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Saturday, August 10, 2019

Pocket Points App Lets Students Earn Rewards And Save Money

As a former high school assistant principal, and current teacher, I can tell you that cell phones on school campuses are a pain in the butt!  It doesn't matter what type of school it is, private, charter, public, small or big, most students will struggle staying off their phone in class.  If students check their phones during a lesson, for whatever reason, they're not really "present" or in the moment learning all they can from their hardworking teacher.

I consider myself a fairly tech friendly teacher, and I allow my students to use their phones ONLY for instructional purposes that I design.  Still, there are teachers who don't allow them out in class at all!  Inevitably, all teachers no matter their style will become a disciplinarian, and lose precious instructional time enforcing cell phone policies and rules.



What about parents?  Well, they too hate having to deal with problems their teen child caused at school.  If cell phone abuse gets out of hand, many parents simply take the phone away, essentially crushing their child's entire world. HA!


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PocketPoints.com to the Rescue!

According to legend (the wikipedia page), in 2014 CEO and co-Founder Rob Richardson was sitting at the back of a large class one day while at Chico State University when he noticed several of his fellow students missing out on the lecture on account of their smartphones.  The light bulb went off in his head, and along with his frat brother, Mitch Gardner, they created an app that incentivizes students to stay off their phone while on campus and more!

Similar to Facebook, Pocket Point's initial audience or app user base were college students across the country.  Rob and Mitch figured students would be more willing to temporarily "lock" their phones if they could earn food rewards, e.g., a free pizza slice from the local restaurant.  So they sought business partnerships with brands and merchants willing to help students stay off their phones.

In turn, these businesses get additional traffic and sales by getting "in front of" (mobile advertising) their generation Z consumer.  But that's not all, Rob and Mitch figured they could also try to get professors to participate.  After all, some professors may spend most of their time talking to the board, but they have eyes in the back of their heads!  Surely they notice all the young eyes glued to screens.  They pitched the app: extra credit points for engagement.  What say ye?  The faculty's answer: No!  Professors ain't got time for that!  



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As they say, when one door closes another one opens up.  Rob and Mitch thought about all the high school students in America; they're even more addicted to their phones!  Classroom teachers across the country would probably be way more open to giving extra credit (or other classroom perks) on assignments if it resulted in more students being off their phones.  Rob and Mitch were right.  Think about it...kids respond better to rewards than punishments, and teachers themselves would rather be positive with their students versus negative.      

How does Pocket Points App Work?

Once you download the app on your phone for free, you get to select whether you're a student or teacher.  If you're a student, you then give Pocket Points permission to access your location and motion.  This is how the app determines if a student is in class or driving.  You also have to find your school from a list of schools in your area.  There are probably a few more steps, but this is how far I got with this option not being a student myself.  While the app is on, your phone is on lock mode, and you start earning points you can later redeem on the merchant gift page.  With teachers, you don't earn points.  Rather, you accumulate time off your phone and teachers determine how much of it earns you a particular reward.

The app works differently for teachers.  You start out by "Creating a Class" on the app.  You can set the title of the class, time, and date it is in session.  Then you create a reward.  This is where teachers get to be creative.  The reward doesn't have to always be extra credit.  You can reward your students a myriad number of ways (homework pass, extra bathroom pass for the semester, free McDonald's lunch, etc.).  Advanced settings let you fine tune the reward.  Finally, similar to Google Classroom, an invite code generated by the app lets you add students into any particular class.     

What Are The Reviews So Far?

If you go to the App store on an iPhone and look for the Pocket Points app, you will find that it has a 4.7 out of 5 rating with a total of 13,240 reviews.  That's pretty good.  After reading some of the negative reviews, it seems there was bug in the app at some point and students were upset (left bad reviews) because their points weren't being recognized or fully tallied.  Other glitches included the app not turning on properly at times.  Finally, some reviewers suggested a need for better deals, and more business partnerships.  All of these issues were seemingly handled by the Pocket Points customer service team.

Positive reviews, which were plenty, stated that the app helped just like advertised.  In other words, students were very thankful that they got food or apparel at a discount from local vendors.  Many of them became more aware of their phone addiction.  As a teacher, I was curious to see if any of the reviews were left by educators.  I couldn't find any within the first 30 or so ratings I glanced through.  But an email from the company provided several positive teacher testimonials.  The email also stated that in Spring 2019, "teachers kept students off the phone for 10 million hours of class time."  I find that to be very impressive!  Keep up the good work Pocket Points!


Well, thanks for being here and reading to the end.  For the record, I'm not being paid to write this review.  I read about the company online and thought it would be great to share what it's doing to help my favorite people: students and teachers.  Until next time!    

Tuesday, July 2, 2019

How To Decide Between A 403b or a 457b?

What's up everyone!  I got an interesting email this morning directly from my Kindle eBook: CommonCoreMoney: Financial Literacy for Educators and Other Professionals.  The person, a 16-year veteran teacher of the San Diego Unified School District, wanted help figuring out if he should open a 457b account with Valic, AIG Retirement Services.  Already putting some of his money in a 403b, Steve (not his real name), needed help sizing up the 457b offering as a potential replacement for the 403b.  He wrote:

"Looking into getting a Roth IRA started up and switching out my 403b with a new vendor the district is working on adding by summer's end...I keep reading a 457 is better than a 403b..."

He then included the link to the San Diego Unified 457 highlights PDF for me to look at and give him feedback on.

To keep this part of the story short, I told him that the 457b by Valic has as one of its "pros" the fact that admin fees are waived by his district.  As a "con," I wrote to Steve that I didn't like the limited offerings in terms of the mutual funds available to invest in.  Specifically, I didn't like that there weren't any Vanguard Funds to select from.  Vanguard is the low cost/fee leader in the industry!




However, I couldn't give him a definitive decision as to whether or not he should choose the 457b in favor of the 403b because I didn't have any info on how he is positioned in the 403b.  Here's what all of you need to understand about these very similar retirement investing products.

457b and 403b Similarities:

Both the 457b and 403b are annuity entities that allow you to build a retirement fund outside of your State Teacher (Educator) Retirement pension tax free.  You make set amount (you choose the amount) and direct contributions pre-tax from your gross pay into the annuity.  In doing so, you lower your taxable income, and in many cases, get paid a little more each month than you would normally if you had nothing else to offset your taxable income.  Of course there is a catch!

Just because you have the option of building a secondary retirement fund outside of your state teacher pension, it doesn't mean you should do it using either a 457b or a 403b.  You could open up a Roth IRA and build your second stream of retirement income with after tax contributions.  You can withdraw contributions from your Roth IRA tax free anytime if you follow all the rules!  (Look these up).




The unknown known about 403b/457b investing is the future of your tax situation.  Namely, will you be in a higher tax bracket when you retire or in a lower one?  If you don't intend on buying assets that allow you to deduct and lower your effective tax rates (like rental property) and you will be simply climbing the pay ladder of your career, then you will undoubtedly be in a higher tax bracket when you retire.  This means that once you're allowed to withdraw from your 403b/457b funds in retirement, you will be taxed more on this income than you are today.  Yikes!  So think long and hard about this before you open a tax sheltered account like a 403b/457b.  

In my eBook, I recommend you do like me, and Steve, and put a little away each month using either a 403b/457b AND a Roth IRA.  Annuities have their perks, but they're not the end all, be all.  I have, for example, a 403b, and two Roth IRAs in addition to my CA state teacher's retirement pension.  (I also own several rental properties and this helps tremendously with taxes).  But I'm not maximizing my 403b.  Some money into a 403b/457b is better than no money.

And now I go to the question serving as the title of this post: How to decide between a 403b or a 457b?

Below are the things you should consider listed in order of importance!

1.  Admin fees.  It doesn't matter if it's a 403b or a 457b, can you get enrolled in one that takes the least amount from you each year.  Does your district allow you to shop around for a 403b /457b vendor or are you stuck with only one?  CalSTRS provides members with a webpage that allows them to 403bcompare.  Not all vendors are the same so if your district allows you to choose from more than one, select the one that charges the least admin fees!! I can't stress this enough people.

2.  Mutual Fund fees.  This is where educators and basically most people (401k, 403b, 457b, etc.) get in trouble.  They select mutual funds to invest in within their tax-sheltered retirement account not knowing how much they're paying in mutual fund expenses.  If you have no idea how mutual funds work, you are most likely letting the vendor sway you into mutual funds that are expensive.  These will sap away your investment gains over time.  The least you can do is look up the "Annual Fund Expense Ratio (%)" of the mutual funds you intend on selecting or are already invested in.  Fintech companies like Wealthfront make their money helping people sort this stuff out...for a fee, of course!    

3.  Choice of mutual funds.  You have a pool of choices whether you do a 403b or 457b.  What matters is the choices you have to invest in Index Funds!  Yet another crucial mistake people make when selecting mutual funds to allocate their money into each month in their 403b/457b/401k is too many funds.  They look at it like a menu at a restaurant and pick funds that sound juicy.

"Ooooh, I think I'll have the Growth Small Cap, and the International Large Cap, with the Value Midcap, please.  Oh and can you please add a little Muni Bonds on the side?"

LOL!  As funny as this scenario is, it's happening all the time.  I took a look at my older sister's 401k and she had a ton of overlap. Just paying more fees unnecessarily!




Let me help you make this extremely easy.  Do like Warren Buffett, Jim Cramer, and Jack Bogle have all recommended: invest in index funds.  For example, in my 403b 58% of my current monthly contribution is used to buy shares of Vanguards Total Stock Market Index Fund, Ticker: VTSMX.  Expense ratio: 0.14%!!  The remaining 42% of my contribution is used to buy shares in Vanguard's Total Bond Market Index Fund, Ticker: VBMFX.  Expense ratio: 0.15%.  You're fully exposed to both markets this way so don't let vendors try to trick you into buying other types of mutual funds.  By the way, I don't work for Vanguard and no, they're not paying me any money to recommend their funds...though I wish they were.

The last thing you have to decide on when setting up a 403b/457b are your allocations, i.e., what percentage of your monthly contribution do you want to be used to buy your stock index fund versus your bond index fund.  If you're young, obviously you want a high percent of your money going into the stock fund, and little into the bond fund 90:10, e.g.  Some people use the 100 Rule to decide.  I use it myself actually.  Every year of teaching I adjust my allocations online at the 403b vendor's website.

Okay, I hope this has helped all of you understand the 403b/457b and even 401k investing mystery.  Thanks for being here!

Wednesday, May 1, 2019

Why Getting An LLC For Your Rental Properties Is A Big Mistake!

So last February I refinanced one of my three out-of-state rental properties.  There was a glitch in the underwriting process of my new loan that caused a closing delay.  This meant I didn't get my cash when I was supposed to.  Wells Fargo bank apologized by sending me a $2,500 check.  I kid you not!  They literally sent me what I was due from the refinance in cash-out, PLUS an additional $2,500.  Lucky me, right?

So when talking with my EA at tax time in late March, he recommended I use that money to finally get a trust written up.  Very important by the way!  You don't want to die and not have clearly laid out how your kids get your assets, etc.  Anyway, I agreed.  "But first I'm going to set up an LLC for my rental properties and protect my personal liability," I said to him.



I got right on it.  My EA gave me a recommendation to use his friend (no, he doesn't get a kickback) to have my LLC filed properly with the state of CA.  Now, I've read threads online before that were in favor of setting up LLCs for rental properties, and I've also read threads that mentioned investors not needing them.  Those in the camp of leaving the assets in their name provided a solution: Get an umbrella insurance policy of upwards of 2-3 million coverage.  If something happens at the property, and the tenant sues, the easiest money is the one the insurance can offer.  This was the extent of my understanding.  By the way, I currently have an umbrella policy for my rentals and the coverage is 3 million.

Why did I think I had to change things?  Many of you that own 1-3 rentals may be in the same situation, wondering if setting up an LLC is the right course of action.  I'm in the middle of buying a fourth rental property...loan app is done and I'm waiting on the rehab work to completed.  I thought: Well, I'll just add this latest property to the LLC I have formed...total of four rentals in an LLC seems like a good number.

I paid $750 for Gomez Legacy, LLC to be formed and filed with the state.  I was super excited to get the articles of incorporation in a nice binder, courtesy of the person I hired.  Then it hit me...

Wait a minute.  How do I transfer title from my name to the LLC?  I emailed my guy.  No response.  I went on Google and typed: How to transfer title from personal to an LLC.  A few articles came up.  I thought it was going to be simply a matter of listing the property addresses on some form or something.  Boy was I an idiot.



While in theory keeping rental properties in an LLC to grant you some protection from personal liability is the right call, it's not feasible for most investors.  Most new investors don't outright own their rental properties; they've procured them through conventional financing.  For each of my rentals, including this fourth one I'm about to get, I applied for conventional financing, using my credit, income, evidence of being in good financial standing, and down payment funds.  The bank took a risk on me, not some unknown Limited Liability Corporation!

You see, a new LLC has no credit history and no income.  You didn't apply for your investor loan using the LLC, so why would a bank allow you to transfer title to one?  In fact, most banks won't lend money to an LLC.  There are strict lending regulations already!  The loans we get as investors have investors behind them.  Risk of default is no joke to them!  For my loans, the investors were Freddy Mac.  The notes are held by Chase, Wells Fargo, and Mr. Cooper.  I called them up one by one.

Chase:  Sorry, we don't allow transfer of title per Freddy Mac.

Wells Fargo:  Sorry we don't allow transfer of title under any circumstance.

Mr. Cooper:  We don't do checks for title change.  So long as you keep paying the loan each month, that's your prerogative.  Use a quit claim deed.

Well, my new LLC had been rendered useless.  I'm not spending $800 a year (CA LLC fees) to keep one rental property in an LLC.  Even if the fee is tax deductible!

So, those are the issues you too will face, especially if the loans you got were procured by you, and NOT your LLC.  Transferring title is mostly not allowed by lenders.  Why would they want to risk it?

When Should I Get An LLC?

1.  If you own the property outright.  It's easy to "donate" your property to your LLC.

(That's it!...Sorry to make you think more things were coming)

You can try talking to a real estate attorney before you commit to paying $2-3K, and see if they have a solution on this titleing quagmire.  If you have other ideas, please comment below!

In the meantime, keep the properties in your name.  Keep using the bank's money as often as you can to acquire more properties.  Just make sure you insure the crap out of them.  People are greedy and will settle out of court for a large amount of cash.

I spent $750, but I learned a powerful lesson.  Finally, if you think having an LLC is better for taxes, you should know that for tax purposes an LLC is a pass through entity treated like a person, meaning, it's the same as you filing.

Thanks for reading!

Tuesday, April 16, 2019

Florida's Real Estate Market--a Forecast

Florida has captivated the imaginations of winter-weary Americans since the Gilded Age.  Its tropical climate and its sandy, palm-lined shores have been drawing visitors since the 1920's.

However, things really began to pick up once people began moving there en masse.  The advent of air conditioning in the post World War II era made this a reality, starting a steady long-term run-up in housing prices.



Things haven't always been perfect--economic disruptions like the 1970's oil crisis have triggered periodic pullbacks.  However, none of these held a candle to the carnage the Great Recession unleashed.  After peaking at an inflation-adjusted high of $475,000 in 2007, Metro Miami prices spent 2008 and 2009 in a free fall before bottoming out at around $200,000 in 2012.

From that point, prices began their recovery.  From 2012 to the present day, statewide median prices have risen from a low of $123,000 to $230,000 at the end of 2018.  In 2012, the average home spent 120 days on the market--during the 2018 peak selling season, that number was as low as 83 days.

Is the Florida housing market set to return to the heady days of the mid-2000's?  That's the question we'll attempt to answer here.

Where are Prices headed in 2019?

Prices have been in a steady upward trajectory since they hit rock bottom in early 2012--but will this trend continue into 2019?  While concerns about the global trade war and increasing interest rates persist, there are no imminent signs of a crash on the horizon.

What factors are expected to fuel an increase in real estate prices for the seventh straight year?  What are the main downside risks?



Trump tax cuts:
In 2017, the Trump Administration advocated aggressively for unprecedented tax cuts.  While these reductions took effect at the start of 2018, many Americans neglected to adjust their withholding.  Therefore, as the 2019 refund season unfolds, millions of Americans will find themselves with an unexpected surplus of cash on their hands.

What does this mean for the Florida housing market?  House hunters will have more money available  for down payments.  Take a married couple with a household income on $100,000, for example: they now pay a 22% rate rather that 25%.  Combine that with a near doubling in the standard deduction to $24,000, and they will have $7,000 more to spend compared to last year.

For many investors, this will provide enough liquidity to make deals that may have not been possible before the Trump tax cuts took effect.

Historically-low interest rates:
After eight long years of being stuck at 0.25%, interest rates have been steadily rising since 2016.  As 2018 drew to a close, interest rates sat at 2.5%.  While this will put affordability pressure on would-be homeowners, it's also a catalyst for price increases in 2019.

Borrowing money may no longer be 'free,' but the cost of doing so is still low by historical standards. As recently as 2007, rates were as high as 5.25%.  Turn the clock back to 1989 and it was 9.75%.  Back in the inflation-wracked days of 1981, it peaked at an eye-popping 20%!

Bearable for those with a fixed rate mortgage--good luck if you're trying to buy though.  With rates near historic lows and no end in sight to interest rate increases, home buyers will be increasingly motivated to lock in a low rate while they still can.

Trade war fallout:
The effects of the Trump trade war remains to be seen, but experts warn it will have a net negative impact on Florida's economy.

While Florida's tourism industry has not been directly impacted by retaliatory tariffs, Trump's singling out China may end up doing significant damage.  According to Roger Dow, president of the U.S. Travel Association, Chinese tourism has surged more than tenfold over the past decade.  If this trade conflict continues to escalate, any restrictions placed on travel to America could have a chilling effect on Florida tourism operators.

Agriculture is Florida's second largest industry--unlike tourism, it has been directly affected by retaliatory tariffs.  A joint study published by the National Retail Federation and the Consumer Technology Association projects that Florida could shed up to 7,000 jobs in 2019 due to reduced exports.

14% of Floridians are employed in agriculture and agribusiness.  If this trade war continues to grind on through 2019, it could apply significant downward pressure on markets outside the Miami, Orlando, and Tampa Areas.

How can I prime my property to sell?

Whether you've been holding since 2012 or are buying Florida real estate in 2019, maximizing your return on investment should be your top priority.  Maintaining curb appeal through landscape improvement, painting interior walls, and updating the kitchen/bathroom are a few ways this can be done.

However, many real-estate investors neglect to take out a home warranty on their properties.  This is a huge mistake--for example, most homeowner insurance policies will not cover faulty wiring, as it is deemed a wear and tear issue.

This is where home warranty policies come into play.  By investing several hundred dollars per year into a plan, thousands of dollars in maintenance and replacement costs can be saved.  A central air system costs $5,500 to replace on average--in comparison, paying $50 per month is a much better deal.

It gets better though: when you decide to sell, your property will be worth more in the eyes of buyers.  According to a study done by the Service Contract Industry Council, houses under a home warranty contract sold for $2,500 more and 16% quicker than those who lacked one.  Floridians can be served by at least 7 companies, among them Sears home warranty.

The 2019 Florida real estate forecast: sunny, but with headwinds

You can expect the Florida real-estate market to increase in value Year-Over-Year.  However, as the impact of the global trade war becomes clearer, increases in land values may be more modest than those in past years. 

Tuesday, March 26, 2019

Is Rosarito Condo Living Right For You?

It's windy and overcast today in Rosarito, Baja California.  The mercury is slated to reach only a high of 63.  Yesterday however was an incredibly gorgeous day, sunny and warm enough to wear a polo shirt over a white cotton t-shirt.  Of course if you're not from Southern California, say somewhere colder, you'd probably be walking around in shorts and a tank-top.  My family decided in early February to take a 3 day vacation in Rosarito, using AirBnB.com to book a two bedroom condo in the heart of the city.

My view while I type


We're staying two blocks away from the famous Papas & Beer restaurant and Spring breaker club central in a condominium tower called, La Jolla de Rosarito.  Because it's the last week in March, there is still not a whole lot of young (American) people everywhere.  So we get to see Rosarito as it would be seen "off-season."  That's not to say we haven't encountered Americans.

Chillaxing on the common grounds facing the beach, La Jolla de Rosarito

Kids kicking around a ball we brought from home.


Indeed, other than the security guard, the cleaning crew, and landscapers, we haven't seen Mexicans who live in the building.  So far, we've talked to two white women in their retirement years.  One was walking her dog and mentioned having moved in a year ago.  She said, "It was the best decision of my life."  She used to reside in Point Loma, San Diego.  The other lady had just come back from some shopping.  Holding her bag, she said, "Kinda of cold today," as I walked my kids out of the building and down the walkway leading to the pools.

Took some pics on my morning beach run


I wasn't going to stop people and interview them as they went about their day obviously, but I suspect Americans choose Mexico, and in particular, Rosarito, because of its affordability and proximity to the U.S.  One of the most difficult decisions we, Americans, have to contend with is where to retire.  What we have saved for retirement will have more pull as to where we can live out the rest of our days.  Some people don't have enough to stay in the U.S. and afford everything they need.  So they come to Mexico.  But why Rosarito of all expat places?

If you didn't get a chance to read my post on Ensenada, B.C., you should.  Compared to Ensenada, I like Rosarito better.  For one, you can get around a whole lot easier.  Rosarito is not as densely populated and big as Ensenada.  You can go North and South on the main boulevard (Benito Juarez) and find everything you need.  Entering Rosarito (North) you'll find their Pabellon, or outdoor shopping mall.  There's a Walmart, a Radio Shack, an Applebees, Peter Piper Pizza, representing American retail and eateries, and other high-end Mexican shops.  We had to go to Walmart to shop for some breakfast food and it was no different than in the U.S., unfortunately, long slow lines.  Self-checkout is still faster (if you're not buying alcohol...hehehe!).

With kids, my wife and I decided to look for some outdoor fun that didn't include the beach or common grounds behind the towers.  Being gated and fenced in, there's only so far kids can venture.  Luckily, Rosarito offers a spectacular outdoor park experience in the form of Parque Metropolitano.  If you don't mind driving east of the main boulevard, up the hills and through the colonias (neighborhoods), you will come to a pristine and picturesque canyon zone that just happens to have the best park in Baja CA North.  Being a weekday when we drove to the top, and kids still being in school in Mexico, the park was empty.  If you enjoy hiking or walking trails, this is the spot!

Top view of Parque Metropolitano

The wife posing for a shot.

So far we've eaten out for lunch (Tacos El Yaqui) and ordered pizza for dinner (D'Angelos Pizza) for less than $40.  We intend on going out for dinner at Patagonia (an Argentinian steakhouse).  I literally came south with $200 in my wallet and I still have $140 left after two days.  Rosarito has an array of diverse cuisine all for less than what you pay in the states.  There are Japanese, Chinese, Italian, American, Mexican, Argentinian, Colombian, and I'm sure many other types of food places here along the boulevard.  You could cook at home, but why?

One of the biggest questions people ask about Mexico is:  Is it safe?  I've seen the Marines only once, when we drove in.  I've mostly witnessed Police doing their day to day work.  We never felt at risk or in danger.  Indeed, while eating at Tacos El Yaqui, there were some American teens eating at the table next to us, complaining about their parents.  My wife and I couldn't help but smile about their teen problems.  That's not to say that you should be oblivious.  Like anywhere else in the world, follow the rules, don't show off your wealth, and try to blend in as just another expat if you visit Rosarito.  If you intend on driving around, remember the streets can get rugged, cars don't have to be smogged so there will be exhaust smell from time to time, especially if there's no wind, and don't expect cars to do full stops at stop signs.  Street names aren't always visible or even where you'd expect them.  Use your navigation system!

By the way, if you're worried about not knowing the language, don't be.  In these frequently tourist visited establishments, the service speaks English.  My wife is African-American, and instinctively they tried to take her order in English.  I intervened of course and ordered for her in Spanish.  (There was a long line behind us).  

We have very much enjoyed condo living in Rosarito.  My wife and I are considering buying a condo here in the future, as a getaway from the hustle and stress of the U.S.  Mexico isn't for everyone, but maybe after reading this post you'll consider it some more.  Thanks for reading!

Thursday, February 21, 2019

How I Manage My Anxiety When Investing

Do you suffer from anxiety?  I do.  I've had anxiety as long as I can remember.  It was especially frustrating during my high school days as a track and field athlete.  Workouts worried me.  Meet days gave me irritable bowel.  My coach always wondered where I was right before a race.  "I was in the bathroom, coach!" I'd tell him.

Image result for anxiety


I wasn't diagnosed until 28 years of age.  A lot of it was cultural.  As a Mexican youth living through the 1980's, we didn't talk about mental health in my family.  I don't recall any of our Mexican friends mentioning psychological problems either; they mostly used the word, "loco," to describe a person not right in the head.

I started my life as an investor, per se, sometime after my initial meetings with my psychiatrist. I started taking medication, and it literally transformed me into a new man.  That's not to say that it cured me.  You can never be cured of anxiety.  You can only learn to manage it.  Aside from medication, I manage my anxiety in a whole host of ways.  For example, I cut back on coffee.  Exercise was, and still is my go-to strategy.  I learned breathing techniques at a Kaiser class in my thirties.

Image result for anxiety

What's this all have to do with investing, you may be wondering by now?  Well, I'm willing to bet that a lot of you, if you suffer from anxiety, are probably letting both fear of losing money AND anxiety derail your investing.  The fear of losing money is very intense for some people.  Add anxiety into the mix and you can just about forget anyone taking on any risk.  So let me share with you how I deal with my anxiety while investing.

First, I use knowledge to lessen the anxiety.  The more I can read about an investment, the better I feel overall.  Investing in the stock market can be damn near impossible for many people with phobias, and anxiety.  But reading over 50 books on stock market investing made me overcome my anxious episodes.  The old adage, "stick to what you know," is true here.  But so is staying informed.  If you don't have time to stay informed, and use knowledge to calm you down, I suggest you invest in low-cost mutual funds and let a professional manage your money.  

I also buy "packaged" investments.  What are these?  These are investments that have had the risk in them mitigated.  For instance, I buy out-of-state rental properties from turn-key companies. They've taken on the risk of buying the property, and rehabbing it.  They also rent it out and have a management company.  These companies sometimes offer rent guarantees for a whole year!  They also give you a warranty on anything in the house that breaks.  In contrast, if you were to be an active real estate investor, you'd find the property yourself, buy it at a discount hopefully, and flip it yourself, or keep it as a rental.

These aren't the only types of packaged investments.  You can now participate in crowdfunding, where you take on risk with many more people.  I invested in a non-traded public Real Estate Investment Trust, offering quarterly dividends at 7.5% via crowdfunding.  Sure, we can all be wrong, but at least we have the means to communicate with each other by attending things like the Annual Investors Meeting.

Social Media has given me the ability to find people participating in an investment and glean firsthand information about an investment.  I can always message someone and get their review of a company, investment opportunity, etc.  In fact, I've had multiple people Facebook Messenger me about the non-traded REIT I invested in.  I'm happy to let them know exactly how I feel.  Of course there are also Google reviews on almost anyone or anything.

Finally, I hang around other investors, and communicate with them daily.  They have made investing a normal part of their lives, and so have I.  If you have no one to assure you, how are you supposed to get in on something?  You need like-minded people who can share their highs and lows with you.  This will transform the process of investing into a furry little kitty cat, instead of the monster your brain believes it is.

Thanks for reading!  Until next time.  

  

Sunday, February 17, 2019

Why Now Is A Great Time To Refinance Your Best Rental Property (Or Your Own Residence)

It's President's Day 2019 weekend and I got Benjamins on my mind!  Cuz it's all about the Benjamins, yo!  Okay, enough colloquialities up in here.  LOL!  Had to squeeze one more in.
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So, (clearing my throat), I recently refinanced my best rental and I got $26K coming my way next week!  We had a great time sitting with Wendy Souza, notary public out of Mission Viejo, last Thursday to get our closing docs all done.  Wendy, Jessica, and I discussed topics such as life after divorce, romance, dancing, cooking, kids, all while signing and dating like 100 pages of dry and boring, real estate legal docs.  I wanted to give Wendy a shout-out because she was extremely personable...and I like helping people!

Back to the topic of this article though.  So, refinancing my best rental was a process I began last year in November.  The timing was perfect.  Let me explain some things first.  What do I mean by, "your best rental property"?  Well, if you have multiple rentals in your portfolio, this means look for the one that has appreciated the most AND, and I stress, AND, the one who also has the most cashflow.  This means that when all expenses are factored (taxes, insurance, maintenance, property management, etc.) you have a nice monthly payment coming into your investment checking account.  

Appreciation is key, however.  Remember that the best you'll get on a refinance is between 60-75% LTV (Loan-to-Value) from a bank.  Example:  If your rental can appraise for $150K, you'll get a new loan for up to $112,500, using 75% LTV.  So if you owe, say, $65K on the property after paying down the mortgage...correction...after your tenant(s) have paid down the mortgage...hehehe! Then you can expect to get a cash-out check in the amount of about $44,000 because you'll have some closing costs.  Also, you have to decide based on your numbers, whether or not you want all this cash, and not a lesser amount.

Why a lesser amount?  Well, consider that when you refinance your rental, the new loan will include a higher mortgage payment. Taxes and insurance should stay around the same, unless you upgrade your insurance premium to account for the new appraised value.  All this means that the rental will have less cashflow.  That's why I suggested above that you select the rental with the best cashflow.  So that you can pull as much cash out on the refinance AND still cashflow on that rental each month (albeit, a lot less).

Let me give you some rough numbers (although I did calculate the scenario to its entirety for my situation, just don't have the exact number here for you).  So for my best rental refinance, I'll be cashing out $26K.  At first, my lender (Wells Fargo agent, Dusty Carrol out of Oceanside) thought my rental could appraise for $150K.  The appraisal process is independently done by an appraiser and you have no say as to what you think the property is worth.  They do their thing, and report back to the lender when done.  Our rental came in below $150.  It was somewhere in the high $130K's or maybe even $140K. Can't recall right now.  The point is, this determined my cash out amount, and my subsequent mortgage payment at the investor rate interest I locked in (6.5%).

My new payment including mortgage, taxes, and insurance is $911.  My rental is rented for $1250/month.  I pay $125 to property management company.  This leaves me with $214 cashflow.  However, I also pay $26 HOA dues per month or $315 annually.  Now I'm at $188.  $188 doesn't factor in any maintenance issues that can arise.  These are rare right now as my property in Cordova, TN is fairly new (this century) and flipped in 2010.  However, if an issue arises, it's coming out of that $188 cashflow, and my reserves.  So you can see, pulling equity significantly reduced my cashflow position on this rental.  And if I were to simply go out and spend all that money on stupid things, like a new car, a home makeover, a family vacation, etc...things that are not going to give me a return on my money, then this is a waste of a refinance.

But I'm not!  Duh!  I plan on utilizing this cash windfall to buy, you guessed it...another out-of-state rental property!  I already have lined up the turn-key wholesale company that I'll be working with.  In fact, I'm on their waiting list for a new property in August of this year.  Yes, waiting list.  You see, they have so many out-of-state investors from New York and California, that they need to put us all on a 6 month waiting list.  According to their multiple sales examples, my new rental will average between $325-$375 cashflow per month.  It will cost me between $55K to $80K, depending on how I shop for their available inventory when I get called on.  Thus, this new rental will more than replace the cashflow I lost from refinancing, and then some.  I'll be adding to my portfolio, meaning adding to my asset column, and improving my cashflow per month!  Win, win.

Why Refinance Now?

According to what I've been reading lately, home price appreciation is stalling.  They're no longer appreciating as quickly, if at all in some markets.  Google it if you don't trust me.  Anyway, it's likely your rental property(ies) are due for some refinancing consideration.  After all, mortgage rates too have stopped rising thanks to the Fed slowing their roll.  Investors have to pay investor rates, but they're still quite low.  I got a 6.5% rate in January.  You may be able to lock in a lower one.

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Cash is king right now.  Not because you'll get higher interest rates for stashing your cash away in a Money Market account and forgetting about it.  Inflation is on the rise, especially for goods.  Rather, cash is king because of the impending recession!  Yes, it's bound to happen sooner or later.  You'll want to have cash on hand to scoop up assets at discount levels after the fallout settles.

If property values stall, or even fall, you may be able to buy your next rental at a better price!  And, if rates are kept the same by a Fed that doesn't know how to proceed...heck, they may even decide to cut rates if a recession happens this year, you may be in store for even better rates on your investor purchase.

Should I Refinance My Personal Residence?

Yes, if you are disciplined enough to not fall for the trap that is home improvement.  Home improvements will make no difference to your monthly cashflow (how much you keep at the end of each month).  You can pay down your high interest credit cards so you have more money available to you at the end of each month.

Or, if you don't have credit card debt, put your refinance cash into buying your first rental property!  Or your next one.  Anything that puts money in your pocket at the end of the month works.  Just please don't go on a vacation, or buy a new car.  Don't do anything with that money that will entrench you even more in the Rat Race that is your life already.

With that, I say, adieu mes amis.  Hasta la proxima.  Holla back!     

Friday, January 4, 2019

Time To Review Your Car Insurance Policy Or You'll Be Sorry!

One of the most ignored expenses is car insurance.  I mean, who wants to bother looking over the renewal packet you get in the mail every 6 months or so?  They're long, boring, and state the same thing (in terms of your coverage) they did the last time you got one in the mail.  Up until a few days ago, I simply looked for the latest insurance card for my vehicle, pulled it out from the perforated portion of the sheet, and dropped it inside my car's glove compartment.  Done!  On to driving another year and paying my premium on automatic deduction from my checking account.

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Last November, my wife, Jessica, was rear-ended.  She texted me to tell me she was okay, but the rear bumper on her Lexus was warped and scratched up.  Well, turns out she got some whiplash, and has had to go to the chiropractor for her neck and upper back.  She was not at fault so we assumed things would go smoothly come time to get the Lexus fixed.  The person who was at fault for the accident had really bad insurance.  Anchor General...look at their reviews.  You better hope no one driving with this insurance ever wrecks your car!  But I digress.

We got tired of dealing with the claim directly with A.G. (we were being cheap and didn't want to pay the deductible of $500 with our insurer) so we let Allstate take over.  Our Lexus is in the shop and should be repaired by next week.  When will we get our deductible refunded?  Who knows?  These things drag on, especially when dealing with not so reputable car insurance companies.  My wife is also seeing a lawyer about her chiropractic expenses.

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Now, you'd think that an accident, whether or not you were at fault, would be a good time to review your car insurance policy.  Mainly to see if you are under-insured.  But oh no...not for me.  I'm a dunce!  I went about my business as usual.  This week, my little sister visited from San Diego.  She lives with her boyfriend and is a recent graduate of SDSU.  She's a waitress, and has been trying for over a year to get admitted to a Physical Therapy program.  While visiting, she shared that she'd been admitted to a PT program in Oakland, CA.  It's pricey.  She already owes like $30K for her bachelor's degree.

It's her dream to become a PT so I made sure to counsel her on how to approach paying (and going into more debt) for her future studies.  But then she divulged that she was being sued!  I'm like...whaaaaat?!  She explained that over 8 months ago, she made a left turn into an empty parking spot and hit a car that was oncoming.  The driver, according to her, was not hurt, and was seemingly in good spirits after the accident.  No harm, no foul, right?  Wrong!

Recently, she received a summons to appear in court in April of this year.  Her insurer, Allstate, has informed her that the other side is asking for $50K in medical damages.  One huge problem...my little sister is only insured for $25K; this is the minimum a driver must have for liability coverage in CA.  Allstate has offered her legal help, because they're a great insurer.  I told her that chances are the case will be settled out of court.  But my little sister is obviously struggling with this.  She feels like her dream of going to a PT program is in jeopardy.  And she doesn't have any money.  Like most Millennials, she's got school debt she hasn't even started paying back yet!  I felt really bad for her.

This is when I got to thinking.  Holy shish...what's my coverage?  Unlike my little sister, I have assets to lose should I cause a serious accident.  I called my Allstate agent in Carlsbad, CA, and sure enough, I too only had $25K coverage (one person bodily injury)!  Folks, you get charged more than this for a simple test done at an emergency room.  $25K is nothing these days.  Imagine if you cause damage to more than one vehicle, or heaven forbid, you should seriously injure someone?  You're SOOOOO S.O.L!

I got on it quick.  I asked my agent to up my coverage to $100K per person bodily injury.  My deductible didn't change.  My premium went up by a mere $84 a term of six months.  I don't know what I was thinking driving around with the minimum liability coverage and I dare say I dodged a big one.  Now I ask...what kind of car insurance coverage are you driving around with?  If you're young, don't put your future at risk.  Everyone else, don't put your assets or income at risk.  Insure yourself as high as you can afford.  Peace of mind is priceless!