Archive for the 'Numbers' Category
Utah has seen a small decline in it’s formerly hot market, as things have slipped to a slower pace. Many homeowners are finding it necessary to slash priced in order to move their homes during the slow winter months. Hopefully the market will improve come summertime.
After fighting with Utah County assessment, I was successful in lowering my property tax appraisal.
As I mentioned before, the state of Utah has decided to take advantage of the recent housing boom in order to kick taxes upward. Those that fail to fight the new appraisals may see their taxes become much higher in ‘08.
Interestingly, the county only allows you one opportunity to dispute your taxes. After that you need to dispute in court, which the county doesn’t want you to do, so they provide next to no info on how to do so.
Ever notice the constant stream of “Real Estate Investor Seeks Apprentice” signs littering the offramps of most highways here in the west. These signs are generally cheap placards with nothing more than a promise of $5-10k monthly income, and a phone number that often goes to an equally vague voice mail.
These signs are the brilliant marketing strategy of a non-accredited school known as NRU, the Nouveau Riche University…. I know, I found their French method of spelling Rich offensive as well.
NRU is expensive. Casey Serin spent $16,000 to attend a few days of classes, which happens to be more than many people here in the midwest spend on a year’s tuition and board, and in some cases, an entire degree. Part of the reason these classes are so expensive results from the huge commissions (up to 50%) they offer to students who refer others to this ’school’.
Cleverly, NRU doesn’t seem to actually pay any commission until a student has referred three others. Just two, like in Casey’s case, means not a dime.
A quick glance on the internet will reveal many websites outlining the scam and mlm tactics of this school should be enough to dissuade almost anyone not already put off by the ridiculous signs littering the highway. Surprisingly, it doesn’t, as a steady stream of signs continue to appear.
As PT Barnum once so eloquently put it, there is one of them born every minute…
Now don’t get me wrong. NRU is like the magic tiger rock on the simpsons. They encourage their students to buy real estate in bulk, and throw every spare dollar into it. Many people have made their fortunes doing so, and so it is not entirely illogical that some people could very successful at this. That said, you don’t need to pay $16,000 to learn this. You’ll likely learn more about real estate reading this blog than attending any crazy MLM seminar. In fact, I will now proceed to explain a strategy that if followed, will make you significantly wealthier.
Step 1: Save $16,000. In order to do so, you should avoid any MLM scams, enrolling in nouveau riche university, or buying a new car.
Step 2: Actively walk around your neighborhood for exercise. Talk to neighbors to be friendly, all the while keeping an active eye for any homes that might be on the market, soon to be listed, or for sale by owner. Find a home that you can negotiate down to at at least 15% under market value.
Step 3: Use as little of the $16,000 as the bank will permit to buy the home. Proceed to either fix it up and flip it, or rent it out as finances and situation permit.
Step 4: Repeat step 2 and 3 until the $16,000 is spent. Hopefully Step 3 will lead to the occasional profit, permitting you to eventually own several properties that are cash flow positive from rent after expenses.
That’s it. Simple. Are you going to do it? Chances are no. You’d rather have that new car, besides…what rational person buys more than one home? Only wealthy people try to be landlords right?
Well if that’s how you feel, then maybe going to Nouveau Riche University is the right thing to do. If it takes wasting $16,000 to convince you that buying real estate (along with hard work) can be profitable, it may well be worth it. But if you can come to that realization without wasting spending half a year’s wages…more power to you.
No one ever gets this right
This was by far the worst class I have had so far at Real Estate School. I have become accustomed by now to all manner of ridiculous, and often humorous classroom situations. I’ve even been able to handle some the boring material rather well. Everything else paled in badness compared to today.
Class started normal enough, with the usual groans as the instructor warned that today would be another math course. I smiled to see the slide projector and tape player out like in Lesson 16. Our instructor began by warning us all: “Do not let anyone move into the home you have sold until closing. Settlement is when papers are signed, but it is NOT the same thing. Until funds close, you never know what could happen”
Surprisingly, after only a minute or two of slides and this brief warning about closing, our instructor eagerly announced that he would be leaving the classroom, and that we were to remain inside and work on a closing statement, which he beamed at us, “No one has EVER gotten right”
This was cleverly intended as a means of motivating the class into trying to be the first ones to fill out a closing statement correctly. As the instructor left the classroom, he mentioned softly that some of the required information was actually missing from the closing statement assignment.
I’ll try to scan the assignment so that everyone can see how ridiculous this thing was. It was essentially a blank table, with a confusing paragraph describing some of the information which we would need in order to fill out the closing statement, and leaving the rest to our imagination I suppose.
In case I haven’t mentioned it yet, a closing statement is a summary of all the closing costs involved with the final real estate transaction, and dividing the amounts spent between the buyer and the seller. They are detailed, long, and confusing. If you’ve bought a home before, you probably scanned it briefly and didn’t pay it more than 30 seconds attention.
It should be noted that it is incredibly easy for the title company preparing this statement to make a mistake or a typo which could easily have cost you several thousand dollars. For this reason, you may want to give it another look with a calculator.
Having taken an accounting course, there wasn’t much confusing about how a Closing statement is written. They are just a collection of items, which are either credited or debited. A credit is the thing given in exchange for a debit. An example of this would be a Credit Card Company crediting you $50, in exchange for a debit placed on your account stating you owe them $50. Simple stuff. I hoped to just ignore the problem, but sadly our instructor had assigned everyone a group, and mine had decided that we were going to finish the whole thing, and get it right. It was High School all over again :-p
One of my fellow group members asked another to borrow her calculator. She stared at it for a few minutes, then red with embarrassment, whispered “How do you turn these on?” We helped her press the on button, and she was ready to do math!
I’ll spare my readers the boring details of that next hour and a half. Suffice it to say, everyone gave up from frustration, and several picked up their copies of “Millionaire agent”, a get rich through real estate book.
This initiated a classroom discussion about whether the book could really make someone a millionaire, which soon led to some classmembers asking others if they had heard of the $1000 programs which teach a person how to pay off their mortgage early, or if anyone was going to attend that free real estate seminar that was coming to town. Several of the classmembers who had heard I was writing a book on Investment in real estate asked me to attend the free seminar with them to help them know if it was a scam or not. I told them it probably was, and to save themselves the time. In retrospect, I probably should have taken down their information, not to scam them of course…but at least I’d have some people to sell my book to!
Our instructor finally returned, and shared the answers to the incomplete problem. No one got it right.
Closing Problem - This was handed out to us with the challenge that no one ever gets it right. Spending five minutes trying to answer will show you why. This is probably worth reading over simply because it provides some genuine sample closing-related documents.
Real Estate Purchase and Sale Agreement - This was provided as extra information for the above problem. It created more questions than it answered.
Exclusive Sale And Listing Agreement - This is a dated listing agreement used by agents to list a property for a seller.
Closing Instructions Sheet - This is actually somewhat useful for double checking a closing statement to make sure everyone was charged the right fees.
Blank Closing Statement - Want to try doing a closing statement of you own? Knock yourself out.
Numeros!
If there is one thing agents seem to hate, it’s math. Today when the lesson topic was announced, everyone cringed and began to search for a calculator.
Humorously, our instructor who normally presents his lessons from the top of his head, is using an antiquated tape recorder and a set of slides to teach us math.
He stands beside the tape player, pausing and playing, it begins:
“In order to solve and real estate math problem you must follow four steps:
1. Read the question
2. Write down the formula
2.5 Convert the fractions to decimals.
3. Solve the Problem
4. I didn’t bother to write down #4…but I’m guessing it was something like write down answer.
This brought about our first math problem:
“An area measures 50 feet by 100 feet, how many square feet is that?”
We were given 3 minutes to type away madly at our calculators. I caught some glances as I found myself giggling rather hard. Maybe I’m just too good at math.
.2 x 4 = ?
We were told that in order to solve this problem, we will have to move the decimal, and solve for 2 times 4, then move the decimal back. Tricky! Now I know that .2 times 4 is .8! I’d remember that, but hey, I have a calculator, so really no point. Speaking of which, after 5 minutes of class, I put my calculator away.
I’ll spare you the next part of class in which we were shown simple geometric methods for calculating areas, and given extraordinary amounts of time to solve sample problems. It was mildly amusing to see the instructor ask for volunteers to come up and solve the samples, and to see the volunteers come up, get halfway through an intricate math problem such as 8400/320, and then give up and sit down. How they managed to fill the board with so many numbers is beyond me. It took four attempts before the instructor helped out.
After an hour of this, someone groaned: “This is not a fun class”
Towards the end of class we were treated to one of the class members (a public school teacher) angrily confronted a group of spanish speaking students towards the back of the room, asking what their excuse was for talking so rudely while the instructor was speaking. He also threw in that it was particularly rude for them to be speaking in a language that no one could understand. I disagree with that, I do understand Spanish, and I think I found their constant chatter even more annoying for that very reason…seriously nothing worse than having to listen to hilarous jokes and not being able to laugh (I was still embarrassed about my laughing at the beginning of class.) They sat in stunned silence for the rest of the class, only speaking in quieted English while trying the problems.