Beginning Investing

7 hard earned lessons to use

There are all sorts of people who want to give you investment advice, aka sell you something. Why? So they can earn a commission or profit from you investing with them.

Experienced in life and a former business owner/appraiser. Have nothing to sell you and not giving hot stock tips. Frankly happy to be a full time employee now, but would like to start a second business.

Do Not consider myself a great investor, definitely am Not a day trader and my predictions are average. Have learned from hard knocks.

These are good advice and rules I have learned over the years:

1) Spend Much Less than You Make

Wealthy people often lived for free or on 10% of earnings to save enough to start a business. They did this for years to get started. The wealthiest people I know often drive old cars and wear clothes too long. They only owe on their business assets, and their home may even be paid off.

2) Have a Rainy Day Fund

You don’t know when you or family will be ill, have a major repair to your home or car, be laid off, fired or the business shuts down. Have paid 6 months of bills from savings to get through. Have enough for 1 year’s worth of bills outside my retirement accounts.

3) Start Investing Small

Put money in the company 401K, especially if offered matching funds. I started at 8% on my current job and increased the percentage with every raise. If had more income would save more.

Second don’t buy one investment with all your money. Only invest some on each idea. Often start with a third and see if it is working.

4) Learn Value before You Buy

My best investment has been my house. Being a real estate professional identified good neighborhoods first, then found houses to look at. Originally wanted a 2 - 4 family house to live in, but prices were much higher than the cash flow justified.  Was cheaper to buy a single family house.

Bought at the bottom of the real estate market when few would consider buying, and bought a working short sale 10% under market value. Yes it took 6 months to close. But bought for 2/3 of original owner’s price.

My house is worth 60% more 4 years later.

5) Diversify Investments

Have good savings in cash at bank. Much more in 401K, and equity in my home. Have paid off 30% of the mortgage in 4 years. Goal is to pay off mortgage before retirement.

Am not adverse to holding cash. Especially when stocks, bonds and real estate seem over priced. Can be patient until a new opportunity shows up.

Cash is a safe refuge when the market is going down for an extended period. There will always be recessions in normal economies.

Am willing to sell and sit out the drop until the market starts rising again. Just don’t stay out forever. Look for the opportunity to get back in.

6) Do Not Pile in Late to a Trend

There have been good ideas I have missed. However did not compound the problem by buying at a high prices hoping some fool comes along to pay more. Would wait for a pullback and buy at a better price. Or would just wait for the next opportunity.

The secret to successful investing is buying at the right price. Not necessarily when everyone else thinks it is a good idea.

Beware the phases “This time it is different” (it is not) and “_____ always goes up” (no, they drop too). One investment made by my advisor is a non-dividend stock that is actually losing money. The commodity is way under trend and the company is doing a good job improving productivity. The market is too busy overpaying for dividend stocks to see the value. My advisor wants to be positioned for the future recovery and is looking for the opposite of the late trend.

7) Educate Yourself

Best investment is good books and classes. Pay to take classes out of my pocket to further my career and knowledge. Does not have to be for a degree either.

Find people or groups who invest in what you are interested in. You can learn a lot from like minded people.

These tips are not all you need to know. In fact am still learning, and hope you can teach me something too. However they will make the rough seas of investing smoother if you are humble enough to apply them.

Happy 2009!

Everyone is finally over 2008, but the economy is still a concern for most of us. Lets face it, few investors made money last year, and most of us took a substantial loss. At least my 401K has been crunched :( Thank God I am 50% cash right now, and the rest is losing money in stocks. However I focus on long term investments and good companies, so I will survive and recover.

However my predictions for 2009 are not as pessimistic as most of what you read in the media. Most of the worst effects of the recession already occurred in 2008. No one knows what will really happen, but I will make a few economic predictions like I did last year with oil prices. Warning your mileage may vary as I am limited in experience and make lots of mistakes. But it is good to present views for you to think about and analyze.

Recession: We are still going forward with the recession, and businesses are hanging on to money carefully since borrowing is so difficult. I do not expect the recession to grow into a worldwide depression. The news reports comparing us to a depression are vastly exaggerated. Most people have not experienced a serious recession since the early 1980's. We have lived through recessions before, and will survive.

Jobs: If you personally have a good job you may not feel the recession. People who are job hunting or looking for a better position will have to take more time to find a great job, and may have to take a step backward right now. It is just a delay for the good times to come. My prediction is job loses will peak early in 2009, and by the end of the year jobs will start recovering. So if you are job hunting keep persisting.

Stock Market: I suspect we are getting closer to the market bottom. I suspect we are within six months of the bottom. It may take a year, but I am looking for evidence it is time to fully invest again.

Housing: I see no bottom to the real estate market until around 2010. The over supply of home will have to be worked off the market. I expect prices to fall another 5% - 15% in 2009.

Oil prices: This was my best prediction of 2008. On January 17, 2008 I predicted oil prices would peak and fall during 2008. I thought the bubble prices were way out of line at $105 per barrel, and thought oil would fall into the $60 - $80 per barrel by the end of the year and to $40 - $60 per barrel early in 2009. My prediction was based on the long term cost of alternatives to oil were in the $40 to $60 per barrel range. In spite of the gyrations of politics, wars and speculation, I expect prices to stay in the $40 to $60 per barrel range. We might see another over correction with prices falling into the $30's per barrel with the slow economy. There is an oversupply which will be corrected over the long term.

The best advice summary: The best thing you could do is maintain a very positive attitude. This one action will help no matter the crisis's you face, and will help you reach your goals. Heck you may even succeed with your resolutions. Spend some time every morning meditating on what is good in your life, and thank God for everything. Even the challenges and problems you face.

Have a great 2009! I will no matter what.
Steve

Secrets to Sell Real Estate Now

It is Memorial Day, and Now is the Prime Selling season for Homes. A friend of mine is flipping an investment house he bought and is fixing up. He needs to finish soon and sell before July. Do you need to sell your home, condo, single family, duplex, vacation home, forclosure, or investment real estate Now? I will disclose the secrets to a fast sale.

Most homes are sold after school is out and before September in most of the country. We will exclude the winter home markets where the fall is the big market like Florida and desert communities.

When you get promotions, new jobs or if your company moves you may have to sell quickly. My advice is based on my experience as a homeowner, an investor, a former agent, and as an appraiser. Have over twenty years experience. I sold my last house in 4 days on the market within $3,000 of my asking price, so I do know how to market a house.

The steps are simple: Price the house right for your market. Get professionals involved. Prepare for buyers. Develop a marketing plan. Deal fairly.

1 - First focus on being realistic. Every house is special, but every house has flaws, neighbors, and competition. To real estate professionals and investors, houses are a commodity and won't generate emotion like when selling your own house. Find out what houses are selling for in your neighborhood, NOT what other homes are listed for. List prices are wish lists. Then find out how long it took to sell the homes that sold. You need to know what is the sales trend for similar homes. Price it below the median to generate buyer traffic. Price it near or at the bottom to sell now!

The general trend in 2007 is prices are falling after the big boom of the last 6 years. Investors and speculators are selling, or only buying bargains. Buyers with borderline credit will not qualify for loans, so there are less buyers.

Why should you ask a low price? Because you don't have time for someone to fall in love with it. You need a buyer now. Agents will only bring buyers to houses priced fairly. Ask too much and no one will see your home. The ideal to get multiple offers so you can pick the best qualified buyer and get close to your price.

Special note to those who owe more than it is worth. Mortgage holders will work with you if you are selling below what you owe. Technically they can make you pay the whole amount, but they do not want to take the foreclosure. If you can sell it for them and get most of their debt they will be thrilled. Don't forget the second or third mortgage holders. They have the most to lose.

2 - You want to sell fast? Get every real estate agent in town to see your place. The odds of your listing agent having a buyer also is low. That is why they want other agents to bring their buyers. Hold agent open houses. Clean up, get out of the way, and they will run through your house in five minutes as they tour all the open house. If an agent wants to see your place quickly, let them in no matter how messy or inconvient. The agent just will run through quickly, ask a couple questions, and bring buyers. Have your agent invite agents for other companies!

Don't consider selling yourself if you are in a hurry. The odds of your advertising beating the Multiple Listing Services (MLS) is low. Great agents will maximize your sale price and do lots of paperwork for you.

Disclose any problems to your agent. They may help remedy them, and you will avoid a messy lawsuit or canceled sale. You can write down an allowance for new carpet or whatever necessary will be included in the sale.

3 -Buyers buy within the first 5 to 10 steps into your home. First impressions are the most important! Beware, lots of buyers will stay in their car unless your house appears ready.

So get the buyers into your house. Key is to have a neat front lawn, fresh paint or washed walls, and some colorful flowers by the front door. Potted plants are a good investment.

Next clean up the junk in your house. Especially the living room and any room you can see from the entrance. Start packing momento, family pictures, knick knacks, books and anything you won't need until you are in your new home. Especially throw away anything you can.

The next thing is how does your house smell? Go out for an errant, and check when you come in. The kitchen is the main culprit. Especially cooking with oil, garlic, onions, or strong spices. Next where do you keep shoes? I ate out, cooked outside on the grill, and still sprayed the house with Lysol or Oust every time I left for work or someone wanted to see my house. Don't forget to pack and remove clutter from the cabinets.

Next focus on the bathrooms and the master bedroom. You have made a good impression, don't destroy it. Pack, throw away, and pack some more. Storage is a good idea, and I found buyers will forgive your garage if it is filled with packed, taped moving boxes. They like the idea you are ready to leave.

4 - Market your house. Now is not the time to be private or discreet. Anyone can find out how much your house is list for or what it sold for. Before the internet, most homes are sold to friends of one of your 20 closest neighbors by them telling family or friends about a house for sale. Tell everyone you know and tell them the price.

Classified ads with prices get 5 to 10 times the response than ads without a price. I don't know why agents don't put the price on the for sale sign instead of making people stop for the flyer. So tell every neighbor a couple street each way with a flyer your house is for sale. Some agents will mail postcards for you.

Next I will remind you how important it is to be nice to agents. They are your friend no matter what a nuisance they seem to be. They bring buyers. Hold a second agent open house. Invite other agencies to visit.

5 - Deal fairly with everyone. People can tell if you are looking for an excuse to stiff the agent his commission, or trick a buyer. If you smell tricky, or desperate you will not do as well. It is best to be honest, disclose fairly, and be a good seller to do business with. Agents make their money by commission, and they will keep buyers away rather than deal with a foolish seller. Especially with so many other homes for sale. In this market your deal may fall through, so you want them motivated to deal with you.

Be reasonable. I was trying to sell another home in Connecticut when I changed jobs in Texas. My agent called me up with an offer below what I wanted. When he told me the price was $3,000 below my asking price, I responded "That is only a couple months mortgage payments", and we countered $1,000 higher to insure the deal went through. I saved money by being reasonable.

Good luck and get to work! Believe it or not this method will get you the most money as well as sell quicker.
Steve