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To Own or Not To Own?

January 10th, 2010 Joe No comments

It is a big question in todays market.  Many people are continuing to rent because they fear if they buy a home it might drop in value and they will have lost thousands of dollars.  I am here to tell you that your concerns are valid and real.  Many people who bought in the last 10 years are sitting in a home that is worth half the amount they paid for it.  This is a nightmare.  So the question is To own or not to own?  First I believe that the market is starting to stabilize and within the next year is a great time to buy.  Especially if you can get in on the tax credits given out by the federal government.  I believe that the home you live in should not be looked at as an investment and here is why.

1. You need a place to live.  This cannot be argued.  Everyone needs a place to live.  Just make your home your home.  Who cares if your house is worth 10X what you paid for it.  That means all the other realestate in your market is too.  If you were going to “cash out”  you would have to move to a new, less expensive, market to really reap the rewards.

2. If you rent for “a few more years”  you always feel misplaced and like you are on the edge of leaving or moving or doing something else with your life.  It gives you a sense of uncertainty.  This can cause fractures in other areas of your life.

3. In a rental you are always throwing away the rent.  Right now your money has not gone further in years.  You can buy great houses for such great prices.   Every city in the country has amazing deals.

4. Interest rates have never been lower and they can not get much lower.  That means there is only one other place they can go.  Locking in a fixed rate right now is the best time in history!  This alone will save you thousands over the life of your mortgage.

5. Right now in many cities you can actually buy for less than you can rent because people bought rental properties with a mortgage 3,4,5,8 years ago and they have high payments.  Now those houses are worth half and they still have high payments.  Investors are rarely willing to rent a place for less than the payment.  So that means your payment to buy is going to be 30%-50% less than renting.  What if you took that extra $400-$1000 and put it in your IRA or other savings account?  Do you think after 30 years that would be a nice little chunk of change?  It would!  In fact if you saved $550 a month for 30 years with an average rate of 5% you would have about $40,000 dollars!  Thats a little incentive to buy.

6. Finally, owning a home is the American dream for a reason.  Having a place to belong and make yours is an amazing feeling.  If you are in the market for a home do not wait.  Your home is not an investment its your home.  If you are going to invest in real estate do it in some other way.

Protect Your Money

August 27th, 2009 Joe No comments

These days in the headlines we hear about recession, and depression. It seems everyday that you hear about someone scamming people or ripping them off. There are really more ways to lose your money than there are fish in the sea. Money can be there one minute and gone the next. I was recently reading the article here on the New York Times talking about the fall of some of the nations super wealthy. The part of the article that interested me the most was about John McAfee the mastermind behind McAfee Security Software. His wealth was at one point over $100 Million Dollars, due to the free fall of real estate and wall street he is down to $4 Million. That is a 96% fall. You here this story all the time. You even hear this story in good financial times. _____ lost all his/ her money in a matter of seconds after he worked his whole life building his wealth.  This brings me to my point. Protecting the money you have is step two of getting rich and staying rich. You do not want to spend your time building your wealth just to lose it to a scammer or market downturn. To avoid having your name associated with a story like this you want to make sure you are educating yourself about the investments you are making. There were many people screaming at the top of their lungs that we were growing too fast in the real estate sector. In fact there are stories of guys making millions because they knew the fall was coming and they invested in a way to take advantage of a fall.  Many people put their trust in “financial experts” to invest their money.  This unfortunately is not always a good option.  I am not saying that their are no good financial advisors or money managers out there, I am just saying that if you are getting advice from one make sure to thoroughly investigate the advice given.  The days are gone where you can put a percent of your paycheck in a diversified portfolio and expect decent returns.  It is important to work and educate yourself about your investments on your own.  John McAfee made $100 million dollars investing in a business he knew inside and out.  Many people get complacent once they have made a little money.  They put their money into investments and relax.  Insert story here.

Protect your hard work through educating yourself on your investments.  Always have investments that are on the ultra safe side.  I keep about 30%-40% of my net worth in ultra safe investments.  This way I know that if everything else goes to zero I still have a third of my money.
Education is the reason I started writing here. I want to hash out information and ideas with you, as well as share anything I have that might benefit you. In the mean time I would love to hear from you in the form of questions comments and information you would like to see discussed here on Average Joe Millionaire. I have a back log 50 posts long so stay tuned, I am writing as often as possible. Better yet subscribe to the blog! That way you get updates when I post.