Mechanical Value Investing: Your Best Path to Investing Success

 What's up everybody!  Today I have a stocks and stock market related post for you.  I love me some stocks talk, and especially when the convo revolves around value investing and beating the market!  My guest, Evan Bleker, is a Benjamin Graham (father of value investing) disciple.  He's going to show you the advantages that a small, independent investor has when it comes to investing and why value investing is a perfect fit for you!  Let me tell you, chasing growth (Tesla-TSLA, Netflix-NFLX, Facebook-FB, etc.) continuously might work for now, but it will not work forever!  So pay attention amigos.  Evan is about to break things down for you.

Mechanical Value Investing: Your Best Path to Success

For decades, Wall Street has pushed the idea that investing is best left to the professionals, but is it really impossible for the layman to get ahead?  As we will see, the small, independent investor may have a significant advantage.

Is The Stock Market Rigged?

We all know that the stock market is a hyper competitive space, filled with the smartest minds and funds equipped with billions of dollars worth of the most advanced trading technology.

This is exactly what drives the, "Efficient Market Hypothesis."  If the best and brightest are constantly buying and selling stocks, then the current price of a stock must reflect everything already known!  Moreover, if the current price of a stock is the perfect reflection of all known information, then logically there is no way to make excess profits in the markets, especially if you are a regular, independent investor.

Every year we see reports drawing attention to the chronic underperformance of individual investors vs. their benchmarks.  However, there are a select group of independent investors who are not only matching the index, but in many cases are beating them!

First Advantage: Small and Nimble

Smaller doesn't mean worse.  In fact, in the investing world, companies with small market capitalizations (the size of the company) historically outperform their larger cousins.  This well documented phenomena is called, the small cap advantage.

Numerous theories have explained why these small companies have outperformed.  Some believe it is a premium on the risk investors take, betting on smaller companies that may be more likely to fail.  This sounds credible, but when you look at companies such as Enron or Bear Stearns, you begin to wonder how true that is.

Another theory is that it's simply more logical for these small companies to grow at a faster rate.  A well established company like Apple (AAPL) will find it nearly impossible to double its sales from its current gargantuan size.  A small company, on the other hand, might only be operating in a single state or place, and will find it much easier to expand and grow.

So clearly, investing in small cap companies can lead to outperformance.  Our advantage as small, independent investors is that those genius, well-funded institutions for the most part can't invest in these companies!  Most of them have a set of guidelines that their investors agree to call a mandate, and in most cases, small cap stocks aren't on them.  These institutions do deep dives into individual companies, oftentimes paying someone to just track every minute change in the business.  The universe of small cap stocks is enormous, with far more stocks than any one fund could possibly track with the level of diligence that is required.

For these institutions, it just isn't worth the time to track the thousands of businesses out there.  What's more, even if institutions want to invest in a small cap company, they wouldn't be able to!  Most of these small businesses have such little trading volume and shares outstanding that it would take a large fund months (or years) to exit a position.  They would most likely drive the price against them as they do it.  For these reasons, most institutional investors avoid the small cap market entirely.

What does this mean for us?  Less competition! With less competition you get more mispricing and deals that you'd never see with large Fortune 500 names that everyone in the world is following.

Second Advantage: Patience

The second major advantage we have is that we are independent!  We may hear about the amount of money some funds manage (Assets Under Management-AUM) and get a bit jealous.  In reality, answering to investors 24/7 comes with a myriad of issues, specifically around patience.

Institutions are under constant pressure to perform every single quarter.  For many that don't yet have an established reputation, a few bad quarters in a row can spell their doom.  What often ends up happening is that most funds make very speculative bets hoping for a moonshot that will catapult their performance results.  Or, they hop on the bandwagon of a trendy growth stock, hoping the momentum keeps driving the price upward.

At the other extreme, we also see many funds crowd into the same boring, stable companies simply because the risk is minimal.  Similarly, investing in these stable brands is easy to explain to investors.

This is why oftentimes institutional investors can't take part in the second well known premium in the market: the value premium.  Businesses are considered to be value plays when they have stocks that are worth more than they are currently trading for.  A good value investor finds a bargain, researches it, buys it and waits for the price to rise to what is should be.  You get bonus points, so to speak, if that fair value is actually growing as well.

An institution however, is going to have a hard time explaining to its clients why it's buying a business at the low.  It will be even harder to explain why it's holding a business that appears to be failing.  The small, independent investor need not worry about this.  Value stocks tend to be long-term investments, and certainly longer than the single quarter metric by which institutions are measured.  This allows us, the small investors, to invest for the long haul and enjoy the well documented outperformance that has historically been seen in value stocks.

A Better Approach: Ben Graham's Basket

Benjamin Graham, the father of value investing, and Warren Buffett's mentor, figured all this out a long time ago.  He devised a simple, no-fuss strategy to maximize the advantages that were available to the small, independent investor.

He'd look for extremely undervalued businesses he called, "net nets."  These businesses would be trading below their Net Current Asset Value (NCAV), meaning, they were trading at such steep discounts that if the business were to close down today, they could theoretically sell all of their assets, cover their debts, and still have cash left over to payback shareholders!

This huge discount provided investors with tons of downside protection.  Unfortunately, most of these companies would have to have been facing real issues to trade at such low valuations.  That is why Graham advised buying around 30 of them, to diversify, and reduce the volatility and risk any individual net net had, leaving the investor to enjoy the massive upside benefits.

Best of all, this approach doesn't require investment or brilliance.  It's what investors refer to as mechanical strategy: you buy a pool of stocks that meet a strict set of criteria, hold for a period of time, and then replace them.  The performance of the lot determines your portfolio's performance - you're not relying on any one company.  Rather, the sheer cheapness of the companies propel your stocks on average higher over a number of years.

There are a number of value factors you can use to achieve success.  Some value investors like to look at a stock's Price to Earnings (i.e., PE) ratio.  They like to pay a low price relative to what a business could earn.  Others look at book value, the accounting value of a company's net assets (assets less all liabilities).  There are a number of good approaches for the small investor.  But, each approach is characterized by its own return profile.

Coming from Net Net Hunter, is should be no surprise that I'm biased towards net nets.  To this day, this simple strategy has been one of the best performing for decades, historically providing a compound annual return around 20-30% per year, handily beating both the benchmark and institutional investing.  The strategy has also been good for nearly 100 years, and has ample academic evidence for its success.

That is why we believe that the small, independent investor isn't at a disadvantage at all to Wall Street.  Quite the opposite, being able to remain independently minded, adopt a sound value strategy, and buy tiny, illiquid firms is a major advantage when billions of dollars on Wall Street are fighting over a few hundred mega companies.  We believe that independent investors owe it to themselves to realize this, and start beating the indexes in order to attain financial freedom.

Evan Bleker is a small investor, author, and founder of Net Net Hunter, a community focused on Ben Graham's net net stock strategy.  He recently published Benjamin Graham's Net-Nets through the UK Publisher Harriman-House.  When not combing the stock list for dirt cheap companies, Evan enjoys getting beaten up at Brazilian Jiu-Jitsu class, riding motorcycles, and traveling around the ring of fire.   

Wells Fargo Finally Comes Through!

And it's over ladies and gentlemen...it's finally over!  Yes, we are officially done working with Wells Fargo Home Mortgage.  At one point, it looked like WF had ghosted my refinance application, but a few days after this last blog post, I got an email from Leticia, the mortgage processor.  She explained in her email to my wife, Jessica, and me that they were working with their "underwriting team" to move our file over to the Closing department.  I gotta say it was a little strange getting updated by Leticia.  She hadn't done it before!

Then Leticia proceeded to email an additional three more times with updates.  She was polite, telling us to "have a great weekend," and she even threw in a happy face emoji on one of her emails.  I didn't know what the heck was going on!  If you've read my last two blog post on my refinancing with WF experience, you'd know that this was not what I'd come to expect in the form of customer service.  I was a bit taken aback, but happily surprised that my loan application had not been ghosted!

Leticia redeemed herself in my book.  I would've appreciated a consistent concern for my experience as a WF Home Mortgage customer from a mortgage processor, but as they say..."better late than never."  One person who was my advocate throughout this 6.75 month ordeal...yes, it took that long...was my mortgage consultant, Will Harrelson.  If I were to rate his customer service, I'd give Will:

10/10 for availability

9/10 for communication

10/10 for advocacy

10/10 for professionalism/friendliness

If it weren't for Will, my application would've probably been shelved.  So big ups for Will!

Wells Fargo Home Mortgage underwriting team finally sent my application to the Closing Department at the end of the first week of this month.  It took another week before the closing docs were available.  I was told that the earliest I'd be able to have a notary come to my home would be 9/18.  I thought I'd get an email from Wells Fargo facilitating this last part of the closing process.  But the only thing I got was a phone call from the notary requesting a time to meet later in the evening.  It was unexpected.  Usually, a bank will hire a company to book a notary.  This hired company will send you an email and let you book a time with one of the notaries.  But this is Wells Fargo!  They told the notary to "just call" me.

Luckily my wife and I weren't doing anything that Friday night, so we went ahead and made a late appointment with the notary.  We just wanted this ordeal over with.  One last critique of Wells Fargo was their closing docs.  Listen, I've closed on several mortgage loans...at least 8 times I've done this.  I've never been stumped on what to do or how to fill out a form.  Wells Fargo's forms stumped us all.  Plus they asked for personal information I'd never had to provide with anyone else.  For example, we were asked if we'd been married before.  Jessica and I had to write in the names of our former married partners.  And this wasn't an optional thing!  It's like they wanted to know all about us.

Well, Wells Fargo came through after all.  They gave me what they promised me, a new loan on an investment property I own at a rate of 4.75%.  I also got an incidental amount of cash at closing, $1895.  That wasn't bad.  But we went through too much turmoil for me to give WF Home Mortgage anything beyond a 3 out of 10.  They did offer me an opportunity to leave a review of my experience via a survey.  Of course I let them have it.  I still maintain the position that if you can, you should avoid doing any home mortgage business with WF.  Folks, stay away!  There are plenty of smaller banks out there willing to consider your mortgage application with sincerity and decency.  Until next time!  

Wells Fargo Ghosted My Refi Application & Wastes My Time Again!

 As they say, "Fool me once, shame on you.  Fool me twice, shame on me!"  I feel like a dang fool right about now.  You see, I trusted Wells Fargo Bank and their Home Mortgage Loans division to do the right thing, i.e., to make things right for me.  It seems expecting follow through from WF employees was too much to ask for.  Before I get into the latest mess that has been my rental property refinance process, let me provide you with a link to the first part of this unfortunate saga.

A day after I wrote, Wells Fargo Kills My Rental Prop Refi..., I received emails from both a WFHM Processing Manager AND Branch Manager, apologizing for "any lack of communication" on their side.  The Branch Manager, Ryan, would actually call me and explain to me that my Mortgage Consultant, Will, had gotten some things mixed up and that my loan would indeed be approved, with a guaranteed 4.75% interest rate.  Remember, rental properties command higher interest rates because they are riskier.  This occurred in mid-May.

My Mortgage Consultant, Will, also called me in mid-May and apologized to me for the mistakes he made.  He reiterated the offer of 4.75% interest rate on a 30-year rate and term loan for my rental property and stated I wouldn't have to come to closing with any money.  By this time my rental property had appraised at $170K, exactly where we needed it.  Essentially, I was back in the game, so to speak.  Things, I thought, would start moving forward once again and I could finally put this experience past me.  I was wrong.

In early June, Will sent me a text message.  He wanted to know if I had a Title company out in Memphis, TN (where my property is located) I wanted to work with.  This made me feel like we were heading in the right direction.  Will sent an email out to Stewart Title.

On June 8th, I sent Ryan and Kelly an email seeking an update on a potential close date.  Kelly replied on June 11th:

Hi Carlos ~  your file is being reviewed by the processor next after she is finished with the file she is currently working on.   You will be hearing form us today.  J

Thank you for allowing us another chance to get this done for you.  J

But I never heard back from the "Processor."  On June 15th, I was sent new Loan Disclosure Docs by WFHM.  The new Docs showed the rate at 4.75% as I had been guaranteed, but it also showed that I had to bring $800 "cash to close."  I mean, it's not a lot of money, but the point was they had assured me I'd not be paying any money to close.  So I texted Will.  Will reassured me.  He texted me back, stating "these numbers get adjusted prior to closing," and "we'll make sure you're bringing in a limited amount at close."  Okay, I thought.

On June 18th, Will texted me again, stating a title rep had finally been assigned.  But something soon changed.  It was as if I were a brand new applicant.  Will asked me for more documents, communicating as the in-between with Underwriting.  Why did my Mortgage Consultant have to do this?  I've done many refinance applications with reputable lenders and they always assign someone other than the consultant to reach out for docs.  Well...I did have someone before.  Her name is Leticia.  Apparently, the Branch decided to excuse Leticia from having to work with me after I wrote about her lack of customer service.  But they failed to assign anyone else!

Here is a list of everything I had to produce between June 18th and Monday, August 10th for Will and the mysterious WF Underwriters:

1) A statement from my Roth IRA company showing I transferred funds to Wells Fargo Roth IRA.  (This was a basic custodian to custodian transfer and WF wanted to know where the money came from).

2) All of my mortgage statements once again.  I had to once again log-on, download, and upload every single mortgage statement for my five current properties.

3) A copy of the Loan Proposal from a separate Refinance application I was doing with Cherry Creek Mortgage on my personal residence.  Wells Fargo's underwriters wanted to make sure I was doing a "rate and term" refi only, i.e., not getting any cash back on the refi of my personal residence.

4)  An explanation as to why Cherry Creek Mortgage ran a credit check/report.  Obviously they ran a credit check prior to my closing date with them so as to make sure I had not taken out any new credit!  But WF wanted an explanation nonetheless.

5) A "signed" Settlement Statement from the Title/Escrow company that handled my closing with Cherry Creek Mortgage.  I'd sent Will my copy, scanned, but the WF underwriters wanted it signed by the Radiant Title/escrow agent.  This meant more leg work for me, of course.

On August 3rd, I emailed Ryan and Kelly, and asked them if my application had been shelved.  No answer.

Will was the only one to respond:

"Hi Carlos, nothing is shelved we just got another request from the underwriter for more things.  I can't believe it.  Did your other refi close already?"

This text message conversation is what led to request for docs number 5 from above.

Even WF legal is Unresponsive!

I had a letter sent to me recapping my initial experience with WF Home Mortgage.  I decided to call the number and talk to the letter's author, a lady named, Sara.  When I looked her up on LinkedIn, turns out she's part of their legal department.  Well...I left an angry complaint on her line, asking her to address my matter.  She never contacted me back.  It was as if my call never happened.

I called their Home Mortgage Customer Service Department and was received by a lady named, Jennifer, an Executive Office Case Specialist.  She was so receptive!  I thought I had the wrong number at first.  Jennifer said she would make a thorough inquiry.  This was on August 4th.  I followed up with Jennifer on August 13th.  She stated:

Sorry for the delayed response. I just got access to my computer. I see we are pending underwriting currently. My investigation is still open, and I have no conclusion just yet. I am working diligently to get this taken care of. I apologize.

Would I Be Treated Differently If I Were White Or Does WF Just Suck?   

I'm not so sure I would've been treated differently if I were white.  Unfortunately, because Wells Fargo has held my application in limbo (underwriting) since mid-May, these are they types of negative thoughts that enter one's head.  Mind you, I started my application in early March!  I am going on 5.5 months of this process.  Is this not excessive?  Even with Covid-19, I know plenty of people who have been in and out with a refi process in less than 2 months!  With other banks, of course.  Not shady, Wells Fargo!

Meanwhile, I haven't been able to apply for new credit.  Why?  Because if you apply for new credit during a home loan application, your debt-to-income ratio can change.  This is cause for the bank dismissing your application.  I'm sure you've heard Realtors tell you, don't buy anything on your credit card right before Closing.  

Just look at all of these angry consumers who have had the misfortune of working with WF Home Mortgage: Consumer Affairs, 1-Star, 235 Ratings.  

While I'm At It

The current CEO of WF is Charles W. Scharf.  He's been at the helm since October 21, 2019.  He's definitely inherited a mess.  His predecessors led WF into the 2016 account fraud that cost the company billions...hence shady!  If WF is to become the reputable bank it used to be (I've been a multi-account client since the late 90s), Mr. Scharf is going to have to make deep, and I mean deep, changes to the company's culture, obviously in the area of customer service.

Wells Fargo Stock is vastly under-performing its peers:

  

Credit for chart: Stefan Redlich at Seekingalpha.com

I Just Want Closure

I'm seriously tired of dealing with WF.  If it wasn't painstaking, I'd be looking to close out all of my accounts with them.  I want what was promised to me both verbally and in writing.  And I think I have been patient enough.  As we Latinos say, Ya Basta!  Enough is enough, WF.  I want a Close date, and docs ready for a notary now!  Before I go, I want to thank Will for being my advocate and for seemingly being the only one at WF that cares about my application.

How about you amigos?  Have you had a negative experience with WF Home Mortgage?  Comment below.  Thanks for reading!  Until next time.  

Didn't Check My Home Owner's Policy, Then My Water Heater Leaked

My wife, Jessica, always tells me that the universe is listening so I should refrain from speaking negative things out-loud.  Mexicans can be very superstitious, and despite my having a B.S. degree in bio sciences, I'm compelled by some cultural force to mind her exhortation.  I blame my parents.  Growing up, for example, every time I dropped a utensil on the floor during a meal, my mom would say, "Ahí viene la visita," or here come (unwanted) visitors.  Once my parents got in a bad car accident.  It was somewhat traumatic for them, and for my older sister and I who had to see them all bruised up.  Before they could get back in a car (drive again), they had to get cured of their susto, or scare, by a medicine woman in East San Jose where we lived.  She used all sorts of oils, fragrances, and incense smoke on them while uttering a Mexican Native American language.  I guess it worked because my parents were driving another used car soon after that.

All to say that in January, I spoke some negative words out-loud in a convo with Jessica: "Watch, the water heater will break this year."  Well, the water heater was on year 15 of its own existence so I can't really call myself prophetic.  On August 2nd, while putting her bike away in the garage, Jessica noticed a huge puddle on the water heater platform and directly below it on the ground.  The walls were wet as well near the floor.  Check it:

     

Not gonna lie...a little bit of panic ensued.  I started imagining dollar bills flying out the window.  This was my first water heater issue as a homeowner (I bought my home brand new so the water heater was as old as the house).  It was a Sunday afternoon.  I called a local plumbing company here in Oceanside, but they couldn't come out.  The company's owner, however, did provide me with help over the phone: Shut off the valve at the top of the water heater by lifting the handle.  This would stop water flowing into the water heater, and thus stop the leaking.  He also called another company he works with to come inspect the drywall damage in the garage and in the adjacent interior rooms.  Long story short, water was still flowing into the water heater from the valve, and the water was still leaking onto the drywall damaging it even more.  

My neighbor came by and gave me a hand.  He and I drained the water heater using a water hose, but water kept pouring out of the hose even after the water heater should've been emptied.  My neighbor has many skilled laborer connections, and his daughter's boyfriend is to my luck, a plumber.  So, that Sunday evening, a plumber worked on fixing the leak in the valve.  I'd made contact with Allstate that same day and began a claim.

The licensed Drywall company charged me $1,200 to remove wet drywall, and insulation, plus dry.  Ouch!

Before Calling Any Professional Service

Now let me tell you what I should've done before contacting any professional service for help.  I should've checked my home owner's policy!  Had I done this first, I would've read that my deductible was a whopping $5,000!  Apparently, I'd not changed it since buying the house brand spankin' new.  My premium has changed naturally, as all things go up with inflation, including coverage costs.  From 2005 to 2020, my premiums went from about $1150/year to $1450.  Seeing I had some warranties at the start of my ownership, I probably got over-confident about any disaster happening, and had not thought to increase my premium and reduce my deductible in the process.

By the way...aren't home owner policies a total racket?  I mean we pay thousands of dollars to an insurance company, and hope that some day we have a major disaster at our homes so we can actually make a claim and get some of that back!  

Okay, so I had to drop my claim with Allstate because no way was I going to shell out $5K to get a $3K check from them for the damages incurred.  Not to mention, filing insurance claims almost always leads to premium increases.  Save your claims for the big one, a kitchen fire, for example.

After learning of my $5,000 deductible from a dusty Allstate policy renewal doc, I called my local agent and asked her to raise my premium whatever amount was necessary so that my new deductible is $2,500.  It turned out to be less than I thought.  Like $11 more per month, i.e., an extra $132 a year.  Some people pay a maximum premium such that their deductible is only $1,000.  There is a trade-off, of course.  I'm comfortable stroking $2,500 for any damage beyond $5,000.  It's gotta be worth it, right?

Get Cheap, But Reliable Labor If You Are Strapped for Cash & Don't Want to File A Claim

Here is what I spent on this completely random and totally NOT self-fulfilled event.

$1,200 for the removal of wet drywall and insulation, plus fans and a dehumidifier left over a couple of days.  They wanted to charge me an additional $700 to repair the drywall.  No thanks!

$480, What my neighbor's contact, Mauricio, charged me to repair the drywall completely.  Saved $220.

$1,150, What my neighbor's daughter's boyfriend charged me to fix the leak, remove the water heater, set a new water heater on the side temporarily, and to put it back on the platform once drywall repair was complete.  I saved $300 because the plumbing company quoted me $1450.

Total: $2,830.

Mauricio did a great job!  Only I had run out of paint and had to match it at Lowe's.

Use your contacts before going with a contractor.  If you happen to have Latinx friends, they may know of solid workers who can handle almost every type of home repair/improvement need.  Yes, you can go with a full-fledged company that employs crews and office workers, etc., just expect to pay more.  If your insurance covers it, and your deductible is reasonable, then by all means, spend, spend, spend!  Remember, you can also claim loss of personal items under most HO policies.

Review Your HO Policy Every Year!

Don't be a dope like me.  Every year you should speak with your HO policy representative/agent to have an evaluation done.  They will make sure you're not under-insured as a result of substantial market appreciation, or if your deductible needs adjusting.  Thanks to my resources, I was able to mitigate the damage to my wallet on this one.  But I realize some people aren't as connected around the community as I am.  So, your best bet as a homeowner is to add these policy reviews and potential loss assessments into your calendar.  Don't be caught by surprise like I was!  Thanks for reading.    

How My Due Diligence Saved Me From A Very Costly Investing Mistake

Well folks...adding a 5th rental property to my portfolio was not to be.  If you read My First Seller-Financed Deal, I was on the verge of what I thought to be a profitable investing decision at the time.  I'd analyzed my potential Cash-On-Cash (COC) return based on preliminary numbers, specifically, taking the sellers word for the value of the property (at the time).

What saved me from making a huge investing mistake?

The smartest thing I did during the process of attempting to procure this property was hiring a realtor-investor from the area.  I mentioned having hired a Keller-Williams agent who was local and also happened to invest herself in rental properties.  This was key.  First, she had plenty of connections in town (Little Rock, Arkansas), and she knew the market well.  After both parties signed the purchasing contract, she set us up with Stewart Title.  I made sure to have her add clauses in the contract that would allow me to back out of the deal.  Newbie RE investors...always have an inspection and appraisal clause in your purchasing agreements!  Most realtors do this anyway, but if you're not using a realtor, and are grabbing template purchasing contracts from the Internet, these clauses may not be included.

As my representative, part of my realtor's job was to be present at the inspection (buyer pays for this usually...cost me $250).  I gave her specific instructions: Size this property up for market value using your realtor and investor lens.  A day after the inspection, she offered me her market analysis and it was NO GOOD!  She stated to me that she believed the property to be worth about $60K, and that I could rent it for about $700.  Mind you, the purchasing contract was for a sales price of $75K.  So my realtor was telling me that I was overpaying by $15K!  It was not, however, because the house was in poor or run-down condition.  On the contrary, she found it to have "good bones" and be already in renting shape.  

Normally, realtors renegotiate price for you.  But, because I was the one to have reached out to the seller, and having been the one to establish rapport with him, I decided to email him with a new offer.  I explained to him via email that my realtor had "comped" the property and assessed it to be around $60K.  Of course this made the seller mad.  He'd put in way too much to renovate it, and was trying to recoup his original investment.  I offered him $65K.  He came back with $73K.  I told him I thought his price, based on my realtor's market analysis, was too high, and offered to have the property appraised on my dime.  To my luck, he agreed.  He obviously didn't trust my realtor's home value assessment.  Had he taken my $65K, I would've been underwater on this deal even before closing on it.

My realtor found me a company who appraises properties in the Little Rock area.  The cost to me was $500.  In retrospect, this is perhaps the best $500 I've ever spent.  The appraiser sent the results to my realtor about 6 days later, and the appraised price for the home was shocking: $50K!  I had my realtor share a copy of the entire appraisal report with the seller.  I let him stew on the shock of the results for a day, figuring he would be overly reactive if I gave him a new offer that same day.  The following day I sent him a well-crafted email.

To summarize it, I explained to him that the appraisal was independent, and unbiased.  That the market price of the home was begotten at the peak of our national real estate market, and that I believed a downturn would make it very difficult for the property to appreciate to the point of his current asking price ($73K).  (No way the home would gain $23K in price in 5 year's time, representing the length of our seller-financed term).

I offered him $55K, and claimed that I believed $5K to be a fair premium to pay above market price for a seller-financed deal.  I kept all the other terms the same, namely, $15K down payment, 7.5% rate for years 1-3, and 8.5% for years 4-5, amortized as a 30-year mortgage with balloon payment at the end of year 5.  He came back with a counter offer of $70K and added a new stove to sweeten the deal.  I was like...no way dude.  I explained to him I could not give him $20K above market, and like all proud sellers he disputed the appraisal too!  He believed all of his upgrades to the home were not being rightly considered by the appraiser.

People, let me clue you in on something.  You doing some home improvements doesn't mean you're going to add a dollar spent for dollar appreciation to your home's value.  In fact, your ROI (return on investment) on a kitchen upgrade may be between 60-80% of what you paid.  The average ROI on a bathroom remodel is nationally about 62% of what you paid.  Unfortunately, the seller of this property believed his home was undervalued because his renovations were being underestimated, but that is not how appraisals work.

Sure, appraisers take into consideration how the home looks at the time of the appraisal, but they also look at similar properties that have sold in your area and the price paid for these other comparable homes.  This comparable homes factor is much more important to the appraisal than your kitchen or bathroom upgrades.

The seller and I didn't come to terms so I terminated the deal.  The seller could've asked for all of the EMD (Earnest Money Deposit), namely, $750, but out of courtesy for me giving him a free inspection and appraisal report on his home, he only asked for half of the EMD, $375.  If I were him I would've asked for all of the EMD!

Cost of Doing Business

As a real-estate investor, there will always be costs for doing business.  For this particular NO-DEAL, I spent:

$250 (Home Inspection)

$500 (Home Appraisal)

$375 (EMD to seller)

$300 (Realtor Fee for services rendered)

$75 (Title Company Fee for processing and termination)

Total: $1500

All of it is tax deductible so I'm not trippin'!

Lessons Learned

Next time I communicate with a seller willing to carry, I will make sure it is clear that I will give him/her full asking price if the property appraises at that price.  I will let the seller know that in the event of the property having serious issues (after an inspection) AND also not appraising at sales price, I may decide to either terminate the deal or send him/her another offer for consideration.  I will of course also let the seller know this will be included as a clause in the purchasing contract.

I made the mistake of not letting this seller know I'd reconsider the price after the inspection, and since he was a newbie at seller-financing, he didn't know to expect this.  He didn't have a realtor representing him so he was at a disadvantage doing it alone.  It's a good thing I was tactful and considerate at all time so as not to have a bitter end.

Well, back to the drawing board.  I hope these lessons have helped you on your real estate investing journey!  Until next time.      

Young Investors Club Invests In Stocks With Real Money, Lessons Learned

As a teacher, I've had the opportunity to be part of The Stock Market Game, a stock market investing simulation pitting same grade level teams against each other for ultimate bragging rights.  Each team gets the same amount of virtual money at the start, and they decide which stocks to buy and sell throughout the duration of the tournament.  The team with the most realized gains at the end, wins.  It's an exciting and great way to learn, with no true risks involved.

I never imagined finding a group of teenagers investing real money in the market and conducting themselves like an active fund, but that I did just recently.  And I have them here for you today! Enjoy!

Hi!  My name is Warren Weissbluth, and I am the current President of Young Investors Club (YGN).  Young Investors Club is an investment club where each participant invests real money in the stock market, and democratically decides how to go about investing.  The club's mission statement is, "To educate young adults about investing in the stock market."  We want to give our participants the tools to make informed investing decisions on stocks as well as to increase the financial literacy of our members.

YGN's History

Back in 2016, Jack Rosenthal founded YGN, noticing a lack of opportunities for teens to learn about investing, and get hands-on experience.  In order to develop something of value, Jack persuaded both Gersteinfisher and Young Presidents Organization (YPO) to sponsor an investing club for teens.  Jack focused on growing and promoting the club in order to increase the size of the portfolio and number of members.  Less than two years later, the club had expanded across the nation, gaining more than 40+ new members.  Today, the club has more than 90 members across the U.S.

I joined in 2017, and worked closely with Jack to develop a more interactive and educational agenda at the club.  By my sophomore year of high school, I was promoted to Chief Operating Officer.  Mid-way through my junior year, Jack resigned (he went off to college), and I became the club's President.

As President, I focused on the club's stability.  Between a myriad of issues, including accounting and legal accountability, as well as a lack of education and engagement, the club had lots of room for improvement.  At the start of 2020, a YPO parent, Yaniv Blumfeld, and I worked hard to restructure the club and help fulfill the club's mission.

For several weeks, we worked together to create a governance document, stating clearly in writing the inner workings of the club.  To improve transparency, we also wrote down how the club manages its portfolio of over $100 thousand dollars.  We created a management system, found a more experienced Board of Directors, and outlined everyone's responsibilities.  Finally, we developed an election process, and determined term limits on all club positions.

With more organized tasks such as club emails, calendars, websites, and holding reports, things could be effectively executed through the delegation process.  This transition breathed new life into the club, and sparked engagement.  Our regular communications now include Google Meets voice chats, full record of all decisions posted on the website, voting forms for all participants (even if they can't make the call), and thoughtful research reports on our investments.  The club has never been more engaging and exciting to be a part of!

Why Teens Need Financial Education

The skills one learns from financial education can help teens avoid blunders later in life.  Whether it be credit card debt, one's credit score, retirement, savings, and investing, there are many facets to adult life that are not inherent to young people.  While YGN only intends to educate on a portion of these goals, we hope that an early introduction into the world of finance will kick-start an interest in money management.  Similarly, being exposed to the marketplace as a young person can give valuable insight toward the way things are valued, and the nature of investments.

As President, I hope all members will be able to walk away from the club knowing that they have learned something useful to take forward as they head to college.

Joining or Replicating

YPO continues its sponsorship of the Young Investors Club.  As a result, the club is limited to YPO members and their children.  If you are part of YPO, please check out our website or reach out to younginvestorsclubllc@gmail.com for more information.  If you are not a YPO member, here is the link to join. 

Additionally, if you would like to learn more about starting your own local club, I am happy to provide guidance and insight!  It would be my pleasure to help anyone aspiring to build their own investing club.  Reach out to me if you have any questions!

Sincerely,

Warren Weissbluth     

My First Seller-Financed RE Deal, Under Contract

What an incredible year it has been.  And we're only half way through.  Before I talk about my first seller-financed RE deal, the why, how, etc., I want to make something clear for anyone new to my blog:

I support BLM, police reform, science, education, the LGBT and immigrant communities, am pro-choice (not pro-abortion as some may like to spin), pro-capitalism, not very religious...actually not religious at all, but I support everyone's right to be religious, etc., AND I cut my sandwiches into rectangles.  There, now you know.  If that puts you off...see ya!

  House is 3 bedrooms, 1 bath and roughly 1,200 sq. ft.

Why RE Investors Seek Out Seller-Financed Deals 

There comes a time when a RE investor will have too many properties in the books for their income, and banks (who dole out conventional loans/financing) will consider the buyer "over-leveraged."  Even if a RE investor has very little in the form of debt (car is paid off, no other credit card balances, e.g.), if their W2 income hasn't gone up, they will cap out eventually.  It's also relevant to note that banks only count a certain percentage of rents as "income" for their debt-to-income calculation.

For example, as a middle-school teacher, my salary is around $94K.  Unless I ramp that up, by returning to administration (I don't want to do this) for example, I'm no longer able to get financing conventionally, despite having four rental properties each cash-flowing and providing me with "other" income.  If I add my wife, Jessica, to the loan application, our collective income is higher, improving my numbers.  Jessica is currently on month 18 of her new career as a realtor, however, so there is not much track record of her income yet.  Only one year's taxes so far.  Everyone's situation is different, of course.  But all RE investors face this "problem" of financing at some point.  This is where finding seller financing comes in handy.

What is Seller-Financing?

Simply stated, seller-financing is the equivalent of a home seller choosing to become the bank.  Other ways of saying this OR of looking for it online in searches include, "seller will carry" and "seller will hold."  For personal or business reasons, a seller may choose to carry/hold a note (mortgage) for a buyer.  The buyer pays the seller (not directly, usually a loan servicing company is involved) a monthly payment of principal plus interest.  Just like in a conventional loan, the buyer is responsible for insuring the property, paying property taxes on it, etc.  Unlike bank financing, the seller can negotiate a higher interest rate, length of the loan, and other lending terms with the buyer.  Because a bank is not involved, both buyer and seller pay less in closing costs.  Buyers also don't have to meet the stringent lending standards of a bank.  The seller decides what he/she needs in the form of financial support/statements/checks to qualify the buyer, i.e., the borrower.

My Deal...How I Came To It

About 10 days ago, I got on Craigslist in Little Rock, Arkansas.  Craigslist is a good place to find off-market RE deals.  First question:  Why Little Rock?  I have done business with two "turnkey" RE companies in the Memphis, TN area.  One of these companies started selling turnkey properties in Little Rock, and is heavily pushing the area to its vast network of out-of-state investors.  So, just reading the future here.  If this company keeps selling in Little Rock, at slight premiums, the market will go up in the area.  This company also asks that after your fourth deal, you do 25% down payment for each subsequent deal.  They work with banks that demand this of investors after deal number 4.  I don't like paying more than 20% on RE deals, preferably less if possible.

Now, because I'm not in the area, and I don't like flying across the country, especially to a hot and humid place like Little Rock in the middle of the summer, I look for particular properties on Craigslist:

1) They must be ready to be rented out...like in turnkey rehab condition.  Images will show this.

2) The owner must be the one posting the ad.  You must confirm this.  I cannot stress this enough: MAKE SURE THE SELLER OWNS THE PROPERTY OUTRIGHT.  It won't work if the seller still has a mortgage on the property.

3) Communicate with seller by phone after the seller replies to your inquiry.  Get a feel for the property from the seller, e.g., the type of area it is in, what they rent the property for (if currently rented), and how the seller arrived at their sales price.  It's your job (once you have the property address) to find area property values, appreciation potential based on market outlook, and if anything major in terms of repairs are needed on the property.  *Note, sellers may volunteer all this info, but only a property inspection by a legit inspector can tell you for sure.

I found one property that met my visual and description criteria.  There were several pictures backing up what the seller was stating in the blurb.  I emailed him,

"Hi, X,

I'm interested in your 3, 1 home.  Would you consider a seller financing deal?  I could swing up to 20% down ($15K) and we can discuss terms for the remaining $60K?"

In retrospect, I should've left off how much I was willing to do for the down.  But, the reason I offered 20% immediately was because the seller hadn't specified he'd do seller-financing.  The ad mentioned two contractual options, a) cash purchase, or b) rent-to-own.  The seller boasted having put in a new roof, HVAC system, and kitchen cabinets.  He mentioned having had the hardwood floor resurfaced, adding new kitchen tile flooring, and installing a new water heater.  Lastly, he also stated that he had just painted both inside and outside.  This gave me the impression that the seller/flipper had perhaps over spent on the rehab and needed some money back badly.  I doubt he would've taken less than 20% down.  This allowed me to get his attention too.

To my surprise, the seller agreed to consider the possibility of carrying the paper.  He gave me his telephone number and name so we could talk off Craigslist.  Why was I surprised?  Many sellers don't want to take on the responsibility of loaning to random people.  They may not understand the process, and are fearful about being scammed.  I lucked out though.  The seller would convey to Jessica and me while on the phone that he looked up seller financing on Google, learning how it works, prior to sending me his reply via Craigslist.  That was a great sign.  One of the difficulties of doing these types of deals is having to educate the seller.  Many sellers turn to family, accountants, friends, etc., who may not understand anything about real estate, and end up getting misinformed.

Deal Terms

On the phone we talked terms.  First a little friendly conversation to relieve the tension.  Jessica and I shared a little about ourselves and our goals.  The seller was willing to share a little about himself too.  Then we got to business.  Questions we asked him:

1)  Why are you looking to sell?

2)  How did you arrive at your selling price?

3)  Do you own the property outright?

4)  If we did a title search would there be any liens to his knowledge?

The seller was savvy enough (to his credit) to understand his position of leverage.  Namely, how to get a better rate on the note.  For example, we started by offering him 5% on a 30-year amortized schedule for payments with a balloon payment due at the end of the 5th year.  This would've been the best case scenario for us.  We had already agreed to the 20% down so we were stuck there.  He countered: "For 30-year amortized payments, I will need at least 7.5% on the loan with 5-year balloon payment."  See...he was smart enough to know the amortization was his leverage.  If you're lost, a 30-year amortization leads to smaller monthly payments.  Sellers in a seller-financed deal can ask for 15-year amortization or even 10-year!  The payments would've been too high for us.  As an investor, you want to pay the least amount every month so you can cash-flow.  Jessica and I countered with 7% rate, but he wouldn't take it.  Thus an agreement was reached with terms being:

Sales Price: $75K

The property is in a B to C class neighborhood, so it appraising right now at this price is probably not happening.  Comparing similar properties in the area, sales that is, I think the property is worth at least $65K, maybe a bit more.  Again, without an appraisal, there is no knowing for sure.  The Zillow forecast (I know you can't trust Zillow) calls for 11% appreciation for 2021.

Down Payment: $15K

Loan: 5-year, 7.5% interest rate, on a 30-year amortized schedule

Earnest Deposit: 1% of sales price or $750, to be applied to down payment

Now What?

We had no idea how to proceed beyond this.  This was our first seller-financed offer.  The seller too was doing this for the very first time.  I knew a written offer was next.  But how to go about getting a legal sales contract for the state of Arkansas?  I looked online.  I found some decent templates.  Jessica and I thought about just doing it ourselves.  But then we reconsidered.  We considered hiring a RE attorney next.  One RE attorney gave us a quote: $2,000 retainer and $300/hr. thereafter.  Ha!  No way.  In theory, hiring a lawyer for your very first time sounded like the prudent thing to do.  But they charge way too much.  If the deal had been for a $500K or more property, then maybe.

Then Jessica got the idea of talking with a local Keller-Williams realtor.  Jessica works for Keller-Williams in Carlsbad.  She found an agent there.  The agent happened to also be an investor.  That's what you want!  If you're not going to travel to the state to visually check out the property yourself, having an investor-realtor is the next best thing.  Not only will they advocate for you, but they will be present during the inspection, and tell you if the property is a dud or not.  Just because you agree to terms doesn't mean you can't back out.  The sales and purchase contract specifies all sorts of contingencies (termite clearance, etc.).

We hired the agent (agreeing to 2% commission) and she came with a network.  For example, she asked us to work with Stewart Title.  Stewart Title has an in-house lawyer who charged only $200 for the promissory, mortgage note portion.  The seller normally pays for this since it behooves them to have ownership of this part of the process.  Both buyer and seller have closing costs, and we agreed to pay our own side.  Our closing costs are roughly $954.  That's it!

Bottom Line

I expect to put at least $20K into this deal.  Here is a breakdown:

1) Down payment: $15K

2) Title and closing costs: $954

3) Home Inspection: $500

4) Realtor: $1500

5) New dishwasher: $500-$700

6) New stove: $500-$700

I used Bret Whissel's amortization calculator to estimate my principal AND interest payment: $419.53.

My cost to insure the property will be: $718/year or $59.83/month.

The property management company I will hire charges 8% of the rent amount.

Properties in the area rent for $750 to $800.  So, let's say it rents for $775.  Prop. mgt. fee would be 0.08 x 775 or $62.

Property taxes are currently $444.0/year or $37/month if impounded.

Total monthly costs (not including any maintenance) are:

419 + 59 + 62 + 37 = $577/month

Cash-flow: $775 (using conservative rent amount) - $577 = $198, call it $200.

Cash on Cash return =

$200 x 12 = $2400.

$2400/$20000 = .12 x 100 = 12%.  Not bad.  And it would've been better if I didn't have to buy the two appliances.

Realize this.  Most of the above expenses, with the exception of the down payment, will be tax deductible!  Also, my exit is going to be a conventional refi loan in about two years.  Will interest rates be crazy high in 2022?  Heck no!  We're barely starting our Covid19 depression.  So, in two years or less, I will seek out a cash-out mortgage (to pay off the balance of the loan to the seller) and lower interest rate, improving my cash-flow position.  Maintenance expenses aren't going to be that bad with all the new upgrades to the house. 

 I will keep you all up to date on this deal.  I've learned so much already, and I hope that by reading this, so have you!  Until next time.

The Berenstain Bears Help Kids Manage Their Allowance, Write Checks

The end of the school year is here.  Hooray!  Even as a middle school teacher I've struggled to keep my elementary age kids on task.  My son, a first grader, invented a whole new game: ditch "daddy school" when daddy isn't looking.  It involved him signaling his older sister, a second grader, when to make a mad dash up the stairs.  My yelling for them to stop and come back only made them giggle harder.

Even though they had a full compliment of activities, thanks in part to their awfully committed teachers (some days I wished they were less committed), we managed to finish the "school day" by noon.  They had plenty of time on hand to do other things before dinner like play, clean-up around the house, and watch television.  I didn't like the YouTube channel they watched, consisting of a family (mom, dad, and elementary age son) playing video games together.  Since I restricted how long they could play video games, they thought watching others play wouldn't violate any of my rules.  They thought wrong, obviously.

I had to stop that time-wasting nonsense and replace it with something more productive and constructive.  So I challenged my kids to earn money by reading books of my choosing.  I would buy them a set of books, and every time they finished one, they'd earn $1.  I went on eBay and found several money centered books for kids, but I'd like to focus on just two:

1.  The Berenstain Bears' Trouble With Money

2.  The Berenstain Bears' Dollar$ and $en$e

As everyone knows, Stan and Jan Berenstain have educated kids now for decades.  They have a slew of books on various topics.  My kids in fact have several other "Berenstain Bears" books that they love to read over and over.  Sticking to authors they're already familiar with helps pique their interest in any new book.

The Berenstain Bears' Trouble With Money

Quick summary:  Brother and Sister Bear spend their money at the Bear Country Mall just as soon as they get it or earn it.  Mother suggests to Papa that the cubs should have an allowance.  Papa believes the cubs are too young still.  Plus, Papa wants the cubs to learn how to work for money and save it for a rainy day.  The cubs start hustlin' like crazy, earning wads of cash doing side-gigs every day.  They surprise Papa by gifting him all their earned money, since he's constantly worrying about not having enough.  Papa comes to his senses and agrees to start the cubs on a regular allowance.  But first they take the cubs to the Bear Country Bank and open accounts for Sister and Brother.

Financial topics you can discuss with your kids from this book:  A) How to spend money, B) Why you need to save some of your money, C) Entrepreneurship, D) What a bank account is, E) What interest is.

Read "Trouble with Money" before...

The Berenstain Bears' Dollar$ and $en$e

Quick summary:  Papa Bear gives Brother and Sister Bear a weekly allowance to teach them to be responsible with money.  He tells them they can spend or save their allowance however they see fit.  The cubs repeatedly spend all of their allowance on the same day it is given, and consequently have no money left over for the rest of the week.  Mama has an idea that will help the cubs make better decisions with their allowance.

Great idea if you have kids who mismanage their allowance!

Mama found old checkbooks in a drawer.  She explained to the cubs what checks are for, namely, paying people, keeping balance records, or making them out to "Cash."  She made them write out a check to Cash in the amount they wished to withdraw from the bank (Mama, in this case).  This strategy helped the cubs think twice before making any new purchase.  Example,

Instead of spending $5 on baseball cards, half of his allowance, Brother changed his mind and bought a $3 baseball book.  The check he made out was for $3, and the record showed he had $7 "Allowance Left."

Financial skills learned: A) Making smarter purchasing decisions, B) How checks are utilized, C) How to write out a check.

Why I don't believe in an allowance for chores

There are many families that pay their kids an allowance for doing daily or weekly chores.  I'm not down with that.  I don't want to teach my kids to be employees, working for money by the hour or upon completion of a certain task.  I make my kids do chores, but only to teach them life skills they will need one day.  I prefer to pay my kids for reading, especially financial literacy books.

But it doesn't really matter how you decide to compensate your children for their efforts.  The fact remains that many of them will rush to spend their money without regard for saving, or the "needs vs. wants" mental processing.  Keeping your kid's cash as their bank, and forcing them to write out a check in order to withdraw, might help instill in them a better sense of money management.

Great job Stan & Jan Berenstain! 

     

Wells Fargo Kills My Rental Prop Refi Due To Last Minute Change In Lending

I was minding my own business one day in early March, prior to even the earliest of measures to stay-at-home, when I received a phone call.  It was a Well Fargo agent by the name of Will.  I won't share his last name because that wouldn't be nice.  Will wanted to know if I was interested in refinancing one of my rental properties.  Wells Fargo owns the note so I thought, Hey...why not.  I was already in the process of refinancing my personal residence with Blue Spot Home Loans and that was going great.  I locked in at 3.3%, down from 5.125%.

The rental property details

The rental property in question is my best performer.  I'd once already refinanced it, using Well Fargo, and taken $24K in cash-out.  This was back in 2018.  The refi process had resulted in an increased rate to 6.25%, 2018 rates.  This was high, but I was still cash-flowing nicely due to the rental market in Cordova, TN rising.  The property had appraised at $155K back in 2018.  I quickly looked on Zillow and other sites to see if there was any other additional appreciation to be had.  Comparable sales showed that properties in the same neighborhood had sold for $170K!  Holy smokes!  I said to myself.  I could do a cash-out refi once again and get a lower interest rate at the same time.

Will said I could get 5.125% now.  So I turned myself into a document uploading machine.  Wells Fargo would send me an email requesting documents, and I'd complete the "task," that same day.  It took like three weeks to get my first actual, non-automated response from Wells Fargo.  The Mortgage Processor, a woman by the name of Leticia, introduced herself and said she'd be taking over my application.  This was in late March.  I knew things were slow because of all the people attempting to do what I was doing.

In early April I started to worry.  Leticia had gone silent.  The reports of Covid19 leveling every industry in sight alarmed me.  I emailed Leticia and requested that she order the appraisal of my rental property asap!  I explained to her that I didn't want the value of my property to go down because of people losing jobs.  Finally, some time in late April, the appraisal was ordered.  I spent about $650 and crossed my fingers.  Remember...appraisals make or break deals.  If the property doesn't appraise at the price you need it to, the deal has to be re-structured.  I wanted $14K in cash-out and needed the price to come in at $170K.

Boom!  The property appraised at my price.  Leticia gave me an update, stating we would close by the end of May.  This was the slowest refi process I had ever been a part of.  It would be almost three months from start to finish.  But again, Covid19.

Then there was confusion.  Will called me in early May to tell me we could lock in at 5% now because the rates had gone down.  I inquired about the $14K cash-out, as had been stated in the disclosure forms that Well Fargo sent me.  I had a copy of it.  Will had not seen it.  He pulled it up on his screen and noticed it.  He said that the application was supposed to be simply to lower the rate, and not pull cash out.  He had to talk to Leticia and his boss to see if he could change it to a cash-out app.  Mind you, this was in the disclosure forms that both my wife and I signed, and agreed to!

Another week went by.  Will hadn't gotten back to me with an answer.  Leticia emailed me on Friday of last week.  She stated in her email that Will would call me and explain the outcome.  To this point, I only imagined one of two options: 1) I get the 5% rate and $14K cash-out or 2) I get the 5% rate only.  Will called me on Monday of this week.

He starts to explain to me that due to recent changes, Wells Fargo couldn't approve my cash-out loan.  Okay, no biggie, I thought.  I'll just take the 5% rate refi.  When I asked about just getting my rate lower, Will begins to explain that he couldn't do that for me either.  I was pissed now!

He explains that Wells Fargo decided to not approve any current or future applications where a borrower declares income from rental properties. 

Son of a bitch!  I'd spent at least 4 hours of my life finding docs and making sure they were PDF, uploading them, Docusigning legal documents, and answering emails FOR NOTHING.  I told Will that I was not happy, considering that a) it was he who had called me out of the blue and b) I was ready to close back in April had Leticia been faster at her job and not ghosted me for weeks.  (Once I left a message with her supervisor).

Will was apologetic and I could tell I was not his first let-down call.  He said to me that he would talk to his boss about the possibility of getting the cost of the appraisal refunded to me.  That's where we parted.

Mortgage Refinance Activity On the Decline

Out today is an article that explains why refinance activity was down 6.3% with the week ending on May 15th.  Sure enough, there is mention of lending standards changing among lenders.

Look, I get that banks want to ensure they take on performing loans.  I get that they see many people not being able to pay their rents, affecting landlord's bottom lines.  But to make a decision that affects every single real-estate investor, regardless of their individual circumstances, isn't right!  I have had all of my tenants pay their rent up to this point.  My rental properties are in a state that had limited closures.  Thank you great state of Tennessee!

Many real-estate investors have both W2 (salary from a job) and 1099 (from rental properties) income.  Responsible real estate investors keep enough cash on hand to cover their rents for several months.  I'm one of them!  I know I'm not the only one out there that this happened to.

Wells Fargo has all the right to change their lending standards.  It's good business in times like these.  But don't waste people's time.  They should've allowed loans in process to close and alerted new borrowers, those applying in mid-April for example.  This is just another example of Wells Fargo horrible customer service.  They had their reputation completely blighted by the news of their agents up-selling products and also creating fake accounts in late 2016.  Now they go and do this.

Shame on Wells Fargo!  Lousy, lousy, lousy, customer service.  Avoid doing business with them if at all possible.

If you had something similar happen to you with Wells Fargo, please comment below.  Thanks for reading.

Harry Styles Might Just Be A Freakin' Marketing Genius

When my wife, Jessica, started talking to me about this all-boy Pop band of the past called, One Direction, I did what I usually do: pretended to listen.  Don't take me wrong.  I listen to my wife very often.  It's just that she's always going from one infatuation to another, and I have to be conservative with my attention or I'll never remember anything she says.

Anyway, the initial introduction to this remarkably good lookin' group of young men took place like four months ago.  Jessica claimed to have fallen down a rabbit hole online, discovering all sorts of genius about One Direction, regretting not having known of them when they were actually together.  I didn't get it.  In my defense, I'm a dude that never liked boy bands.  My aversion to them began in the mid-eighties when all the young ladies at my middle school started jockin' New Kids On The Block.  God I hated their merch.  Now I understand I was an insecure and immature little kid.

My African-American Wife Loves A Young White Man From England

Let's not get too racial up in this piece, but...

my soon to be 40-year-old wife liking a white, young man from England speaks volumes about the reach this, "Harry Styles," has worldwide.  I was a little jealous at first.  Jessica kept going off about him and some other member of the group, Zayn Malik.  She gave me the rundown on the theories about this pair in particular.  Theories she'd picked up from watching countless hours of YouTube.

And so some of the hype that is Harry Styles is brilliantly and creatively generated by the tension between him and other group members.  Tension that is never allowed to rest or come to a head.  From what I've learned myself, studying the guy, Harry is a master at stoking insinuation.  Whether it be through his lyrics or the art on his body, the kid has got the hang of sly.  If looks were enough, then every pretty boy in the world would be big shit.  Clearly, it takes more than looks to make it huge.  FashionJournal.com calls H.S. (Can I call him, H.S.? Don't want to offend anyone) a fashion icon of a generation and apparently they can prove it.

A Marketing Genius?

Jessica loves Styles' music.  She listens to him when she showers, drives around, cooks, and exercises.  At first I thought his music was okay.  Not the strongest vocals.  But you don't have to be Whitney Houston to be successful as a singer in the music industry these days.  A couple of his songs are quite catchy: Fine Line and Watermelon Sugar.  The lyrics of some of his songs are, let's just say, interesting.  Nonetheless, songwriting is where Harry Styles elevates himself into a marketing powerhouse.

Lyrics that are raw AND at the same time cryptic, can be frustrating to listen to.  Harry makes a sport of it, and his fans obsess like scientists trying to make sense of data.  The easy to decipher, yet clever, titles of his songs, and the fantasy ecosystems he creates in his videos, are pure fire.  Digital and content marketers need to start paying attention to what this dude is doing!  But even the small time side-hustler could learn a thing or two.  I'm going to break down some of Harry Styles' marketing strategies next.

Personal Brand, Engagement, and Product Launch

1.  Song titles become products.  One of his songs: Treat People With Kindness or "TPWK" is on beanies, hoodies, and shirts at Harry Styles' merchandise store.  Other songs have been stamped on various merch as well.

2.  Engagement with Fans.  H.S. is known for his gratitude.  He consistently thanks fans, and gives them all the credit for his personal fame.  You might be thinking, Well, that's what every good artist should do.  Except that H.S. is better at it.  He throws up websites like DYKWYA to engage his fan base.  No strings attached (no email capture, funnels, products being sold, etc.).  Just fun.

3.  Song Lyrics, More Websites and Fun Engagement.  At Ijustwannatasteit.com we get a glimpse of the marketing prowess behind the H.S. brand.  So this is a one page website like DYKWYA with domain relating back to a song's lyrics.  However, what's different is that it is updated every so often with something new added to the table.  The original image was the table.  Then came the items on top one at a time.  Why?  It's H.S. and company hinting when the Watermelon Sugar video will drop!  Brilliant.  This is essentially how a great marketer would build anticipation for a product launch.  With so much buildup, the video will surely get millions of views.

How Can I Use This?

First, you don't need to have 27.5 million followers on Instagram to effectively utilize some of H.S.'s marketing strategies.  

If you're an author, you can create buildup for your book with a one page website.  Don't over complicate it.  Engage your following by placing an instant thank-you card message like Harry does at DYKWYA.

If you're an influencer or creative, consider using your most liked content to make merch.

If you're a small business owner, use social media, especially Instagram, to unveil a new, "coming soon" product a section at a time. 

Everyone can improve on engagement.  Too often we focus on selling.  "Always Be Closing," right?  Not so fast!  Sometimes just conversing with your following or target customer is what's needed.  Reply to every posted comment on your social media pages in a friendly and professional manner, no matter what.  Be thankful!

 I'm definitely thankful that you took the time to read this post.  I'm extremely thankful that you're here.  I also hope you enjoyed the reading.  If you did, and want to make sure you get my latest, please subscribe before you go.  You can also follow me on my Instagram: Cosvaldogomez.