Wednesday, May 30, 2007

Partnership: This time of year

as the summer fair season starts is when our partnership gets a real workout. Each of us is very strong individually. We make quick decisions and usually solve problems before they happen. But together, on the same job, well, sometimes we just clash. I, for one, am fairly compulsive about organization and keeping things straight. She is incredibly imaginative and sales oriented. I try to use my skills to put everything in the right place so I don't have to repeat myself. She really focuses on the end product. I delegate with the expectation that my idea will be realized. She will do everything herself if she has to, sometimes even if she doesn't. In the early years, this difference in personalities led us to some very loud and explosive interactions which we are lucky we survived.

Nowadays, we have learned to use our capabilities to work together. Each of us has a part. For example, I take the computer and the paperwork, she takes the menu and the presentation. I set up and close down. She works with the staff to develop our sales through care of the customer first. I do all the tasks I can that take only one person. She smoozes the fair execs, trains and schedules the workers, and maintains the production lines. I bring in the supplies, organize the jobs to be done and the check list that makes sure they get done on time. She finds new ways and new products to increase our company's bottom line. If you had to characterize us; I am a loner, she is the people person. But between us we have been able to come up with several creative ways to make a partnership like ours work.

Tomorrow, I'll tell you how.

Monday, May 28, 2007

Ready to Rent, pt. 2

Yesterday I posted about how much we have learned about the rental market through this experience. After I wrote I went for a long bike ride, and as often happens, my mind didn't stop thinking about it just because I written out some thoughts. So here are a couple more observations we had about this. First, just like with solving problems with computers, two minds are better than one. It occurred to me while I was riding up a very long hill as the sun stroked my back and the sweat began to drip, that since the number of renters was going to increase as more and more foreclosures came on the market, this would be the ideal time to buy more rentals. The first thing my partner T said to me after she kissed me hello when she returned from work was "You know, I was thinking about how fast this unit rented and it seems to me . . ." Second, people who have been paying a monthly mortgage of two or three thousand are not going to blink at a rent of one thousand to stay in the same area. Especially, if we continue with our plan to upgrade our current unit. What I really like about this idea is that we have already budgeted the money for the improvements and we have chosen to really improve the quality of the unit. Tile replacing linoleum, new and stylish bathroom mirrors and cabinets, resurfaced sinks and tubs, added storage and landscaping, and replaced and painted fascia, all improvements that will outlive the current renter and give us future options for improvements now that these are done.

Sunday, May 27, 2007

I look at the newspaper . . .

I am an inveterate clip filer. I can't help it. I have newspaper clippings that go back 35 years. There is something about a well written news story, be it just the 5 W's written like it used to be, or today's more "I" oriented perspective. I savor the information that is brought to my eye by my own choice. I usually read a paper from front to back, keeping track of the stories and reading them as I go. It's my version of multi-tasking. What happens though is that over time I end up with a stack of newspaper sections, and sometime magazines, that I have read and bookmarked in my mind but haven't clipped yet.

So here comes my first post on "Print Clips". And as they say on Dancing With the Stars, in no particular order:

The Fed plans new rules for credit card firms says the headline of this article in the Business section of the May 24th LA Times. The Federal Reserve has proposed several new rules affecting credit card disclosures to customers: A 45 day notice rather than the current 15 on interest changes, Key terms must be printed in bold, bar the term "fixed rate" unless the rate is guaranteed and disclosed, Require new charts on monthly statements that explain the interest charges and fees, Require the creditor to Highlight the amount of time it would take to pay off the balance if only minimum payments were made, and Require creditors to disclose the effect of their payment allocation practices on interest rates. If ever a personal finance issue was important this is it. Contact or write Sen. Carl Levin the author of the bill, Stop Unfair Practices in Credit Cards if you have any thoughts on this talking point.

The 6 New Rules of the Rich is the title of this article I found in my financial engineer's office the other week. It comes from an issue of Men's Health for March 2007 by Oliver Broudy. Rule #One: Your brain wants you to remain poor. Apparently, our genetic makeup, that one we acquired in those cave living days, has taught us to value the present much more than the future. That's one reason why it's so hard to save. The trick to this rule, use it to override the impulse by giving yourself present day rewards for continuing to save. Rule #Two: Dealing with things one at a time can cost you money. The idea here is that without the comparitive value of the overall cost of something we tend to spend first and think later. Maybe that's another reason why index funds are so worthwile. Rule #3: Cutting and running can make you rich, in other words, though we don't like to admit it, sometimes taking the loss and moving on is the right choice. The thing about saving or investing with an automatic deduction from the paycheck is that when we get the paycheck our mind sees the result as a loss which we apparently all have an aversion to. Rule #4: You'll make a smarter decision about tomorrow if you do it today. I love this term. Hyperbolic Discounting. It's another way of talking about the art of procrastination. The credit card companies love it too. Rule #5: Your older self should always get a cut. This one is neat because it reminds me of Robert Kiyosaki's, "pay yourself first" dictum. Rule #6: You'll save more if you spend more (intelligently). You'd think this would go without saying but think about your own spending habits and you may see exactly where this one is going.

Well, that's it for today folks.

Saturday, May 26, 2007

Rent or Sell, pt. 2

Well, today the whole discussion became moot. We rented. Now all we have to do is think through what we learned in the process. First, the rental market has changed significantly in this last year. This same unit went unrented for five months in 2005/6. We eventually had to lower our asking price by $50 and even then it was only a coincidence that I was at the unit when an agent was showing one next door and I got an opportunity to show her client our unit. We had even gone so far as to stage the place like realtors sometimes do to sell their houses. Anyway, things have definitely changed. The unit was listed at in the mid of May, and we just put a sign up last Tuesday. Saturday, we got our first call, and while I was there interviewing the new renter, two more couples came by to take applications. When I got home I had another call on the unit, and an email from someone else. The second thing we learned was that by hooking up with the local realtor and contractor we were able to find out much more about the community and the rental needs of our prospective clients. The contractor, for instance, was also an investor with rentals and he told us that in his experience when foreclosures go up so do the amount of renters. Meanwhile, the landscaper we used to remove a tree and some shrubbery added this observation from his years of servicing rental properties. "Making it pretty may rent it but don't expect the renter to keep it that way. They're only renting." This was especially timely since my partner tends to treat every project as though she were going to live there herself. The third thing we learned is just how more extensive the internet information has become. We were able to find a local realtor, check out the local contractor and compare his bid, and then find out in depth what we should actually expect once we hired him. Overall it just seemed as though the whole experience became one serendipitous event.

Thursday, May 24, 2007

Ready to Rent

Recently, I posted that we were getting ready to rent one of our properties in Hemet. It's a half duplex that is part of 55+ community and we've owned it for three years. Before this last renter we did some extensive remodeling. New carpets, added cabinets to the kitchen, repainted the interiors, replaced the faucets in the kitchen and bathroom, removed the popcorn from the ceilings, and replaced the shower door with a rod and curtain. This cost about $4,000 and when we were looking at the idea of to rent or sell this along with the other factors of the current real estate market did play a part in our decision to keep the property and get it ready to rent again.

Of course, the first thing to do once you've made this decision is to find a contractor to do the work. We decided against using the previous contractor when we discovered that he'd used substandard paint (it washed off) on the kitchen cabinets. We had three options. Use the local yellow pages and interview/get bids for the work we wanted to do, ask a local realtor for a reference, or go with the recommendation of our landscaper to use his brother.

Well, the local yellow pages, hmmm. Lets not start there. The realtor however hooks us up immediately with his contractor, a man who's worked in the area for 8 years and done a lot of work for the realtor. So when were done describing the various things we'd like to do to increase the rentability of the property. His bid is $6700. Oh yeah, did I mention that we were looking to find some tax write-off benefits from this? But still, that seems a bit high for replacing the fascia around the front of the house, repainting the front door and replacing its handles/locks/hinges, for tiling the dining area and bathroom, for resurfacing the kitchen sink and bathtub, for sanding and repainting the kitchen cabinets, for replacing the bathroom mirror and medicine cabinet, and for putting in a handicap ramp for the front entrance. At least he's bonded.

Meanwhile, the landscaper's brother turns out to be part of a crew that does all sorts of remodeling tasks. One does resurfacing, another flooring, a third specializes in painting. But I'm pretty sure none of them are bonded or licensed. The landscaper has already done his job and his fees seemed quite reasonable and the work was done efficiently and well.

Right now I'm thinking back to my meeting with both. The contractor met with us, took down the info, and the next day gave us bid but no breakdown. We had meanwhile gone to Lowe's and Home Depot to cost out the parts which came to about $2500, leaving $4000 of his bid for labor. The landscaper has not been asked to bid but while we were talking with him about the work we wanted done, he pointed out that his experience with renters and rentals (over a fifteen year period) made him aware of how little the renters really cared about these places. He cautioned us to keep that in mind so that we didn't go overboard spending on cosmetic repairs. He seems honest.

Where does that leave us? We need to do more research that's for sure.

Tuesday, May 22, 2007

What Would You Do for Money?

I once worked at a job that paid $.35 an hour. I quit it to go to work for $.75 at another job across town. We ate a lot of potatoes in those days but then we were young and in love and willing to sacrifice in order to go to college. But remembering makes me think about my employers in those days. The one who owned the first business took special pains to tell me that he had a friend who lived across the way who watched us work so "we'd better not pocket anything that wasn't ours or we'd be sent packing." This small business owner drove a new car and lived outside of town in an upscale neighborhood. The job I moved to was at a pizza restaurant run by a man from St. Louis who hired his brother and all of his fraternity friends to work out front, while he staffed his kitchen with students hired from the athletic program. He drove a cadillac. $.75 seemed like quite a bit when I'd been working for $.35 for months. The thing is that both of those businesses were landslide successes. The owner's were raking in the bucks and living off the fact that in a town of 10,000 student bodies we workers were imminently replaceable parts. I found this out when I started my second year at the Pizza Cellar by asking my boss for a $.25 raise. My next job was with the City of Norman landscaping department. I was now making $1.00 an hour to mow lawns, weed flower beds and drive very slowly at the end of the day so that we didn't have to start anything new before we clocked out. What did I learn from this experience? Well, nothing immediately. As I said, I was young. But as I look back on these and other similar employment experiences I can see that I did in fact learn what I would do for money. I, also, formed an opinion about what other people would do for their money. I was reminded of this while I was watching a TV show the other night and a car commercial came on that featured a poet reading his work, Hope Springs . . ., and being interrupted by a white VW and its driver yelling out its window about how valuable to the world this new car would be. The thing is that I recognized the poet from Russell Simmons's Def Poets show. And I thought, there's something that someone would do for money. Sell their art. Or rather an ad agency will buy the rights to some one's art (Bob Dylan, the Rolling Stones, et al) so that they can use it to make money for their clients most often by contorting the meaning of the original beyond irony. I wonder if they even realize how much it hurts to hear the songs and poems that inspired us to greatness used to sell the very things that the songs and poets supposedly opposed. Even as I write this, the internet community is trying on its own version of this dilemma as it attempts to figure out its response to the recent news that YouTube film makers are being paid by advertisers to imbed products in their works.

What would you do for money becomes what should you do for the money? It is a really hard line to define. Would you hire on as a mercenary or enlist? Would you invest or divest in Darfur? Are affiliate/associate/blog articles about making money or about selling something you believe in?

What does this all have to do with Personal Finance? At what point does the salesman lose his/her soul? I think its at the heart of the matter.

Sunday, May 13, 2007

To rent or Sell

that is the question? Whether it be wise to lose the cash flow or wait out the down turn, these are some options. On the rent side, we are up against an over supply of competition in the same price range. The neighborhood has taken on a slightly untended look. And there are already 8 places for rent within a couple of blocks. Doesn't look good. But we are willing to upgrade the ammenities, and polish the curb appeal for the renter that fits our model. Another plus is that we aren't feeling any pressure from this because we have a backup account for up to six months without a renter.

On the sale side, the market for these units could continue to slide especially since there are newer options built and being built for the buyer that may or not be now willing to buy. We will still have to prep the unit for a sale. At least, externally. T. really thinks we should try a Lease Option sale. She likes the idea of holding a note that is secured by the property and that increases the cash flow, too. I, on the other hand, worry about all the details that doing something different entails. Ah well.

Saturday, May 12, 2007

Putting the real in Real Estate

T. and I own a rental property up in Hemet that recently came back on the market. Hemet is an interesting part of the real estate market in Southern California because it's part of what we used to think of as a desert but for commercial reasons it gradually came to be known as "The Inland Empire"

The Hemet-San Jacinto Valley is a medium sized community with a little over 100,000 residents in the entire valley. Most are either retired or commute. We are tucked in the far corner of the area known as the Inland Empire. From the closest points, we are 10 miles from the 215 Freeway to the West and 10 Miles to
the 10 Freeway to the North. Since the valley extends about 10 or 12 miles, many of us are 20 plus miles to a freeway. To the south, beyond a large reservoir known as Diamond Valley Lake is the French Valley, which is unincorporated area of nothing but new homes for about 5 or 6 miles before you reach the border of Temecula & Murrieta. These are much larger, newer and more expensive communities than Hemet. Therefore, our housing is much more affordable. Where our average price home is still around $350,000 the homes in Temecula and
Murrieta hover around $500,000. Further south is San Diego County, where million dollar homes are more an more common San Diego buyers who can't afford that market are shuffled off to Temecula and then the Temecula shoppers who can't afford that market are shuffled off to Hemet.

I picked this up from a local realtor/blogger that I didn't even know existed before I started this post. Yesterday, as we were riding around Hemet, visiting Lowe's, eating lunch, and looking at our property, I realized that something had definitely changed in the three years since we bought. There are now more than twice the amount of homes and apartments for rent. Each housing community, there are pockets of them all over the valley, is now studded with for sale signs. At least, 25% of which are of bank-owned properties, and the remaining 75% have been reduced since first offered.

In the little 55+ community we bought into, there are at least 50 of the 1,000 units that are for sale and another 50 that are for rent. When we bought in, T. wanted two things, cash flow and a chance to help others in a low rent area. We bought low, $1o4K, and put down $30K and kept the mortgage low by doing a 3/1 arm at 4.25%. But now, as we just finished a refi to a 6% 30 yr., the property has gone for rent for the second time since we took possession. And so, now we get to decide, spend $4K to increase its curb appeal or sell and put our money elsewhere?

Friday, May 11, 2007

The fair season starts . . .

Today, our summer fair season starts. We'll drive up to OC and meet with the fair manager to sign the contracts. We've been in the concession business now for 14 years. When we started out it was just us. Me and T. Eighteen hour days, sore bodies, doing it all. We can really say we built it piece by piece. At first, it was just work. Work hard and we will make some extra money. We rented one of the family's stands. Sold organic fruits and vegetables from the stand and from tables arranged in front so the people could walk through and pick what they wanted. We were a little farmer's market and a total alternative to the usual deep fried atmosphere. Then the second year, we commissioned T's brother to build a stand that represented the ideas we wanted to sell. An old fashioned store with a porch from which the customers could see an array of our mixed fruit bowls.

Thursday, May 10, 2007


I subscribed to feedburner today but am still in the process of setting it up.

Wednesday, May 9, 2007

Wow! Things are moving fast now

Paper or plastic has become recycle heaven as more and more news sources have jumped on the band wagon. But who cares as long as it's happening. And thanks to the Frugal Momma, I found another source that seems even better than the unresponsive folks at earthwise. The price is better and the service quicker at which I found when I followed the google link from the momma.

Monday, May 7, 2007

More Deep Economy

I haven't read McKibben's first book, The End of Nature, but it is clear that whatever thoughts he brought to the state of our world then have only intensified now. But I really liked the balance that he provided in his analysis of the issues. I had to envy the travelling he did, too. I think of China and the city streets used to be crowded with bicycles not SUVs. But as he points out, countries that have used our model of endlessly expanding economy and increased efficiency are not at fault for doing so. It's just that we haven't yet, and I point to the personal financial bloggers when I think of this, shown them what to do next with all their abundance. We have a chance to model through our own efforts at controlling and understanding our personal finances to be a part of the change that may still save "the cheerleader, Save the world."

Saturday, May 5, 2007

The Bees and Their Business . . .

If it seems to you that Bill McKibben’s new book, Deep Economy, strikes at the heart of personal finance concerns that’s because it does. Laying it out in depth, that’s the deep part, McKibben’s covers the world from his Vermont home to China and back as he develops his answer to the age old question of “paper or plastic”? And though he doesn’t mention that the honey bees are dying, he would no doubt notice the parallel between these small nectar farming bees and their human counterparts who as a result of the so called “Green Revolution” are also disappearing. In a beginning section of the book, he discusses After Growth and asks what next? Where do we go after we’ve reached a place where we have every thing we need and more? Is More Better? McKibben is asking this question of individuals but in a larger sense he’s directing it towards society and those whose power position would enable them to act on the information. As he points out, ecological economists are discovering that the there is real truth to the saying “Less is More”. In the next section, The Year of Eating Locally, he spends quite a while documenting the experience of living frugally while learning the personal financial benefits. By living locally, he is able to feel the effect of getting to know his community markets and the local farm industry. By setting a goal of eating locally for a year, he and his family begin to appreciate the value of home cooked meals made from their own garden. They spend time reading with each other. They even budget their car use so that they stack tasks that can be done on the same trip. In a sense, he travels back in time to when things were simpler. This, quite naturally, leads him to look at the question of how we have changed and why we changed in the next section titled All for One, or One for All. “For most of human history, the two birds More and Better roosted on the same branch . . .” he says. “The idea that individuals, pursuing their own individual interests in a market society make one another richer and the idea that increasing efficiency, usually by increasing scale, is the key to increasing wealth has indisputably produced More. But Better does not necessarily follow." We can’t deny it, as a people, the US leads the world in over-consumption and it’s getting worse. For a variety of reasons, he points to our hyper-individualists as they try to emulate Trump through endless, it seems, seminar after seminar. But I must stress, as McKibben does also, that there are two sides to the economic coin. Nation after nation have profited immensely by turning to the green revolution mentioned above by using mono-crop agriculture and government subsidized growth to climb out of poverty. As more and more people are released from the drudgery of the land and released to develop, they can’t be faulted just because we, the richer nations, are already there. But it is just because of this truth that he talks about The Wealth of Communities in the book’s next section. What can we bring to each other and how can we trust that we are doing it for the right reasons? “We need to once again depend on those around us for something real. If we do, then the bonds that make for human satisfaction, as opposed to endless growth, will begin to emerge.” Much as the internet has created communities of bloggers. Communities where we reassure ourselves that acts of planning and sharing and saving and making do with what you have already are of continuing value to us all. He uses as an example of this the current state of radio where large corporate entities like Clear Channel, et al, have taken over. And then, ask yourself, in your life time has More big corporate owned broadcasting made your radio listening Better? As I walk down the hill to my local grocery, I am reading the final section of the book entitled “The Durable Future”. (This is how I keep up with the reading machine called Trent at thesimpledollar) McKibben starts it off by describing his visit to the Chinese city of Yiwu with its incredible warehouse store called the International Trade City. Picture five IKEAs side by side by side by side by side and you’ll still fall short. Yes, the Chinese economy, in a wonderful mirror model of the US is expanding and expanding in leaps and of course bounds. The per capita income is already up to $1700 a year and expected to double every seven years, ad infinitum, as is their manufacturing production. Extrapolate that to the number of vehicles on their roads. Think about the carbon footprint that will leave. Pogo used to say “We have met the enemy and he is us.” The question as we look into the mirror of personal finance is “Are we a reflection of our culture and its spending habits or is it the collective effect of ours?” In the store, I find the vitamin water I wanted and a bunch of carrots from an organic grower just outside of town and then as I’m approaching the counter I see the display of 10 for $10 durable grocery bags that I can buy to help carry my groceries home. I’m all happy because here in a nutshell is one of McKibben’s economic ideas. Think global, buy local. But then I get home and because I’ve been researching the idea of making a reusable cloth bag for our farmer’s market, I look at the label in the bag. It’s from a company called earthwise reusable bags and it’s durable alright, made from 100% non woven polypropylene, and manufactured in China.

Thursday, May 3, 2007

Hemet and the road

I had to go up the freeway to Hemet today and took the opportunity to learn more about the use of the cruise control. On the way up, I discovered for the first time in recent memory that people weren't passing me even though I was cruising at 61 mph. And on the way back, I saw the weirdest thing. The traffic in the second lane from the right suddenly slowed way down. It was a pickup truck travelling at 55, the driver all leaning back and taking it easy. After I passed him, I looked back in my rear view and saw three other vehicles pull in behind him and start drafting. Wow, this peak oil thing is making life quite a trip.