An excellent website to research the real estate market

As a real estate investor, it's crucial to gather
information about the city to decide whether the market you're interested to invest is in growing, declining or stable phase. The fundamental data include: population growth, the job growth, unemployment rate, cost of living, cost of housing, household income, demographic data, crime rate, climate, education level, property tax rate, percentage home rented vs home vacant, on and on... Basically, the more data you 're able to collect, the more educated you become about the market, and more intelligent decision you could make about your potential real estate investment. These data could usually be found in library or in the city's website. However, most of these data are not layout in a easy-to-read format. You might end up spending a lot of time to gather the information together from different sources, and process could be very tedious. Tonight, I found a excellent site provide these important data for most cities in U.S in a very easy to read and search format. WWW.BESTPLACES.NET It's very easy to search information about the cities and you can even compare it with national average data. The membership is FREE. Check out this site whenever you need any data about the city you're interested investing. It will definitely help you make a better decision about your investment.

Subprime mess and what can you do.

Three years ago, when mortgage interest were at historically low (~4%), many people take advantage of this incredibly low rate and refinance their home with a fixed period of low interest rate. Many choose the 3 year or 5 year fixed program and because of the lower monthly payment, they could afford the house otherwise wouldn't qualify. Now after 3 years, many of these short term fixed rate program become expired, and mortgage rate has increased to 2-3% higher. Many people are experiencing a payment shock! A 2% increase in interest for a 400,000 home could means as much as 1000 dollar increase in the mortgage payment. This is a big burden and lot of people just couldn't afford it. Many end up losing their house in foreclosure. This is what you should do if your loan program is about to expire and you know that you will not be able to afford the payment increase: CALL YOUR LENDER to negotiate a solution. Many people have payment behind too long (3-4 months) and the bank couldn't do much to save you. It's too late! But if you call your lender before you have any late payment, and explain to them your situation, many banks will try their best to work with you to help you continue to make payment. It's bank's interest to reduce the default property. Ex:the bank can extend the current interest rate for one more year, or the bank can gradually increase the payment such that you have more time to adjust and save for payment. Foreclsoure can be avoided! Dig into your statement and call the 1-800 to initiate the talk with bank. Give the bank time to come up a solution. If you waited and you have late payment already, the bank most likely cannot help you but foreclosure your property.Do this tonight if your mortage progam is expireing soon. Don't wait!

I don't need life insurance!?.. Really?

Tonight, I want to talk on the subject life insurance. Many people said " I don't need life insurance now, I'm single, I 'll wait few years until I have family" I don't agree with this point. In fact, I believe buying life insurance is the first fundamental step to take in order to build wealth tonight. It's more important than your retirement account. You should get one as soon as you get out from college and start a job. Let me tell you why. First, from the cost point of view, the younger you're, the cheaper the premium it is. The premium is calculated based on three factors: 1)Age, 2)Health 3)Policy amount. As you can imagine, you're usually healthier when you're young than when you're old. That's another factor to drive the cost down (save you money) when you buy early. Also, it is possible insurance company deny applicant because of health problem. Once it rejected, a person may never be able to be covered for his/her whole life. Go get it when you're young and healthy. Second, from a emotion point of view, isn't it one of your ultimate reason to make a lot of money, build a lot of wealth, is to share all the joy and wealth with your family, your parents, your brother, sister, your spouse, children, etc.. What if (touch wood) you leave the world too early? Wouldn't it be nice that you know at least you're leaving something behind to your loved one? At least your parents spend tons of money to raise you up! It just make sense to 529pm you should get coverage as soon as possible. Don't worry the cost! I've seen policy that is as cheap as 10 buck per month for 100,000 coverage. Your insurance agent should be able to help you.

Buy high sell higher

The old folks saying " Buy low sell high" just don't quite work for me, especially when it comes to stock investing. The biggest problem is when you buy low, you really don't know if the price has hit the bottom or still going down even more. Nobody knows. Even if the stock price is not going any lower after you bought, the second problem is when the stock going high again? Will it be next week, next month, next year or in some extreme case, never? So, "Buy low sell high" is a pretty risky method for me. Instead, I follow the method "Buy high sell higher" A things in motion tends to stay in motion. When a stock is at the 52 week high, it tends to keep getting higher and higher. Then, I use (the system ) to sell portion of my holding one at a time to capture the gain and continue enjoy the ride. Of course, nothing is guarantee in stock market. We just have to use the method that has higher chance to win than to lose. Buy high sell higher works out great for me.

7 things to consider before buying your first house

Tonight, I want to share the experience I gone through of buying the first real estate property as my own primary residence. There are things to consider before you jump into the market. Let me do my best to summarize below:
1) Emotionally be prepared. Buying a real estate is a long term commitment. There are sacrifices. Ex: Unlike living in apartment or renting a room, you can't move around every 3 to 6 months whenever you like. Make sure the property you're going to buy is really the place you want to live in for the next 3-5 years
2) Carefully calculating your budget. Before you consider to buy your own place, you should know very well the expense that incur about owning a real estate in your area. I blog on this subject few weeks earlier, check it out
3) Know what you want. After looking into the expense, you should have a brief idea how much the property you can afford. A qualified mortgage agent can help. Then you decide which area and which type of property you can afford and like to live in.
4) Consider a roommate to help out. I was a single when I bought my first condo. My idea is to rent out a room to get extra money to pay for my expense, so I can save more money for other investments
5) Select an agent that understand your needs. Interview with agents, check his/her background, ask him what is his speciality. If you're first time buyer, I strongly recommend you find an agent who has expertise working with first time buyer. Finding a right agent is crucial part of the whole process, spend time to select agent. Do not just go with an agent because he is your cousin or neighbour. Try to ask for referrals if possible.
6) Prepared to save down payment. The norm in today's market is 10%. Most banks require the source of down payment to be in your bank for at least 2 months history. If down payment is an issue, consider borrowing money from your friends or family members at a market return. Using the house as a collateral if needed. (Most private money lender charge + 10%) Create a deal such that both you and the borrower can benefits.
7) Stay clam. Find the right property, finding the right type of loan, working with the right agent, preparing the down payment, structuring an offer, negotiating with the seller, closing the transaction etc, ....are long and complicated process. Expect to run into problems. Don't let your emotion make decision, use your judgement. You're making the probably biggest purchase in your life. There are many things to learn in the process. Be positive and look for the bright side. After all, buying real estate is proofed to be one of the most rewarding and stable investment you can ever make.

Super lucky day!

Today is probably one of the most luckiest day in my stock trading experience. One of the stock I bought few months ago, PWI, skyrocketed return with over 30% gain in today's trading session. The reason is because it has entered an agreement to be acquired by United Arab company, with purchase price 26.75 per share. Stock immediately jump from 20.50 to 26.75 in today's opening. With this dramatic jump of the stock price, I sold the stock as soon as I see it in this moring to capture all the gain. I'd say this is not skill involved, it's just pure luck on this stock I own. It's feel good to be lucky $-)

Create Value in Real Estate

When I buy a stock, I ask myself "What can I do in this moment to increase the value of the stock I own?" Answer: Tell all my friends to buy the stock I own and hope my friends will tell his / her friends to do the same, and eventually, the stock's demand increase and it's price value increase. This is certainly not very practical if not impossible. Basically, the answer is NOTHING. One of the biggest advantage in investing real estate is the buyer can have many many ways to increase and create value of the property he / she already bought. It's only limited by imagination. Tonight, I want to share a few classical ways an investor can do to add value to the pieces of property already owned

• Add number of bedroom or bathroom. The more rooms your property has, usually the more it's worth
• Convert a open carport into a enclosed garage
• Remodel the kitchen and bathroom. If you have limited budget for remodel, always start with kitchen or bathroom first. These are the two places most buyers pay attention
• New paint, New Carpet, New fixtures, New lighting. A minor improvement detail could significantly add value to the property.
• If your property is rental or multi units, research into the rental market and consider increasing the rent whenever possible. Increase rent could increase the property's value dramatically. Vice verse, reducing your monthly expense will have a positive impact to the value as well.
• Consider an expansion, especially if you 've big lot. You must get permit to make it legal and recorded properly with the county to make it official approved. Careful budgeting is vital to monitor the anticipated value increased after expansion is more than the cost itself.

These are just few example I've considered to use. The goal is to THINK VALUE. It's only limited by our imagination. Let me know what have you done to increase the value of your property?

Full Doc vs Stated income

When I apply the loan for my investment property, my broker will ask me if I want to do full doc or stated income? Full doc require full job verification, income proof (W2), tax return in past 2 year, 2 months bank statement to verify source of down payment , etc to show the lender you're fully qualified for the loan. The interest rate is more advantageous when full doc is used. However, in some case, when the broker see that full doc is not possible. Stated income is used. This mean the income is merely stated and no proof required. The interest rate in Stated income is usually 0.5 pt to 1 pt higher than the Full doc, but the process is much simpler for borrower to get approved. Stated income is very popular during the last 2 year when market was HOT. However, due to recent sub prime market hit, many lenders has tighten the guideline and disallowed many stated income loan. The bank see the stated income loan are too high risk. I think this restrictions will further depress the already slow real estate market.

From dollar to a penny, Penny stock!

Tonight, I want to blog about the experience I had recently with one of this so called-" penny stock". Few months ago, one of my friend told me if I want to make big money in stock, I must own some potential penny stocks. The reasoning is that because they are cheap, usually ~1 dollar or less, I could own thousands of stocks and still very affordable. Plus, when stock move up a only few cent, my return is already skyrocketing. After listening to the reasoning, I said, "Sounds great, I will buy one to try!" So, I buy my first ever penny stock in June. This is the one I own.
Well, if you click on the link, you know my stock is not very pretty with this penny stock. I bought it at 1.40 and today's 0.36. That's 75% drop in 3 months! Average 25% drop in a month, scary! I don't remember I own a stock has such as terrible drop rate in my whole 5 year stock investing experience. Here are few things I learn about penny stock
1) Because of their extremely low volume trading, any single transaction could dramatically increase or decrease the price. The stock price therefore could get manipulated in speed of sec.
2) Market order is usually not allowed with penny stock. Only limit order is accepted
3) Because of their volatility, broker charge a higher commission cost compared to other normal stock
4) It's true that return could skyrocket in a matter of days, but the reverse could also happen. It's an extremely risky business
Well, my first ever owned penny stock just don't work out all that great for me. There are plenty of valuable stocks out there to choose, my recommendation to you: Consider other type of opportunity, you don't need penny stock to make money in stock. If you do have to buy penny stock for whatever your reason, do not put in 5% or more of your capital in it.

Two indicators to stay out stock equity market

While everyone of us want to make the big return in stock market, sometimes, it's more advantageous to stay out the market when market become unfavorable and decline. Two great indications to signals I use are :
1) stay out market when interest rate is rising. When rate go up, business will have higher cost to expand and growth is slowed. Also, think of stock and bond competing money from investor. When bond rate increase, more people will buy bond instead of stock. This could means stock's demands is less and price tend to fall. I usually compare the interest rate in the beginning of each month and compare its with six months ago. If the current interest rate is slower, I'd be more cautious to get into stock market
2) stay out market when 6 months treasury bond is higher than 10 year treasury bond. This is called inverted yield curve. Normally, the longer the bond period, the higher interest rate investor is supposed to receive. However, in some unusual situation, short term bond rate happens to be higher than long term bond rate. This phenomena could indicate that recession is around the corner. It'd be not a bad idea to leave the money in money market or saving account until the 6months treasury bond is lower
These 2 signal applied only to U.S market. If you 're investing in international market, these 2 signal does not has much correlation and not applied. Interest rate is dropping, yield curve is normal, so I'm investing more into stock market these periods.

Full force into equity market in next 2-3months

With FED reducing the rate by 0.5%, stock market has soared last two trading days. My portfolio has took the biggest increase of the year, rising almost 7% in last two trading days. It's exciting! I 'm going to put in more capital into stock market to capture the growth. Few area I will be focusing are ETF, Value Stock, Stocks that pay dividend, and using option to turbo-charge the return. I'm aiming to make another 10% (min) gain in my overall portfolio. I will give you update from time to time.

5 tricks to reduce your tax auditing chance.

No matter you like it or not, tax will be the biggest financial burden everyone could face. While we all have to report an honest and accurate tax filing every year, it 'd be nice to reduce the chance of seeing ourselves being audited by IRS. It's stressful to deal with and likely you end up paying penalty if they found you've missed reporting some income here or there. So how do we reduce our tax auditing chance? Few weeks ago, I have a dinner with a friend who is a certified tax consultant. He share with me 5 great tricks everyone can do to reduce audited chance. Check it out
1)No rounding number. EX: You have item X want to claim as expense. If you report this item X cost you 100 dollar, IRS know you're most likely just estimating. But if you put 97.32 for the item X, IRS will believer more this is the true cost you pay
2)Get extension. The rational is IRS assigned majority of their tax auditors for the regular tax season. Only quite few limited auditors are assigned for the extension period. And therefore, your chance being picked is reduced
3)Make it as a biz. Most auditors are familiar with personal 1040, the most basic tax form employee fill out. Not all auditors (especially the newbie) are not familiar with LLC, LP, S-crop or whatever complicated business structure you've. Auditors are just human, they won't bother to look at stuff that they not know very well
4)Keep number in line with national average. EX: you bought a desk for your office, and want to claim it as itemized expense. It's pretty normal to say this cost $89 bucks, but not $890 dollar
5)Keep all your receipt. In case you do get audited, when auditor see you've such a complete receipt and record, he knows that you're most likely honest with your tax filing and move on to next less organized target.
It makes sense to me, does it make sense to you?

I finally did my cash out refinance.

Few weeks ago, I mention in on of my post I have a difficult time getting refinance of my condo. I bought this condo with 20% down pay. After few repairs and remodel, I put the condo back on market for sale, aiming to flip it in short period of time. However, market turns and demand affected quite badly by the sub prime turmoil. After 2 months of listing, I wasn't able to sell it the price I wanted. I decide to take it back and get a refinance to get back my original investment as cash so I can move on the next investment projects. It was very difficult, most bank refuse to lend me money since the house was just listed on market. The bank's underwriting guideline was very stricted. After countless attempt of visiting banks and mortgage brokers, I finally found a broker who found the Bank willing to loan me money. This is ING lending. After all the process (which take about 1 months), tonight I finally get the refi done and able to pull out most of my original investment. My interest was 6.875%, fixed for 5 yr ARM, interest plus principle payment, with 90% Loan to Value ratio, one loan. Not bad.

FXI . A simple way to capture the CHINA growth

If you ask me which stock I'd buy today to has the highest possibility growth in the next 6 months, I'd definitely tell you to consider FXI. It is an index fund designed to represent the performance of the mainland China equity market that is available to international investors. The price YTD (Yield to date) increase is just SPECULAR!40% in 9 months. A lot of people say China stocks has gone up too much, and bubble soon. But my feeling is that the party is still far from over. With strong GDP growth China experiencing, and the bullish environment in the overall economy, China stocks is continuing to grow. 529pm prediction: this growth will continue until the summer next year, which china will hold the Olympic game. After Olympic game 's over, FXI may have major price correction. So, my strategy now? Jump in and enjoy the ride!

Can a $100,000 single family house really cash flow ?

Tonight, I went to seminar presenting opportunity investing in Dallas single family house (SFH) opportunity. House price of a 3b2b is around $100,000 and the rent is around $1000 dollar a month. At first glance, this look like excellent postive cash flow producing property. This is the breakdown of the calculation
Rent: $1000
Mortgage: $525 (assume 7% interest only, 10% down pay)
Insurance: $50
Tax: $250 (assume 3% of property tax)
Total PITI Expense in this case is $825 per month
So, the positive cash flow we're looking to get is $175. Multiply it by 12 , you get annual income 2100 a month. Dividing 2100 by 10000 to calculate your return of investment (ROI), you get 21%. This seems VERY Impressive. Plus, the potential of the house price appreciation over years in future. Look like a deal!?
But wait, let's look into further, first since I will not be managing it myself, I will need to hire property manager to take care renting. 10% of the rent is deducted. This reduce your annual income to only $900 and ROI to only 9%. Well, it's still ok, at least it's still comparable to stock market average return. But, here comes the BIG BUT, there could be unexpected expense that can pop up once a while and eat up all your cash flow. EX: A roof repair cost 2500, a carpet change needed cost 750, a paint need to be repaint once a while cost 500, heater breakdown cost 300, a window issue cost 350, a foundation problem cost 3000, the list could go on and on and on.... So, I'd say the reason to buy this deal should not be purely for cash flow. The profit is too slim to see them working. We should look more into the equity build up potential as a consideration and investment objective.

Staging is a MUST

Staging is a MUST if you 're looking to get top dollar in your investment property when you're ready to sell and capture the profit. The picture you see is one of my property that my agent decorate before we put on the market. Decorating is like helping a model dress up before presenting to the world. It can turn an average house into fantatistic and high class house. Buyer will like it and hence, you have better bargain power to ask for your price. Staging does not need to be expensive. Negotitate with agent to include it as part of the listing service. Not all agent willing to do that, interview few more until you find the one. Also, check his/her pervious work to see the quality of his staging skill. If you couldn't find an agent can do a quality staging work, consider hiring a staging company to do the professional job for your property. The budget should be kept under US 1000 dollars. It will be worth.

Do you have a PLAN?

In order to build wealth tonight, we must have a PLAN. Let me break it down and I hope you could start Planning your success tonight.
P stands for PASSIONATE. We must love what we do to become successful. One reason I couldn't see myself get a promotion from my job is because I really don't like my job. So, find something you're passionate about, that you really love to do. Money will follow.
L stands for Leverage. Leverage other people's resource (time, money, skills, talent, knowledge, network, creativity, reputation, the list is really endless..) to help them help you. Communicate your vision to inspire other people to join your team to help you achieve things that would otherwise be impossible by doing it yourself. Focus on long term relationship than short term profit. No one can become successful without other people's involvement in one form or other, so use Leverage!
A stands for ACT. Take massive action no matter you're ready or not. The prefect someday will never come, Take Action now.
N stands for Never give up. Never never give up. Winner never quit, quitter never win. Learn from the mistakes we make. Mistake should help us become smarter, not weaker. The only way we lose in build wealth game is we quit, so don't quit.
What's your PLAN right now?

What should we do when we see a gain in a stock?

This is a million dollar question, give it a serious thought for this question will help you make more money in stock market. Usually there are two things people will do.
1)Sell it. But wait, what if the stock price continue to rise? We will be kicking ourselves of "selling it too early" I used to own this one stock NVDA. After I sold it for a small profit, the very next day, the stock jump over 10% in few hours trading session. I just left regret and watching it go up with no stock on hands.
2)Hold onto it. But wait, what if the stock price tumble after reaching some new high. I had an experience which the stock price go from $5 to over $18 in a short period of time. I was so ignorant, thinking the stock will hit 30 dollar soon. So, I didn't sell a single share. Well, the stock crash down after some bad news earning! Now the price is sitting around 3 bucks!
Obviously, the above 2 ways are not very intelligent ways to handle the stock when it has a gain. Now after all my bad experience, I will tell you the 3rd way to help you build wealth.
529pm: sell a portion to lock in the gain gradually. EX:
When stock has risen and reach more than 7-10% of original buying price, you should sell half of the stock to lock in your gain.
When the stock price has reached 12-15% of the original buying price, you should sell a quarter of stock to lock in more gain.
Finally, when the stock has made 20% or more advance, you should sell the remaining quarter to capture the remaining gain.
I do believe that's the best way to answer the questions on topic. What's your thought?

23.3% return in less than 20 days

Tonight is an exciting night for me! I make my first profit in trading option! I make an awesome 23.3% return in less than 20 days by holding this ETF EWH. 2 months ago, I met a friend who is a option trading guru, he told me once I understand how the option trading work, I will never go back to trade stock. After briefly listening to his wisdom, I decide to dig in more the subject and learn by just doing it. The result was very rewarding. For those who has never trade option before, let me give you a few ideas to get started.
1) Talk with your friends who has experience on this subject and ask how he/she did it (Remember, your network determine your networth. It's time to build your network and get to know more people with experties in trading option)
2) Go to http://www.888options.com/ for great online option education. Most of the class there are free and very informative. You should gain a solid foundation after taking class over there.
3) Keep it simple. Focus on 1 to 2 strategy to do your first option trading to gain some experience how it works. I'd recommend buying call at a lower price with longer expiration date, and sell it at a later higher price as your first trade. Once you understand the mechanism, you may consider more advanced method like writing call or buying put.
4) With tremendous amount of information online and offline (books) on this option topic, you really don't need to spend huge amount of money to just get started and understand how it works. Learn as much as you can without spending too much money on some ebook or get rich quick program. It's not something you need to have a degree in order to make money out of it.
5) Talk to your broker and apply an account to trade option. I gain tremendous information from my broker when I took the time to visit his office. He give me useful advice and a little booklet that I can read and learn. They're very willing to teach you, because they want you to trade as often and as successful as possible.
6) Just do it. Start small, (keep it less than 500 bucks) just to test water and observe.
Good luck in your learning curve in option trading. It could be a powerful way to leverage your way to wealth!

Increase your net worth by increase your network

There is an old saying "your net worth is the average of 5 people you hang out with every single day" One of the critical factor to increase your net worth is to increase your network. I work in a traditional company where most people around me are employee type and has not much interest to create extraordinary financial success. Therefore, I like to go to seminar to meet with people, who has the similar desire like I do to get ahead financial life. Every weekend, I like to go on http://www.craigslist.com/ under event section, I search for real estate, stock, Internet business opportunity, networking group to attend. Most of the event are during weekday 529pm. I make a habit of going to event at least once a month (although I should have gone more often) to meet and network with more people. Some of the people I met become my good friend. It is fun, educational, and could be a rewarding way to spend your 529pm to develop relationship and expand your circle of friends who may give you a helping hand to build wealth. You may consider doing this activity at your 529pm.

power of LEVERAGE

Leverage is probably the most important word in investment and business world. With the proper use of Leverage, one can achieve success and come out miles ahead compared to others who don't. It's just critical to understand the power of Leverage.
Leverage: the use of small initial capital to gain a very high return in relation to its capital by using other people's_____ (use your imaginations to fill in the blank)
In real estate investment world, we can use leverage by using other people's money to complete a transaction that would otherwise be impossible. EX: We borrow 90% from the bank and put in 10% down pay to acquire the property. It is a 9 to 1 leverage.
In business world, boss use leverage by using other people's time to complete job that produce reward more than the salary paid out. EX: we get paid by 50,000 annual salary and we help the company bring in 100,000 revenue. It is a 2 to 1 leverage.
Of course, leverage work both ways. It has negative effect if not used properly. In pervious example, if an employee produce instead only 10,000 revenue to his boss, the business is actually lossing more money by hiring more people. We have to manage the leverage closely to make sure it's always in full force working for us.

Assest protection tips

Tonight, I went to a real estate seminar which taught the subject on assets protection. I thought it was an excellent information and want to share all of you what I learnt tonight

1. Sole, Joint Venture, Teannet In common are bad way to hold title
2. General partnership is the worst way to hold title. You may lose your personal assets if your partner get sued! Double liability!
3. Land trust offer no assets protection
4. LLC or LP is the most recommended way to hold title.
5. Two kinds of attack: A) Tenant fell in your property and sue you B) You had bad car accident and get sued
6. LLC can protect you from attack B, but not attack A!
7. LLC is most recommended to be formed in Nevada or Wyoming. These two states has the best state law in the property owner's interest.
8. You should buy a Umbrella insurance policy to cover your personal liability.
9. Consider putting your brokerage account under LLC instead of your own name to shield against potential lawsuit
10. After transferring your title from personal to a LLC, don't forget to inform the insurance company for the change
11. Use 1 LLC to hold 1 property in the state, and have a central LLC manage each individual LLC. You're the ultimate manager of this one central LLC
12. Debt is good way to discourage creditors.

For more information, I'll recommend you to visit the speaker for tonight's seminar www.sutlaw.com Garrtt Sutton is very knowledgble real estate attroney.

Don't wait to buy real estate, buy real estate and wait.

Don't wait to buy real estate, buy real estate and wait. That's my way to build wealth. Imagine we have the opportunity to buy real estate 10 years ago, how many will you buy? As long as my rental income can cover ALL expense (PITI), I'm going to buy as many as possible. Really! Although it becomes harder and harder to find this kind of deal as price has increased quite dramatic over last several year, I'm still constantly searching for opportunity every single night. My goal is to keep holding, holding, and holding more and more properties in excellent area, and patiently wait for the long term appreciation in 3, 5 or even 10 years.

Turn a 2bed2bath into 3bed2bath

3bed2bath single family house is usually the most desirable type of property in most cities. Married couple who has 1 to 2 kids, or plan to have a kid in future will likely to pick 3bed2bath over other type of floor plan. Therefore, 3bed2bath is always filled with high demand, and hence, the value will be driven up.
I have a friend has a creative idea to make some good money by focusing this niche market. He will consider any smaller property to buy and turn it into 3bed2bath. Because it has less demand, a smaller property 's price range could be significantly lower. In one of his best deal he creates, he locates a property with 2bed2bath that has asking price 100k less than a typical 3bed2bath in the same neighborhood. He finds professionals to submit plan for legal construction permit, and contractors to build an additional bedroom with 100 sqft. (In fact, it's a pretty small bedroom...) The total cost is only 30K. After its completion, he quickly put it on the market advertise it as a 3bed2bath, which is much more desirable now. He make a handsome profit 70K in short period of time by using this simple and obviously working strategy.

Formula of Wealth

As we're in process to build wealth tonight, we should put some thought on what does wealth really means to us? How is it calculated? I put in some thought and want to share this simple formula of wealth which make sense to me.

Wealth= ((Money + Time) * Return) - (Inflation + Tax)

This formula apply both investing and starting a business. As you can see, one must put in either time or money, not necessarily both, as our initial contribution to build our wealth. Without either of these two components, wealth can hardly be built. The money is the amount you willing to set aside to invest or start a business. The time is the amount of time you willing to spend to do things that could help you closer to your financial goal, ex, reading my blog (529pm) :D ! The return could be postive or negative. Different vehicle offer different return, we just have to train ourselves to select the best one match our objective and yield the highest postive return. Inflation is a factor which we can't do much to control. It varies from countries to countires, in U.S, we're sitting around 4% a year. TAX is another big enemy which will erode our wealth. We must always think how to legally and ethically reduce the tax effect from the build wealth formula. There you have it, does it makes sense to you?

Do this before you sell your property to reduce the risk!

In real estate transaction, one of the major tasks buyer need to do is to inspect the property condition completely. The two reports buyer look for are 1) Home inspection and 2) Termite report. If there is any major deficiency reviewed from the reports (ex: toilet sink is leaking), buyer could go back to the seller and ask for a repair or reduction in price to address the issues. As a seller, you would want to make sure the buyer is satisfied with your property's condition, so the buyer can close the transaction on time. This issues found from buyer could negatively hurt seller's asking price position, delay the transaction, or even worst, buyer back out and drop the offer.
How could a seller prevent this type of problem exists? This is what I will do: I hire a professional home inspector and termite inspector to conduct a complete reports on my property before I put it to market. The advantage is that you could fix the problem beforehand within your budget. When buyer ready to inspect my property, I simply provide the reports I already completed and tell them all the major problem is already taken care of. Most of the time, buyer will accept the finding since this is done by professional. The cost for me conducting the report could run as high as $500 dollar. But it's all worth since I eliminate the risk the buyer not satisfied my property's condition and lost interest of my property.

Rule of money. Rule of 72

To become a successful investor, we must be constantly thinking how to compound our money so it can keep growing, growing and growing to create wealth for us. One very very powerful and simple rule to calculate how fast the money compound is called RULE of 72, or I call it rule of money. This rule is invented by the greatest scientist all time. Mr Albert Einstein. I think this rule is even more profound than E=MC^2!

Here's how it works,

Let's say you invest 1000 dollar into a investment account that earn you annual 4% of interest, you wonder how long it will takes for the initial capital to double? Rule of 72 can help you determine it quickly. You use 72 divided by 4, you get 18. This means that after 18 years from the time you invest, your initial capital will double! In our example, after 18 years, your money will become 2000. Please note that we assume we pay no tax and we reinvest our interest each year.
Now, look at the case on the top of this post. Imagine a person have 10,000 to invest at age 30, he put in some kind of tax deferred account which allow money to grow without paying tax until he reach 66 for retirement. Can you see how the small increase of the of annual interest can product A BIG BIG BIG difference over a long period of time? This is the power of compound interest! What if the annual interest is 18%, can you figure how much money will that be at age 66?