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Subject: persfin-digest V4 #96
Date: Fri, 24 Oct 1997 20:10:50 -0400 (EDT)
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persfin-digest Friday, October 24 1997 Volume 04 : Number 096
IN THIS ISSUE:
ADVERTISEMENT: LAN ACCESS TO MCI MAIL
Re: Pay an extra $100/month on a 30 Year, $200K Mortgage?
Re: Stock Market Game / Consulting Question / FICA Refund?
Re: Medical Insurance for Playing Sports at School?
Re: Pay an extra $100/month on a 30 Year, $200K Mortgage?
Re: Why Japanese Markets Don't Follow Interest Rates
Re: Wayne Cook: Check Motley Fool Article
Re: Prepay mortgage? Pros and Cons
Re: Self Employed Retirement Plan Options
RE: Pay an extra $100/month on a 30 Year, $200K Mortgage?
Best Gas Credit Card?
Re: Long-Term Care Insurance
RE: Interest rate question
RE: Pay an extra $100/month on a 30 Year, $200K Mortgage?
Disagree with Ira's view on mortgage prepayment
Lenders vs brokers
Re: W2 or 1099 consultant
Re: Roth IRA vs. Traditional
Re: Yet another Roth IRA question
Answers for Peter and Jeff
Re: Interest Rate Discussion
re: towing insurance
Re: Stock Game For Children?
Re: Carleton Sheets
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Date: Fri, 24 Oct 1997 19:31:26 -0400 (EDT)
From: Somesh Rao <somesh@syl.nj.nec.com>
Subject: Re: Pay an extra $100/month on a 30 Year, $200K Mortgage?
>Does anyone recommend paying an xtra $100.00/month on a 30 year
>mortgage for $200,000? I have heard pros/cons so I would
>appreciate any input on this......
Hi Kathleen,
If I assume an interest rate of 8% paying $100 additional principal a
month will result in a total interest of $248491.56. Without the additional
principal, you will pay a total of $328300.50 in interest. So, you save
about 80k in interest over the life of the loan.
Also you will finish paying the loan about 6 years ahead.
This might help you make up your mind.
Somesh
------------------------------
Date: Fri, 24 Oct 1997 19:33:20 -0400 (EDT)
From: Susan Mangiero <mangiero@shu.sacredheart.edu>
Subject: Re: Stock Market Game / Consulting Question / FICA Refund?
Re: Stock Mkt. Game for Children, there's a web site for the National
Stock Market Game. I don't know the URL but it's geared towards school
age children. It's sponsored (I think) by the Ntl. Assn. of Securities
Dealers (NASD). Let me know if you have problems finding the site and
I'll look it up for you.
Re: consulting, does anyone know which insurance company (ies) sells
professional liability (errors and ommissions) insurance for people who
are acting as consultants?
Re: Social Security..
I recently sent away for an estimation of benefits from the S.S. Admin.
as I'd heard several finl. planners say this is a good thing to do every
several years, regardless of your age. I discovered that in the mid and
late 1980's when I'd changed jobs (two times this happened), I paid about
$2000 per year (for the two separate but not continguous years in question
during which I changed jobs) more than I should have. Why? Because when I
started at my new job, they deducted FICA taxes as if it was the beginning
of the year.
However, in my prior job, I'd already maxed out. Bottom line: Is it too
late for me to ask for a rebate of the excess FICA taxes I paid?
------------------------------
Date: Fri, 24 Oct 1997 19:34:39 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Medical Insurance for Playing Sports at School?
>
>Can schools require that students need to take out an extra medical
>insurance when participating in sports, even though our family medical
>insurance will adequately cover the child. Hmm... I wonder if these school
>officials have a financial interest in these insurance companies.
>
The school officials may not have an interest personally but you can be
sure that the school district receives a "kick-back" not only from the
insurance agency but from the guy who takes pictures, the guy who sells
rings as well as the guy who puts in the Coke Machine. You might even find
that these vendors take out ads around the football field, make
contributions to campaign funds etc.
Avrum Lapin
Upland., CA
------------------------------
Date: Fri, 24 Oct 1997 19:36:07 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Pay an extra $100/month on a 30 Year, $200K Mortgage?
>(Editor's Comment - You should definitely do it. It's a totally risk free
>"investment" in increasing your net worth. -IK)
But I think that it would be better to put it in a broad based low expense
no load mutual fund
A few reasons:
$100 to the mortgage saves maybe 8% (the interest rate) while over
a 30 year period $100 in equities will probably earn 11% with compunding
the 3 % difference makes a big difference over time).
In time of need it may be easier to sell some shares than trying to
get a home equity loan (may be too tempting).
If you must sell the house in a declining market (say to relocate,
after a hurricane etc) it is better to have less equity tied up in it
Avrum Lapin
Upland., CA
------------------------------
Date: Fri, 24 Oct 1997 19:37:07 -0400 (EDT)
From: Avrum Lapin <avrum113@cyberg8t.com>
Subject: Re: Why Japanese Markets Don't Follow Interest Rates
>It is known that with increase in interest rates stock market usually
>declines (at least in a short run) because bonds become more attractive
>and cash flows from stocks to bond. Could someone explain why in Japan
>interest rates are below 2% and the stock market keeps go down. They
>certainly don't have an inflation (based on their interest rates).
Not an economist but I believe that it is because the parameters like
earnings, margins etc have not been growing at Japanese companies. I
believe that the Japanese state of mind today is somewhat like the American
state of mind in the 1980 time frame (when we were supposed to try to
emulate the Japanese and German models). I suspect that if Japanese
companies do some heavy downsizing (and a few fold) the Japanese stock
market might climb again.
Avrum Lapin
Upland., CA
------------------------------
Date: Fri, 24 Oct 1997 19:38:01 -0400 (EDT)
From: Ravi Chandran <rchandra@trc.tellabs.com>
Subject: Re: Wayne Cook: Check Motley Fool Article
Jay:
Anyone interested in following Wade Crook's (oops, I mean Cook's)
methods should check out the following extensive article on the Motley
Fool's website:
http://www.fool.com/Features/1997/sp971006WadeCook97.htm
After reading that, you should be able to judge for yourself whether you
want to try his methods.
Ravi
------------------------------
Date: Fri, 24 Oct 1997 19:39:35 -0400 (EDT)
From: Stephen Brodeur <sbrodeur@draper.com>
Subject: Re: Prepay mortgage? Pros and Cons
>Does anyone recommend paying an xtra $100.00/month on a 30 year
>mortgage for $200,000?
I'm not a professional, worth what you paid for it, etc......
Any principal you prepay on your mortgage is the equivalent to investing
that same money in an [taxable] investment that pays the same return as
your mortgage rate. This assumes that you can take all mortgage interest
as a deduction, and that the investment return is taxable as normal income.
That's the only easy part of the question, but it gives an idea of how to
make a $$ comparison. Now for the hard part. Besides the simplistic rate of
return issue, there are other questions to think about. For example:
- --Will you *really* have the discipline to invest the $100 elsewhere if you
don't prepay the mortgage? Many people won't.
- --Might you need the money in an emergency, and possibly not be able to get
it out of your home equity? (liquidity)
- --Does paying down the mortgage have other side $$ benefits, like getting
rid of PMI sooner?
- --Will paying off the mortgage give you some additional peace of mind?
- --How does this fit in with (or impact) your overall financial plan
(retirement planning, life /disability insurance, emergency fund)?
I'd recommend an alternative investment under the following conditions:
1. You find an investment that you understand- especially the risk and the
time frame- with a better return than your mortgage rate.
2. You set up an automatic payment plan to make the monthly investments.
However, I'd recommend prepaying the mortgage for the following reasons:
1. It's easy and regular. (You already pay your mortgage monthly anyway.)
2. You can stop when and if you want to stop.
3. It's a guaranteed rate of return that's pretty attractive, especially
for small $$ increments.
REMEMBER: If you send in additional money with your mortgage, be sure to
indicate that the excess is to be applied to *principal*!!
sbrodeur@draper.com
standard disclaimer. just me. not a professional. opinion, not advice.
------------------------------
Date: Fri, 24 Oct 1997 19:41:07 -0400 (EDT)
From: dulnev@jhu.edu (Jason Dulnev)
Subject: Re: Self Employed Retirement Plan Options
>I am a 45 year old male who has recently lost his job due to
>a company bankruptcy.
>For probably the next 6 months, I will be doing some consulting
>work for both a business enterprise and a non-profit social service
>agency.
[deleted]
> I have read about
>Keogh plans, SEP-IRA's, etc. Which do I qualify for and which
>options may the best to maximize my contribution limits.
You qualify for all the existing retirement plans for self-employed,
they just differ in: (1) how much you can contribute; (2) whether you
have to commit to a certain size of contribution; and (3) whether your
employees can participate (not an issue for you); and some other minor
things.
Basically, the maximum you can contribute with a retirement plan that
doesn't cost anything to set up and maintain (or costs very little) is
20% of your net business income - revenue minus all business
deductions. It is actually defined as 25% of your income, but then you
have to take into account deduction for contribution to a retirement
plan and half of the self-employment tax in order to figure out what
your net income is. It's a recursive process: the bigger deduction for
contribution you take, the smaller is your net income, the smaller can
be your deduction, etc. You can find all the details in the IRS
publication "Retirement plans for self-employed".
Something you most likely don't need to know: you can deduct and
contribute as much as 47% of your self-employment income to "defined
benefit KEOGH" which is very expensive to set up (about $1500-2000)
and maintain (about $750 to a $1000 a year). This plan is great if you
make at least $50,000 and want to put half of it into KEOGH. There is
a LOT of variables going into how much you can contribute to such plan
and at your age (too young) the contribution maybe much less than 47%.
The amount you can contribute is determined each year by an actuary,
that's why it's so expensive.
>Does anyone know of a comprehensive document that could advise
>me especially regarding, social security taxes I need to pay,
>estimated tax payments due, etc. This self-employed stuff is
>all new to me.
The IRS publications on retirement plans, taxes for self-employed and
other related issues are pretty good, in my opinion. They are a great
place to start your research and they are free and can be immediately
downloaded off the web. There is also plenty books on the issue in any
large book store. I started with IRS publication then bought couple
books on retirement investing for self-employed as well as general tax
guides that all have chapters devoted to self-employment tax issues.
------------------------------
Date: Fri, 24 Oct 1997 19:42:18 -0400 (EDT)
From: "Schafer, Rick" <schaferr@eng1.otis.com>
Subject: RE: Pay an extra $100/month on a 30 Year, $200K Mortgage?
Depends on your interest rate, doesn't it? If you have a low interest
loan, why pay it down -- invest the $100 somewhere else. If it's a high
rate, pay it off ASAP!
Rick Schafer
------------------------------
Date: Fri, 24 Oct 1997 19:44:17 -0400 (EDT)
From: "Benjamin Okun" <bokun@hotmail.com>
Subject: Best Gas Credit Card?
Hi all...
I know this must have been addressed before, but if somebody could give
me the group consensus on the best credit card for gasoline purchases,
I'd appreciate it. The Shell card offers a 3% rebate up to $70, and 1%
thereafter (all on gas purchases). Anybody know of anything better?
Thanks....
- -Ben
------------------------------
Date: Fri, 24 Oct 1997 19:45:32 -0400 (EDT)
From: "Richard A. Bauer" <owowo@netguard.net>
Subject: Re: Long-Term Care Insurance
Re the recent thread on this subject - there is an excellent article in
Bloomberg Personal, November 1997, page 119. It is well balanced
article. It talks about advantages and affordability and cost of living
considerations. Per the article 57% of people reaching 65 never enter a
nursing home. Of those that do, about half will stay less than a year
and 30% only three months. The whole article is worth reading.
Richard A. Bauer St. Louis, MO
http://www.netguard.net/~owowo/index.htm
------------------------------
Date: Fri, 24 Oct 1997 19:49:46 -0400 (EDT)
From: "Narasimhan, Seshadri" <NarasimhanS@bernstein.com>
Subject: RE: Interest rate question
>It is known that with increase in interest rates stock market usually
>declines (at least in a short run) because bonds become more attractive
>and cash flows from stocks to bond. Could someone explain why in Japan
>interest rates are below 2% and the stock market keeps go down. They
>certainly don't have an inflation (based on their interest rates).
Just the kind of question I was looking for. Now I can get into my
'Economist' armchair and say what no other self-respecting economist
will say ... <ahem> ... I don't know!
But seriously, the reasons are manifold. Japan's financial structure
hardly resembles the one we are most familiar with .. the US.
1) The banks there are hand-in-glove with the companies. They lend money
with one hand to these companies on the one hand, while they 'invest' in
the companies' shares on the other hand thereby propping up share
prices. (The Glass-Steagall act specifically prevents this from
happening in the US).
2) The banks (and other companies) 'invested' in the real-estate bubble
market of Japan, when all prices were going up, up and away. Now that
the real-estate market has crashed quite heavily, prices are slowly
adjusting to the present more realistic prices.
3) The fixed-income market in Japan is very immature. The interest rates
on securities issued by companies are not set by the market (as they are
in the US, where we have agencies like S&P and Moody's assigning ratings
to bonds and investors paying amounts based on these ratings and other
factors - this works most of the time ... however the Orange County
crisis showed how even these agencies can be duped by some clever people
... but I digress ... that is a whole new can of worms). Instead (and
this is something that I read in one of the last few issues of The
Economist) the prices are based on the whims and fancies of the banks.
This results in the underpricing of the fixed-income securities. If you
check out the latest Economist figures on interest rates you will see
that corporate bonds actually yield (1.64%) LESS than the Japanese
government debt (2.04%)! Can you ever imagine this happening anywhere
else in the world? It is like saying you have more confidence in the
ability of a company to make good its debt than the ability of the
country it is based in!! Quite a contradiction, if I may say so.
4) The holding structures of the various Japanese companies is so
complex that the usual analysis that one can do regarding the valuation
of a stand-alone Japanese company (a horrendously complex task in itself
even with the 10K and balance sheets available in the US) is well nigh
impossible. The cross-holdings cause this complexity.
5) Also, since the individual Japanese investor does not tend to invest
in mutual funds, 401K plans etc. the investor requirements for such
disclosure is less. As a result, the Japanese stock market is a lot more
difficult to read and understand than the US one.
6) Since companies are able to get loans at such favourable rates from
banks, they find little need to go to the public and borrow. Also, they
find little need to maintain and disclose their results. Banks are
always willing to lend to them!
How do these comments answer your question? Well, they don't directly do
so. But you can see that the valuation accorded to a company's debt
(bond yield) and equity (stock price) has more to do with banks holdings
of these than with the results expected in the forthcoming quarters
(which is what the US market bases its prices on). Hence interest rates
have little to do with Japanese stock prices!
Comments and criticisms to persfin please!!
------------------------------
Date: Fri, 24 Oct 1997 19:52:25 -0400 (EDT)
From: Peter & Karen Diamond <diamond@vsi.net>
Subject: RE: Pay an extra $100/month on a 30 Year, $200K Mortgage?
IMHO this is a very bad idea unless ALL other financial needs are taken
care of.
If you can honestly say that you are adequately insured, you are
adequately funding your retirement and college for your children, you
have an emergency fund, you have paid off all consumer debt and you have
a steady income then MAYBE you should be doing that. Otherwise there are
probably many other low risk investments that will earn more than
prepaying a mortgage.
The "rate" of return on your mortgage "investment" is the interest
rate*(1-your tax rate), so for many people this will be about 5%. There
are lots of ways to do better than 5%. Also, you cannot get your
"investment" in your mortgage back without selling the house! (Sure you
could get a home equity loan, but if you need to borrow money, why are
you prepaying your mortgage!)
Peter Diamond
------------------------------
Date: Fri, 24 Oct 1997 19:53:31 -0400 (EDT)
From: "Benjamin Okun" <bokun@hotmail.com>
Subject: Disagree with Ira's view on mortgage prepayment
Ira commented that one should "definitely" prepay an extra $100 each
month towards one's mortage. I disagree.
By prepaying $100, one would essentially be investing this money at the
rate of the mortgage (8%, for example). Actually, the rate would be
slightly less, because you would lose the tax deduction associated with
the interest on that $100.
Ira is right to say that the rate of return would be guaranteed, and he
would also be right to say that this is a tempting investment. It's
*quite* hard to find a guaranteed return of 7 or 8%.
To say that such an investment is a universal no-brainer, however, is
not right. For example, I am 25 years old. Assume I have a net worth
of $100,000. $75,000 of this is comprised of equity in a home. $25,000
is in a balanced fund.
With a 75/25 allocation to real estate/balanced funds, should a 25-year
old person planning to retire in another 35 years *increase* the
unleveraged allocation to real estate, neglecting equities and other
riskier but potentially more lucrative investments? I think not.
Remember that there are no "definitely" right investments. Everything
depends on individual situation, time frame, risk tolerance, and other
factors.
JMTC
- -Ben
------------------------------
Date: Fri, 24 Oct 1997 19:54:51 -0400 (EDT)
From: "Grady Cash" <cashg@gte.net>
Subject: Lenders vs brokers
Phil's problems with credit reports and lenders brings to mind a
quick thought and my recent experience.
Phil, why not forget the lender and check out one of the mortgage
brokers on the Internet? Explain your problems, fax them your credit
report and see what they can do.
Interest rates are a little lower than they were 30 days ago. Even
if you lose some fees to the lender, you might still come out ahead
AND you could get your house on time.
My experience with lenders is enlightening. In shopping for the best
rates, I beat my lender by 3/8 point using a mortgage broker. I
called the lender and asked if they could meet the same rate. They
refused so I used the broker.
After closing, the mortgage broker notified me that my loan had been
sold to - guess who - THE SAME LENDER!
Grady Cash, CFP
http://www.healthycash.com/center/
------------------------------
Date: Fri, 24 Oct 1997 19:56:54 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: W2 or 1099 consultant
[Disclaimer: this is my opinion, not advice. I am not a professional.]
I'd be very wary of the company that's hiring you. W-2 vs. 1099 is
not a choice. If you are a employee under the tax law, neither you
nor the company can make that go away by deciding to 1099 you.
Likewise, if you are a self-employed under the law, W-2ing you won't
change that.
The IRS has a set of tests on employee vs. self-employed. One has to
see where one falls under those tests and then must be paid
appropriately.
Now, if the company is actually going to treat you differently (with
respect to supervision, whose equipment is being used, etc.) based on
your choice, that may be different. But if you are being treated the
same either way, you have to be paid according to what the IRS tests
say, not according to what you (or the company) want.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Fri, 24 Oct 1997 19:57:20 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Roth IRA vs. Traditional
>Actually, Andrea, it much easier to prove Mr. Carriero wrong by using some
>simple algebra, rather than numeric examples.
I note that a digest or so ago I sent an article using "simple
algebra" correcting my first post. Perhaps Mr. Foulks could use his
analytical acumen on that post.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Fri, 24 Oct 1997 19:58:11 -0400 (EDT)
From: Rich Carreiro <rlcarr@animato.pn.com>
Subject: Re: Yet another Roth IRA question
>The folks at Strong funds recently informed me that when I transfer
>deductible contributions from a regular IRA to a Roth IRA, the taxes
>due can be paid out of the principal in the IRA, by virtue of a
>premature withdrawal of principal which would not be subject to a 10%
>penalty.
I don't know if it is true or false, but I wouldn't do it anyway
(unless I had no choice). Paying the taxes out of the IRA funds
reduces the amount of money that can grow (and be withdrawn) tax free.
By paying the taxes out-of-pocket you are in effect making a
contribution (the taxes paid) to the Roth.
Rich Carreiro
rlcarr@animato.pn.com
------------------------------
Date: Fri, 24 Oct 1997 20:00:13 -0400 (EDT)
From: JONESW@CCSUA.CTSTATEU.EDU
Subject: Answers for Peter and Jeff
Jeff Morgan asked if paying the tax on an IRA out of the principal avoids
the 10% penalty. The answer is NO. If you withdraw $10,000 principal from a
regular deductible IRA, and rollover only $7,200 of it to a Roth IRA,
then you do not have to pay the 10% penalty on the $7,200, but you have
to pay it on the $2,800 you did not rollover (assuming you are not 59.5 yet).
Peter Diamond asked if it is better to keep stocks in taxable accounts
and bonds in tax-deferred accounts. The answer in general is NO. If you
have say $10,000 in stocks in a taxable account and say $10,000 in bonds
in a Roth IRA, you will come out way ahead if you switch them, even with
the new 20% capital gains tax.
You can try various scenarios to test this, and in general you will find
something like the following happens: The bonds grow to 40K in the Roth
but only to 27K in the taxable account. So bonds lose 1/3 of their value
to taxes. The stocks grow to 80K in the Roth but only to 62K in the
taxable account. So bonds lose only 22% of their value to taxes. The
rate of loss on stocks is lower. But the dollar amount you lose is
higher (in this example, by $5,000), because the lower rate is applied to
a higher amount.
That is, what counts is not the tax rate you pay, but the number of
dollars you pay. Since you project that stocks will earn significantly
more than bonds in the future (otherwise, why invest in them), put stocks
in your tax-deferred accounts. A similar logic applies to regular IRAs.
Bill Jones
------------------------------
Date: Fri, 24 Oct 1997 20:01:42 -0400 (EDT)
From: Ken Meinken <kmeinken@one.net>
Subject: Re: Interest Rate Discussion
Stan,
I'm certainly not an expert, but here's my two cents worth:
remember, interest rates and the stock market are both determined by
supply and demand. The Japanese people save a lot of money, that
makes a lot of supply available, so the demand, and therefore
interest rates are lower (businesses can get money easily because so
many people want to save). The Japanese stock market had a BIG
bubble several years back (Nikki was at 36,000 I think). It was
tremendously overvalued and finally crashed (to 16,000 or so). It is
still recovering. On top of that, Japan has a lot of structural
economic problems, banks have loaned money on real estate far in
excess of it's real value (another bubble). And there are government
economic problems. In total, not a good investing environment.
Ken
kmeinken@one.net
------------------------------
Date: Fri, 24 Oct 1997 20:02:26 -0400 (EDT)
From: Ken Meinken <kmeinken@one.net>
Subject: re: towing insurance
> May I make a suggestion from personal experience... towing insurance is
> *well* worth the cost. For $6/6 mo, we don't have to worry about paying
> towing bills. Period. For the sake of argument, if you assume the
> average tow costs about $60, you would have to go "towless" for 5 years to
> make up the difference. From personal experience, we typically have to
> get a tow about once every 2 years or so. Couple of months ago it was a
> timing belt. Time before that it was a clutch cable. Who knows! But
> it's worth the money...
I would say a major factor is the reliability of your car.
In 34 years of driving, my wife and I have only been towed twice,
once with a new car and once with one with 100K miles. GM now
provides free roadside assistance with new cars.
All that said, there is great convenience in having a single number
to call no matter where you need assistance. We do have AAA, but it
is more a "piece of mind" factor rather than an economic
justification.
Ken
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Date: Fri, 24 Oct 1997 20:03:24 -0400 (EDT)
From: Stephan <stephan@mail.org>
Subject: Re: Stock Game For Children?
Bob and Debbie asked:
>Does anyone know of a game -- say, like Monopoly, but instead of real
>estate, a game that teaches frugality, saving, and investing in the stock
>market...
Actually, it is _Monopoly_ ! Get the "Wall Street" add-ons for your Monopoly
set and enrich Parker Brothers a little more ;^)
Stephan
* Useful Links for Business & Personal Success *
* at http://members.tripod.com/~RoundWorld *
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Date: Fri, 24 Oct 1997 20:06:16 -0400 (EDT)
From: BOB FORD <BOB_FORD@compuserve.com>
Subject: Re: Carleton Sheets
>Also, what is the Carlton Sheets program?
CHARLTON SHEETS is just another person in a long line of people that have
been on TV for over 20 years telling people they can get rich quick in real
estate.
Does anyone remember Robert Allen, Hal Morris, Dave DelDoto, Richard
Paulson, Barny Zick, Tom Vu, Ed Beckley. They always say it does not
require any of your money to invest in real estate and their tapes will
give you all of the information you need to get rich.
I have been a real estate investor for 30 years and I can tell you that for
99.999 percent of the people, it is not possible to just buy their tapes
and get rich in real estate quickly or slowly.
All of the these real estate "experts" tell you basically the same thing.
Find a property that is way below market value, buy the property with no
down payment, and resell it for a big profit. They tell you to assume
the current loan on the property. They don't tell you that assumable
loans are almost a thing of the past. Very few have been made in the last
10 years.
Most of these "experts" say you can buy property with NO MONEY DOWN. If
you buy their tapes, no money down to them means NONE OF YOUR OWN
MONEY. They want you to find someone to give you their money to invest.
What do you think the odds of finding someone that will let you invest
THEIR money? They have an answer for that question also. They tell you go
get a cash advance on your credit cards for the down payment. Now you
are paying 18 to 22 percent on this credit card debt. This is not the way
to get rich.
The odds of finding a property that is way below the market AND that you
can buy for NOTHING DOWN are very very small. If this is a no money down
deal, who is going to pay the real estate agents and the closing costs?
You have better odds hitting the jackpot in Las Vegas on the slot
machines.
If a property is below market value, there is always a reason. If you want
to sell the property at market value, you must correct the problem that
caused the low price. These corrections usually take, money, work, and
time. If you do not correct the problem, why would anyone buy it for full
market value?
You can make a lot of money in real estate but it takes lots of money,
study, work, time, and risk. Property management requires a lot of skill.
If you do not have these skills, it is very hard to make any money on
rental property. Just ask any landlord how they like dealing with
tenants.
GOOD LUCK
BOB FORD
BOB_FORD@COMPUSERVE.COM
Conscripted editor of the 57-56 -55 CHEVY list
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End of persfin-digest V4 #96
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