3 Questions That Can Help You Prioritize Financial Goals

I recently read the 8 smartest things to do with your money on Business Insider and instead of being encouraged I finished the article overwhelmed. All of these financial suggestions are wise but how do you prioritize them? Some are obvious like taking the free money your company offers with a 401k match, but what […]

Continue reading →

10 Ways to Find a Deal on Real Estate – Part Two

#6. Find Houses Not Yet For Sale

Have you ever walked past a home that looked to be in complete disarray? The lawn is a foot high, there are weeds growing everywhere, and there might even be boards on the windows. This house is screaming, “Buy me for a deal!” The only problem is, there is no For Sale sign in the front yard, so how can you get in touch with these people to see if they want to sell their house?

Every home owner pays property taxes, which means that every house has registered information with the city where it resides. All you have to do is:

punch the address of the home into your city’s database
click on the parcel number next to the address
and find the name of the owner (as well as many other interesting facts about the property)

This can easily be done with any property that interests you. From here, you can either send a hand-written letter to the address listed in the database (sometimes the owner has a different address than the actual home that you spotted), you can walk up to the property and try to speak with the owner, or you can find their home phone number through the white pages (since you now have their full name). They might not be at all interested in selling their home, but for the ones that have considered it, they might just give you a screaming deal so they don’t have to mess with a listing, a realtor, or the price haggling. This might just be your ticket to finding a deal on real estate.

#7. Visit the Pre-Foreclosures

This option will take some major guts, and to be honest, I’ve never done this. But, when you look at homes on Zillow or Trulia, you have probably already seen homes that are listed as a pre-foreclosure, which means that they probably missed a payment and are trying to catch up to remain current with their bank. Some of these pre-foreclosure listings may be a complete mistake and others could already be resolved, but a handful of them might be drowning in missed payments and are looking for a way out.

The best way to approach a pre-foreclosure owner is to knock on the door, mention that you love their home, and ask if they’ve ever thought about selling. You really never need to tell them that they’re nearing foreclosure if you don’t want to – they probably know that already and they might be thrilled to see you, a potential buyer, that could free them from their current nightmare. This might just be your ticket to find a deal on real estate. It’s never easy, but it’s certainly an effective option.

#8. Look For What Could Be

A house may be listed as a 2 bedroom, 1.5 bath and priced accordingly, but could it be more? There are quite a few 1.5 story homes in my area that are listed as a 2 bedroom home – one on the main level and the upper area is a large master. But, instead of a large master bedroom upstairs, many times these upper areas can easily be converted into two bedrooms, which quickly turns the home into a 3 bedroom home. The same is true for bathrooms. Perhaps that half bath can pretty easily be converted into a full bath, thus creating a much more valuable home.

With this option, you aren’t necessarily getting a deal on real estate when you purchase it, but you can pretty easily transform it into a much more valuable home, thus creating equity soon after you sign the deal.
find a deal on real estate#9. Get a Quality Inspector

The typical home inspector walks through a house and lets you know what’s not up to par with it. They hand you the paperwork for your review, and their job is done (as they hold out their hand for their $300). This type of home inspector is a dime a dozen. Avoid them. They aren’t worth the money.

What you want is a home inspector that will ensure that you’re getting a deal on real estate. Not only should they be pointing out potential hazards in the home, but they should also provide solutions and the likely cost for these solutions. Find a home inspector like this and you’ll be more likely to find a deal on real estate as you’ll be aware of all the issues and future costs of bringing the house back to code.
#10. Flash Some Cash

Finally, you can more easily find a deal on real estate if you have some cash to flash. Since it still isn’t easy for many to get approved for a loan, sellers that know you have cash are more likely to flex on the price (since they know the deal will go through, and will go through more quickly and smoothly than someone that has to dicker with the bank for the money). When you’re ready to make an offer, simply let the seller know that it’s a cash offer. Even though your bid might be slightly lower than someone else’s, it might just be selected, which means you’ll get yourself a deal!

10 Ways to Find a Deal on Real Estate

Are you trying to find a deal on real estate? With the housing market so hot these days (see the national housing trend below), it can seem almost impossible to find a deal on real estate, but no matter how hot the market may be, there are still plenty of ways to find yourself a deal.

Some people walk through a house and everything has to be pristine for them to even consider purchasing it. This is most certainly NOT how to find a deal on real estate. So how can almost anyone find themselves a deal? Check out these 10 methods and you’ll likely save thousands of dollars on your next home purchase.

#1. Find a Quality Realtor

As a buyer, you can hire yourself a realtor and pay absolutely nothing for their services. This is because their commissions always come from the seller (both the seller’s agent and the buyer’s agent split the commissions from the seller when their home is sold). But, just because your realtor is more or less “free” for you to use, this doesn’t mean that you should just settle for the first realtor that you come across.

Instead, ask your friends who they have hired for a realtor and see if they’ve been satisfied. Beyond this, check their status on sites like Zillow.com to see if they’ve been reviewed and how active they are in the real estate world. If they make minimal sales and have no reviews, you might need to move on.

If you’re trying to find a deal on real estate, you want to be sure that your realtor is constantly in the game and can find homes without relying on the MLS listings. If they are networking and are in constant contact with other realtors, they’re likely the ones that will find you your deal.

#2. Watch the Listings Every Day

Have your realtor set you up on the MLS mailing list. They can enter in your criteria of price, bedrooms, and bathrooms, and have those listings sent to you automatically when they come on the market. Just watch your phone for new emails and you could be one of the first to jump on that property that’s perfect for you.

#3. Check the Price Drops

There are some homes that are better than any others and their owners know it, which means that their price holds firm for many days and maybe even months. Eventually, they get their asking price and happily accept.

There are others though that don’t have the luxury of setting a price and waiting for that perfect buyer to come along months down the road. They might be hard up for money, they might have moved out of state, or maybe they’re heirs to the estate and just want to sell the property quickly so they can divvy up their inheritance.

Whatever the case may be, if you see one price drop (or more), then you may have found yourself a potential deal.

Liz and I recently found a house that was initially listed for $120,000. After 10 days, the price dropped to $110,000. After another 15 days, the price dropped to just $95,000! This family was obviously urgent to sell. With the price dropping that fast, they might even accept an offer of $80,000, even though the house is probably worth over $100,000.

find a deal on real estate

If you want to find a deal on real estate, keep your eye on the price drops.
find a deal on real estate#4. Ugly Houses, but Good Bones

As I stated early on in this post, there are some people that are looking for a home that’s completely done and move in ready. They’ll never find a deal this way. If you want to find a deal on real estate, then you’ll need to have some vision. The ideal house is the one that has a solid roof, good siding, and a firm foundation. The rest of the house might be painted pink and have pee stained carpet, but you know what? That’s replaceable and fairly inexpensive. By rolling up your sleeves and adding some paint and carpet, you could probably add $20,000 of value to the house for about $2,000. If you want to find a deal on real estate, find the ugly houses that have good bones. You can’t go wrong with them.

#5. Spot Foreclosures, HUDs, and Short Sales

Foreclosures, HUD homes, and Short Sales are all basically the property of the bank, and this might mean a deal for you. Don’t be fooled though, not all bank owned homes are deals. Some are priced according to the market if the bank doesn’t mind holding onto the property for a while (and some really don’t mind, so long as it earns them some extra money by doing so).

What you want to know is if the bank is willing to give you a deal.

Foreclosures are hit or miss. They might be a deal or they might not be. If the house is 200 miles from the bank that owns it, then they’ll probably be more willing to haggle on the price so they don’t have to deal with it. If, however, the bank is in the area and the housing market is hot, then they’ll likely price it according to the market and still sell it in a reasonable amount of time. The bank isn’t stupid. Just because they’re selling a house doesn’t mean that you’ll get a steal of a deal every time.

HUD homes are from owners that have defaulted on their FHA loans. These houses are often much cheaper than the market, but there is a catch – you have to physically live in the home for a full year after the purchase. In other words, these homes are not intended for investors, only primary home owners. So, if you’re looking for a deal on your main residence, then you may want to keep your eyes peeled for a HUD home in your area.

Short sales can be a pain in the butt, mainly because there are three entities involved: the bank, the seller, and the buyer. The seller has defaulted on their loan and can’t afford the house. In an effort to save their credit, they partner with the bank to try and sell their home. If they succeed in a sale, their credit is dinged a bit, but they owe nothing to the bank, even if the sale was below the amount they owed. As a buyer, these purchases can take quite a while because the seller just wants out of the house and will likely list it at a ridiculously low price, while the bank wants to get as much money out of you (the buyer) as possible. So, your initial offer might get considered, but you have to wait for a solid month to hear anything, and they then counter. You provide a new offer which takes another month…etc. etc. The process takes a while, but if you have the time, you can still end up with a quality house at a low price.

How to Profit From Binary Options

Despite the fancy name, binary options simply means two-option trading. You trade on future asset prices through predicting “call” or “put” options within a set timeframe. A “call” option means you believe that an asset’s price will rise. A “put” option means you believe that an asset’s price will fall.

One of the strong draws of binary options trading is that there are many assets to trade on. You can trade on individual stock prices, stock indices, foreign exchange rates, and the prices of commodities in universal demand.

Choose Your Asset Well

Spreading your capital across numerous assets may seem like a surefire way to minimize risk, but you are likely to minimize your profits. Take time to properly research your asset.

Say you choose gold to trade on. Since it is a commodity in universal demand by central banks and jewelry producers, you figure it’s a good starting point.

Say you began trading in April. You know that the Akshaya Tritiya, the largest gold-buying festival in India, is coming up soon. So you trade on a call option that the overall price of gold will pass the $1,300 mark around festival time.

However, you miss out on the droughts that leave the rural regions with less of a budget for gold. The price stays low, and the option expires. You should know your asset well enough to trade on its prices, and that means finding an effective strategy.
Finding A Binary Options Trading Strategy

You cannot only depend on forecasts to predict a call or put option. The fastest way to gain experience is to learn about binary options strategies: technical or fundamental.

The technical trading strategy looks at the rise and fall of the asset prices over a certain period. The trends for gold, for example, show that the price has been steadily decreasing for the last five years. Furthermore, prices are consistently low in December or January, while they spike higher in April and May, and August and September.

The fundamental trading strategy, on the other hand, studies pieces of information that affect asset prices. For example, someone relying exclusively on the technical trading strategy would only know that gold prices tend to rise in April. An investor relying exclusively on the fundamental trading strategy, on the other hand, would know that part of the reason is the Akshaya Tritiya.

The most effective overall strategy would be to combine both according to your preference. Some investors understand the trends better the more quantitative the approach. Others need to see the connections between news articles and price changes to be able to trade profitably.
Exercise Financial Responsibility

However, there is no point to using binary options for profit if you do not approach it with a long-term financial strategy that will provide you with a firewall against trading risks. To begin with, do not simply pour all of your capital into trading. You need to have enough kept back to buffer against possible losses.

The rule of thumb is to invest no more than 5% in any single asset, and no more than 15% across the market, at any one time. That way, you can buffer your losses and effectively profit with your successes, without finding yourself out on your ear.

3 Reasons for Reinvesting Dividends

There are a few basic concepts every good investor must understand. These concepts include dollar-cost-averaging, risk tolerance, expected return, and dividends. Grasping the idea of dividends is confusing for many. Some people look at it as income. Other people (like Warren Buffett) don’t care about dividends whatsoever. Others, like this guy, believe dividend income is an important part of financial freedom.

The final group of people are those who don’t give dividends the time of day. They passively reinvest them.

As you can tell, there are many ways to approach the subject. My goal with this article isn’t to spout my personal beliefs. It’s not to say reinvesting dividends is correct for your situation. I don’t know your exact situation. Thus, I’ll simply be giving the reasons everyone should consider reinvesting dividends. There are three good reasons I’ll outline below.

For simplicity’s sake (and to keep this article from being 5,000+ words) I will talk solely about reinvesting within a taxable account. The situation changes dramatically from one investment vehicle to the rest: taxes, rebalancing, deposit caps, withdrawal options… that article would go on for ages. Perhaps we can cover the other investment vehicles at a later date. For now, here are the reasons to reinvest dividends within a taxable account.

Reinvesting dividends is just plain easy. Simple. No math required. It’s as easy as checking a box. Many people enjoy taking a long-term, passive road to investing success. There’s nothing more passive than allowing dividends to buy more dividend-producing stocks.
reinvesting dividendsNo Purchase Fees

Since the money never leaves your investment account, there are typically no purchase fees involved (as with Vanguard, for instance). Think about it like this… when you take a dividend, you pay capital gains as you exit the investment account. You may do this on October 31st. But then on November 15th, you may put more money into the investment account. It may in fact be the same money you just withdrew as a dividend. How much sense does that make? It doesn’t make sense.

However, reinvesting dividends to avoid the purchase fee isn’t a massive win. It will hardly disrupt your early retirement plans.

Let’s say you get $300 per quarter in dividends. If you take it out and reinvest it later with a .50% purchase fee, that’s only $1.50 lost (not taking into account your capital gains tax rate – which could be zero).$1.50 buys you what, a king-sized candy bar at a gas station?
Opportunity Cost

This is my favorite reason for reinvesting dividends. It’s the most important. When you take a dividend out of the stock market, you’re taking your money out of production. Yes, you may put it back later but it’s still gone for at least a few business days. The markets wait for no one. During that time you spent shuffling money, your fund has probably grown. Historically, the stock market always goes up.

Let’s assume the stock market will give you an 8% gain, and that you earn a 2% dividend yield. Let’s also assume the dividends come once per month; and you contribute $10,000 per year. That new money enters the stock market on a monthly basis. This is how your investments will grow:

After 10 years of not reinvesting dividends: $166,336.55
After 10 years of reinvesting: $166,454.87
After 20 years of not reinvesting dividends: $503,438.98
After 20 years of reinvesting: $504,229.21
After 40 years of not reinvesting dividends: $2,797,664.94
After 40 years of reinvesting: $2,807,810.40

Reinvesting means a difference of $10,145.46 over 40 years.

Decide What’s Right for You

Reinvesting within a taxable account makes sense of many reasons. It’s easy. You’ll likely pay fewer fees. And your money can work harder for you. However, it may not be right for your situation.

Perhaps you would rather take the dividend and put it towards your living expenses. Perhaps you like using dividends as your annual vacation fund. Or perhaps you flat out have to take the money ASAP. The fact is, if you’re getting dividends, you’re already doing really well. Keep on investing.