Like more people get to do every day, I work from my home office. As I look out my window on this cold, wet and quickly approaching snowy day, I’m reminded of how lucky I am. When I woke this morning I went through a similar routine as most; I shaved and showered and dressed and prepped myself for the day. I ate a little breakfast and instead of getting into my car for my morning commute, I strolled down the hall to my office arriving about five seconds later.
I didn’t have to sit through traffic or get frustrated at the guy in the left lane doing twenty-five in a forty. I didn’t have to park out in the sticks hoping to avoid another door ding from the other guy stumbling into work and not paying attention to the world around him. I didn’t have to go outside in this miserably cold and wet day.
So now I sit here with you sharing my thoughts and opinions. I expect that I have a more positive outlook than those who had to endure all of the above. However, it’s not always so rosey. ( I’m not sure if a pun was intended, but I do recognize that it is punny, ha ha. ) Anyhow, when you work from home people don’t always think of you as working. I don’t know what it is exactly. I speculate that if they haven’t had the privilege of doing so themselves, I don’t think they fully understand.
Just because my commute is significantly shorter, doesn’t mean that I don’t have similar deadlines and restrictions as they do. It just means that my commute is shorter. I have a double whammy because in addition to working at home, I’m self-employed. So this must mean that I can drop everything at any time just because I want to.
This typically comes into play when the children have those “teacher workdays” or they’re sick. Speaking of teacher workdays, I’m really tired of our educators complaining about how much they get paid. They have more time off... Anyhow. If I’m working at home, I must be the one who can watch kids. I’m here anyway. Think about if you brought your kids to your office. How productive would/could you be?
Just like most things in life, you have to take the bad with the good. Don’t take me wrong, I’m not complaining. Not really. I have it pretty good. I’m just trying to enlighten those who don’t work from home to keep in mind that the most import word in “work from home” is “work” not “home.”
To find great locally owned and operated businesses, visit iSwami.com
Tuesday, April 24, 2007
Wednesday, April 18, 2007
Early Mortgage Payoff through MMA?
Recently I was contacted by a mortgage professional about a new program that claims “The average MMA customer will pay their 30-year mortgage off 100% within 8 to 11 years—with little change to their day-to-day spending habits and without increasing their monthly mortgage payments.”
I’ve now received a couple of messages regarding the program and had just brushed them aside until I came across multiple advertisements for this program in craigslist. My initial reaction was that something with this program isn’t quite right, but with as much as I’m seeing it, I figure that my clients and customers are seeing it too, so I better look into it further.
Let’s first look at the primary claim: “The average MMA customer will pay their 30-year mortgage off 100% within 8 to 11 years—with little change to their day-to-day spending habits and without increasing their monthly mortgage payments.” Sounds too good to be true. I’ve done the math several times and it just doesn’t add up. Quite a few others have too. The following is an analysis by DLM on Scam.com:
If the mortgage on my house is a 30 year mortgage at 6% interest, how exactly could I pay off my house in 6-12 years without increasing my monthly mortgage payment? Even if my mortgage was at 0% interest and 100% of my payment went to principal, it would still take nearly 14 years to pay it off without increasing my mortgage payment.
Interest is interest, whether it's in a first mortgage or a HELOC. If I have a $100,000 mortgage at 6% and I pull $20,000 off a 6% HELOC to pay down my first mortgage, I still have $100,000 in debt at 6%. It's now just split between two loans. So let's separate fact from hype. FACT: You might save some interest if your HELOC interest rate is very close to your first mortage interest rate. However, the interest savings only amounts to an average of $10-15 per month using the above example of $5000 per month income. What does that translate to? About 1.5 to 2 years off your mortgage term (paying off your 30 year mortgage in 28 years). That's a bit different than what they're promoting.
In the presentation, they passed out a sample report from the software. I filtered through the numbers that they gave (paying off a 30-year $150,000 mortgage at 6.5% interest in 8.4 years). The mortgage payment was listed at $850 per month (which should have actually been closer to $950). They even make the reports difficult to read, but here's how they arranged to pay off that mortage in 8.4 years: They took $5000 in monthly income and applied $2845 per month toward the "system" (note that the amount is three times the original 30-year amortized payment). My first question is, how exactly do you triple your mortgage payment "without altering your current standard of living" and "without increasing your monthly mortgage payment"?
Now here's the good part: Let's take that original loan amount of $150,000 at 6.5% interest. The MMA program was going to pay it off in 8.4 years by applying $2845 per month toward the first mortgage and/or HELOC. Now what would happen if we didn't use the MMA program and just paid $2845 per month toward the first mortgage of $150,000 at 6.5%? Ready for this?... 5.2 years! That's 3 years faster than using the MMA program, just by simply paying the same amount directly to your first mortgage. But how many people can afford to triple their mortgage payment anyway?
The bottom line is that UFF is in the software business. This system was created from a simple concept (accelerated mortgage reduction) and made extremely complex so the average person couldn't understand how the numbers really work. Then they make it look like they're going to save you $100K or more in interest without affecting your lifestyle, so $3500 for a piece of software that's really worth a small fraction of that seems like a bargain. DO THE MATH! They're complicating a simple concept to make you think you need to give them $3500 for a piece of software. Think about it.
To find great locally owned and operated businesses, visit iSwami.com
I’ve now received a couple of messages regarding the program and had just brushed them aside until I came across multiple advertisements for this program in craigslist. My initial reaction was that something with this program isn’t quite right, but with as much as I’m seeing it, I figure that my clients and customers are seeing it too, so I better look into it further.
Let’s first look at the primary claim: “The average MMA customer will pay their 30-year mortgage off 100% within 8 to 11 years—with little change to their day-to-day spending habits and without increasing their monthly mortgage payments.” Sounds too good to be true. I’ve done the math several times and it just doesn’t add up. Quite a few others have too. The following is an analysis by DLM on Scam.com:
If the mortgage on my house is a 30 year mortgage at 6% interest, how exactly could I pay off my house in 6-12 years without increasing my monthly mortgage payment? Even if my mortgage was at 0% interest and 100% of my payment went to principal, it would still take nearly 14 years to pay it off without increasing my mortgage payment.
Interest is interest, whether it's in a first mortgage or a HELOC. If I have a $100,000 mortgage at 6% and I pull $20,000 off a 6% HELOC to pay down my first mortgage, I still have $100,000 in debt at 6%. It's now just split between two loans. So let's separate fact from hype. FACT: You might save some interest if your HELOC interest rate is very close to your first mortage interest rate. However, the interest savings only amounts to an average of $10-15 per month using the above example of $5000 per month income. What does that translate to? About 1.5 to 2 years off your mortgage term (paying off your 30 year mortgage in 28 years). That's a bit different than what they're promoting.
In the presentation, they passed out a sample report from the software. I filtered through the numbers that they gave (paying off a 30-year $150,000 mortgage at 6.5% interest in 8.4 years). The mortgage payment was listed at $850 per month (which should have actually been closer to $950). They even make the reports difficult to read, but here's how they arranged to pay off that mortage in 8.4 years: They took $5000 in monthly income and applied $2845 per month toward the "system" (note that the amount is three times the original 30-year amortized payment). My first question is, how exactly do you triple your mortgage payment "without altering your current standard of living" and "without increasing your monthly mortgage payment"?
Now here's the good part: Let's take that original loan amount of $150,000 at 6.5% interest. The MMA program was going to pay it off in 8.4 years by applying $2845 per month toward the first mortgage and/or HELOC. Now what would happen if we didn't use the MMA program and just paid $2845 per month toward the first mortgage of $150,000 at 6.5%? Ready for this?... 5.2 years! That's 3 years faster than using the MMA program, just by simply paying the same amount directly to your first mortgage. But how many people can afford to triple their mortgage payment anyway?
The bottom line is that UFF is in the software business. This system was created from a simple concept (accelerated mortgage reduction) and made extremely complex so the average person couldn't understand how the numbers really work. Then they make it look like they're going to save you $100K or more in interest without affecting your lifestyle, so $3500 for a piece of software that's really worth a small fraction of that seems like a bargain. DO THE MATH! They're complicating a simple concept to make you think you need to give them $3500 for a piece of software. Think about it.
To find great locally owned and operated businesses, visit iSwami.com
Friday, April 13, 2007
Real Estate Residuals & Profit Sharing
Hello everyone. In this post I’m going to talk a little about some of the “profit sharing” systems some real estate companies use to recruit and retain associates.
Those of you who know me understand that I typically don’t knock what other companies are doing. I’ve always felt that there’s something for everyone. What appeals to one person about a company might not appeal to another.
Here’s the thing. I think that a lot of people who join real estate companies because of “profit sharing” or what another company refers to as “residuals” aren’t doing the math. On the surface it all sounds great and wonderful, but what about the reality of it.
Most of these profit sharing incentives revolve around you recruiting new people into the company. This is of course great for the company, but how great is it really for the associate?
Let’s first look at the commission splits. Lets example a good associate broker earning sixty thousand per year, which by the way is significantly above the average let alone what a new associate might earn. In the course of a year that associate will pay about eighteen thousand of that to the company.
Compare that to the six thousand they would pay to a structure like my company, Rose Real Estate. We’re talking about a twelve thousand dollar difference. What do you get for that? You get to recruit more people into the company!
Now, when you do recruit other associates and if and when they start to make money, you get a percentage of the net profit. If this recruit also makes sixty thousand, again, which is against the odds, out of the company’s eighteen thousand, how much of that do you think you’ll see?
Don’t you think in the long run you’d create more wealth, FOR YOURSELF, by taking that twelve thousand dollar difference and buying an investment property? I certainly think so. Also, if you had the skill to recruit enough people into a company that maybe you should start your own? How much more wealth would that create for you?
Like I said, there’s something for everyone. But, before you make a decision about what company to work for. Please, explore your options. And do the math! If you’re interested in learning more about Rose Real Estate LLC, please visit http://roseusa.com
Those of you who know me understand that I typically don’t knock what other companies are doing. I’ve always felt that there’s something for everyone. What appeals to one person about a company might not appeal to another.
Here’s the thing. I think that a lot of people who join real estate companies because of “profit sharing” or what another company refers to as “residuals” aren’t doing the math. On the surface it all sounds great and wonderful, but what about the reality of it.
Most of these profit sharing incentives revolve around you recruiting new people into the company. This is of course great for the company, but how great is it really for the associate?
Let’s first look at the commission splits. Lets example a good associate broker earning sixty thousand per year, which by the way is significantly above the average let alone what a new associate might earn. In the course of a year that associate will pay about eighteen thousand of that to the company.
Compare that to the six thousand they would pay to a structure like my company, Rose Real Estate. We’re talking about a twelve thousand dollar difference. What do you get for that? You get to recruit more people into the company!
Now, when you do recruit other associates and if and when they start to make money, you get a percentage of the net profit. If this recruit also makes sixty thousand, again, which is against the odds, out of the company’s eighteen thousand, how much of that do you think you’ll see?
Don’t you think in the long run you’d create more wealth, FOR YOURSELF, by taking that twelve thousand dollar difference and buying an investment property? I certainly think so. Also, if you had the skill to recruit enough people into a company that maybe you should start your own? How much more wealth would that create for you?
Like I said, there’s something for everyone. But, before you make a decision about what company to work for. Please, explore your options. And do the math! If you’re interested in learning more about Rose Real Estate LLC, please visit http://roseusa.com
Tuesday, April 10, 2007
Real Estate Wealth
You may already know, but if you don’t, there are more people become millionaires from real estate than anything else. But how do they do it? It’s typically not from fixing and flipping and it usually doesn’t happen very quickly. It’s not too sexy either. It’s your basic principle of buy and hold.
Buy and hold. It’s just as it sounds, you buy a piece of real estate and you hold it for an extended period of time. But how can you make more with buying and holding than you can as a “flipper?” Let’s first look at a term that’s thrown around quite a bit when referring to real estate: investor.
An investment is typically something passive. You buy it, whatever it is. It could be stocks, bonds, coins, whatever. You then hold onto it and allow it to appreciate. Fixing and flipping is more like a job. Yes you’re self employed, but it’s still a job. You have to be actively involved day to day. Just like a day-trader isn’t so much an investor as he/she is, well, a day-trader.
So, back to buy and hold. Why is this so powerful? Let’s look at the most common investment people make, single family homes. As an investor, you buy a house, you typically take out a mortgage on the house and you rent it to someone else. This mortgage, or leverage is what really amplifies your return on investment. Let’s say you bought a $100,000 home. The market is appreciating at 5% and you’re earning $600/month in rent. You have some expenses, so when subtracted let’s say you’re earning an additional 5%. You’re earning a 10% return on your investment.
You do have some work to do such as leasing the property and maintenance. But if you owned stocks, you periodically buy more or sell some or analyze its performance. There is some work, but it’s still an investment.
Let’s take that same $100,000 home. You now only put 10% down and finance the rest. The market still only goes up 5%. But now you’re earning $5,000 on your $10,000 investment. That’s a 50% return. That doesn’t count that someone else is paying down the mortgage, plus the tax advantages of depreciation. That’s a great investment.
So now what? First, you now have a great investment without owning a job. Second, sit back and let that property appreciate for a few years. Let’s say five years. That property is now worth $128,000. Refinance the property and pull out $13,000. Take that money and buy another like kind property (now worth about $130,000). You now get a leveraged return on two properties. Wait another five years and do it again and you’d have four and again in five and you’d have eight. So in 15 years you’d own eight properties.
Don’t do anything else but manage those properties. Over the next ten years let the tenants pay down (and possibly pay off if you don’t keep any positive cash flow) the mortgages. When it comes time to retire or do something else, you now have well over $1,000,000 in net equity. Even more if the market is providing a higher rate of return.
No, there’s nothing too much sexy about it. It’s a slow and steady approach. But if you talk with most people who accumulated their wealth in real estate, that’s how they did it. It could be homes, or offices or apartments, but the principle is the same; buy and hold.
To learn more or to get started, you can find me at http://roseusa.com
Buy and hold. It’s just as it sounds, you buy a piece of real estate and you hold it for an extended period of time. But how can you make more with buying and holding than you can as a “flipper?” Let’s first look at a term that’s thrown around quite a bit when referring to real estate: investor.
An investment is typically something passive. You buy it, whatever it is. It could be stocks, bonds, coins, whatever. You then hold onto it and allow it to appreciate. Fixing and flipping is more like a job. Yes you’re self employed, but it’s still a job. You have to be actively involved day to day. Just like a day-trader isn’t so much an investor as he/she is, well, a day-trader.
So, back to buy and hold. Why is this so powerful? Let’s look at the most common investment people make, single family homes. As an investor, you buy a house, you typically take out a mortgage on the house and you rent it to someone else. This mortgage, or leverage is what really amplifies your return on investment. Let’s say you bought a $100,000 home. The market is appreciating at 5% and you’re earning $600/month in rent. You have some expenses, so when subtracted let’s say you’re earning an additional 5%. You’re earning a 10% return on your investment.
You do have some work to do such as leasing the property and maintenance. But if you owned stocks, you periodically buy more or sell some or analyze its performance. There is some work, but it’s still an investment.
Let’s take that same $100,000 home. You now only put 10% down and finance the rest. The market still only goes up 5%. But now you’re earning $5,000 on your $10,000 investment. That’s a 50% return. That doesn’t count that someone else is paying down the mortgage, plus the tax advantages of depreciation. That’s a great investment.
So now what? First, you now have a great investment without owning a job. Second, sit back and let that property appreciate for a few years. Let’s say five years. That property is now worth $128,000. Refinance the property and pull out $13,000. Take that money and buy another like kind property (now worth about $130,000). You now get a leveraged return on two properties. Wait another five years and do it again and you’d have four and again in five and you’d have eight. So in 15 years you’d own eight properties.
Don’t do anything else but manage those properties. Over the next ten years let the tenants pay down (and possibly pay off if you don’t keep any positive cash flow) the mortgages. When it comes time to retire or do something else, you now have well over $1,000,000 in net equity. Even more if the market is providing a higher rate of return.
No, there’s nothing too much sexy about it. It’s a slow and steady approach. But if you talk with most people who accumulated their wealth in real estate, that’s how they did it. It could be homes, or offices or apartments, but the principle is the same; buy and hold.
To learn more or to get started, you can find me at http://roseusa.com
Thursday, April 5, 2007
Flip That House
You’ve seen it on TV thousands of times. Flip this house. Flip that house and so on. It’s been all over television for the past few years. At the same time you’ve been getting postcards in the mail and seen advertisements in the newspaper to attend the seminars that will teach you how to do it. You’ve probably been to at least one of those seminars as I think half the country has.
They sure do make it sound easy don’t they. And it sure does look easy on TV. Most of the time anyway. They buy a home for pennies on the dollar. Call up a bunch of guys and a few weeks later you’ve got a brand new home worth a hundred thousand dollars more than you paid for it. Take out the fifty thousand it cost you for the work and after having one open house you’ve sold it and put fifty thousand dollars in your pocket.
Then of course there’s the couple’s, usually husband and wife who do all the work themselves. They budget twenty thousand dollars for the materials and about 3 months for the week and it ends up costing them forty thousand and taking six months. Interesting enough, they still “profit” sixty thousand. Of course, it’s never revealed whether that profit takes into account the six months of mortgage payments and the sales transaction costs. I expect their profit is closer to thirty thousand.
Still not bad right? What there not showing you is the dozens of others who were followed around by cameras and who ended up losing their shorts, or if they were lucky, got to work for free for six months and break even. What is also not shown on the programs and in the seminars is that most of the markets where the flips were successful the markets were appreciating at double digit paces, so no matter how bad your numbers, you were still destined to make a profit.
What’s not reported is that those who make a reasonable profit at the fix and flip game are very few. And, there are only certain markets that will allow for it. For instance, the opportunities in Charlotte, NC are much different than those in Colorado Springs. Those markets not in double digit appreciation have a much more difficult time profiting from flipping.
There are a number of factors you must account for when analyzing a property to flip. When looking at a property (and most likely you’re looking at a single family home) you need to start by determining what you can sell the home for when all the work is done. Take that number and subtract how much it will cost you to do the work materials and labor, even if you’re doing the work yourself. Remember, always pay yourself for whichever role you’re in. You’ll be wearing many different hats and your time is valuable and you must be paid for everything.
Then subtract your financing and carrying costs. Everything from what it cost to take out a loan to the mortgage payments you’ll make to utilities and taxes. Then subtract your sales costs. Everything from commissions to marketing expenses to title insurance. Subtract a variance of about ten percent because you’re numbers are not always precise and this is the maximum amount you can afford to pay for the property.
This is where most people fail. They either start from the bottom and work their way up. Meaning. They just pay full price for the home, add on their expenses and put the property on the market for “what they need.” This is a formula ripe for failure. And this is why we see so many of these homes still on the market. If a home isn’t priced according to market, it just won’t sell.
The point of all this is. If you’re considering jumping on the fix-n-flip bandwagon, do so with caution. Make sure you’ve included all the numbers. Pay yourself as an investor and as labor. And, solicit the advise of a real estate professional. The few thousand dollars it may cost for their help is like insurance against losing tens of thousands of dollars. If not more.
Until next time, you can find me at http://roseusa.com
They sure do make it sound easy don’t they. And it sure does look easy on TV. Most of the time anyway. They buy a home for pennies on the dollar. Call up a bunch of guys and a few weeks later you’ve got a brand new home worth a hundred thousand dollars more than you paid for it. Take out the fifty thousand it cost you for the work and after having one open house you’ve sold it and put fifty thousand dollars in your pocket.
Then of course there’s the couple’s, usually husband and wife who do all the work themselves. They budget twenty thousand dollars for the materials and about 3 months for the week and it ends up costing them forty thousand and taking six months. Interesting enough, they still “profit” sixty thousand. Of course, it’s never revealed whether that profit takes into account the six months of mortgage payments and the sales transaction costs. I expect their profit is closer to thirty thousand.
Still not bad right? What there not showing you is the dozens of others who were followed around by cameras and who ended up losing their shorts, or if they were lucky, got to work for free for six months and break even. What is also not shown on the programs and in the seminars is that most of the markets where the flips were successful the markets were appreciating at double digit paces, so no matter how bad your numbers, you were still destined to make a profit.
What’s not reported is that those who make a reasonable profit at the fix and flip game are very few. And, there are only certain markets that will allow for it. For instance, the opportunities in Charlotte, NC are much different than those in Colorado Springs. Those markets not in double digit appreciation have a much more difficult time profiting from flipping.
There are a number of factors you must account for when analyzing a property to flip. When looking at a property (and most likely you’re looking at a single family home) you need to start by determining what you can sell the home for when all the work is done. Take that number and subtract how much it will cost you to do the work materials and labor, even if you’re doing the work yourself. Remember, always pay yourself for whichever role you’re in. You’ll be wearing many different hats and your time is valuable and you must be paid for everything.
Then subtract your financing and carrying costs. Everything from what it cost to take out a loan to the mortgage payments you’ll make to utilities and taxes. Then subtract your sales costs. Everything from commissions to marketing expenses to title insurance. Subtract a variance of about ten percent because you’re numbers are not always precise and this is the maximum amount you can afford to pay for the property.
This is where most people fail. They either start from the bottom and work their way up. Meaning. They just pay full price for the home, add on their expenses and put the property on the market for “what they need.” This is a formula ripe for failure. And this is why we see so many of these homes still on the market. If a home isn’t priced according to market, it just won’t sell.
The point of all this is. If you’re considering jumping on the fix-n-flip bandwagon, do so with caution. Make sure you’ve included all the numbers. Pay yourself as an investor and as labor. And, solicit the advise of a real estate professional. The few thousand dollars it may cost for their help is like insurance against losing tens of thousands of dollars. If not more.
Until next time, you can find me at http://roseusa.com
Tuesday, April 3, 2007
Everyone is talking. Is anyone listening?
In no other time in history have we as individuals had the power to quickly, easily and for little or no cost reach millions of other people. With a few keystrokes or mouse clicks we can share with the world our thoughts, opinions, dreams and complaints. We can express ourselves artistically and experiment with our creativity.
This ability is fantastic. I myself have taken advantage of these opportunities and continually write articles such as this one or create video logs to express my thoughts, opinions and expert knowledge. Now don’t get me wrong. My efforts are not purely for a creative outlet. I have something to sell. Not a product, but services. If enough people find my articles interesting and informative then maybe they’ll think of me the next time they need help in my areas of expertise.
I find that a great deal of people are doing just as I am; sharing their thoughts, ideas and expertise with the intent of letting others know more about themselves and ultimately about their professional services. With all this sharing going on, I question sometimes if others are getting the messages.
In other words, is anyone listening? Those of us who are blogging and vlogging can spend a great amount of time doing so. With the time it takes to put out a quality product (I do consider our work products) does anyone one have much time left over to read or watch other people’s work?
Not as much as we’d like, but hopefully enough that we achieve the desired result. If you’re not doing so already, do set aside some time just to read and view what others are doing. Appreciate the time and effort they put into it. I’m sure you’ll come away with something valuable. If not knowledge, I’m sure you’ll be entertained.
Until next time, you can find me at http://roseusa.com
Tony Rose
This ability is fantastic. I myself have taken advantage of these opportunities and continually write articles such as this one or create video logs to express my thoughts, opinions and expert knowledge. Now don’t get me wrong. My efforts are not purely for a creative outlet. I have something to sell. Not a product, but services. If enough people find my articles interesting and informative then maybe they’ll think of me the next time they need help in my areas of expertise.
I find that a great deal of people are doing just as I am; sharing their thoughts, ideas and expertise with the intent of letting others know more about themselves and ultimately about their professional services. With all this sharing going on, I question sometimes if others are getting the messages.
In other words, is anyone listening? Those of us who are blogging and vlogging can spend a great amount of time doing so. With the time it takes to put out a quality product (I do consider our work products) does anyone one have much time left over to read or watch other people’s work?
Not as much as we’d like, but hopefully enough that we achieve the desired result. If you’re not doing so already, do set aside some time just to read and view what others are doing. Appreciate the time and effort they put into it. I’m sure you’ll come away with something valuable. If not knowledge, I’m sure you’ll be entertained.
Until next time, you can find me at http://roseusa.com
Tony Rose
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