Greetings to all you wealth-building enthusiasts out there!
We are in the homestretch of the New Year.
New Year’s Eve 2022 is a mere two days away.
Let your 2023 resolutions start to take shape and begin shortly. However, let us have a few moments of reflection over the last year shall we.
A recently elected Congressman, Maxwell Alejandro Frost, had a rent application rejected weeks ahead of being sworn in. He is unable to afford an apartment in Washington DC, as the median rent is $2,395, due to his bad credit.
Just applied to an apartment in DC where I told the guy that my credit was really bad. He said I’d be fine. Got denied, lost the apartment, and the application fee.
This ain’t meant for people who don’t already have money.
Frost had to quit his job to be a full-time candidate. Seven days a week, 10-12 hours a day. He is couch surfing with friends until he can again have access to a livable wage after driving for Uber did not leave him enough to pay all of his bills. Thus, the reason for his bad credit.
He is far from alone in this situation. In 2018, Alexandria Ocasio-Cortez (AOC) couldn’t find an apartment in DC. She didn’t have the money.
At the height of COVID, more than 100 members of Congress are sleeping in their taxpayer-funded Congressional offices in 2020.
Let us provide some context here.
While rank and file members of the U.S. Congress make a decent salary ($174,000 a year), they don’t receive a per diem. Meaning they have to pay for everything out of their own pockets while some, other members do receive a per diem that can be used for housing. If you think this is unfair or strange, consider that for most of the period between 1789 and 1855, the only compensation senators and representatives received was a $6 per diem.
The fact that housing has become so unaffordable is just insane. I wrote a blog post about how I used a Roth IRA to buy property. However, not everyone has access to these means. Especially, if you have no retirement accounts to begin with.
Many officials were screaming poverty at the time they were seen working in their offices by day and converting them into bedrooms at night.
When the rent becomes so high that those helping write the laws are sleeping on couches, we need to address the matter of housing affordability.
Why not have communal living spaces? Similar to college dorms. This is far better than sleeping on a cot in your office.
What about building micro apartments? Enough space for a bed, couch, bathroom, small kitchen, and closet in about 500-600 square feet.
There has to be some affordable solutions out there. I had to do some thinking outside the box to start buying property with my Roth. Maybe that is what we need. Some out of the box solutions for long-term housing problems.
Buy land, they aren’t making anymore of it. – Mark Twain
I am a firm believer in the learning curve. A learning curve is the rate of a person’s progress in gaining experience or new skills. Through time and experience will your ever-increasing knowledge and skills grow to help you make better and wiser decisions. That includes not only in your personal life, but in your financial life as well.
This post was inspired on an episode from the television series Supergirl (2015-2021). In an early Season One episode, two or three, Supergirl (Kara Danvers played by actress Melissa Benoist) is having a talk with her boss, Cat Grant, at her job with the company CatCo.
See the events of that exchange below.
Cat penned an article for the Tribune on Supergirl’s blunder at the port and ordered Kara to get it ready for posting. Kara wondered why Cat was constantly criticizing Supergirl, claiming that Superman never faced such heavy backlash. Cat expressed that women need to work twice as hard as men to succeed, pointing out that Supergirl, despite her good intentions, is still a novice; she left Flight 237 in the bay after saving it and now caused an oil spill while trying to prevent a fire. Since Supergirl’s job is a learning curve, Cat advised her to start with smaller targets and work her way up, similar to how the latter rose through the ranks at the Daily Planet.
Put simply, no one starts in at the top. You have to work your way there. Wealth building requires the same.
You have to learn to manage one dollar before you can manage one million. You start small and work your way up. Then it hit me. You can use one wealth building tool to help you build another. They are both levers that can be used to help you scale up your wealth.
It is like the S meaning on Supergirl’s costume. It is the family crest for the House of El; it means Stronger Together.
Both your Roth IRA and home investment can help you build wealth faster. They are both stronger together.
The major fortunes in America have been made in land. – John D. Rockefeller
Buying a home takes money. You generally need money for two items: Down payment and closing costs. You can use funds from your Roth IRA to do this.
Roth IRA withdrawal rules allow you to take out up to $10,000 earnings tax and penalty-free as long as you use them for a first-time home purchase and you first contributed to a Roth account at least five years ago.
Normally you would need to wait until you are age 59 1/2 to start withdrawing funds. If you withdraw money from the account before age 59 1/2, you will typically have to pay a 10% penalty on the amount withdrawn. The distribution will also be subject to taxes. However, there are certain circumstances in which you might be able to take out funds from the account before reaching age 59 1/2 and not incur penalties.
One exception to the early withdrawal penalty is for the purchase of a first home. To be considered a first-time homebuyer, you cannot have owned a primary residence at any time during the previous two years.
This $10,000 exception is available for every individual, so a married couple can withdraw $10,000 from each of their IRAs for a total of $20,000 that can be used for a down payment.
In addition to purchasing your own home, you may qualify to help others buy their first house. IRA owners can withdraw funds penalty-free to help their first-time home buying children, grandchildren or parents purchase a home. Sweet!
However, $10,000 is the lifetime maximum for first-time homebuyer withdrawals. Therefore, the total of your withdrawals must remain under the $10,000 mark to avoid the early withdrawal penalty.
Many of you out there may say why not a traditional IRA. There is a method to my madness. Bear with me.
The reason for using a Roth versus Traditional IRA is that while there will not be a penalty on early IRA distributions for a first home purchase, you can expect to pay taxes on the amount withdrawn when using a traditional IRA.
For example, if you are in the 22% tax bracket, a $10,000 withdrawal for a home purchase will lead to $2,200 in taxes. For a couple in the 24% tax bracket who withdraws $20,000, the taxes due would come to $4,800.
However, this is not the case for the Roth because you have already paid taxes on that money so you owe no income taxes on money that is withdrawn for a first time home purchase.
So if you are all in on this plan, then let’s get down to business.
Ninety percent of all millionaires become so through owning real estate. – Andrew Carnegie
The rules for using a Roth IRA rather than a traditional IRA are slightly different. You can withdraw any contributions (not earnings) at any time from your Roth IRA before retirement age without penalties as long as the account is at least five years old. You will be able to withdraw any amount up to the total amount you contributed without being subject to taxes.
In addition to your Roth IRA contributions, you might opt to take out some of the earnings in the Roth IRA. You can withdraw an additional $10,000 from the earnings under the first-time homebuyer exemption.
This is where the withdrawal exception comes into play. You may withdraw a combination of both contributions and earnings or just earnings to use toward your home purchase.
Just remember that if you are only using earnings the cap is $10,000. Any penny above that will trigger the 10% penalty in a traditional IRA or just the the income taxes in a Roth IRA.
You can always take out funds above the $10,000 threshold if you are taking out contributions only or in addition to earnings.
Again, simple math can help you build wealth.
We don’t have to be smarter than the rest. We have to be more disciplined than the rest. – Warren Buffett
My method of using the Roth IRA early withdrawal exception.
First, I did some research and found out that if you qualify as a first-time homebuyer, you can withdraw up to $10,000 from your traditional IRA and use the money to buy, build, or rebuild a home.
Second, I learned that with a Roth IRA, you can withdraw your contributions tax- and penalty-free at any time, for any reason, as long as you have held the account for at least five years.
This got me thinking. At the time, I was renting. I had opened up a Roth IRA more than five years ago. I had been squirreling away cash in it since opening it up with T Rowe Price starting with $50 dollars a month.
I also opened up a second Roth IRA with another brokerage at another time as not to mess with the good thing I had going with the first one as you could no longer open a Roth IRA with T Rowe and continue with an automatic contribution of $50 per month.
Do not scoff or turn your nose up at investing small sums of money. Over the years dealing with both accounts and after regular and sporadic contributions over time my T Rowe account grew to over $10,000 as did my other one. I had well over $25,000 in both not counting my 401(k), Rollover IRA, or other cash and investments.
I was skeptical about moving forward at first with this decision to buy property. My first. Then, I thought about what Wayne Gretzy and Michael Jordan said, “You miss 100% of every shot you don’t take.”
This quote helped me as well. Progress always involves risk. You can’t steal 2nd base and keep your foot on 1st.– Fred Wilcox
Therefore, I went for it.
I started by combining both accounts. Then, I cashed out $13,000 of of my Roth IRA.
The first $3,000 was in contributions and the additional $10,000 was in earnings. After, using the funds for closing costs and a small part of it for renovations, I ending up paying taxes on a tiny portion. The grand total: $238.
I was shocked! I couldn’t believe it. I felt like I should have taken the plunge long ago.
Alas, we cannot look backwards, we can only go forward. Within a few months of me owning the property it had increased in value by $14,000. That is more than what I withdrew to get the place.
And owning gave me such a sense of peace. That right there is priceless. I decided to do some updates and renovations to feel better about the space I was in. It took some hard work and time, but it was worth it in the end.
I got inspiration from several places. I knew I wanted the feel of how I always felt every time I walked into a Restoration Hardware.
Restoration Hardware Front Entrance
I got the idea to base my bathroom feel and design on the Marriott and Caesar’s Palace in Vegas. Clean lines, white, simple and elegant. I also went with frosted sliding shower doors that you could not see through.
Caesar’s Palace Las VegasJW Marriott
My bedroom is my center and place of peace. I call it my home base. I also always have a mini home office in my bedroom as I like to roll out of bed in my pajamas and write, work and check the stock quotes.
Houzz design
And I love an organized closet. I got inspiration for mine from the Container Store. Although, mine does not look like this, I did make sure it was organized with all of my suits, shoes, and sweaters together like in the picture below.
The Container Store Custom Closet Design
Lastly, the heart of the home. The kitchen was inspired by honey + lime. Stainless steel appliances and organized kitchen cabinets make life easier. Again, although my kitchen does not look like this, it was done with something like the picture shown in mind.
honey + lime kitchen design
Every time I think back and ask myself if I made the right decision I think of this quote from FDR.
Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world. – Franklin D. Roosevelt
“Patience and perseverance have a magical effect before which difficulties disappear and obstacles vanish.” —John Quincy Adams
Stocks are down and housing prices are up. We have seen a shift in way consumers are spending. Mortgages are in. High-priced stocks are out.
Although the stock market has had an astounding run since the Pandemic began in March 2020, it is the acquisition of housing has most Americans chomping at the bit.
The US has minted more than half the world’s new millionaires over the last few years as investments in equities and tech stocks propelled assets higher. Real estate, is generally considered to be a more stable investment than volatile stocks or fluctuation cryptocurrencies and is a tangible asset. Real estate investing has also created 90% of the world’s millionaires.
However, not too far behind is stocks as nearly 70% of their wealth gains over the past year and a half have come from market gains. The wealthiest 1% know this. That is why they own 89% of all US stocks.
Those at the top of the economic food chain know the wealth comes from the owning of assets. The top 1% own a lot of stock my friends. And those at the bottom of the economic pyramid own so little. Meaning they are not keeping up with the rise of inflation and their purchasing power is steadily decreasing.
The dollar in their pocket is worth less now than it was yesterday. This means you are able to afford less at the grocery market and to purchase other consumer goods. For example, the cost of a pound of brisket was listed as $9 a pound. My sister sent me a screenshot of a 9.67 pound of brisket in her grocery store. The cost: $87.
I am sure somewhere my grandmother is looking down upon us and thinking that the family may very well have to turn vegetarian or severely cut back on meat consumption. I know grandma, I know.
According to Pew Research, the Consumer Price Index, the most widely followed inflation gauge, increased 7.0% from December 2020 to December 2021 – its highest rate in nearly 40 years. Families are spending $30 more per week at the local grocery store or farmer’s market. An increase in prices also mean less that is being invested and saved.
The price of lumber has increased by 288% making the cost of homes go up by an average of $36,000. The average new car price is now $47,000. As of 2021, the average monthly car payment in the US is $575 for new vehicles and $430 for used vehicles.
When I put these numbers in my compound interest calculator, it informs me that if I can invest either one of these amounts monthly for 30 years, I can become a millionaire. Therefore, I have come to the conclusion that new cars are wealth stealers and must be avoided at all costs. Rejecting new cars has made me richer. Things have gotten so far out of whack for the average household that people have begun to put groceries and gas on credit! This an absolute no-no. Building wealth requires cash.
Even if using OPM – other people’s money – you still have to bring some cash to the table to invest in index funds or put a down payment on a home. You must have capital to work with if you want to build wealth.
And companies are all too happy to part you from this wealth whether you have some or not. Case in point, I recently looked up the Kelley Blue Book value of my car. I just wanted to know what it was worth. Little did I know that this information gets sent over to local car dealerships who within mere seconds of me inquiring started sending me a barrage of solicitations for my business to put me into a new car.
I know very well that the average car payment is over $500.
These salespeople are looking to increase their monthly sales quota. I continue to get offers to get me into a new car by email, phone and text over the next week.
At this point, my Spider-sense is tingling. Why are folks still calling me after a week? I get it. Business is all about sales. They make fat commissions of us folks once we sign on the dotted line.
I prefer to keep my money where it is; in my pocket.
Just for kicks, I decide to look up the cost of food, housing and cars from the last 30 years.
After doing all of this research, I have come to the conclusion that the future is going to be expensive.
Therefore, it is unwise to use credit for present consumption with yet unearned future dollars.
We can prepare for the increases in living expenses by investing our dollars today. Don’t believe me. Just take a look at all the charts I provide in this article.
Numbers don’t lie.
The constant outflow of discretionary dollars on basic cost of living has consistently gone up. The cost of homes, education, cars, gas, and food are going through the roof!
I truly feel that incomes have not kept pace with the cost of homes and education. Equity may have increased, but so has the cost of homes.
In 1976, the cost of Harvard University tuition was $3,740. In 2019, it was $54,002. How can they justify it? It is almost like that owl in the how do we get to the center of a Tootsie Pop commercial: the world may never know.
This is a mystery that I do not even think Scooby-Doo and the gang could solve no matter how many Scooby snacks Velma has in her back pocket.
I do not say these things to scare you. I am merely your jedi money guide on this journey. I want you to invest.
Own your primary residence and buy those index funds.
As the stock market goes down, buy the dip. Buy low. Get those high returns to sell high.
I did this back in 2013 when I bought shares of Apple (AAPL) for $258. The stock went on to split twice. Once for a 4-for-1 basis on August 28, 2020, a 7-for-1 basis on June 9, 2014. Prior to each split the stock was trading well over $500. It was $656 in 2014 and $656 in 2020.
It went from a billion-dollar company to a $2 trillion-dollar one. At the time of this writing, it is hovering around a $3 trillion-dollar market cap. Off a small one-time investment, I made tens of thousands of dollars.
And that small home that was purchased years ago. It has increased in value over $100k. The equity has gone up by over $100,000 and counting. That is why we invest my friends. So we can keep earning money in our sleep. Our money can work without taking vacations or sick leave. We can’t.
So here is your homework for this evening. I want you to find a home you would like to buy and a stock you would like to purchase. Figure out how much of a down payment or initial but in you will need. Divide this amount by how long you think it will take you to save up these funds.
For example, the VTSAX has a minimum initial investment of $3k. You decide you want to but this investment in a year. Therefore, you divide $3,000/12 months = $250. That is how much you must save every month to but this index fund. Doing the math will allow you to slowly build your dreams.
Let us not forget the wisdom of one of the greatest investors of all time: Warren Buffet. He reminded us that American living standards advanced seven fold in the 1900s, while the Dow rose from 66 to over 11,000. The Dow now stands at 34,934.27 today in 2022. “The model has worked well for America. If you look at all these disparate businesses, such as if you looked at the Dow Jones as a single entity… (though it rotated)… but going from 66 to 11,000 is doing something right. Owning a group of good business isn’t a bad plan.” Yes, owning is good for your pocketbook in the long run. Now I want you to go out and get some assets.
But before you do here is some more Buffet wisdom, “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” And lastly, “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.” Patience is key. It will take you to the promised land of financial independence.
When I read the tea leaves on the stock market, I see it rising to 100,000.
Why you ask? A little research.
The Dow Jones industrial average index (DJIA) opened in 2018 just shy of 25,000 on Jan. 2, and a little over two weeks later it already had topped 26,000. The DJIA would need to rise by 20% to hit 30,000. We did that. As reported by Kigplinger, the DJIA has enjoyed an annualized increase of 7.33% since 1950, based on Yahoo Finance historical data. Therefore, the DJIA will double every 10 years (9.82 years, to be exact). If we continue at our 1950-2017 pace, the DJIA index will double, or hit 50,000, in 10 years.
If a $100,000 in the market at a 10% return will net you $1,000,000 in 30 years, then you can become a multi-millionaire with help of the stock market. And that excludes housing equity. So get out there and start putting your dollars to work.
Millionaires know that you get rich by saving $20 bucks at a time.
Happy New Year all you Greenbacks Magnets out there!
Hope the New Year is putting more money in your pocket than last year.
Let 2020, the year of perfect vision, be the year you see things more clearly and become more fiscally fit.
However, it was not long before news articles began to make me painfully aware of how income inequality affects our everyday lives.
Recently I read a frightening statistic.
The average American cannot afford to buy a home in 71% of the country. Average earners can’t buy property in 344 of 486 counties in America.
That just breaks my heart that so many people are locked out of the “American Dream.” I bought a home after the 2008-2009 financial crisis. There were homes popping up on discount all over the country. Now we are back up to gargantuan home prices again!
That means America is becoming a land of renters.
If necessary, you may have to do some geoarbitrage to afford to put a roof over your head without going broke paying rent.
What is geoarbitrage?
Geoarbitrage is an interesting concept, often closely related to the definition of lifestyle design.
Geography is location.
Arbitrage is different in that it is all about economics. In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices at which the unit is traded.
The two terms combined are a powerful combination.
They kind of remind me of Captain Planet.
For those of you who do not know or remember what that is, I will give you a short synopsis on Captain Planet: A cartoon about a group of kids that teach communities the importance of family (heart), recycling, and caring for the planet earth in all its splendor and recognizing its importance through its elements (earth, fire, wind, water). On the show when they combined their powers Captain Planet would be created and save the world from pollution.
Geoarbitrage combines the power of finances and location to optimize the two for extending the life of your money. It basically means relocating in order to take advantage of the lower costs of a city/country. There are different ways you can go about this.
However, the goal is to pay less than you can afford no matter where you decide to live. This way it ensures you are not spending more than you make.
Median home prices are $257,000 across the country. You would need to make $67,650 to afford to buy at that price point, but the median salary is around $57,000.
Source: U.S. Census Bureau
Renting isn’t much better. Come on San Francisco, $3,500 for rent is a mortgage payment!
Therefore, living in expensive places like Sydney, New York, Los Angeles, Singapore, London, Paris, Hong Kong, Osaka or Vancouver can break the housing budget big time.
We are about to go around the world today on the blog.
So watch out cause Greenbacks Magnet is going international! Let’s go!
First up, we are going to look at what it costs to be in the land Down Under: Australia.
You know the place. The place that gave us Crocodile Dundee and created one of the hands down most quoted scenes in movie history. “That’s not a knife. That’s a knife.”
🏘️ Australia's property market is heating up again after 2 years of decline. @SybillaGross explains
According to realestate.com.au a one bedroom executive apartment is going for over $800,000!
$825,000 – $865,000 187 Kent Street, Sydney 1 Bed 1 Bath Apartment
It’s mighty expensive to live in the land known for koalas, kangaroos, the outback and its sandy beaches.
When I did a search for homes that were for a maximum price of $500,000 or less, the website turned up no results! I got this message. We couldn’t find anything that quite matches your search. Son of a beach!
Now let’s do like Pauly Shore in the movie Encino Man and keep on cruising. Next stop, New York.
Manhattan is the prime real estate in the Empire State.
According to Zillow, this home on Central Park West is going for $1,250,000. That is with a price reduction! The estimated mortgage payment is $7,461; annually that would cost $89,532 USD.
$1,250,000 3 bd2 ba 1,100 sqft Price cut: $145K (10/24)420 Central Park W # 5/6C, New York, NY 10025 For sale Zestimate®: $1,222,319 Est. payment: $7,461/mo Get pre-qualified
That’s after-tax dollars folks. The concrete jungle is just as pricey as the outback! Check out these prices in Manhattan. Can of coffee: $6.14 Average rent: $3,783 Price of a home: $1.36 million T-bone steak: $12.78 Trip to the beauty parlor: $68 Dozen eggs: $2.89 Notice home prices are over five times the median home price of $257,000! Wow!
Next stop, Hollywood. We are now in Los Angeles California. Known for its year-round warm weather and beaches, it’s the place where many movie stars call home.
According to Zillow, if you want the standard two bed, two bath home, then prepare to open up your checkbook. Couldn’t find too many homes with decent square footage that were less than about half a million. This home was over $600,000!
$669,9003 bd3 ba1,340 sqft 3901 Walton Ave, Los Angeles, CA 90037 For saleZestimate®: $661,657 Est. payment: $3,106/mo Get pre-qualified
And that is small potatoes to many others I saw.
No wonder people are renting more and rents are skyrocketing. It’s a landlord’s market! There is no cap on rent so it just keeps on going up.
Rent is averaging 1% to 3% increases annually. That is keeping pace with inflation and the cost of living.
Buying a home may be what many people want to put down roots, but renting often is more affordable.
Renters are at war with their checkbook.
Trying to balance budgets on shoestring wages. Can’t afford to buy, can’t afford to rent. Catch-22 as housing a necessity!
Now we are crossing the Atlantic. Hold onto your wallets. I mean buckle up. Next stop, Singapore.
The crown goes to Singapore, as it is the most expensive city in the world. Properties were going for $50,000,000 on Sotheby’s! That’s right $50 million. So this place for $578,000 should be considered a bargain!
Even Realtor.com International knows that space is a premium in Singapore. Check out the first line in the description. Size is not everything but it certainly plays a crucial part in this new development from Sim Lian. Well said and well played to get these places sold. Size is indeed not everything.
Tampines St 11 , , District 18 USD $578,522 SGD $781,000 Apartment 2 Bed 1 Bath 581.00 sq ft
Next stop, London!
Now that Prince Harry and Duchess Meghan Markle and stepping away from royal duties to become *ahem* financially independent, I wonder if their UK estate, Frogmore Cottage, can go on the market as it recently underwent a $4.1 million renovation. It would be a shame to spend all that money and just let the house languish and sit unoccupied. But what do I know. Those are matters of the Crown and HRH Queen of England.
Looking at homes in the London area of the UK, it seemed the ones with the most space started around $800,000 and went up into the millions!
Here is the home description: New to the market a stunning 4 bedroom semi detached family home. This property has been extended and modernised to a high specification. 29 ft main reception / leading to garden and 2 further reception rooms. Spacious modern kitchen and large utility. 4 double bedrooms all with en-suites and dressing room to master. South facing garden and of street parking for several cars.
Street parking for a home worth $1.27 million! Can I at least get a designated parking spot?!
USD $1,274,017 GBP £975,000 London 4 Bed 4 Bath
Now we are going to take a trip to one of the fashion capitals of the world. Paris!
Yet again, I went with my standard 3 bedroom, 2 bathroom criteria and look what I found.
For this historic 199th century apartment, it will cost you USD $1,104,398 or EUR €995,000. Um, non, merci (no thank you).
paris, Île-de-France, Address available on request
Next stop, Hong Kong. If you are looking for a place in Hong Kong, China, it will cost you. A 300 sqft. home could cost you $900,000. Some people’s work cubicles or offices are bigger than this!
According to Christie’s international real estate, there are 556 Luxury Homes for Sale in Hong Kong. Place like park Rise, Bel Air on the Peak and Repulse Bay Road cost around $3,000,000.
Some of the pictures of the homes are magnificent, but out of range for average homebuyers.
Hong Kong
Next up, Osaka. If you want to be where the action, expensive real estate, and big paychecks are in Japan, look no further than Osaka and Tokyo.
I found a beautiful apartment located in walking distance near a subway: Kitahama Station (1 min. walk) Osaka Municipal Subway Sakaisuji that cost ¥146,000,000 or $1,332,980 USD.
Osaka, Japan
I’m starting to see a pattern here across the globe of home prices in major cities costing on average $1,000,000.
And last but certainly not least, Vancouver BC.
According to the Vancouver Courier, Vancouver was ranked the most expensive Canadian city in the annual Mercer Cost of Living survey. Vancouver has the highest cost of living in Canada for expats.
According to Remax, This newly listed home located at 502 1571 W 57Th Avenue Vancouver, BC, will set you back $848,000. It is a 1 bedroom, 1 bathroom and only has 748 sqft. Can’t even get a 1,000 sqft of living space without spending $1 million. Canada is super expensive.
Vancouver, Canada Estimated Mortgage Payment: $3846.78/mo 1 bed|1 bath|748 sqft|condo Date Listed: Thu, Jan 09, 2020 Property Tax: $1,930 (2019)
Our neighbors to the north charges a premium to set up shop in this town.
I prefer to invest my money in stocks and let that money grow large enough to pay for my living expenses.
Build your wealth first, and then buy luxury. Get paid. Invest in stocks like the S&P 500 index or VTSAX. Rinse and repeat. Do this until you earn enough in dividends and interest to pay for your lifestyle.
Then you can quit the rat race sooner rather than later.
“There are only the pursued, the pursuing, the busy and the tired.” ― F. Scott Fitzgerald, The Great Gatsby
For many people out there I am sure you have heard of shows like Flip this or Sell that house. Many of them are broadcast on A&E. One of these gems was a show called Flipping Vegas.
The show starred real estate investor Scott Yancey and his
interior designer wife, Amie Yancey. What made this show stand out was the
outrageous personality of its star, Scott Yancey. He could regularly be seen
losing his mind over the tiniest of overages to his immensely short time table
he gave to flip any house. It made for great television. I felt it was the
funniest of all the house flipping shows out there.
Scott would regularly drive around in his Porsche (he loves
cars) and go from house to house that he had invested in to inspect properties.
His wife, Amie, could usually be found at places like Walker Zanger to purchase
materials for all of the homes they were flipping. The couple were constantly
bickering about house design, location, and finances. They were a riot.
What I remember most is that Scott was always very concerned
about the budget as where Aime was not. She believed that a well-designed home
sold itself. However, Scott did not always agree. He would regularly have a fit
if she spent extra money or over-improved a house. It was hilarious.
“When you have a
foreclosure sign on the house, it’s saying, ‘Vandals, homeless: Welcome. Please
strip it,’ ” Scott told The Las Vegas Review-Journal of the properties he
purchases. “We’re in a race to get it done and get it sold.”
So, without further ado, I give you what it’s like to flip
Vegas.
WHAT IS FLIPPING VEGAS?
“The houses that are the worst to buy are the ones we save for TV because we know there’s a great storyline with it.” – Scott Yancey
Flipping Vegas was an American reality television series that aired in the United States on the A&E network for 5 seasons from June 18, 2011 – September 27, 2014. Featuring the husband and wife team, Scott and Aime Yancey. The couple would fix and flip homes in Las Vegas, Nevada. It aired on Saturdays. And ran for 41 episodes.
Meet the real estate players
Scott and Aime
Vegas was hit hard by the housing crash of 2007-2009. Where
most saw disaster, Scott saw opportunity. He would buy low-priced and
dilapidated homes in Vegas, fix and flip them quick for a profit.
Setting a quick timetable of about 4 weeks and even shorter budgets of approximately $10,000. A quick fix schedule and low budget is called flipping. Spend less money equals more or maximum profit. His opposite is Aime, who buys high-end finishes that are not in the budget, without telling Scott. Let the fights over the checkbook begin.
Here is some of the banter on this show.
Real estate agent: Can you all this done in a week? It’s a
lot to do?
Scott: I turn and burn these suckers!
Aime: Scott, you’re so cheap.
Scott: Once again you are unconcerned with deadlines and bottom
lines.
Aime: Give the house a great design.
Scott: This house is an ugly girl. Put lipstick on her, we’re
not giving it plastic surgery.
That’s Scott, always keeping it classy. He works hard and
lives his life fast. He likes quick wins and flips. I’ll give him this, at
least he always kept it real.
In an interview with the Vegas
Sun, Aime said, “I mean, I feel like I’m giving birth to each of them. I
know Scott has timelines to turn them around fast, and we butt heads. He sees
the bottom line, and I fall in love with the transformation. I can’t stop
myself; I really need rehab for designers.”
They generally work with the same contractors and real estate agents to sell their houses. In addition, will also have multiple trades working on one house at the same time to keep up with Scott’s insane open house schedule (think buying a home, renovating it, and putting it on the market in 7 days). And yes, there was an episode that he tried to do this.
The show got is start from a conversation Scott had with some show business friends where he recounted how he had to pull out his Glock (he’s licensed to carry) on some homeless people that came at him with needles in a boarded up house. They recorded some footage of him (Scott paid for their expenses) at work and it got into the hands of someone at Lionsgate. That is how his reality show career got started.
Finance Lesson 101: You have to spend money to make money.
ALWAYS EXPAND
Expand. Never contract. – Grant Cardone
One of the best times to start a business is during a
downturn. Scott is a businessman who owns a real estate brokerage called
Goliath Company. He invests sells, and flips houses. In addition, Scott also
was an executive producer of the show and an author. Reality television star is
also one of his many titles.
When asked what it was like doing the show Scott stated, “It’s reality TV for a reason, but try working with your wife for 12-14 hours a day. [The producers] know our fans. They love it when I break shit, and that’s my favorite part. If I could take a bulldozer and knock out a shed, that’s great. Take a chainsaw to a wall, that’s great. Demolition is No. 1; drama is No. 2. And then education.”
The best episode I saw and my favorite was the Season 2 Episode
10 show entitled, “Yancey’s Eleven” which aired on February 16, 2013. Scott
purchases 11 unfinished villas at Lake Las Vegas for a total of $380,000 and
takes on the gargantuan task of getting them all fixed up at the same time.
A&E episode description(www.aetv.com): Scott takes on
the biggest flip of his life having purchased 11 unfinished villas in upscale
Lake Las Vegas with hopes of flipping all 11 in less than 45 days! It’s a risky
gamble that could have a huge payoff…if Scott can manage to bulldoze through
some unexpected and high-priced construction roadblocks.
Show me the money honey.
The couple then began doing seminars. A no-strings attached
sort of deal. It started out for free with a preview, but then morphs into a sales
pitch. Over three-hours attendees are enticed to pay a $2,000 fee for a second,
more intensive three-day seminar. Those who paid and made the investment in the
three-day event received yet another pitch to invest in the next level that
costs a whopping $30,000.
I, personally, can confirm the first part. I was invited to a Yancey seminar. I went and it was basically someone coaxing and goading you to spend money (not the Yancey’s as they were not there). Basically, it was a high-pressure sales pitch. The free part was just to get butts in the seats. The free meal was a cold sandwich, chips, and a stale cookie. Although, it sounded good, and everyone acted professional. I refused to spend money going to yet-another seminar. After that experience, I swore off all seminars for good.
They said most people did not complete the problem because there was work involved. So, they quit. Customers cry foul. That they were not properly trained. Scam???
Finance Lesson 102: If you are going to expand and ask people for money, then you better bring you’re A-game and deliver. Better to write a book and sell it for a reasonable price, that provide the details of how you became successful then give people false hope and empty promises. A book is at least tangible.
A GOLIATH OF A TASK
“The main thing is that in TV land, they speed everything up. They [the viewers] think, ‘Oh, wow, it’s a breeze. They come in, and it’s done.’ It takes a long time to put them together, to pick out the fit and finish and work on the quality. They only see a glimpse of it.” – Amie Yancey
Scott started in real estate at a young age. He got advice
from a friend to invest his $30,000 settlement from a car crash into real
estate as his family was doing. Scott took the advice.
Forgoing finishing college he still found a way to make a
million dollars. Even though he almost quit real estate after the downturn,
overhearing a conversation between patrons made him change his mind. When he
heard how little people were paying for properties in Las Vegas only to start
renting them out to tenants, Scott saw a golden opportunity to profit. Why not
buy at the bottom?
“At the next table, the discussion revolved around the Las Vegas real estate market and the fact that there were homes available to buy for as little as $36,000 that would rent out for $900/month. Just hearing those two numbers put Scott’s real estate brain into gear. Two things came to mind immediately, ‘You make your money on the buy in Real Estate’ and ‘fortunes are made in bad economies.'” – Scott Yancey
His task was to buy real estate at the bottom. Things have to hit rock bottom become they come back up. You can capitalize on that. It was risky and things were rough. Like me, quotes were in Scott’s mind: “Nothing great is easy” and “Debt equals drive.” Those helped him. He had this epiphany and ran with it.
Similar to the money epiphany I had in 2017. Once I figured out a way to save more, I began to do so massively. Start where I was at and work my way up. I started by saving $50 a month and then slowing increased my savings every day or month. Now, I save over $13,000 a year and increase that number every year.
Finance Lesson 103: Best time to start a business is in an economic downturn as fortunes are made in bad economies. For instance, when the stock market crashes, that is the time to buy.
COLLEGE DROPOUT TURNED MULTI-MILLIONAIRE REAL ESTATE INVESTOR
“I’m not a college graduate.” Scott told Vegas
Seven. “I went to probably five colleges, and I dropped out of them all. I
have ADD. I didn’t come from money. But you don’t need money to be a real
estate investor, and that’s what I teach people. I did my first land deal on my
own without any of my own money, and I netted $2.3 million. I can relate to
most of the people who write to me and say, ‘I’d love to do what you’re doing.
I don’t like my job, but I don’t have any money.’ Great, you don’t have to.
You’re right where I started.”
Scott was hired as a real estate runner for a real estate
attorney named Walther (Walt) J. Plumb III. His salary at that time was
$5/hour. Walt ultimately became Scott’s mentor. He also convinced Scott to get
his real estate license as his last 3 runners had all become millionaires. He
ended taking his advice and making so much money in real estate, that he left
college. He was making hundreds of thousands of dollars, which is a lot of
money for a guy in his 20s.
He was making so much money for Walt that he decided to
strike out on his own.
The $2.3-million-dollar deal allowed him to pay off all his
credit cards and buy the care of his dreams, the Porsche. And put a million in
the bank. He used his big payday to pay off debt. This is similar to what John
Legend did.
You can also regularly hear Scott complain about amateurs on
his show.
In an interview with the Vegas
Sun, Scott said, “but I think there are a lot of amateur-type flippers who
have gotten in in the last little while, and they have short fuses because
they’ve borrowed money to their properties. Scott usually pays all cash.
This is what Warren Buffet says about borrowing: “I’ve
seen more people fail because of liquor and leverage – leverage being borrowed
money.”
He says, “if you don’t know what you’re doing, leave it to
the professionals.” He stills relies on
him and asks his mentor for advice. Looking up the couple net worth online
yields results of $5 million each.
Finance Lesson 104: You can be successful without college. However, you need to decide early and when you are young what vocation you are going to do to try and make a living.
THINGS WILL AND ALWAYS DO CHANGE SO PREPARE
“Flipping is great at first to generate capital, but as an investor, the goal is to take your capital and invest it in rental properties. The rental properties pay you every month. Flipping, you make one payday; you’ll make $100,000 on a good flip. [Investing] that in a rental property [can} make you $5,000 a month. … It’s a lot less work to collect a rent check than to renovate a house.” – Scott Yancey
At one point, in an interview with Vegas Seven, Scott thought that the real estate market would change as it always did. In addition, that there is a false send of high-fiving.
Most purchases are all cash deals being done by investors.
Lots of flippers have left and are out of the flipping market. People are
buying and holding, which should be the real estate investor’s endgame. As far
as renters for his homes go, he wants good tenants that resign every year and
he only takes cash as payment. He also buys near hospitals so many of his
renters are ER doctors and nurses. Basically, those with steady reliable
incomes and paychecks.
I hear that.
I also read a real estate investing book that said a great place
to buy was near college campuses. Get those college rentals going. Not bad
advice. Pretty similar to what Scott has done.
I recently read that the government shutdown has closed up
shop 4 times within the last 10 years. That is a huge problem for RE owners.
Especially, if this trend keeps up and considering that furloughed contractors
don’t get back pay when the government reopens.
Not surprising. A home is only an asset if it can or does
feed you. You can only get access to the equity when it’s sold. The only other
way to make money is to rent it out. Either by the unit, home, or room. If you
want to start a profitable real estate business and become a landlord, then you
better have the funds to handle downturns, bad tenants, vacancies, and repairs.
Finance Lesson 105: All businesses need capital.
You can take that piece of advice all the way to the bank.
“Um, Anya, while I completely trust you to take care of the inventory and the money, um, dealing with people requires a certain… finesse.” – Giles, Buffy the Vampire Slayer
Yes, indeed. Say it with me, finesse. PEOPLE. REQUIRE. FINESSE.
I cannot tell you how many times I have done business with people and their attitude caused me to cancel my transaction. All I ask for is a little kindness. Being nice can go a long way.
If you are passionate about what you do, then you are generally more pleasurable as well.
People will forget the things you say or do, but they never forget the way you make them feel. I learned that from Maya Angelou. And it is so true.
Today, I want to share with you some advice from my peers. Money Bloggers.
You better believe it. I read every contract. Cross every T. And dot every I. The reason I have an Emergency Fund is for my peace of mind. It means no matter how much the government changes the laws, your job sucks, the lack of integrity around you, or people’s scruples, you are protected.
Here are some of my posts on the importance of emergency funds and having money in the bank.
You don’t need money in 8 banks, 20 credit cards, and 3 homes if you can’t find a way to manage it. Simplify it. Hire a financial advisor and property manager. Or just decrease the amount of banks and credit cards you use, homes you own, and stuff you have.
No matter what, simple is best. KEEP IT SIMPLE!
3. YOU DON’T HAVE TO SPLURGE ON EVERYTHING
Things Worth Spending MAX Money On For A Better Life – https://t.co/IXRyboM4Cm – You don't have to splurge on everything. Just the most important things. What's missing from the list? pic.twitter.com/3aM4LU7KGX
Absolutely, you don’t. I read a book years ago on health and fitness called Beyond Diet. She stated instead of buying all organic just get a few main items such as milk to keep your budget in check.
I have always spent my money on the things that mattered most. Namely, my health, education, a good pair of shoes, a good coat, and reliable transportation.
See more on saving and buying what really matters.
Because I'm a money nerd and a comics nerd, one of my favorite things is when these two obsessions come together in the form of (drum roll, please): financial graphic novels! You might think that's a niche I just invented, but you'd be wrong. https://t.co/ea0q30ojwlpic.twitter.com/e13jgOoPrs
I take every chance I get to educate someone about money. I bought the Automatic Millionaire for my best friend years ago, so she could get better acquainted with Mr. Benjamin, cause it’s all about those Benjamin’s.
If you don’t teach your kids about money, they will grow up not knowing how to earn and manage it.
If your not sure where to start, check out my post on Scrooge McDuck. It’s kid friendly.
You think you know where your money’s going, but you have no idea.
Well, welcome to the club. Most people have no idea where their money went.
I suggest you start tracking it right now. Yes, stop reading this post and go track your net worth right now!
You can only do better when you know better.
7. A CAR IS NOT AN INVESTMENT
A car is not an investment, it's a tool. It's ok to spend more money to buy a nicer tool. Especially if it's a tool that you use often and needs to be relied upon.
There is nothing wrong with owning nice things, just don't lie to yourself by justifying it as an investment.
Don’t even get me started on cars. Like money, it is just a tool.
I paid off my car about a decade ago. Here is a screen shot of my $0 balance. I paid off that car and out that money to work for me. Forget cars! You do not need an expensive car.
Ah yes, they say ask and you shall receive. However, you still have to ask and do the work. Nothing is for free.
The sorted topic of coin is a tricky one. Money is emotional. But side hustles can get you more money, so I say why not try to EARN money by doing something you are good at and do for free already. Just a thought.
How do you FIRE? Basically, you work your butt off when you’re young, live on like 50% or less of your income and save and invest the rest. You have a better chance of achieving this if you can save and invest 50-70% of your income.
From what I have read, most aspire to FIRE with 25 times their income. Could be anywhere from $500,000 to $2.5 million. Then live off the interest.
However, whether or not you FIRE, you can help others. It can be done with money or time. Either way, with financial independence comes the ability to choose what you do, as you become the master of your time when you no longer have to punch a clock.
When is it time to leave your job and FIRE?
Ask yourself: Would you do this job for free?
You want to be able to do your passion right? Then, you have to make some changes. Leave the grind of the 9-to-5. Get out of the proverbial rat race. It all starts with what you earn and what you spend.
Financial freedom allows you to spend more time doing the things you want. You can spend more time with family, take more vacations, serve in the peace corps, help build homes for habitat for humanity, and the list goes on.
Hope you enjoyed this post, as much as I enjoyed writing it. It was nice to remember some of the things I’ve learned along the way on my own journey to wealth.
However, whether or not you FIRE, you can help others. It can be done with money or time. Either way, with financial independence comes the ability to choose what you do, as you become the master of your time when you no longer have to punch a clock.