Frugal Holiday Gift Ideas

December 9, 2007

The following ideas were sent out to a forum of which most of the authors and co-authors from my publishing company use to stay connected. Many of the ideas came from several of the Ask Amy columns that are published in the Los Angeles Times, so I take no credit for originality, nor do I want to be accused of plagiarism.

When I was young, many, many, many years ago, I would go crazy trying to find the "right" gift for family and friends. As an adult I have changed dramatically. As an adult I recognize people have different ideas about gifts. I hate, as in "HATE" object gifts, like a tie, sweater, souvenir, plate, vase, knick-knack, watch you name it. I only allow my family to give me a gift I can consume: Candy, soda, movie tickets, video rental coupons, restaurant gift card, etc.

If I can't consume it, I don't even accept it. I realize that is pretty bold, and can even be considered obnoxious, but my family and friends know what kind of gifts I would prefer. And, isn’t a gift about giving what the individual truly needs or wants. Some folks want diamonds; I want a gift certificate to the Cheesecake Factory. This year my children did well. My daughter created a scrapbook of pictures from her childhood to having her own children. My son gave me a calendar he made from the photos stored on Snapfish and the Kodak Gallery with his son. And one of the photos has all three of my grandsons together. That’s what I really wanted.

One time my partner found a unique antique toy truck, very similar to the real antique truck that I own. I have a 1945 Dodge pick up and it is not a “thing” in my life. It is a working truck I use to haul lumber, stoves, refrigerators, and etcetera for my apartment buildings. I looked at his “potential gift” and said how cute it was. And he could see by the look in my eye that I did not want to have it in my life. I have enough “things” in my life, regardless of how cute they are.

Now to the point of this rant; how to cut down on both the amount of gifts you have to buy, the expense involved, and providing people with what they really need or want. Here are some ideas to make the holiday season easier and profitable on everyone, except perhaps retailers. I and/or my family have done many of the items on the following list.

1. (From Debbie Moore, Denver, CO) - This is what Gordy and I do for each other. We each have an envelop with our names on the envelop. Throughout the year as we see things that we would like we tear them out of the catalog or write them down on a piece of paper and put them in the envelop. Then when holidays or birthdays come we go to each other’s envelope and choose the gifts from among the ideas in the others envelop. It works really great! We are always surprised with the gifts we receive and they are always something that we want because we put them in our envelope. Only one rule to this little game; once you have put something in your envelope you can never look through your envelope. This was you are always surprised at holiday and birthday time. It really is a lot of fun and we always get gifts that we want!

2. Charity White Elephant - Large group activity: Each person brings a small wrapped inexpensive or white elephant gift to a potluck get-together. The gifts remain unopened, they are auctioned off starting at $1 and one or more charities receive the money raised. 15-20 people could raise $500 or more. Usually the more beautifully wrapped gifts fetch the most money, but could have the tackiest items.

3. Musical Gifts: Each adult buys a set number of gifts from 1-5 that cost no more than $5 each. At the get-together the adults play a game of "musical gifts." We person holds a present and the music plays. When the music stops you open the gift that is in your hands. This is a fun way to buy presents and avoid the stress of getting the "right" thing for the "right" person.
4. School Project Donations: DonorsChoose.org is a website that allows you to donate any amount of money to fund a specific classroom project, either part or the entire project. An athlete can donate to a sports uniform, a book lover can donate to a classroom set of Shakespeare, a traveler can donate to fund a group of students trip to a new city or state. If you fund the whole project you get thank you notes and photographs from the recipients.

5. Charity Check Up: You can find out the quality ranking of charities, foundations and non-profits based on their use of funds at CharityNavigator.org

6. Set a limit, like $10, and go to the 99 Cents store and get items you think your recipient would enjoy. This works best between couples or children. A child’s limit could be $3-$5. Suggest this for other family members, grown brothers and sisters, cousins, aunts and uncles.
7. Forget about gifts altogether: Recognize the holidays are really about families getting together, especially when they are scattered around the country, or world. Recognize ahead of time that the purpose is to simply enjoy each other’s company.
8. Spend your time help those less fortunate: Donate your time, not just your money, to a homeless shelter, food bank, or bring groceries to a battered women’s or children’s shelter or orphanage. Combine # 3 with this, bring the whole family, and have it become a tradition.
9. Gift exchange: Again, pick a dollar limit, write down the names of all the people you expect and draw names a few weeks prior to the event and get one gift for the person who’s name you picked.
10. White elephant gift exchange: We have all received things we do not want. Now is the time to have fun with them. In this game people draw numbers from a hat, based on the number of people at the event. The more people the more fun. If there are 20 people, then there are 20 slips of paper in the hat numbered from 1 – 20. Each person comes to the event with one gift, and places it on a table. It is best when no one knows who brought what. Number 1 goes first and picks a gift from the table.
Number 2 can either pick a gift from the table, or if they like what # 1 has, they can “steal ” that gift. Number 1 now picks another gift from the table. Number 3 can take a gift from the table or from # 1 or # 2, and so on. Place a limit on the number of times a gift can be stolen. Sometimes it is something desirable, like a board game. Other times it is dreadful, like an ugly monkey coin dish. We have done this for about 10 years now, and it just so much fun to see who can get the ugliest or funniest gift.One year an auto mechanic friend of ours beautifully gift-wrapped a used motor piston. The last part of the game after all the gifts have been selected is to guess who brought the gift. A final option is to have 2-3 extra gifts. First let anyone plead their case as to the worst gift and why. Then take a vote and allow a winner or two or three to pick one of the extra gifts from the table.

11. Make charitable contributions to the organizations that your recipient favors in their name.

12. Donate books to your local library or school. Pay for a textbook for a struggling or underprivileged college student.

13. Give the gift of time by doing a difficult chore for family, elders or neighbors. Examples: Put up storm windows, rake leaves, clear snow or rain gutters, paint trim…

14. 10. Finally, check out www.alternativegifts.org for worthy projects that benefit children, women and families in other parts of the world with food, medicine, water, etc.

Active versus Passive Investing

Active versus Passive Investing – Thanksgiving Day 11-22-07

The other day I was reading a pre-publication interview with a financial planner in Denver based on some questions from a reporter with the Denver Post. The planner had such an unusual name: Steve Smith. There is probably only one person in the country with a name like that. ( ;-) – smirk) Anyway, I used to be a financial planner, or rather do that work for a living, and can recall how my own thinking was prejudiced by the industry in which I was working.

I gave very little thought to the difference between an active and a passive investor back then, but Steve’s comments reminded me of how I look at investing now. Passive investors do things like dollar-cost-average into a mutual fund; they contribute to their 401(k) plan or IRA and get the help of a stockbroker, friend or financial planner to help them choose the investments. They might choose stocks, bonds, mutual funds, or even REITs. The point is passive investors give their money to someone else and hope they have a decent return, like 8-12% per year. I am not saying there is anything wrong with this, and it is probably appropriate for 80-90% of the population. I am suggesting this is not the only way to invest, but it seems to be the only method offered to the public that seeks investment advice.

Since I have been both a passive and active investor, a Chartered Life Underwriter and a Certified Financial Planner, I have both the education and experience to speak about both approaches to investing. I have done very well with real estate investments. I have done okay with stock investments earning 1% while others were losing 30-40% of their portfolios.

My views that are not necessarily in conflict with what Steve, or any other financial planner or stockbroker, might have to say but rather I want to add another dimension to the typical comments about real estate versus stocks.

1. Invest nationally or globally instead of just local:
Local markets can be excellent. As an example I have made millions of dollars by staying in the Los Angeles area. Unfortunately, it may not be fair to compare a local market like Denver Colorado to Los Angeles County. In the Los Angeles metro-plex area we have 14 million people, which is greater than the population of 46 states in the United States. There are only 4 states with a population greater then my metropolitan area. However, it is still "local" for me. New York was "local" for Donald Trump for a long time, and he did okay.

2. Invest in REITs to get real estate diversification:
REITS are Real Estate Investment Trusts. They group real estate properties, like apartment buildings, office buildings, shopping malls, industrial parks, etcetera, into a big pool, and sell shares like a mutual fund. It is easier for most individuals to come up with the money to own a part of an office building than to buy the whole building. Also, most people have no experience in managing an office building. And, while REITs give people diversity they also give the investor no control, just like a mutual fund or stock. Diversity is great for mediocre returns. If you want great returns you need to own the office building, mini-storage facility or apartment building and be an active investor.

3. Beware of sweat investment as a part of capital investment:
Yes, it is difficult to determine my investment return from capital versus sweat. When buying apartment buildings I was willing to work to produce great results. I am not a passive investor: My partner and I select the properties, improve them though remodeling or repairs. After that I manage the properties: Collect the rents; issue 3-day-pay or quit notices; choose the tenants; cleaning crew, painters, and plumbers. But I have been handsomely rewarded for it, far beyond the 5% fee that is customary for a management company.

I understand that most people do not have the willingness or experience to be active investors, but if they do, the rewards are far greater than historical returns for the stock market or real estate in general. When you combine the returns on commercial real estate from New York to Los Angeles you get numbers like a 7% return on capital. This provides no guidance for decision-making regarding investing in real estate in general, or in a local market specifically.

What the heck does a 7% return mean to me in Los Angeles when my partner and I are investing in apartment buildings that have been mismanaged and have deferred maintenance? Nothing, that's what. When we can take a building and double the rental income in 6 months through remodeling and effective management those national numbers about the returns on commercial real estate are meaningless.

Again, I am talking about active investing, not passive, and that type of investing most often is ignored in those interviews with financial planners, stock brokers and the like.

Have a wonderful Thanksgiving holiday and say a prayer for our troops.
Rennie

Doing versus Teaching

My last post was back in May, four months ago. Most people know the expression; "Those who can, do. Those who cannot, teach."

Well I do not like that expression, but I have been busy remodeling a 15 unit apartment building purchased in May. I have been too busy doing to be posting to my blog.

But, I believe teaching is important. Why? Because that is how I learned to do what I do. I also feel that those who know what they are doing should be contributing back to the community by teaching.

Therefore, I will be teaching a class at ULCA on Saturday, October 13, based on my book, Wealth On Any Income.

For those who did not learn how to handle money effectively, set financial goals that can be achieved, and ultimately create wealth, please sign up for the class. Or, send someone else to the class that you feel would get value from this information.

You can sign up at
MGMNT 833.61
Moving from Debt to Wealth on Any Income
Sincerely,
Rennie

Unbalanced Reporting

Unbalanced Reporting – 60 Minutes – May 13, 2007

It has taken me a while to respond to the 60 Minutes broadcast on Sunday night May 13. I have been busy buying real estate from a Realtor. The points the show made were that anyone can sell his/her own home; Realtors do not deserve the commissions they earn; and the National Association of Realtors (NAR) is attempting to restrain trade. Although I am NOT a Realtor and I do not belong to the NAR, I can still see unbalanced reporting for what it is based on my experience and study.

They even interviewed a Realtor and asked her some questions she was unable to answer. I don’t know how many Realtors they interviewed to find someone who would be too stupid to respond to some simple questions, but it appears they waited until they could find someone to support their position and make Realtors look foolish.

First point: Anyone can sell a home and you don’t need a Realtor. Yes, that is true. However, study after study shows that when a knowledgeable Realtor is used, not someone who just got their license in a recent hot market, the seller gets more money in their pocket, even AFTER paying a full commission. The skill is not in putting a sign in the front lawn or listing the house in the Multiple Listing Service (MLS). Any discount brokerage can do that.

The skill is in the pricing, negotiating, qualifying the buyer, and nursing the deal through escrow to closing. It’s like saying anyone can cut hair, which is true, but how bad of a haircut are you willing to live with. At least your hair can grow back and you can get it cut by a professional next time. With a home sale, after you have lost thousands of dollars it is not so easy to make it up.

Second point: Realtors do not deserve the commissions they earn. Some Realtors do not earn it. Other Realtors do earn it. A study done by NAR showed that about 10% of the Realtors earn 90% of the commissions. I do not know if that means 90% of the Realtors don’t know what they are doing, or they are just scraping by, but the point I made earlier was that a professional Realtor will put more money in your pocket even after you pay the commission. Again, they earn their money from their negotiation skills, not by inputting your home information into a computer.

I had an auto accident a couple of years ago where the person who made a left turn in front of me tried to say the accident was my fault, and his insurance company did not want to pay. I could have represented myself against his company, but I hired an attorney instead. He produced results I could not have produced. The other company even tried to deny my medical bills because the medical records and X-rays showed I had three broken ribs, but I didn’t say that was a part of my injuries in their phone interview with me. Guess what? My doctor didn’t tell me that is why I had the pain in my chest and when I would breathe. There wasn’t anything he could do about it anyway. He couldn’t put my ribs in a cast and he didn’t tell me. These were the grounds the other insurance company tried to use to avoid paying my medical bills. Had I not had an attorney, I probably would not have received the funds to cover my medical expenses. His knowledge and skill in this area made the difference. Yes, I might have received some money, but not a fair settlement.

Third point: The NAR want to restrain trade by blocking discount brokers from listing with the MLS. The 60 Minutes program spoke about how some states passed minimum service requirements to force discount brokers to do more than list houses in the MLS and then leave the consumer high and dry. Guess what? There is a reason for providing minimum service when it comes to selling a home. Enough consumers got burned that states created laws to protect them. The broadcast made it seem like minimum service was a bad thing. There is a reason that a doctor has to perform an exam before writing a prescription. Just because you say you want some medication does not mean that is the best thing for you. Minimum service is a good thing.

One of the solutions would be to hire a Realtor as a consultant, just like you can hire a CPA or attorney for advice and guidance. They are out there. Check out www.ACREcourse.com for more information or the book by Mollie Wasserman, Ripping the Roof Off Real Estate.

This one sided broadcast was the most unbalanced reporting I have seen in a long time. However, I can recognize both sides of the issue because of my background, experience, and study, and can recognize when only one side is presented. Most viewers do not have that advantage and they were short changed.

Rennie

Myth # 5 – You need to turn your home into a showplace to list it

Yes, this is a myth. However, if your place is a dump, you will certainly be offered less money for it than a similar house that shows like it’s in “move-in” condition. Also, you need to determine if someone is talking about cleaning and painting or remodeling.

I have been in many homes where I could not believe people actually lived there under the conditions before my eyes: Clothing piled up 2-3 feet high in the center of the living room; pathways through a room that required walking around clutter; bedrooms where the floor was not visible through 2 feet of clutter; dirty dishes, pots, and pans all over the table and counters in the kitchen; a front yard with a few patches of grass that grew despite never having been watered; and carpet worn through past the pad to the floor beneath.

These same homes where I live could sell for $100,000 more with the clutter removed, the dirt cleaned up and fresh paint. The work involved to clean up the house might cost a couple hundred dollars for some helpers to clean up and haul away the trash, and maybe $1000 to re-paint. Even if it cost $5000, and the home seller had to borrow the money to do it, the financial gain would be well worth it even if it only brought in half as much as I said.

Dirt and filth turn off most people. More people are attracted to clean and fresh environments. And there are some people who look for sellers who live in filth and clutter so they can get a bargain and then the buyers will do the clean-up work themselves. They may live in the house after they do the work, or they may “flip” it for the profit. I am surprised by the sellers who cannot see the advantage of doing this for themselves, but they are out there.

The Parade article went on about improvements, like a new kitchen or bathroom, just to sell a house, and how this would not be worthwhile. This is so silly it is hard for me to imagine why they even bothered writing about this. There are at least two reasons for a homeowner to avoid that type of expense to sell their home. First, what they do may not appeal to the taste of most buyers, and second, most remodel work only returns about 80% of the cost of the construction according to a recent survey cited in the Parade article.

Bottom line when it comes to selling your home: It does not need to be a showplace, but you will make far more money by cleaning out the clutter and giving it a fresh and clean look.

Rennie
www.RennieGabriel.com

Myth #4 – You can get the advertised rates from any lender

This is a myth. First, rates can change on a daily basis depending on what is happening in the economy: job forecasts, Treasury Bill auctions, or an increase in the inventory of major appliances. Second, the rate a lender quotes is for the best credit risk, and that may not be you. See Myth # 3 for more on this.

Third, if you are dealing with a lender on the Internet, or a lender that does heavy advertising, there is little investment in satisfying you. With all the leads they have coming in from their marketing they can disappoint many people and stay in business. They can quote one rate to get you in the door, and change it at the last minute when it’s too late for you to go anywhere else. I have seen this happen to many people I know. I try to warn them to work with an individual who they have been referred to and that can be trusted. But some folks just go for the low rate and end up with the bait and switch.

I have used the same mortgage broker for six or more years now. When he gives me a rate, it is based on my credit score and it’s competitive with any lender out there. He has all of my documentation, properties owned, assets, liabilities and more. All he has to do is update the file from the last submission, AND, the big plus for me, he handles the application process. I do not have to fill out any forms; he fills them out for me. I review them, make changes if needed, and sign them.

The last time I thought about going to another lender it took me three hours to complete the application and copy the documents that the lender requested. Between purchases and refinances I do 2-3 loans per year and spending three hours on a pile of forms is not my idea of fun. This mortgage broker is like a member of my real estate team, just like my roofer, plumber or architect.

When it comes to advertised rates, you have to get a rate based on your credit score and lock in the rate if you think they may rise before you are ready to close the sale. If you want to know if you have a good lender, there are questions to ask, but start with a referral from someone you trust.
Rennie

Myth 3 - A low credit score means no mortgage

This is the third of five myths that were the basis of an article in Parade magazine. Wow, another accurate myth, for now. With the current crisis in the sub-prime marketplace things could change quickly. In the past people with a weak credit score could get a loan that practically assured they would get in trouble a few years down the road.

What is a low credit score anyway? The score that everyone is talking about is the FICO score, which stands for Fair Isaac and Company. They created an algorithm that is designed to determine the likelihood of an individual to pay their debts on time, or go into default. The score considers things like credit cards, the length of time accounts have been open, auto loans and payment history to come up with the score. You can find out more at myFICO.com

The highest score is 850, and anyone with a score of 760 – 850 would qualify for the best rate a lender would offer. The following chart comes right from the www.myFICO.com website:

The higher your FICO score, the lower your payments!

See for yourself. Interest rates accurate as of April 16, 2007:

Based on a 30 year fixed rate mortgage of $300,000

FICO score	APR [?]	Monthly payment *
760-850	5.928%	$1,785
700-759	6.150%	$1,828
660-699	6.434%	$1,883
620-659	7.244%	$2,045
580-619	8.777%	$2,366
500-579	9.670%	$2,560

You can see that a low FICO score would cost a borrower an additional $775 per month for the same size mortgage as someone with the top score. That difference is $9300 per year and $279,000 over the length of the loan. That is an extra quarter million dollars wasted because someone did not pay their bills on time.

What many lenders did was to provide loans to people with a low credit score programs that had low teaser rates, or rates that would adjust over time to the point where the borrower could no longer afford to make the payments. Then the loan would do into default. Well, Wall Street had provided the funding for these loans through the sub prime lenders. When faced with the threat of wave of foreclosures, Wall Street pulled the plug on the lending and caused the bankruptcy of several of these lenders who catered to borrowers with low credit scores.

So, while loans may still be available to those with low credit scores, they will not be the teaser rates, interest only, sucker punch you later loans. The loans will be more traditional that may be too expensive for those with weak credit and low FICO scores. So while a low score will not necessarily mean no mortgage, it may mean mortgages that are out of reach. If you, or someone you know wants to improve their credit I recommend my # 1 selling Wealth on Any Income: 12 Steps to Freedom available at Amazon.

Rennie

Myth 2 - Your agent wants to get the highest price for you.

This is the second of five myths that were the basis of an article in Parade magazine. Well, at least this is an accurate myth, if it is a myth at all. Let’s first look at the typical sales commission and split. First, the commission is not fixed; it could be 3, 4, 5 or 6%. Second, one agent does not get the whole commission. Depending on the agent and the brokerage office they work for, it could be a 50/50 split, and that’s on the half each agent and office gets from the commission. Usually there are two agents and brokerage offices involved in the sale and purchase.

So, on a $500,000 sale at a 5% commission the total commission paid would be $25,000 and the share one agent gets would be about $6250 (25% of the total) LESS their taxes, board dues, transaction fees and other business expenses. If the agent got another $10,000 in the sale price, it would only mean another $125 in commission. Now the agent could be thinking, “Could I get another $10,000 for the seller, or could I loose this buyer completely and maybe another one won’t show up?”

It’s not worth the extra $125 to the agent if the potential is chasing away a solid buyer and having no deal at all. Because I have relationships with hundreds of real estate agents around the country I have heard the sad story many times where the seller wants to hold out for more money and the buyer walks. Everyone looses in that situation. The seller has no buyer, the buyer didn’t get that home and the agent has no commission after all the time and money they spent marketing that home.

When, and if, the next buyer comes along, the sales price could be, and often is lower. Why? Because the next buyer wants to know why the first buyer walked. Maybe there is something wrong that’s not being disclosed. Maybe the home was overpriced to start with and that’s why the first buyer walked. Maybe the market has changed. Now the property has been on the market longer, and that’s not a good sign. Bottom line; this is often an accurate myth. The agent wants to close the sale more than the agent wants a few extra dollars commission against no commission at all.

Rennie

Five BS Real Estate Myths - # 1-You need a Realtor to buy or sell your home

I have not posted anything for over a week, but the dry spell is over. I just read in Parade magazine an article entitled 5 Biggest Real Estate Myths that is full of male cow excrement. Sometimes I am really amazed at the audacity of a reporter to write on a subject where they know little, and interview people who know even less, but have an ax to grind. And since Parade is an insert in major newspapers around the country, I wanted to reach as many people as possible, and the blog seemed like a good approach. Please feel free to circulate this if you agree with me.

I will list all of the myths from the article and then go through each of them and let you know the reality.

1. Only a licensed real estate broker should sell your home.
2. Your broker wants to get the highest price for your home.
3. A low credit scored means you won’t qualify for a mortgage.
4. The advertised rates are what you’ll get from a lender.
5. Your home must be turned into a showplace before it’s listed.

1. Only a licensed real estate broker should sell your home. There are so many flaws with this one it’s hard to know where to start. First, let’s get the terms correct, you will most likely work with an AGENT, not a BROKER. An agent does not have a broker’s license and cannot run a real estate office. You can work with a broker, but most real estate sales people you would meet are agents, not brokers.

This is NOT a myth, but reality. The person quoted in the article is a CEO of a company that supposedly helps sellers sell homes by themselves. The reason stated in the article on why people are afraid to do this is because they do it so infrequently. It goes on to say they have access to all the demographic data they need. Yes, they do, but so what! If you had access to all the data to pull an infected tooth, does that mean you should do it? Data and information does not provide experience or skill. Just think of the expression about an attorney that represents himself; he has a fool for a client.

As I continue down this one point, I realize this could get to be so lengthy, that you could be reading for hours. What I realize I will have to do is cover these points in separate blog posts. And to finish off this first point, I’ll provide some quotes from an email I received from Mollie Wasserman, the author of Ripping the Roof Off Real Estate. The points Mollie makes are valid:

1. The end of the Multiple Listing Service (MLS) is on the horizon. This service contains all of the data regarding houses for sale, sold and specific data, all of which is, or will soon be, available to anyone with an Internet connection.

2. Because someone has data, does not mean they have the expertise to interpret the data.

3. The value a “real professional Realtor” (not someone who got their license in the glory days and only made three sales in their career) brings to the table is the skill to interpret data and NEGOTIATE on behalf of their client, whether it’s a buyer or seller.

4. There are now a group of Realtors who have been trained to be consultants. They do not have to rely on making a sale to get paid. They can be paid for the expertise that the buyer or seller needs; negotiating, determining the financial qualifications, or managing the escrow so that the sale actually closes.

Even if I was not the publisher I would highly recommend Ripping the Roof Off Real Estate: How a Multi-Billion-Dollar Industry Came to Have an Identity Crisis by Mollie W. Wasserman

Here are the comments from an email I received from Mollie that was directed to other real estate agents on an author forum:

The MLS, as we know it, is terminal. Whether you believe that our MLS's sold us out or it's just the natural consequence of the free flow of information in the Internet age, the MLS, as THE place for property information is ending. To try to make it be like it used to be is like putting the toothpaste back in the tube. As much as we dislike the thought, I believe that buyers and sellers, armed with information that they got WITHOUT going through an agent, will find each other more and more. Many sellers who have time will do their own marketing activities and buyers will do more of their own hunting.

Now, a warning, I am going to go into partial sales mode now: this is why, especially during down periods like right now, that it is vital that we learn how to do real estate consulting. Because consulting is where our future is. The Internet is a wonderful thing and as we are seeing, can provide and distribute information like no human ever could. But what it can NEVER do is interpret what that information means - only a real estate professional with years of experience can do that. We know that most people lose money when they try to buy or sell on their own but where they lose it is not in the marketing and searching but from contract to close.

A seller finds their own buyer easy enough but doesn't have the foggiest idea of how to negotiate the contract, and even more importantly, how to troubleshoot the transaction to close. They get a pre-approval from a buyer and don't know if the lender is reputable or a scum-bag that will hold up their closing. They don't understand commitment dates and get hammered on inspection issues. Ditto the above for buyers.

Worse, because we have stubbornly stuck to the commission-only-sales model, there is no framework for hiring a real estate professional to provide this important contract to close counsel. Most people hire attorneys and attorneys cannot do what we do because they don't know what we know. They don't know property values so it's hard for them to negotiate a good contract, they don't know the good lenders from bad and they certainly will not babysit a transaction, making sure the dates are adhered to and everything goes as it should.

Again, it is not about finding a property to buy, or finding buyers for a house you have to sell, it is everything else that has a quality Realtor earn their commission. And to find a quality Realtor in the southern part of the San Fernando Valley, go to www.RobertandDianne.com

Rennie

Dealing with Tenants

It appears I continue to have to back up each time I discuss apartments. I started with how to buy an apartment building, then why to buy one, and now I am hearing the objection that tenants create major headaches and damage. It's the fear of the three "Ts"; tenants, toilets and trash. Well let’s solve the tenant one now.

One person complained that they have a resident manager who seems to listen to the hard luck stories of tenants who are consistently late on rent. They were not sure if they should continue with the 3-day notices and eviction threats. While they said their current screening is much better than in the past, they inherited some problem tenants and asked what I would suggest to deal with late paying tenants. Here is what we discussed and what I said:

It seems like you have several things going on at the same time. One involves training your manager, but maybe that’s been handled because you say your screening is better now. I think the apartment association does seminars to help in this area.

Regarding the tenants, in addition to the screening, I think you have a couple of choices. First, you or your manager must be diligent with your 3-day notices to train your tenants that the rent is due on time. If you get sloppy, the tenants will get sloppy.

Second, you can interview the tenants to see how you can help them pay the rent on time. There are services that do automatic bank drafts for rent payments. But what if your tenants don’t have a checking account?

You can train your tenants how to handle money more effectively. I hope you know how. If you own apartment units, I expect that would be the case. However, I’ve discovered that 90% of our population has not been taught money skills, not from their parents and not in the schools. How can people be expected to know how to budget for their rent, car payments, groceries, and everything else, when barely anyone has been taught?

Many years ago I came upon a novel way to solve the problem of tenants who continually paid late or had rent checks bounce. These particular tenants, a husband and wife, had good jobs, earned a good living and had good credit based on their reports when they moved in. When I sat down to talk with them about the problem, they admitted they were never taught “how” to budget. I suspected this because I’ve been teaching these skills in classes at UCLA for over 10 years. After a few years of meeting thousands of people who lack budgeting skills you know the signs to look for.

We sat down and went over the concepts and practical tools of a budget. I actually call this a “spending plan.” We talk about spending money in alignment with the goals they want to achieve. I find more people like to “spend money” than those who like to “budget.” We talked about planning for the unexpected. For example, we all know a car will break down, or need service; we just don’t know when. I showed them how to plan for these expenses, how to “pay themselves first” and how to set financial goals.

Next, we set up their budget based on their income and lifestyle. In three months they had saved an extra month’s rent in a separate account. They were never late or had a check bounce again. They stayed another two years before buying a house and moving out.

In Los Angeles we have rent control and we are limited to a 4% annual increase to current tenants and on July 1 that changes to 5%. When someone moves out we can peg the rent to market rates. I give each of my tenants a copy of my Wealth On Any Income book, (buy at Amazon) and my guess is that 50% of my tenants move out because they’ve purchased a home.

If someone doesn’t feel confident in training a resident manager, or training their tenants themselves, they can read my book first, or provide a copy of my book to the tenant or the manager. That’s an easy way to get the job done.

Rennie

Why buy an apartment building?

After my previous blog posting I got a comment that it was not a fit. Here I was writing about the steps in finding and closing escrow on an apartment building, but I was not addressing the issue of why to buy an apartment building in the first place. This came from an attorney who said she owns a small condo and wanted to know why she should even consider buying an apartment building. Her first thoughts were the three “Ts”; tenants, toilets and trash.

When we are small children and people tell us something, it becomes our truth. As adults we are far more suspicious of what we are told, regardless of what it is. When I was a child my mother impressed upon me what a great investment it was to have an apartment building. She said, “The tenants are the ones who buy the building for you.” This was a lady who worked as a bakery clerk earning an hourly wage. She and my dad sold their home when I was 8 years old and used the money as the down payment on a 4-unit building near Beverly Boulevard and Robertson.

My dad died 3 years later and she was able to raise me as a widowed single mom. When she retired she had her social security payments and a union pension. She lived rent-free and received rental income. The total was more than she needed to live on so she was able put money into saving up until the time she died. If a bakery clerk can buy an apartment building, so can this attorney and so can you.

Just like my mother, this attorney has an advantage; she owns a home, or rather owns it with the bank. When my mom died I inherited the building. It’s about a block and a half north of Beverly Hills. They bought it in 1956 for $36,000. While today that wouldn’t be enough for a down payment, my parents were only earning about $4800 per year between the two of them. This attorney had been in her condo for a while and the equity is enough to use as the down payment on a small apartment building. But, and this is very important, but she doesn’t have to do it by herself.

If you do not home a home, you can still buy an apartment building. In the same way Robert Allen writes in his books about buying property with no money down, what he really means is that you buy it without using YOUR money for the down payment. You can get seller financing or find an investor to buy the building with you.

While the Southern California apartment building market is tight, there are still bargains available. It just takes more time and energy to find them. In my last posting I spoke about one of those bargains I found. If you are not prepared to do the work yourself, partner with someone who does this on a regular basis. While I intended to share this project with two other people I now need to do a 1031 tax deferred exchange, so the two friends will have to wait to invest with me later.

Again, you don’t have to do it alone. If you find the property and can’t handle it on your own, call me. With my partners and friends we are always looking for more property. Owning an apartment building creates financial security, it is purchased for you through the rent tenants pay, and you have tax advantages I did not even discuss in this posting.

Rennie

Buying an Apartment Building

Today I received great news from my broker, Robert Bluman (www.RobertandDianne.com) I placed an offer on an apartment building in Burbank and the offer was accepted. BUT, how it works when you buy a house is not how it works when you buy an apartment building. There are phases that have to be completed before the deal is done.

Phase one – find a property
a. Create criteria for the income property that you want based on your long term goals, preferences, ability to manage (or provide to a management company), cash flow, ROI, deferred maintenance, mismanagement, ability to add value, whatever.
b. Then find a property that fits your criteria. That is the most difficult part; you could look on www.Loopnet.com, the classified ads, work with one broker or several brokers, do a mail campaign to apartment owners, or whatever. While I found a few that appeared to be a fit over the last 18 months, it does not mean any of my offers were accepted.
c. Make a written offer on the property and put up a cash deposit. With apartment buildings you do this BEFORE you see the inside of the property. When buying a house, you do not make an offer until AFTER you have seen the inside of the property.

Phase two – make an offer
a. If your offer is at all within the range of acceptable, you continue to negotiate the price and terms until you and the seller come to an agreement. Terms are just as important as price, and sometimes more important. Examples: Do they want to carry back any financing? Do they need a short or a long escrow? Are they willing to do any repairs?
b. After you come to an agreement on the offer, you now set up an appointment to see the inside of the units. This is called the "inspection period." It would occur 7, 10 or 14 days from the date the offer is accepted. This is one of the terms that is negotiated.
c. This is a two way street; as the buyer I need to prove that I have the ability to buy the building; that I have the cash for the down payment; that I know what I am doing (own other properties already); and present documents that prove what I say.
The seller needs to provide an accounting for the building, leases, permits, estoppels, and proof of expenses like utility bills and maintenance.

Phase three – enter escrow
a. If I like what I see and the seller likes what he sees, we now enter escrow. If I don't like what I see, the process stops and we do not enter escrow. If the seller doesn't like what he sees, the process stops and we do not enter escrow.
b. Escrow continues with all of the documents being prepared so the sale can close, down payment funds are verified, liens are handled, financing arranged, deeds prepared and so on.
c. If items were found that could not be discovered in the initial inspection, then more negotiation can take place. A cracked foundation is discovered, a leaking firebox for the heater, a lack of permits for remodeling or the replacement of water-heaters, whatever.
d. When everything can be finalized and signed and recorded, escrow will close. The buyer gets title and the keys to the property and the seller gets the money.

Phase four – dealing with the tenants and the property
a. Now you notify the tenants about the change of ownership and where to direct rent payments; get leases signed if they were missing (and if you want them), evict tenants that have not paid rent and do on.
b. Begin to take action based on your criteria. Here are my criteria: I look for buildings that have been mismanaged and have deferred maintenance. This usually means it has below market rents and I will be able to purchase it at a good price. I will then invest in the remodeling work and raise rents to market, or above market rates. In the Los Angeles market, for every dollar of additional rent that I create I have added ten dollars of additional value to the building. To see our properties, visit www.ValleyVintage.com

Rennie

Credit cards & vending machines

A recent article (2-26-07) in the Los Angeles Times reported on a new market for credit cards; vending machines. It appears sales have been lost because many people just don't have change, and most vending machines will not take bills larger than $5; but most people are carrying $20 bills they got from the ATM machine.

So while consumers are excited to find a vending machine where they can use a credit card that will give them expensive candy or soda, and Cadburry Schweppes and MasterCard are thrilled to see the sales up by 5-35% in their test markets from New York and Chicago to Dallas, I am concerned that consumers will create even more debt they cannot pay off.

About 14 million Americans cannot do any better than make the minimum payments on the credit card debt. People often make purchases in a trance, do not do comparison shopping, and have no plan on how to get out of debt. They have become wage slaves to the credit issuers and little by little line the pockets of major corporations while going into bankruptcy. Of course many people, one third of credit card users, pay off their balances in full, so I am not talking about them. I am talking about the other end of the population that is being taken advantage of.

According to Vending Times, an industry publication, 2005 sales was $46 billion and was practically all cash. What a wonderful new market for the credit card issuers. Fast food restaurants were the last big cash outpost to gain credit card acceptance, and we are all so much healthier as a nation now that we can eat more fast food and put it on our credit card.

While I don't have any solutions here, I can at least post a warning: Wake up and be conscious when using credit cards, or making any purchases for that matter. I created a spending register many years ago that has helped thousands of people get on track with their spending. In 5-10 seconds it allows them to evaluate if they are on target to their financial goals. It allows them to be conscious when they spend money. More more information on that concept, please read my book, Wealth On Any Income.

Money vs Marathon

Yesterday, Saturday, March 3, I taught the UCLA class based on my book, Wealth On Any Income, and today I rode my bike in the L.A. Marathon bike tour. The bike tour starts at 6 am, 2 hours before the start of the Marathon. In that way it is completed and those on bicycles are not in the way when the runners get started. This year, to have it even more safe, the runners started at least 8 miles away from where the runners started. Based on this opening paragraph, you may be wondering, what does this have to do with the title, Money vs. Marathon. Right?

I didn't connect the two until today when I reflected back on my class in how people develop the habits they need to handle money effectively, pay off debt, save, invest, and so on. I can no longer run in the marathon because my right ankle gives up too soon, like 2-3 miles. So, now I ride a bike. Back when I started training, it doesn't matter if it was to run the marathon or ride the bike, I didn't start by running or riding 26.2 miles. Specifically, when I started jogging, I got 1/4 mile before I was winded and had to walk. From there, I gradually increased the distance.

When I started riding my bike, I would practice by riding up the hills in Encino. I recall the first time I tried this; I had to stop and rest 3 times to go up a steep 1 block hill, and that was even after doing a zig zag pattern up the street. I couldn't even go up the single block in a straight line. But now I can ride all the way up to Mulholland, about 3 miles staight, with no rest stops.

Now I will get to the part about money: It works the same way. The principle that creates wealth is based on a concept that is 5000 years old called "pay yourself first." Many people will do a spending plan, or budget, and figure out they need to set aside 10-20% of the their income to meet emergency spending and retirement goals. Rather than start where ever they can, like 2, 3 or 5%, they act like they have to run the marathon without building up their bodies to go the distance. If they can't set aside 15% right now, they do nothing instead.

This is how money and the marathon are related. When it comes to creating wealth, you need to start from where ever you are, take some actions, set aside some money, and as time progresses move on from there. Start a savings plan now. Increase your 401(k) deferral. Set aside funds for emergency spending, regardless of how little it might be right now.
Rennie

Location, Location, Location vs Price & Value

I ran across the following article by Kerry Bodily. He is a 25 year veteran of the real estate industry, a real estate instructor, award-winning software designer, real estate board officer, and advisor to the Multiple Listing Service. So I think what he has to say about the difference between the old adage about real estate value being "location, location, location" may need to be questioned. The following is his article in it's entirety. His book on the topic is available at Amazon.
Rennie

How the Real Estate Market Really Works
Determining Price and Value

Imagine living in a home on a busy street with a major train line just beyond the back yard fence. People really do live in these locations, and even worse ones, by choice, but why? We’ve all heard the real estate adage, “location, location, location,” but there are two things much more important than location, and they are price and value.

You see, in real estate especially, you can only buy what you can afford. But regardless of the location, style, or attributes, as a buyer, you should still receive maximum value for the price you pay.

Let’s say, for example, that you’re wearing your buyer’s hat. You’ve hopped in your car, driven all over town, and you’ve personally inspected every viable property in today’s market that meets your particular needs and requirements. Now you’ve chosen one: A single, perfectly beautiful piece of property and the first issue you should decide is what is its intrinsic value to you. After all, you are the one who will be living there.

But what if you could determine the value of this property before deciding to enter the negotiating stage? Then you would know whether the asking price was too high (forget it), too low (a steal), or just right (perfect). In other words, there wouldn’t be a need to consult with an appraiser, a real estate agent, a relative, or even your best friend, because we all know what happens next: if you ask the opinion of others, the answer would come from their perspective of price and value, and not yours.

What I’m getting at, is that the truth about price and value in real estate is quite simple:

Today’s competition determines today’s value

If you have just viewed a dozen properties, and you have inspected and evaluated each, then that is today’s competition. It’s not what sold yesterday, or what recently sold up the street, or what just sold three blocks over, but it’s what’s on the market today. Once again, it’s today’s competition that determines today’s value.

Think of it this way: that you, as the buyer, are the expert on value. The real value is simply what it is worth to you. And therefore, your opinion of price and value is now exalted. Why? Because, without a buyer, i.e., without you and your genuine interest in that single, perfectly beautiful piece of real estate, there is no sale and you are not going to pay more that it’s worth to you, the buyer.

Now, by contrast, let’s put on a seller’s hat and take a walk through the immediate neighborhood. Yes, walk! Though the buyer must drive, the seller can walk. Why? If you’ve ever sold a home, or talked to a real estate agent or appraiser about how to value a parcel to sell, the typical explanation takes a wild and crazy turn away from the simplicity of value. The common answer passed down through the decades would sound like this: Find three properties that have sold recently, in your neighborhood, preferably mirror images of yours, and even on the same street, if possible.

Now those comparables, when presented to the seller, along with a myriad of statistics, market trends, charts, graphs, and other non-conclusive data, will ultimately suggest a price range from which the seller can choose. The typical seller will usually choose the higher values from the range. Wouldn’t you? But, does that sound anything similar to how buyers value properties? No. In fact, it’s exactly the opposite! Sellers are looking at properties from a market that no longer exists, and buyers are looking in today’s market at the only choices they have.

Let’s ask the question, “Why should there be any difference in how value is determined, regardless of who is asking the question, or for what reason? All logic says, “There shouldn’t be,” but each half of the market, i.e. buyers and sellers, determine price and value from opposite sides of the fence, if you will. Is there a problem here? And, if so, is there a solution?

One example of a problem for sellers is signs that say, “Price Reduced.” The implication is that the seller has finally realized the property is over-priced, i.e., not priced competitively, and now wants to fix it. Too little, too late? Maybe. Consider this: When a new property is added to the market most of the activity takes place in the first few weeks. In real estate circles, this is often labeled as, “The window of opportunity.” Buyers and agents who are actively looking in that area and price range will often try to be first-in-the-door. If their first impression is, “Nice house, but overpriced”, then they move on and rarely look back. Though, to appease sellers, it is often said: “Buyers can always make an offer,” but most buyers don’t want to start negotiating with a seller who has visions of grandeur. The point is: the property would not have been over priced if the seller had determined the value the same way typical buyers would in the first place.

The real solution for the seller is almost as simple as driving around town or looking on the Internet and identifying your viable competition. Now adjusting for differences and determining your comparative value requires some simple tools, which are slightly beyond the scope of this article, but the real challenge here is overcoming the natural human trait of resistance to change. As a seller, put on the buyer’s hat and try looking at the market through the buyer’s eyes, though this approach would be foreign to most real estate agents or appraisers. Open minds, open doors!

Kerry D. Bodily, author of Untold Secrets How the Real Estate Market Really Works. http://www.pricingrealestatecompetitively.com/,
To reach the author directly, you can email him at kerry@kerrybodily.com

UCLA Debt to Wealth class

I should have done this weeks ago. It should have been my first post, but being new to blogging I did not have the priorities on what should be posted. I was broke after my second divorce and I am now wealthy. This is not the format to divulge numbers, but let's say the net worth for my beloved wife and I puts us in the top 3% of the country. My UCLA class is where I share all the details. I explain the blocks to wealth, from emotional attitudes and values, and provide the practical tools and techniques to achieve wealth. It will be next week: I will be teach all day Saturday, March 3 on the UCLA campus in Los Angeles.

I only get paid about $300 for the day, so although this is my contribution back to the community it only happens once per year. You will find the link to the UCLA website with information on the class below.

Please, if you know anyone in the Los Angeles area that struggles with how to handle money effectively, please let them know about this class. Or, rather than suggest that someone attend, please consider an email blast to help me promote the class, and ask those who receive your email to pass it on to others. I would truly appreciate it. Thank you in advance.

Besides individuals or clients that you might know, good prospects are Realtors, Lenders, CPAs, insurance agents and financial planners for either themselves or their clients. If someone who wants this information cannot attend, then they can get almost all of the information from my book (Amazon link):
Wealth on Any Income: 12 Steps to Freedom

This class is NOT for day traders, investors or the stock savvy. It is for people who are struggling with how to set up a budget, get out of debt, how to start saving and investing, etc.

UCLA class info:
Moving from Debt to Wealth on Any Income
Course Open Reg# S7789U

Class description from the catalog:
If it seems like all the money you earn comes in one hand and just goes out the other, you're not alone. Over 90 percent of our population has not been taught the basics of handling money effectively and only an estimated 10 to 20 percent of American workers and business owners will retire feeling financially secure. In this seminar, participants learn a revolutionary system to move from debt to financial independence, a system which is consistently practiced by the wealthiest people in the country. Topics include how to set and achieve your financial goals, living within your income, getting out of credit card debt, saving 10 to 20 percent of your gross income each month, handling emergency spending without a financial disaster, and learning how to spend money. Students leave the seminar with practical techniques and strategies that can be implemented immediately. Enrollment limited. Advance enrollment highly recommended. Single admission at the door is $160 (space permitting); payment by check or credit card only.

4 Steps to Keep the Home You Purchase

Keep the Home You Buy in 4 Steps

You may have been in a situation where you’ve qualified for a home loan, closed escrow, started making mortgage payments and several months later had a problem making your next payment. You’re not alone. Many homeowners have faced the same problem due to buying more than they could afford, but qualifying for the loan regardless.

Now that you’ve put out all your money for the down payment, re-painting, minor remodeling and some new furniture you’re afraid you may be loosing the house. This situation is far more common that you might imagine. According to Morgan Stanley, the default rate for homeowners who are 90 days late on their mortgage payments almost doubled from 7% in 2003 to 13% in 2006. How can these situations be avoided? The following 4 steps will help you to keep the home you purchased if you run into a financial bind. In addition, you’ll see if you need to change your standard of living, you’ll be prepared for emergency expenses, without creating a financial disaster, and you will ultimately be able to choice to work instead of have to work.

Step1. Create a long-term financial goal.
I call this deciding from the big picture instead of the details. Many times we are confronted with difficult choices: Should I buy this sweater in red or blue? Red or blue? Red or blue? The difficulty arises because this is the wrong question. It’s based on a detail and not a big picture, or long term objective. Some better questions would be: Do I need another sweater? If I didn’t have to work for a living, would I buy this sweater? What is the purpose I desire to fulfill by buying this sweater? Is the purchase of this sweater in alignment with my long-term goals?

Creating a long-term goal allows you to answer the last question I posed. If your objective is to save up and buy new furniture for cash, take a world-class vacation in three years, or retire in 15 or 20 years, then you can see if buying that sweater is in alignment with producing your long term goal or goals.

Step 2. Find out what your current financial picture looks like.
This is done with two or three forms. The first is a list of what you own (assets) and what you owe (liabilities) called a balance sheet. When you subtract what you owe from what you own, your net worth is the amount left over, provided this is a positive number. A negative amount would require more immediate attention. Make believe you were on your way to a new home of a friend, and got lost along the way. When you called your friend for directions, what would be their first question? “Where are you?” Correct? What a balance sheet does is tell you where you are financially at one moment in time. Just like you can’t get to your friend’s home without starting with where you are at the moment, you can’t create financial results if you don’t know from where you’re starting.

The second form is a cash flow form, or a listing of your income and expenses. Put how much money you earn each month on the left, and where you spend it each month on the right. Don’t forget to add in the items which don’t show up each month like car registration fees or maintenance and repairs, property taxes, fire insurance, back to school or special event clothing, holiday gifts, vacations and so on. Look over your checkbook register or credit card statements for the last twelve months to be reminded of what happened. I guarantee something like those items will occur in the future, and the money ought to be set aside now for them. For most families, this is generally 10% of their monthly income.

The third form depends on whether or not you have credit card debt. Only about one-third of the people with credit cards can pay off their balances in full each month. For the other two-thirds of the credit card population, (Which is about 80 million people!) create a list of all of the cards, the outstanding balances, monthly payments and interest rates. Look at these payments as a level amount. By setting aside 10% of your income to pay for the non-monthly expenses shown on the cash flow form, you can end the increasing credit card balances and over time pay them off in full. Also, look to see if you can transfer balances to lower rate cards. I recommend you learn how to handle money effectively. I do not recommend you refinance your home to pay off credit cards. Don’t secure your home for debts that are otherwise unsecured. Any quick and easy method to eliminate credit card debt is a wasteful solution. It’s like getting lipo-suction without changing your eating or lack-of-exercise habits.

Step 3. Track your spending to see if it’s in alignment with your long term goals.
Obviously, you can’t do this unless you’ve created a long-term financial goal from Step 1. Every millionaire I’ve met or read about knew in detail how much money was coming in, and where it was being spent. They were conscious of the flow of their money. After all, the money was created by trading the energy of their life for money. You’re doing the same thing, trading your life energy for money. Are you spending your life energy and feeling satisfied?

Use a blank check book register, rather than a random list like a spiral notepad, and create categories for the expenses that occur all month long. Include the unexpected ones. There is no need to track your mortgage payments because it is usually only once per month, and the same for the car payment. Track items like groceries, meals out, entertainment, clothing purchases, hobbies and so on. Millionaires do this to create wealth and to maintain wealth. If it’s good enough for them then it ought to be good enough for regular folks too. Right?

Step 4. Pay yourself first.
There’s something else millionaires do that we can all learn from. Besides paying themselves first by setting up an account with money to spend later (as I explained in the paragraph about the cash flow form in Step 2), pay yourself first money you will keep forever. Set aside 10%, or more, of every check you receive. This is the money you can invest so that at some point in the future work can become a choice, instead of a requirement. Some people retire and other people work at what they always wanted to do. Contribute the maximum to your 401(k) plan at work, or put money into an IRA, or buy stocks, mutual funds, or more real estate. If you set aside 10% of your income and earned 12% on your invested money, in 30 years you could have a portfolio which would generate annually three times more passive income than what you earned from your work.

With these four steps in place, you will see what it takes to meet your mortgage payments and maintain your standard of living, or change it if you need to. You will be prepared for emergency expenses, without creating a financial disaster, and you will ultimately be able to choice to work instead of have to work.
Send comments or questions to rennie@GabrielBooks.com

The BIG picture

A young couple came into the office today for some financial coaching. The husband wants to start a personal service business and his wife does administrative work. She wants security and he has an entrepreneurial bent. She wants to set aside money for their retirement and wants to know how that can be done because they also need money to get his business started.

This led us into the conversation about the big picture versus the details. The BIG picture is retirement. The details are stocks, 401(k), social security, real estate, mutual funds, insurance, etc. Too often I find people focus on the details to the exclusion of the big picture. As an example, if you were to cross the street and focus only on the details, like how high the curb is, are there cracks in the street, an open sewer drain, puddles, whatever, and each step you took was to avoid problems with the details you could get killed. Why? Because you must first see if there are any cars comming from any direction. That's the big picture.

When it comes to money, it seems easier for most people to focus on the details and they are completely disconnected from the big picture. The big picture could be having enough money so that work becomes a choice, instead of a requirement, at age 60, or 55, or 75 or whatever. The details are, "Should I remodel the kitchen or bathroom?" Well, maybe neither one should be remodeled, or both should be done. The question should be, "How will remodeling fit into my big picture of retirement at at 60?"

Rennie

Loosing a dream home

Nancy (not her real name) called me on Friday, February 9th, regarding her parents. She had given them enough money to cover four months of their mortgage payments so they would not loose their "dream home" in foreclosure. Six months later they are in the same position. I held a call the next day, Saturday, with Nancy and her parents, Mike and Vicky.

Many of the following details have been changed so the confidentiality of their situation will not be breached. It turns out that Mike and Vicky were living in England a few years ago and Mike decided he wanted to move back to the US and settle in Virginia where they used to live. They build a custom home and then sold it and built a bigger home, their "dream home."

Unfortunately, no one bothered to see if the costs to maintain that home fit into Mike's budget, and they don't. Vicky used to do art work and write. Now she has to do work she can't stand to bring in more money to support the "dream home" and it is still not enough. They are now back to a similar situation like the first time when Nancy gave them money to save the house.

Mike and Vicky are in their 50's, so it is not like they do not have the ability to earn money any longer. These are not parents in their declining years. Of course Nancy does not want to continue to support her parents who seem to lack the forsight to plan ahead. Yes, the house is for sale, but it has been on the market for six months now with no buyer in sight.

What is the point of all this? When you look down the road at any plan you have, new home, new career, retirement, college for children, whatever, you must factor in your ability to handle the financial challenge. While very few people have been taught by their parents or in school how to budget, the information is out there. The forms to use are out there. Workbook and cassette programs are out there. Books are out there. If you have an interest in a SIMPLE budgeting form, let me know, and I will post it to the blogsite. I do not yet know how, but I will find out.

My book, Wealth On Any Income, is a great start.
Amazon link: Wealth on Any Income: 12 Steps to Freedom
Rennie Gabriel
12:28:00 PM

First posting

Welcome to the Valley Real Estate and Money blog. My intention is to provide news, comments, thoughts and guidance on issues related to real estate in the San Fernando Valley and financial issues anywhere in the country.

I think it is vital that you know something about someone who professes to know about the topic upon which they write:

My name is Rennie Gabriel and I have been a Certified Financial Planner (CFP), Chartered Life Underwriter (CLU) and book publisher with about 80 titles published and in distribution on consumer education in real estate and finance. (www.GabrielBooks). Since 1996 I have taught an extension course at UCLA based on my own book, Wealth On Any Income. Locally, I own and manage several apartment buildings through various corporations and limited partnerships, so my comments should be appropriate for those who own or invest in real estate, and for those who live in it.

When it comes to financial issues, I have been broke. I had been divorced twice and had to start over again financially for the second (and last) time in 1998. I know what it is like to have no money to buy groceries for the family, have creditors want money from me that I did not have, and I also know what it is like to have vast sums of money at my disposal and feel secure in my net worth.

Personally, I am married for the last time to an amazing woman, Dianne Merryl. She has a daughter who is now 17. Oh joy! (Please insert sarcastic feelings here.) Dianne is a wonderful human being and a top producing real estate agent with Prudential Realty in Encino. Her and her partner's website is www.RobertandDianne.com As an example of her wonderful nature, her partner Robert is her ex-husband, and they are still able to work together. That also says a lot about Robert as well. He is a wonderful man and we all get along very well. So well in fact that the three of us invest in real estate together.

My own children, Ryan and Davida are grown, very successful in their own lives and have their own families. I have three grandsons, two from my daughter and one from my son. I could spend a lot of time here bragging about my children, their spouses and my grandchildren, but this is not the format for that.

For many years I provided financial coaching through my company, The Financial Coach, Inc, (www.financial-coach.com) and supported individuals to achieve their personal goals and I coached other financial professionals, like CPAs, insurance agents and financial planners to achieve their pesonal and business goals. I had several financial planning firms and construction companies as my coaching clients. I still do some work in this area, but on a very limited and selective basis.

I hope you enjoy my future postings, find value in the comments, and can take action on my suggestions. They will lead to your personal feelings of wealth and satisfaction.