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Using Your Palmtop to Achieve Financial Independence
Can your Palmtop help you achieve financial independence? According to one Palmtop User the Answer is... "Yes!"
What images do the words "financial independence" bring to mind? The casino at Monte Carlo? gleaming Ferraris, champagne and caviar? The definition of financial independence to Joe Dominguez and Vicki Robin, co-authors of the book "Your Money Or Your Life," is having enough money to meet your daily needs (enough so you don't have to work unless you want to) - and a little bit extra.
To me it means having "time" -time to write novels, to draw cartoons, study guitar, learn Spanish, travel and pursue meditation and yoga. For the last three years I have focused the majority of my time and energy on making financial independence a reality in my life through the purchase and rehabilitation of rental real estate. For these same three years my Palmtop has been helping me on the way, one keystroke at a time.
Buying Rental Property-Buying an Income
When you buy a rental property you are buying yourself a potential income stream - hopefully for life. My financial independence mentor and guide, Curly Smith, suggested I use rental real estate as my vehicle because I already had carpentry skills and, well, not much else.
I am convinced now that the way is not complicated and doesn't require brains or money. What it requires is that you do it. To my delight, two months after my first talk with Curly, I bought my first two small houses. At this writing three years later, I have four houses, three of them completed, and can finally see the light at the end of the tunnel.
Here's how my Palmtop keeps me organized, on track and in the right frame of mind along the way.
Looking For A House
After three years I still have a repeating appointment in ApptBook that signals me monthly to call my various real estate agents and remind them that I am still here, waiting for them to call me about a property.
I also cruise the streets when I have the time, recording addresses of houses I might be interested in. This is what I'm looking for - unkempt houses with tall, unmowed grass, cars on blocks, with peeling paint and hopefully some well placed litter - in a nice neighborhood. As they say in all the real estate books, there are three important things to consider when buying property: location, location and location.
I record addresses and pertinent information into a hand-held recorder, then, at home, I transfer this material to my Palmtop's DataBase in a file called "houses.gdb." I created the fields I need for this information, such as: Address, Owner, Owner's phone, Date last sold, Problems, etc.
Later I will take these addresses to the courthouse to look up the owners' names, addresses and phone numbers. After contacting the owner, I move the entry to the "Dead pile" or hopefully set up an appointment in ApptBook to get together with him or her.
The other way I use my Palmtop at this stage is to keep in touch with the people who will be assisting me when things get going. This, and every other business I know of, is a relationship business. Just like a salesman, I contact the people I will be dealing with - advisors, real estate agents, other landlords with whom I swap tools and advice - to wish them a happy birthday, happy anniversary or just to chat about my latest toy. "Hey, Dick, you've got to see this auto-feed sheet rock screw gun I just bought. It's really cool!"
For birthdays and anniversaries I use a repeating appointment in ApptBook that pops up monthly telling me to check them for the month.
I have customized my PhoneBook to have a check box for every month of the year. When I know a person's birthday or anniversary, I enter it in the appropriate field, then check the corresponding month's check box. On the last day of each month I create a subset for that month: (F6) (Subset), (ALT) (Define), (Fn) (UpArrow) to the correct screen, (TAB) to the appropriate check box, select it by pressing (SpaceBar), (F10), name the subset, (F10) (OK), (F10) (OK). This way I bring up the PhoneBook listings for the people I need to call.
I also use my Palmtop during this time to stay positive. I have three repeating Events that appear daily at the top of my ApptBook screen, that contain affirmations (e.g., "I don't need anything I don't already have"), knowledge (e.g., "A sincere compliment works wonders") and rules (e.g., "Don't make unnecessary calls, answer the phone or otherwise procrastinate after 8:00 p.m. or you must donate $10 to charity").
The 100 House Rule (from the book "Think Like A Tycoon," by Bill Greene) says to get the information on the last 100 houses that have sold in the area you are looking at. You can get this list from your local real estate agent. What you are after is the address and selling price, not the original asking price. Don't make an offer until you have looked at 100 houses. At this point, you are an expert at valuing houses in that area and you can make an offer on every house that fits your criteria.
Never make an offer based on the asking price of a house. Make your offer based on what you feel is a good deal for you. Sometimes that may be much lower than the asking price. To figure my initial offering price I open up HP Calc's TVM (Time Value of Money) function. I enter the information I need, working backward to figure out how much I can pay for the property, given the interest rate I know the bank will charge me and the rent I think I can get, adding $150/month minimum profit. Then, since sellers and buyers expect to compromise on the offer, I lower my bid accordingly.
Next I list the price I want in an appointment in ApptBook that I keep moving forward into the current day. This way I can know instantly, without having to redo my figures each time, how high I can go and still make the purchase work. Also, I list other houses I am looking at in the Note field of this same appointment to remind myself that this is not the only deal out there, not to get too attached to it and to stay with my numbers. At the bottom of the Note field I list promises made on the listing sheet or by the real estate agent such as "and of course, you get to keep the a/c units, piano, stove, etc." I date these promises using (Fn)(Date), (Fn)(Time) at the bottom of the Palmtop keyboard.
I must say, sometimes I sympathize with the real estate agents I work with. For example, my last purchase originally listed at $35,000, far above its unkempt value. My first offer was at $15,000. I set a repeating appointment in ApptBook to call my real estate agent every month to present a new offer. First I presented the offer verbally. If that was rejected, I presented the same offer in writing one month later. Here's how it went:
Asking price $35,000
Paper offer 6/17/98 15,000
Verbal offer 7/20/98 15,000
Paper offer 8/29/98 16,000
Verbal offer 10/6/98 17,000
Paper offer 10/17/98 18,000 accepted
Once I have done my job, namely getting a signed offer on a house I am excited about, I bring in the big guns, the experts. These are my real estate advisors and I want their final seal of approval. If there is a problem that I didn't notice in the beginning, I want their knowledge. At this point I can still cancel the contract using one of the "escape" clauses I have built into the contract. (If you do your homework using the 100-house rule, you should never need to "escape" out of a contract. I never have, but this kind of clause allows me to sleep at night during the negotiating process.)
Due to the damaged state of some houses, I have been forced to borrow money from private lenders at exceedingly high interest rates. I will use TVM again when I have fixed the house up and need to refinance it, working backward in TVM to figure the interest rate and number of periods (time span of the loan) that I want, based on the income the house is bringing in.
To follow the closing process I set a series of alarmed appointments in ApptBook. This is a critical time and I like to check with my real estate agent and attorney to see that everything is progressing smoothly. If they need some information or a document, I volunteer to get it for them. They usually decline my offer but it lets them know that their speed is important to me.
It is very important to have all the facts and figures of the deal at your fingertips at all times. In your Palmtop you want the phone numbers of all parties concerned: attorneys, real estate agents, back up lenders, pest inspectors, knowledgeable friends in the field, insurance agents, real estate mentors, utility companies, etc. I also keep the numbers of local lumberyards, plumbers, painters and electricians. You may have nagging last minute questions or need to get bids on necessary repairs that you weren't expecting. Once I got a message from my insurance agent one day before closing telling me that he wouldn't insure the house I had just signed off. Boy, did I scramble!
Fixing It Up
Palmtop/real estate tip - Every so often go into your real estate database (where you keep your "Errors I have made in the past" list and remind yourself of past mistakes and possible future pit falls. For example, one of my notes reads "Only tear off a small section of the roof at a time if the weather is iffy!" I can still hear the plaster falling off the ceiling in big chunks during the night.
Now comes the real job of fixing up the property. I get out my Palmtop, go to PhoneBook and call for a dumpster to be dropped in front of the property. When you deal with a dumpster company or any other company, here is something I've found invaluable. In PhoneBook's Note field for that entry, always list:
1. The company or store's hours for the week
2. The department manager's name
3. The names of helpful employees
4. The amount of your contractor's discount. (Once you are on your second house, you are worthy of a contractor's discount.)
Next, in my real estate database, I make an entry for the house and enter:
1. Day of week for garbage pick up
2. Loan information (the payment, percentage, duration, the loan number, future balloon payments, etc.)
3. Names of the next door neighbors
4. Property tax amounts
5. House color information (it's the same for all my houses) - body color, exterior, interior, trim color, etc. My last house had wood columns that I matched with Sherwinn-Williams Plum Mahogany stain. That information will be invaluable if ever I need to touch up a worn spot.
Palmtop/Real estate Tip
The most important fix up items for a rental house seem to be:
1. Beautiful colors - critical, inside and out. Spend the time and money necessary to pick the right ones and stay with them.
2. Fancy light fixtures - I buy closeouts, brass or crystal.
3. A tasteful mailbox - I put up a vertical one, mount it on the wall next to the front door and paint it the same color as the accent trim.
4. Fancy brass numbers - Spend the time and money necessary to pick the right ones.
5. An elegant, brass, lighted door bell.
This information and any pertinent prices, item numbers, etc., I enter in my database under the house in question.
Avoiding Lists of Clutter
In ApptBook, I create an appointment for the new house (e.g., "(DO NOW!) 510 E. Adams INSIDE JOBS LIST - info below"). I roll over this appointment one day to the next. In the Note field I list the items to be fixed and delete them as they are completed. Hopefully I will decide some of them are not critical and can be moved to my "To Do In the Future" list in DataBase. This is my Palmtop "round file" for non-real estate ToDo's as well as real estate ones. As it is said, "out of sight, out of mind." It's amazing how really pressing items like "make new labels for spice jars," never seem to bother you when you move them to your Database's round file. And though I will probably never look at these items again, having them "somewhere" inside my Palmtop makes me feel better than deleting them. Human psychology, I guess.
Record keeping during fix up is CRITICAL! You will be referring back to your check register in Pocket Quicken many, many times. This could be to see if you've paid a mortgage due, to check a rent deposit, to see how much your last utility payment was or any of a myriad of reasons. So, when you buy items for two different houses, use Splits (F3) to get to Pocket Quicken's Transaction Splits screen, then keep the amounts separate. For each item, you can enter the Project name (I use the house address - e.g., 510). Don't forget to enter something in the Memo field. You need all your information to be as complete as possible since you might have to look back at this entry years later if the IRS audits you.
I have set up a handy way to move backward through my Pocket Quicken check listings by month. I create a new listing on the first day of every month (F2) (Add), and enter "ZZZZZ" in the Payee field. I list the Transaction Type as a deposit and leave all the other information blank. This way if I want to go back a month at a time, I simply press (Z) when I am in the main screen.
Remember that rehabbing a house is a big project. Don't forget to take some time off along the way. I take a half day every Sunday afternoon and get out of town, away from the phone and the cell phone, and into nature. I don't take my Palmtop. I've found that spending three hours redesigning my PhoneBook does not classify as a "day off."
Finding A Good Renter
Finding a good renter in important. Bad tenants will create a desire in you to end your career in real estate fast. To help me do this I list any "qualified" people who have expressed interest in renting a house along with their phone numbers. When I get a vacancy I call them all.
Here are some good rules of thumb when picking a tenant:
1. Don't jump at the first tenant that comes along because you need the money. It's better to lose a few weeks rent than to have to ask an irritated 6 foot 4 inch, 275 pound tenant to move out.
2. Never say "Yes" to a prospective tenant while they are standing in front of you. Go home and think about it when you can be somewhat objective.
3. Go with your gut. Trust your instincts. If your mind says, "Yes," but your insides are doing summersaults, go with your feelings first.
On Being an Organized Landlord
In my PhoneBook I have a field for e-mail addresses. This will come in handy when I am in Argentina and need to e-mail my bank to check rent deposits or e-mail a friend to ask him or her to call a plumber in response to an e-mail I just got from a tenant.
You can keep track of similar rent amounts deposited in your bank account by assigning each house a slightly different rent amount. For example, the rent for my 200 E. Madison is $375.01. For 510 E. Adams, the rent amount is $375.02. This way, which deposit has been made can be easily identified.
How To Save Money With Accelerated Payments
You can save a lot of money by making accelerated payments. Compare the payments on a particular loan based on a 30 year, 15 year, or 10 year amortization schedules. For example:
1. The payments on a $50,000 loan amortized over 30 years at 8% interest are $366.88 per month (principal and interest).
2. The payments on the same loan amortized over 15 years are $477.83 per month (principal and interest).
3. These payments amortized over 10 years are $606.64 per month (principal and interest).
This is especially pertinent to landlords like myself who live in the mid-West. The house referred to earlier, purchased for $18,000 has a mortgage on it of $13,500. It currently rents for $375. The difference in payments by length of term on this mortgage (at 8.25%) is:
-- 30 year - $101.42 per month
-- 15 year - $130.97 per month
-- 10 year - $165.58 per month
With the cash flow it currently has, I chose the 10-year amortization. I cut off 20 years of payments to the bank.
Another way to save money is to pay your mortgage bimonthly. I have eight repeating appointments in ApptBook reminding me to pay my mortgages bimonthly on my four houses. This is a trick that my mentor Curly showed me. The first time you pay your mortgage you make your normal monthly payment plus 50% of that amount. From then on, starting 15 days later, you pay half of the monthly amount on the scheduled day of the month, and another half month's payment on the day that falls 15 days later. This simple manipulation, Curly tells me, cuts your loan term by approximately 25% while you pay the same total amount of money per month. I thought my bank might object to this idea since they would be losing interest money, so I called them about it. They didn't care one way or the other. As long as they received their money on time, they told me, everything was fine.
Life on the Riviera
I can't say my life has actually landed me on the Riviera yet. But in the mean time, one of my favorite games is to go into HP Calc's Currency Conversions application (MENU) (Applications) (Conversions) (Currency), play with different rates of exchange and dream. Joe says never pay for a vacation when you are financially independent-donate your time to a charitable organization in the country you want to visit and let them pay for your travel and expenses.
Since I am single, my target "rejuvenation" (I don't like the word "retirement") amount is $1,000 per month. Whenever I tell someone this, the usual response is, "No one can live on $1,000 a month!"
But it can be done easily. Again, the concept comes from Your Money or Your Life. My plan is to teach English as a Second Language or do volunteer work (travel with expenses paid) for six months a year. While I'm gone, my $1,000 per month income will be adding up in the bank. This way, for the six months a year when I am home, I will have an effective income of $2,000 per month, and this I know I can comfortably live on. I will have the time to ride my bicycle rather than drive and I know how to find great deals on the things I will want or need.
What about future opportunities to make money? According to Joe and Vicki they are easier to spot when you don't spend all of your day working.
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