Gee - we ARE getting these posts a bit more often now! Super Cool!

Direct Mail Update:

The response to my direct mail effort was, well, underwhelming. For an untargetted mailing, though, it's within reasonable expectations. So, I'm not concerned. I will just push that down on my list of marketing efforts in terms of effectiveness.

I have, however, discovered something which HAS proven useful: Craig's List.

Now, the most effective ads are the paid ads: job ads. They're $25 per category, and you can post the same ad to more than one category. They just just don't like it when you post the same ad to multiple geographic areas. Guess they don't believe in covering a lot of bases at once.

Still, even these ads are not as effective as one might like. I do get responses, but mostly these are from people who are not looking for anything other than a job. They just want to come in, go over their resume with you, fill out your application, apply for benefits and start collecting regular paychecks.

That's what makes this such a crooked furrow - it's a learn-by-doing type of experience.

So, that said, I developed a new Craig's List ad based on the results of some members of my investors' group who said they were getting the best response from bandit signs advertising for sales rep.'s.

I posted an ad on Craig's List titled, "Sales Rep.'s Needed". The ad read like this:

Must be comfortable working for 100% commission as 
an independent business person. No travel, work 
from home.

Training on products is provided.

Must be comfortable generating your own leads. We 
have a few to get you started and training on lead 
generation is provided.

Licensing fee required, no other up-front money.

Commissions are unexpectedly good. Details 
provided during training.

I thought was appropriate because the real estate school this revolves around does pay referral fees or commissions. It's about as close as one can come to any kind of opportunity which pays its own way. I do have to cover my own marketing costs, as would anyone else. So, there is some expense incurred aside from the licensing fee.

I did get one very promising response the first time I ran that ad. He's currently in a sales position and has construction and construction supervision in his background. If he has an entrepreneurial spirit as well, I think he'll not only come on board with us, I think he'll do very well. One of the group leaders was also in construction - remodelling, actually. So, these two will have a lot to talk about if he comes on baord with us.

So that's my current status. I did sign up for the basic classes offered by the real estate school. I started that today.

I'll also be keeping up my marketing efforts.

Follow along with me. The best is yet to come!

Your comments are always welcome!

We'll talk again soon!

Take care - be well!

Much Success!

The Next Crooked Furrow - Pt 2

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Gee - we're getting these posts a bit more often now! Cool!

In the last post, I promised a URL to my "squeeze page". Before I do that, let me explain: this will be most useful to those in the Chicago Metropolitan area. The squeeze page takes you to an ivitation to a local meeting - remember, we talked about that last time: this group is based in the western suburbs of Chicago. They also have an office on the City's northwest side, in Indianapolis and in the Greater Rockford area.

So, that said, here's the link: www.DJEDevelopmentGroup.com

The video is short, about five minutes.

The "squeeze page" asks for your name, your phone number and your e-mail address. It's o.k., I won't be calling or e-mailing you without your permission. See, when you enter that information, the first message you get is by e-mail asking permission to continue to correspond with you. Seems redundant, but it IS required by law that I do it that way.

Click on the "authorize email" link in that message and you will receive a "Thank You" message from me. In the "Thank You" message, I tell a bit more about the group and the folks who lead it. Don't want to spill the whole thing here. This is a blog, and that's information for folks who choose to pursue a business relationship with me and with the group.

Still, you can unsubscribe at any time. I don't plan to do e-mail campaigns or any of that.

If you do choose to continue with me, we will be in touch regularly by phone, e-mail and in person, if you're local to the Chicago suburbs.

What I am doing a bit different from most folks in the group who choose to use the squeeze pages is that I'm using their ability to do on-line "relationship building" via e-mail. I've had a good two years of exposure to on-line marketing, though this is my first attempt at on-line relationship building, known in the larger business world as "CRM": Customer Relationship Management.

This may catch on, depending on the response I get. So, please use the comments space here on the blog to voice your opinions. I'd really like to know your thoughts to help me build this business further, hopefully with some of you alongside me. We can earn, learn and grow our businesses together.

Here's the best part: this group holds a workshop every month, usually the third Saturday. For $50, whether you join in any other aspects of the group or not, you get a whole day of content and learning, from 9 to 5 with a 90-minute lunch break. Note that the focus of the day is content, not a sales pitch. For $50/month, you can't beat the learning opportunity. Others would charge hundreds for a single-day presentation.

Otherwise, the group meets on Thursday evenings and Saturday noon time for the business presentation, and then on Friday at noon time and Monday evening for a follow-up, question and answer session.

This is what you don't get from the "gurus" who do the 90-minute sales pitch webinars: a place to learn and to build an on-going relationship with the people in the group. As we go along here, I'll point up more of the differences, but that's a big one, and even though you're getting this blog for free, this little bit of knowledge can be worth many, many millions of dollars to you.

If you've read my earlier posts you know that I DO advocate listening to the sales pitch webinars. In the first place, they're "free". You're paying to run your computer and have internet access anyway. This is one way to make it productive. If you listen to enough of these "gurus" you can pick a LOT of good information out of their presentations. You just have to get past the sales pitch to find the information.

Here, this group doesn't offer up sales pitches. The Saturday Workshops are all content. In fact, when you come, bring a fresh pad of paper and a good pen or two to each one because you WILL want to write down a lot of information. You won't want to run out of paper or have a pen run dry on you.

Here in this area, I know of only one other group which holds "no sales pitch" meetings. The group is known as "the WCRT", for no special reason. The letters don't really mean anything according to the group's leader, Ryan Steele. Ryan is a successful investor in own right and does do one-on-one mentoring, for a fee. The WCRT meets the first thursday of every month, except where that falls on a holiday. Take a look at the WCRT website for more information. Every month features a speaker - pure content, no sales allowed.

Having the group for support and making local contacts is by far the most valuable resource any group can offer. The "gurus" don't seem to get that - their presentations are pure marketing from start to finish - just being brutally honest, no offense intended.

As to part 2 of the latest crooked furrow, I dispatched my first direct mail campaign this afternoon. 556 pieces to two carrier routes in a local zip code. We'll see what kind of response they draw. Untargetted direct mail gets the lowest response rate, usually. So, I'm guessing less than 1%. Out of 556 pieces, maybe 2 or 3 people will pursue it. I'm hoping to do better, of course.

We'll talk again soon!

Take care - be well!

Much Success!

The Next Crooked Furrow

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Well! We went another more than a month without a new post. I've been busy and there's good news coming!

First, let me thank those who expressed support while I was recovering from the changes that went down this past Spring. Your warm wishes meant a lot.

Secondly, I'm still plying my IT trade and shopping the job market while working toward my financial independence goals. Working on a new job that's more in-line with the bulk of my experience. Looking good, but I don't have the offer yet. Wish me luck!

Third, I have some REALLY great news on the financial independence front.

I've connected with a local group of investors. I was going to make that a longer sentence, but thought better of it because it contains an important point: I've connected with a LOCAL group ...

The key word there is "local". That means I can visit them, attend their gatherings, sit and take notes as often as they hold their events. That's SO much better than buying something off the web and trying to figure it out without some active support. It means so much to have the group to whom I can turn with my questions because SOME one is there who has some kind of answer. There's typically more than one answer to questions not involving legal issues, and even that is not 100% certain.

That said, there is something connected with this group which is strongly in keeping with the principles I set forth when I started this blog: at least SOME level of support for those whose financial means are stretched well past the breaking point.

While this group does do marketing for a real estate "university", they do something that NONE of the other marketers in this space can even pretend to do - and many of them do "pretend": the school offers financing! ...and down payments as low as 20%!

Unfortunately, even this outfit and their marketers do not have what the true "no cash, no credit" people (like me) need, BUT: they do have a way to generate income that can pay for the classes they offer. By being an affiliate marketer you can earn commissions that can pay for the classes you might want to take from the school. The affiliate licensing fee is $125 a year.

Also, the class material is all self-paced and on-line. You can study at your own speed in your own home office or anywhere you have internet connectivity.

In my next post, I'll do something that might be considered unthinkable by some: I'll post a link to my "squeeze page" where you can be introduced to this group and the school they represent. If you want to know more, you'll have to tune in again in a couple of weeks to get the rest of the story.

In the mean time, ask yourself this question: if you had people with private money looking to you for an opportunity to get better-than-bank returns on their retirement accounts and other investments, how easy would it be to turn some real estate deals and make some income?

Now, what does this have to do with "crooked furrows"? Well, if you read my earlier posts, you may remember that one of my adopted mentors holds that he'd rather see a crooked furrow than a field unplowed. I'm cutting another crooked furrow in relation to my latest venture thanx to the US Postal Service.

USPS has introduced a new service called "Every Door Direct Mail", or "EDDM". EDDM provides delivery to every mailbox on a carrier route within any zip code. It's not targetted at all - there's no provision for mailing lists or special permits, it's just base rate per piece. You need a minimum of 200 pieces in a mailing, which means you may need to start with two or more carrier routes to go over the top of 200.

Here's the USPS link for more information:
https://www.usps.com/business/every-door-direct-mail.htm

I showed my first draft mailpiece to some group members. One of them suggested I need some attention-grabbing graphics. Right now, it's all text, like a sales letter. I'm not a graphic artist. I don't know from graphics. So, I'm considering my first attempt at a direct mail piece to be a "crooked furrow".

Tune in again in a week or two and I'll have more for you!

We'll talk again soon!

Take care - be well!

Much Success!

Nobody's Perfect

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

When we're starting out, getting everything together to start our business, we worry a lot about doing something wrong. Often times, this can lead to procrastination and hestitation to take action. In this post, I want to share a story about a "famous" crew who experienced a major hiccup in one of their projects.

So many of us want to hit the mark perfectly on the first shot. The truth is, of course, very few of us do. Often times, our first attempt is less than perfect, less than ideal. To quote from Warren Buffet, "Business is like baseball: more games are won with base hits than with home runs."

One of my adopted mentors said, "I'd rather see a crooked furrow than a field unplowed". I don't know if he originated that or where he got it from, but I think it makes a great statement. Do SOMEthing, even if the result is less than perfect.

I just saw an episode of "Flip This House" where the team made some major misjudgements. It seemed like a good example because here we see that even seasoned professionals sometimes still get it not quite right.

The subject property was a Connecticut contemporary with a view of Long Island Sound from the deck. It was found by one of their students who initially thought it would be only a few cosmetic fixups.

As it turns out, however, there were some REALLY major issues.

Initially, it seemed that the worst issue to fix would be some water leaking from the attic space, apparently from an air conditioner in that space. The fix wound up being major repairs to the air conditioning unit, including replacing the evaporator coil. The condensate drain also needed to be rerouted to prevent condensate being trapped in the pan and over-flowing into the living space.

When work on the project began, they started outside on the landscaping. Good thing they did, too. It helped them uncover a major issue with the septic system.

Many of us are accustomed to city water and sewer. So, sewers and waste water disposal are easy to overlook, especially when we're not familiar with an area we may have never visited before. In the case of this house, city sewer was not available. So, the septic system had to be dealt with.

By the way: take the word septic *VERY* seriously! I provided the link for a good reason. If you're uncomfortable with strong odors, you'll want to approach these properties cautiously. I remember once hearing an explanation of how to distinguish between chemistry and biology: if it doesn't stink its chemistry. If it stinks it's biology.

When the property was found, it was disclosed that the septic system was not working. This should have been a major red flag.

The initial rehab estimates did not include a replacement of the septic system. So, the initial estimates for repairs were low by almost half of the resulting final amount. While this did not eat up all of the profitability of this property, it was a major hit.

I did not know before watching this show that when a septic system is taken out of service permanently, the old septic tank has to be crushed and left unusable. I'm thinking the main reason for this is to prevent a cave-in at some future point as the concrete buried in the ground deteriorates over time.

In the end, the property was sold at a substantial profit. Still, the repairs did run over budget by more than $25,000.

What's my point?

Sometimes, when we should do "Ready, Aim, Fire!", we focus so much on the "Aim" that we never seem to get to "Fire!".

So, I will encourage you, as others will, to do "Ready, Fire!", THEN aim.

Now, of course, I don't mean that your "first shot" should be entirely random. Once you're comfortable with a general direction, GET MOVING! Take action. You'll have to make corrections along the way, of course, but at that point at least you'll have things happening. Remember: a vehicle which is stopped cannot be turned - it has to move in order to even turn the wheels toward a new direction.

Perhaps you've heard it said that a ship at sea or an airplane in flight is off course most of the time. Small corrections are always being made to keep the craft on track toward its destination.

Likewise, we must always make corrections to our course to keep ourselves and our endeavors on track towards our goals.

Give yourself permission to be imperfect. Perfection is always elusive. Success is achieved by those who pursue it!

We'll talk again soon!

Take care - be well!

Much Success!

Life

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Welcome back to the blogosphere!

This post, I want to relate some of what life hands us as we go along.

It is said that "Life Happens". Indeed it does, and yours truly does not escape that.

There was no April 2011 post on this blog. My apologies. Life did indeed happen.

It not only happened, it ended.

Not my life, of course, but someone very dear to me - my own Mother.

Mom was 98, and very much in need of a constant companion in her final weeks. Initially, I'd moved in with her expecting my finances to come crashing down, but with the new job back in September of 2010, I was able to stay afloat. Then, another job came along, and good thing it did. Little did I know that it would make possible my brief stint as Mom's live-in, full-time caregiver. They let me work remotely which was more of a blessing than I can express.

I'd never before been this close to an almost centenarian, so I had no idea how it can go for people of advanced years. In her last weeks, she barely knew who I was. In her last days, she wasn't even sure who she was. In her last hours, she reached out to the objects of her Faith and begged their intercession. When she did finally go, I could almost feel her relief because her trial in this world was finally over.

If you're ever called upon to be of service to someone who needs you, I hope you'll embrace the challenge, and do so with relish. Watching her waste away was by far the most heartbreaking experience of my life, but being there and taking care of her was almost as if I was meant to be there.

I didn't always know what I was doing. Heck, I made most of it up as I went, and yeah - I screwed up a LOT! Still, it all came to me as if I'd done it for years and had only to reach inside myself to remember.

While watching her final moment of life was an experience I will not soon forget, I really can't imagine a more rewarding experience than being there for Mom when she needed me.

So, that's my post for this round - short and to the point.

It's been said by so many, but I'll say it anyway: Be A Servant

I mean that - truly a servant. Give of yourself with no expectation of return or recompense. We each have a gift inside us, a gift that someone around us will someday need. When that day comes, your purpose will be fulfilled when you give that gift because that is why you have it: to fill the other person's need. Only you can give that gift - no one else has it to give.

I believe that a part of my purpose is to be here and share with you my experiences along my journey. Please consider me your servant!

We'll talk again soon!

Take care - be well!

Much Success!

Real Estate Tips

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

This post, I want to pass along some tips I've come across. Again, more stuff you'd pay thousands for from anyone else.

Investor's Research

Now, quite the opposite of real estate, my sister lives with her husband on a sailboat. Still, she was able to pass along this link:

Mapping America — Census Bureau's 2005-9 American Community Survey
http://projects.nytimes.com/census/2010/explorer

This is a fairly high-tech map with lots of "mouse over" functions. So, you may need a speedy, newer computer to use it and get the most out of it. That said, it includes lots of data gleaned from the census - demographics, yes, but also community information. Also, it only covers up through 2009. So, it's a bit dated.

Now - you'll notice its from the New York Times, and NYTimes has said that it plans to start charging for using its website. So, don't be surprised if this is no longer a free service at some future point. Goodies like this seldom stay free for very long.

In keeping with this blog's focus, however, let me also point out: my sister and her husband bought the boat as their first retirement home. Since then, they've both seen former employers - and the associated pension plans - go under. So, the income they thought they would have has dwindled a good bit. The husband recently had a near-drowning experience which could have been much worse and could have caused medical expenses which would have devasted their finances.

All the more reason to pursue passive income from multi-family property.

Property Owner?

In talking to my brother, I was reminded of a common mistake rental property owners make. The first home he and his wife bought is now an income property for them ... or, at least, it should be. He remarked that he still has two houses and wishes he only had one. I asked him if it was positive cash flow. He said just barely. When I asked why, he said it had to do with incidental expenses which crop up: this breaks down, that needs replacement, water in the basement, and so on. When I asked what his maintenance budget was, he just sort of stumbled over his response.

See, any rental property has to be treated differently than your own home. The property has to pay its own expenses - ALL of them! It's up to you, the owner - or your assigned property manager - to include some cash reserve deposits in your "positive" cash flow.

With your own home, when a sump pump breaks, a toilet flush valve breaks, or something else happens, you can usually absorb that into your household budget.

Your income property has to have its own budget, separate from your household and your personal income. Your income property has to carry its own weight, entirely separate from your personal income.

Income property -MUST- be treated as a business. It has to stand on its own, first and foremost. If it can't, consider selling it to someone who can afford to rehab it so it can command a higher rent and cover all of its own expenses with a little left over for the owner. You could rehab it, or pay someone to do it, unless you're competent and available to do it yourself. Just remember that any work you do or have done has to be to code and must pass inspection.

In my case, I'm looking to acquire large multi-family properties. So, I'll be hiring a property manager, hiring tradesmen and rehabbers, and so on. I'm only one man with physical challenges. I need to hire a team to do what I myself cannot.

Remember also to control everything - own nothing. Your rental properties should be assets of a business or businesses you control so you personally cannot be sued to gain control of those properties. We've talked about this before. See my earlier posts on this blog. Remember also that I cannot give financial or legal advice. Consult your legal and financial professionals for guidance.

We'll talk again soon!

Take care - be well!

Much Success!

Beginning Vendor Credit

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Some important information I wanted to bring to your attention, as you begin to build credit for your business entity:

Some vendors will deal with startups having no credit history. Of those, some may extend credit right away.

Yet others will want you to pay up front for the first 90 days. Then, they'll report the entire 90 day period as on-time payments to the bureaus. So, it's entirely reasonable to go a whole calendar quarter buying from your vendor and paying up front, yet seeing no progress from them on your credit history. Then, of a sudden, you'll find you have a history with that vendor and they reported 90 days of on-time payments!

So, that was unexpected.

It's also the good news! Since you pay up front, your payments don't get a chance to be late! Rather an interesting plan, eh?

If you've been reading along as I publish my experiences, you may have noticed that I've been advocating opening two lines of credit a month and buying $60 or more from each vendor every month. If you follow these guidelines, your expenses will look like this:

Month 1
Vendor 1: $60
Vendor 2: $60
Month 1 Total: $120

Month 2
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Month 2 Total: $240

Month 3
Vendor 1: $60
Vendor 2: $60
Vendor 3: $60
Vendor 4: $60
Vendor 5: $60
Vendor 6: $60
Month 3 Total: $360

Total, 1st Quarter: $720

Of course, that's a low estimate. By the time you pay taxes and shipping, your actual purchases will likely run closer to $75 each month, more or less, from each vendor. So, now the numbers look like this:

Month 1
Vendor 1: $75
Vendor 2: $75
Month 1 Total: $150

Month 2
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Month 2 Total: $300

Month 3
Vendor 1: $75
Vendor 2: $75
Vendor 3: $75
Vendor 4: $75
Vendor 5: $75
Vendor 6: $75
Month 3 Total: $450

Total, 1st Quarter: $900

That's not inconsequential, but it's not too bad. It's as close to "no cash, no credit" as we can come given what we're trying to do. I mean, how do you establish credit for your business entity if the entity doesn't buy stuff and pay for it?

On the other hand, you're reading this blog for the cost of what you're already paying. If you're at home, you're already paying your power and internet bills. If you're reading this at the library on their computer, that's about as low cost as it gets.

I'm blogging to help you do what I'm doing. I'm not asking for a month's take-home pay like some "get rich" gurus might ask.

All I'm asking is to stop by here every so often and look for a new post. I try to post at least once a month, more when I have news that won't wait.

Let's layout the timeline, then:

From the time you start buying, figure two calendar quarters before you can start looking for startup lenders who will honor your entity's established credit. That's six months.

For me then, that means I have six months to study large multi-family properties and explore lenders and other options. So, I'm looking at June of 2011.

At last! A "stake in the ground"! A concrete target I can aim for. A wise person once said, you can't hit a target you don't have!

We'll talk again soon!

Take care - be well!

Much Success!

Pay It Forward

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Just a quick update to the blog today. Really, sort of thinking "out loud".

One of the tasks for building credit for your business entity is to make some purchases from, for example, office supply stores and such. You need to buy about $60 worth of stuff from each vendor every month, and pay the net-30 bill on time to build a good credit history for your entity.

So, whaddaya gonna do with all that stuff?

Here's one idea I had. Since you're using your own money to capitalize these purchases, why not buy things that schools and churches need, donate the excess stuff - beyond the needs of your own business, and take a deduction for the donations?

Now, naturally, you'll need to consult your own tax accountant because I obviously am in no position to be giving advice. You'll need to consult with your own professionals and see whether and how much that would work in your favor.

Why donate what you bought with your own, hard-earned money?

Consider:

Our purpose here is to build a business that produces massive passive income.

I'm sure you've heard it said that much is expected from those to whom much is given.

So, by buying and giving now, before your plan comes to fruition, you're "paying it forward" and developing the habit and attitude of giving: an attitude of gratitude. When your business starts cranking out cash you'll be so in the mode of giving and sharing that you'll NEVER be called a rich, old penny-pincher, stingy or a miser.

I know - rather flies in the face of conventional wisdom, does it not?

If we want to be financially independent, we want to hold onto money, not give it away, right?

Well, yes and no.

We want to avoid unnecessary expenses, certainly. Providing for the less well-off and contributing toward the education of our children are certainly necessary, I'm sure many of you would agree.

Those were my thoughts while trying to decide how many cases of paper to buy from one vendor, how many pens, pencils and other supplies from another.

One extravagance I might like for myself, though: When I got married, I gave my best man a genuine Montblanc Meisterstuck, but didn't get one for myself. I like those big, heavy, brass pens - I have several bootleg versions (they accept the Parker refills, but not the Montblanc). They feel good to hold and to write with. I might do that to satisfy one month's purchase from a vendor who offers it, if I find one.

We'll talk again soon!

Take care - be well!

Much Success!

LLC Update

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Well! It's been quite a while since last we met! A lot has been happening. Let's get caught up...

Probably the biggest news is that I'm back to work after a year and six weeks! While the original plan was not to take another J.O.B., the reality of my financial situation did not make that possible. The new job came along just as my money - the last of my life savings - was running out. October would have begun the bankruptcy and foreclosure phase of my life. Now, we can forestall that for the time being and keep building the LLC's credit!

On the LLC front...

Where this is at: we're ready to start building store/vendor credit and get our D&B profile put together. So, that's the next step. The LLC has everything it needs to be recognized as a valid entity: An EIN, a real address (though that address needs to change - part of the story I haven't told here just yet) a checking account and its own phone number (with Vonage). That makes it a "real", recognizable entity in the eyes of potential lenders and creditors.

As relates to the LLC's purpose...

Here's a real gem I picked up recently from a REIA leader:

Y'know how the Real Estate investment gurus always tell you to make offers and they claim it can be done without tying up gazillions of dollars in earnest money? Well, here's how you do it: this works for "commercial" real estate (which, for purposes of this discussion, we define as "large" multi-family residential, 12 units or more) and may work for some single family income property. The "secret" - if you want to call it that - is to make a distinction between an offer to purchase and a "Letter of Intent", or "LOI".

An Offer to Purchase such as you or your agent may submit to a seller for an given property requires an earnest money deposit and is a binding contract once it is accepted.

A "Letter of Intent", or "LOI" is just what the name implies: it's a letter to the seller indicating your intent to negotiate to purchase their property. It is NOT binding on either party, so no earnest money is proffered. The LOI is merely a vehicle used to open the lines of communication. For any given seller or property, the LOI might or might not lead to negotiations which yield an offer to purchase. The LOI may undergo revision as the negotiations, if any, proceed before the seller accepts one of the proposals contained in the LOI. The accepted proposal then gets written up as an offer to purchase, earnest money is put forth, and the seller accepts the offer at which point the offer typically becomes a purchase contract which is binding on both parties.

The fellow giving the presentation used examples of LOIs wherein he actually makes three proposals in each LOI.

The first proposal in the sample LOIs is usually 100% seller financing. He indicated that this is seldom accepted, but it has happened. The first proposal is usually structured to be the most lucrative to the seller, having the highest purchase price of the three proposals, and highlighting is used in the letter to make that stand out, such as using a larger, bolded font to indicate the total amount received by the seller through the end of the financing period.

The second proposal in the sample LOIs typically includes some kind of cash to the seller in addition to seller financing. He showed examples where the second option is presented less attractively with fewer details and no highlighting, since the most desirable scenario is the 100% seller financing proposal. The purchase price is lower than the first proposal to reflect the buyer's (your) additional overhead (finance charges on the money that will need to be borrowed to provide cash to the seller).

The third proposal in the sample LOIs was simply an "all cash" offer. No details provided or needed. The purchase price for this proposal is the lowest of the three.

That information there would normally "sell" for at least a couple of thousand dollars at a guru's seminar or in their books-and-tapes "course" they might sell from a table at the back of a hotel banquet room. You just got it here "for free". I paid $20 to attend that presentation, and I was a half-hour late because I forgot it was happening that evening.

Here's a tip you might pay to get from a marketing guru:

When sending your Letters of Intent, it's o.k. to print the letter off of the computer. In fact, you want to look as serious and professional as possible. Remember to sign the letter in your own hand, of course.

To get your letter opened, however, HAND-WRITE the addresses - the property owner's address and your own (return) address. Research shows you stand a much better chance of your letter being opened and read when the envelope is hand-written. Otherwise, you just look like more junk-mail.

So, in the "course" of this blog post, I figure I've not only helped enable you to make $millions, I've saved you $thousands in money you'd otherwise pay to gurus to attend their events or purchase their stuff, most of which is fluff intended to motivate you to buy even more stuff, most of which is fluff intended to motivate you to buy even more stuff, etc., etc.

Since the purpose of the LLC is to buy and hold income property, I thought it appropriate to include that here in my LLC update.

Tune in again soon. Now that I'm able to get the whole credit building project onto the fast-track, there will be more news more often.

We'll talk again soon!

Take care - be well!

Much Success!

Progress Report July 26, 2010

Hello! David J here again bringing you more of the steps on my journey toward financial independence.

Well, it's been a while since last we met. Here's what's been happening this past month...

When last we met, we discussed the initial actions to complete and the order they need to happen.

First, we chose a state and set up our business entity.

Then, we applied for our EIN (Employer Identification Number. Some folks call it a "Tax Id").

Interesting bit of EIN info: the IRS form for that is the SS-4 form. The IRS replies with a document containing your EIN. That's the document you keep with your book of records to show your EIN and that it was officially issued by the IRS.

Where I ran into a delay was that my service provider - who helped me set up my entity - managed to scramble my e-mail address in their records. So, I was waiting for a document they couldn't get to me by e-mail, and they weren't sending it by snail mail, for some reason. So, that cost me almost the whole month of June.

The next step after that was registering the LLC in my home state. No big deal, but without the IRS document containing the EIN it, too, was delayed.

I now have the IRS Form in softcopy showing the EIN. This is saved in hard copy in the book of records for the LLC, also. Hard copies were sent to the state as part of registering the "foreign" entity doing business in my home state.

An important item: you may need to check with your local municipality to see if your entity will require a business license. According to my current location, my LLC does not require a business license given the business I intend to do with it, "General Real Estate Related Activities".

As we go forward attempting to build a credit history for the LLC, a key item is getting the LLC its own checking account.

Naturally, I thought this would be a simple situation, now that I have the EIN. I even went on-line to my chosen bank and filled out the information thinking, "O.k., type all this in, a few more clicks and I should be done."

Needless to say, it didn't work out that way. Oh, sure, I did all the on-line entries. Then, the last screen says, "You will receive ... in the mail in approximately two business days." Well, the packet from the bank arrived three days later. There was a whole checklist of items to be copied and included in the packet to be returned to the bank. Items such as the LLC's Articles of Organization and the Operating Agreement, among others.

So, I made all the copies, wrote out a check to cover the initial deposit, went to the Post Office and dispatched the return packet. That was on a Friday, two weeks ago. This past Friday, I noticed that my initial deposit check had cleared.

Now, I'll be watching the mail for the next package from the bank. I'm thinking it will include my initial checks and deposit slips and some form of "checkbook" including a ledger similar to a check register for a personal account. It may even look just like a personal checkbook. I won't know until it arrives.

Once I have the LLC's account number and routing number, I can go to Vonage and set up a company phone number.

My service provider for building business credit initially said that VoIP services weren't suitable for the purpose of obtaining commercial credit. The important item is to be listed with Directory Assistance where someone researching your entity can find it.

I'm now told that Vonage does provide Directory Assistance listing and so is suitable. This is good news because a "hard", land-line phone line would introduce additional complications.

If you've been following my saga since last August, you know that I'm coming up on a year of being out of the workforce. I'm now faced with a situation where it will very probably be necessary to rent this house out to avoid foreclosure. So, having the LLC physically tied to this location would complicate the situation even further. Just doing an address change for a fledgling entity is going to be complicated enough.

So, here are the steps which lie ahead in the days this week and the next two weeks or so:

1. Set up a company phone line with Vonage, including automated attendant and voice mail. 
2. Begin setting up store ("vendor") credit with those businesses who report to Equifax and Experian business credit. 
3. Acquire some small items such as office supplies from my credit sources to the tune of $60 or so a month, payable Net-30. 
4. Track the LLC's business credit rating with Equifax and Experian. Prepare to work with my service provider to establish a Dun and Bradstreet account for the LLC.

Also, since I'll need to convert my home to a rental property, these additional steps:

• Set up a new entity - or use the existing LLC - to hold this property so it does not show up as an asset in my name and to limit my exposure to liability related to the rental property. 
• Sign on with a property manager to provide services to my eventual tenant. 
• Check with the HOA (yeah, I know...) to see what additional steps are necessary to put a tenant in here instead of me.
• Contact my insurance agent and let his office know of the change.

Whew! Going to be busy for a while! So, the next post may be another month out, but check back here every week or so, anyway. As I learn new things about these processes, I'll likely write up a new post about what I'm learning and why it's important.

We'll talk again soon!

Take care - be well!

Much Success!