Archives for May 2015

How To Cook Everything Fast, Reviewed By a Slow Cook

cookfastAs part of my ongoing effort to Cook It Yourself in 2015, I’ve been trying out new cookbooks. (So far I’ve managed to lose over 20 pounds by cooking at home and eating less of what I cook at home. 😉 ) I bought How to Cook Everything Fast: A Better Way to Cook Great Food because Mark Bittman has been a long-time advocate of cooking at home and it received positive reviews including a 4.4/5 average rating on Amazon.

This cookbook is the size of a large phone book (for those of you young enough to remember phone books). At over 1,000 pages and 2,000 recipes (including suggested variations) crammed inside, you probably won’t be bringing this to the grocery store with you. It cost me $21 shipped from Amazon, so if you measured cookbook value by recipes per dollar or pounds per dollar, you’d be a happy frugal camper. But don’t expect nice pictures, as color pages are expensive.

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There are some good techniques to streamline your home cooking. Here are some general observations on how this cookbook tries to differentiate itself from the many other cookbooks out there.

  • Clearly indicate whether it will take 45, 30, or 15 minutes to make.
  • Every recipe is laid out so you can see the entire thing with the book open on a stand (see image below)
  • Streamline recipes down to critical ingredients, or substituting easier ingredients when possible.
  • Do things in the right order, like preheating oven, preheating pans, or boiling water first.
  • Use techniques like grating or slicing things so they cook faster, using the food processor, or mincing multiple ingredients all at once.
  • Assign specific prep work to be done during natural downtimes in cooking.

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For the most part, these techniques work and you start looking for ways to apply them to your other recipes. But sometimes doing the prepwork while something cooks doesn’t work out if you are slow with your knife skills. It took me closer to 10 minutes to do the slicing and mincing that I was given 5 minutes to do, and meanwhile the meat got overcooked. You can turn down the heat, but that doesn’t always work and you might not realize in time either. Many times I found myself wishing for a slower pace and less stress rather than save 5 or 10 minutes.

Sample recipes. Here are some YouTube videos which include recipes from this book. These are definitely some of the better recipes and makes the food come alive much more than the blue and black text in the cookbook.

Overall impressions. In the end, this book certainly delivers as a large reference book on “how to cook everything fast”. It covers everything. It is fast. Now, in many of his videos, Bittman somehow manages to come off as both slightly goofy and a bit condescending. (You may notice this in his videos above.) In the book, everything is much more subdued. There just wasn’t much personality in reading the recipes – I’d even prefer arrogance over blandness.

For me, having a bajillion recipes on hand was not a benefit. If I wanted access to 10,000 recipes, I could just run a search on AllRecipes. I now realize that what I want are the best recipes, dishes with a little flare that a home cook (not restaurant chef!) has made hundreds of times and ideally passed down through at least two generations. With any book with 1,000+ recipes, I would expect some great, some okay, and some disappointing. That’s exactly what I found with this book.

The best part of the book was learning a few techniques to optimize other recipes. If you are more of a visual learner like me, I would start by watching his YouTube videos as they are usually “The Best Of” his recipes before diving into the book.

Disclosures: I bought this book with my own money at Amazon.com for $21. If you buy this book using my Amazon link above, I will receive a small commission.

Teaching Money Management Skills… Without Using Money

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spoiled160In the book The Opposite of Spoiled by Ron Lieber, there are a number of tips and tricks presented to help teach your kids to be good with money:

The foundation of the book is a detailed blueprint for the most successful ways to handle the basics: the tooth fairy, allowance, chores, charity, saving, birthdays, holidays, cell phones, checking accounts, clothing, cars, part-time jobs, and college.

As I read through them, most of them were never found in my own childhood. I was never given a wad of money to buy my own school clothes. I didn’t have a fancy save/spend/give jar system. I had chores, but was never paid for them. There was no forced or guided philanthropy. My parents didn’t pay me interest on my savings. When confronted with the fact that all my friends had allowances, my parents eventually relented and gave me… a dollar a week. This was sometime in high school.

I’m not saying that all these clever little schemes don’t help to create financial skills. I plan to use some of them myself. But we should also focus on the core values and character traits that lead to good behavior in general. Indeed, this is also acknowledged in the book:

Finally, I want to help all of you recognize that every conversation about money is also about values. Allowance is also about patience. Giving is about generosity. Work is about perseverance. Negotiating their wants and needs and the difference between the two has a lot to do with thrift and prudence.

So I took many of the topics in the book and tried to connect them with the corresponding character traits in the big graphic shown above.

There are many other ways to encourage your kids to learn traits like patience, perseverance, curiosity, or delayed gratification. Many have been part of cultures and/or religions for centuries. The first way kids learn is by watching their parents, so we must be good examples as well. (I know, can’t I just buy an app or something instead? I mean, thanks Mom and Dad!)

Annual Income by College Major Ranked by Quartile and Percentile

Here’s another article about the relationship between college majors and future earnings. But this WSJ article at least looks beyond just providing the median wage and helps you visualize the spread between the 25th and 75th percentiles for each major:

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There is also an interactive chart embedded in the WSJ article. For example, I could sort to find the top 10 majors according to their 25th percentile wage, imagining more of a worst-case scenario that just assuming I’ll get the median income or higher. Here are a few more nuggets that may surprise you:

Graduates of architecture programs may have higher salaries than teachers, as the latest paper shows, but the February report noted that they’re also likely to see unemployment rates twice those of education majors.

[…] just choosing a major in science, technology, engineering or mathematics, known as the STEM fields, doesn’t secure a hefty paycheck. Mr. Carnevale’s team found that biology majors have median annual wages of $56,000 over their careers from age 25 to 59, or about one-third less than physicists.

Yet once biologists finish graduate programs—and more than half of them do—their median annual earnings jump to $96,000, roughly on par with physicists who have advanced degrees.

There are also wide ranges in salaries for specific majors. The top 25% of earners who majored in finance can expect annual earnings of more than $100,000, while the bottom quartile may bring in just about $50,000 a year.

[…] lifetime earnings for economics majors at the 90th percentile are nearly triple those at the 10th, reflecting the range of destinations for such experts in government and the private sector.

I support the notion that prospective income shouldn’t be the only consideration in choosing a career, as I’ve tried working in decent-paying fields that don’t interest me and it just didn’t work out. However, money remains a factor and I like to have an idea of what the stats are.

Here’s another thing to consider: early retirement in under 20 years requires a 50% savings rate. Such a savings ratio is much more likely if you make twice the overall median salary with median spending (make $120k household income, spend $60k) as opposed to a median salary and half-of-median spending (make $60k household, spend $30k). Someone could start working at 21, retire by 40, and spend the rest of their life doing whatever job or activity they wanted to. Semi-retirement is another option.

Capital One Spark Business Credit Cards: $500 or 50,000 Miles Bonus

sparkyLooks like the small business credit card competition is heating up. Capital One has temporarily upped the sign-up bonus on both of their small business cards:

Capital One Spark® Cash for Business is offering a one-time $500 cash bonus once you spend $4,500 on purchases within the first 3 months. There is a $59 annual fee that is waived for the first year. “Existing or previous Accountholders may not be eligible for this one-time bonus.” Note that there is also a Spark Select for Business and Spark Classic that are different cards with lower sign-up bonsues but no annual fee.

The Spark Cash for Business offers 2% cash back for all purchases, which is strong, but you have to weigh that against the $59 annual fee after the first year. If it was 2% with no annual fee, that would be keeper business card for sure. Just comparing the two CapOne cards head-to-head, you have to spend more than $11,800 every year to make the 2% back and $59 annual fee (Spark Cash) pay out more rewards than 1.5% back and no annual fee (Spark Cash Select).

Capital One Spark® Miles for Business is offering one-time bonus of 50,000 miles – equal to $500 in travel- once you spend $4,500 on purchases within the first 3 months. There is a $59 annual fee that is waived for the first year. “Existing or previous Accountholders may not be eligible for this one-time bonus.” Similar to the offer above, the Spark Miles offers 2 miles per dollar with the $59 annual fee but there is also a Spark® Miles Select for Business that offers 1.5 miles per dollar with no annual fee.

As far as “normal” small business spend, I usually don’t charge more than $12,000 a year on my small business. My primary expenses are web hosting, cell phone, internet, and office equipment. But if you spend a lot on stuff that doesn’t fit in the 5%/2% bonus categories of the Chase Ink Cash or Chase Ink Plus cards (office supply, internet, cell phone, cable TV, gas stations, restaurants), then these cards may be a good fit as a primary small business card.

Here are some selected quotes from the fine print for the Spark Cash card (not Miles):

How does my spend bonus work?
You will earn a $500 bonus if you spend at least $4,500 within 3 months of your rewards membership enrollment date. Once you qualify for this bonus, we will apply it to your rewards balance within two billing cycles. Existing or previous Accountholders may not be eligible for this one-time bonus.

How do I redeem my rewards?
You can get your cash back upon request in the form of a statement credit or a check. You can also set up an automatic redemption preference; options include: (1) at a set time each calendar year or (2) when a specific threshold ($25, $50, $100 or $200) has been reached. Just go online to capitalone.com or contact our Rewards Center. […] Until you set up an automatic redemption preference, you will receive your cash back each year in the form of a check issued in your rewards membership anniversary month.

I’m not sure why someone would pick the miles over the cash, since the miles are restricted to use over travel. My theory is that some businesses like that the miles aren’t cash because then they can be given out as a non-taxable perk like other frequent flier miles?

Note: I do not receive any referral fees for the application links above. They are the best publicly-available offers that I could find. Opinions expressed here are the author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer.

Bogle on Mutual Funds, An Investment Classic Book Review #TBT

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Whenever I feel overwhelmed by the amount of noise coming at me through my computer screens, I read a book. When the new books on my desk don’t impress, I find an old book. That is how I came to buy a used, first edition of Bogle on Mutual Funds last year from Amazon for a penny + $3.99 shipping. John Bogle is best known as the founder of Vanguard who brought index funds to retail investors and changed the entire industry. Since most people just know him as the Index Fund Guy, I feel that he is under constant pressure to stay “on message” and only promote buy-and-hold passive investing.

But you know what? Even though many would prefer the world to be black and white, it isn’t. For a very long time, Bogle also ran and owned low-cost actively-managed funds like the Vanguard Wellington and Wellesley funds. To this day, a big chunk of Vanguard assets are actively-managed. Even recently, he has expressed skepticism about the trend towards holding more non-US international stocks.

When you read the circa-1993 material in Bogle on Mutual Funds, I feel like you get more of the “grey” Bogle. There is advice on how to pick a good stock mutual fund, even amongst actively-managed funds. There are some practical considerations for picking amongst asset classes. Of course, the main takeaways are still there:

  • Index funds are a great invention for long-term investors.
  • Low costs are very, very important.
  • Low portfolio turnover and minimizing taxes are very important.

But the book also includes a lot of little nuggets like comparing dividend yield relative to interest rates. First, here is a chart from the book showing how S&P 500 dividends have grown steadily with inflation. Meanwhile, the yield from a bond may start out higher, but would remain be constant until maturity.

divinflation

Unfortunately, defining what constitutes too high a price for dividends is a fallible exercise, one that must take into account not only the average historical valuations for stocks but the current valuations for other investment alternatives as well. History suggests that stocks are relatively expensive when the price paid for $1 of dividends is above $30 (i.e., a yield of 3.3%) and relatively cheap when the price paid is less than $20 (a yield of 5%). However, stocks may well be attractive at a yield of, say, 3.5% if there are compelling reasons to assume that their dividends will increase rapidly or if yields on other classes of financial assets are relatively unattractive.

In the example shown in Figure 2-5, buying a portfolio of stocks at a 3% yield rather than a bond at a 7% yield might not be a sensible investment, especially considering the incremental risk incurred in holding stocks. When stocks yield 4.5% and bonds yield 6%, that may be quite another story.

As of mid-2015, the S&P 500 dividend yield is ~2% and 30-year Treasury bonds are ~3%. The relative difference between the stock yield and the bond yield only 1%, even less than the 1.5% gap that he calls “quite another story”. This would suggest that (long-term) the S&P 500 is expensive historically, but still attractive relatively when compared to bonds at this point.

Anyhow, I bring this up is because Bogle on Mutual funds has just been republished as part of the “Wiley Investment Classics” series. (#TBT = Throwback Thursday.) It’s a great book and you could buy it to have it in Kindle format or to support Bogle, but you can also buy a used, 1st edition hardcover for $4 shipped. (Or borrow it from a library, but this is going in my permanent collection.) Unfortunately it is not a “revised” edition where the charts are updated or there is new investment commentary based on current market conditions. The only difference that I could find between my 1993 version and my 2015 review copy is a new 17-page introduction which mostly talks about the history of the book itself.

If you’re going to buy something new, I’d recommend their other Bogle classic – John Bogle on Investing: The First 50 Years – which is a compilation of his best speeches over the years going back all the way to his 1951 undergraduate senior thesis. I haven’t read that one yet, but I really enjoyed a similar compilation of Charlie Munger speeches.

Paperless vs. Paper Statements

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Pictured above is the Fujitsu ScanSnap iX500 Scanner. It can digitize a page every 2 seconds, and some version of it has been on my Amazon Wishlist for many years. However, I still haven’t plunked down 400 bucks for it, because I don’t know if I’ll ever go completely paperless.

There are many tutorials on how to scan all your paper documents into Dropbox or Evernote. Liz Weston recently had a Reuters article about going paperless with tax-related documents:

I don’t make New Year’s resolutions. Instead, I resolve every tax season to get a better handle on my paperwork — with mixed results. This year, I turned to three certified public accountants to find out what apps, software and strategies they use to keep track of everything.

Kelley Long, a Chicago CPA and personal financial specialist, tries to generate as little paperwork as possible, opting for electronic records instead. “The IRS accepts electronic records,” said Long, resident financial adviser with Financial Finesse in Chicago. “There’s no need to keep paper. That’s the one thing they’re modern about.”

Long keeps a folder on her computer desktop for the current year’s tax documents. If a document comes to her in paper form, she scans it, saves it in the folder and shreds the original. She converts emails documenting charitable contributions and other tax-related expenses into PDF files by choosing the “print” function and then “save as PDF.” […] At the end of the year, she downloads her bank and credit card statements into the folder.

But then Reader Bill sent over this Clark Howard article about the benefits of paper statements:

If you think about all the companies you do business with, they all try to get you to turn off paper statements. If you’ve done so, I want you to turn that around and go back to getting statements in the mail.

With a paper statement in hand, it’s easier to prove that you had the money in the first place in the event funds go missing. If you are set up for electronic info only, well, that’s going to hurt. So the best precaution I can give is for you to go back to getting the paper.

So, which is safer? In my opinion, for most things they are equivalent. Paper statements can be lost, stolen, or destroyed (i.e. house fire). Electronic statements can be lost, hacked, or destroyed (i.e. hard drive crash). You can protect yourself with redundant copies of either one (i.e. safe deposit box, extra USB drive, cloud backup). Keeping a nice long history of either paper or paperless statement can help you prove ownership or status of assets. Indeed, the IRS accepts electronic copies as equivalent to paper, so why shouldn’t we?

(I would agree with the implication that those repeated calls for you to “go paperless” are less about eco-friendliness and more about saving printing and mailing costs. I am also curious to know if credit card companies have found that paperless statements lead to more missed payments and thus more interest and late fees. It certainly is less wasteful, though.)

The safest thing would be to keep both. In the event of some Fight Club-esque event where the digital records of your assets are lost, paper statements might help. In the event of some local disaster where my home and my bank is destroyed, then digital records in the cloud would be helpful. (It may be a good idea to read up on file encryption.)

What do I do? I maintain regular paper statements for my most important financial accounts. That’s basically my primary IRA, 401(k), brokerage, checking, and savings accounts. The main reason for the statements is that I am in charge of family finances, and if I am injured or worse, then my spouse will be able to track everything simply by opening up the mail (plus other estate documents). I also keep paper copies of our monthly bills coming in for the same reason. I still enjoy my ritual of sitting down with physical bills and paying my bills (online) once a month as I use the opportunity to review our monthly spending. Important statements are sent to a P.O. Box instead of my house to reduce chance of theft and protect privacy.

I also have several other financial accounts that are either dormant, temporarily opened for reviews or experiments, or have low balances. Those are all set to paperless and tracked online by Mint.com. I’d rather give Mint my passwords and keep a virtual eye on all of them, rather than the likely alternative of never checking in on them at all.

Sling TV Review + Free Amazon Fire TV Stick or Roku Stick Promo (Updated)

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Updated review after 3 months of using Sling TV. Promo still live for a couple more weeks. Sling TV allows you to stream a package of major cable networks live over the internet. That means you can watch it on your smartphone, your home TV, or your laptop. No cable subscription required. Here are the channels included in the base package that runs $20 a month:

  • ESPN (live sports!)
  • ESPN2
  • CNN
  • Food Network
  • Travel Channel
  • HGTV
  • Cartoon Network
  • TNT
  • TBS
  • Cartoon Network
  • Disney Channel
  • ABC Family

Right now, if you commit to prepaying 3 months of Sling TV ($60 total), you can get any of the following deals:

That’s a $39 to $50 savings, depending on the deal, if you were looking for a modern streaming device. You must redeem the promotional code by June 5, 2015.

Alternatively, if you sign up at Sling TV directly first, you can get a free 7-day trial to see how it works for you. If are then ready to commit, then I would sign up for this Amazon promo using a different e-mail address as it says “new customers only”.

My 3-month user review of Sling.

  • Quality isn’t bad; my internet is only 15 Mbps on a good day but we usually don’t have more than one thing streaming at any given time. It looks especially crisp on my iPhone.
  • I’ve had a couple of crashes while channel surfing. This is on the Mac OS X desktop app.
  • You can’t choose to record shows for later viewing. It doesn’t work like a DVR. However, on select channels you can get limited replay of past episodes. From their site:

    Sling TV includes a 3-day replay feature that allows you to watch shows that have aired in the past three days on the following channels: HGTV, DIY, Travel Channel, Cooking Channel, Food Network, Galavision, El Rey, Univision Deportes, Universal Sports, and beIN Sports and we expect this list to grow. Sling International customers can enjoy exclusive 8-day replay on all international channels.

  • On the non-replay channels (including ESPN, ESPN2, ABC Family, TNT, TBS, Disney Channel), you can’t even pause a show for a few minutes and pass the commercials later, or have it blip back 10 seconds if you missed something. On the other channels listed above (Food Network, Travel Channel, etc), you can pause and blip backward. I was surprised how often I would try to click the pause button, with no response. Boo.
  • There is no contract and it is easy to cancel online under your account details. It just took a few clicks and 30 seconds. No calling in required at all, which means no Comcast cancellation nightmares. Note there are no refunds the 3-month prepay offer above. You can reinstate your account easily as well, similar to Netflix.

I did this free streaming stick promo, but after the 3-month comittment I cancelled my Sling subscription mostly due to the lack of DVR ability on all channels. I’ve had a TiVo since roughly 2005 and over the last 10 years, I have completely lifestyle-inflated myself such that I just can’t watch old-school TV anymore. It was too annoying not being able to pause a show, skip commercials, record a show, or blip backwards. I don’t watch that much TV, but when I do, I want it to be on my terms. (You may feel differently!) Now I primarily just stream kid stuff like Sesame Street via Amazon Prime Video.  

Charlie Munger On Leverage and Paying Your Mortgage Off Before Retirement

housemoneyWhile reading back through various transcript notes from the 2015 Berkshire Hathaway Annual Meeting, I recalled the following quote from the Q&A session. A shareholder had asked why Berkshire had never borrowed money to buy stocks (i.e. leverage). Charlie Munger replied:

It’s obviously true. If we’d used the leverage that some others did, Berkshire would have been much bigger … but we would have been sweating at night. And it’s crazy to sweat at night.

This is an important point, as many other similar investors have used leverage to boost their returns (not always, but some with success). Buffett and Munger certainly could have justified such an action, especially given their excellent investment track record.

Munger did not make this jump, but I believe but an individual investor could also apply this quote to paying off their mortgage early. Even I enjoy discussing the details of mortgage payoff vs. retirement savings, and acknowledge that mortgage interest rates are low while stock returns are historically higher. Why use your money to pay off your mortgage when you could invest in stocks instead?

The problem is that if you are putting off paying off your mortgage just so you can invest in stocks, you are using leverage! That is, you are taking borrowed money and then putting it at risk. That may increase your overall returns, but it will also increase your exposure to bad outcomes. For most people – not everyone, but most – paying off your mortgage debt will help you sleep better at night. Based on his biography, Warren Buffett himself bought a house in cash when he got married. Even though he was confident he would have made more money by putting those funds toward his investment partnership, he chose not to have a mortgage.

In addition, many financial advisors are incentivized to maximize the amount of your money that they manage, as they can’t earn any fees off your home equity. Wes Moss, a fee-only advisor and Money Matters radio show host, ignores that and gives blunt advice in his book You Can Retire Sooner Than You Think:

Sooner or later, every homeowner asks the simple question, “Should I pay off my mortgage?” and immediately gets bombarded with a variety of complicated, hedged responses. Here is the simplest possible answer: Yes. If you are anywhere near retirement and can afford to pay off your mortgage, you should.

I view this as an example of how real-world, experience-based advice can differ from theoretical, academic-based advice. Humans are not perfectly rational. I have never regretted paying off my mortgage early, although I do agree with the qualification that mortgage payoff should roughly coincide with retirement date.

* Of course, Warren Buffett quickly added: “…over financial things.” Ba-dum-bum-ching!

Montessori Chart of Age-Appropriate Chores For Kids

spoiled160I’m currently reading The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber. So far, it covers a lot of topics about money and kids that even us adults don’t like to talk about in public. For example, kids and chores. Do you pay them? Should they be expected? What tasks should they handle? As a new parent, I didn’t really think about how controversial this could be.

Every couple of months, someone sends me a link to a particular list of appropriate chores for children of different ages. The chart originates with the Montessori school movement, where children use tools at younger ages than most others do and choose activities that the teachers refer to as work. The chart suggests that 2- and 3-year-olds can carry firewood, that 6- and 7-year-olds should empty the dishwasher, and that 12-year-olds ought to do the grocery shopping. Invariably, the sender includes a note with some version of the general message: If only!

I found this version from the Maria Montessori Facebook page with over a million shares:

spoiledchores

For the most part, I would agree a the average kid can do these things at those ages. I really have no idea what the average kid does for chores nowadays:

…we can help our kids act on what Stanford psychologist William Damon describes as a drive for competence. “They avidly seek real responsibility and are gratified when adults give it to them,” he wrote in Greater Expectations, his book about how far our expectations for our children have sunk in recent decades. Indeed, in many urban and suburban families, the chores that we assign them don’t add up to much.

I hope to keep my expectations high of my own little ones, but I won’t go around bragging that “my kids will do that!” just yet. 😉 It sounds like it is more work to get them to do the chores than to just do them myself. But then again, isn’t it always harder to be a good parent than a bad one?

Real Estate Crowdfunding Experiment #1: Property Details and Numbers Breakdown

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Woohoo, I just received my first interest payment on my real estate crowdfunding experiment #1. I put in $5,000 at 11% APR, which should work out about $46 a month but the first partial payment was an underwhelming $16.81. I e-mailed Patch of Land and they said I could share the details of my loan, so here they are. If you are a SEC accredited investor and a (free) registered member, you can view it on their site.

Financial details. Here is the summary and breakdown from the Patch of Land listing:

The developer is requesting a loan of $179,000 in order to purchase and renovate the underlying property. The property was purchased for a total of $155,000 in April of 2015. There is minor renovation needed for the underlying property, totaling $55,000. The borrower will receive 2 draw(s) totaling $175,420 over the course of the loan. The initial draw in the amount of $120,420 occurs when the loan closes. The second draw of $55,000 will be disbursed when renovation is completed. The borrower plans to sell in 1 year or under.

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Loan is secured by the property, in the first position. Also have personal guarantee from borrower (not worth much). 6-month term (roughly April 15th to October 15th). 11% APR interest, paid monthly.

So the developer is contributing roughly $40,000 and the loan is roughly $180,000. So a total of $220,000 is being put into this house. Considering that the loan will charge roughly $10,000 in interest over 6 months, plus a potential 6% brokers commission upon sale, this house would have to sell for around $245,000 for the developer to break even. The developer thinks the house can sell for $275,000 but it all depends on how well they spend that $55,000 in renovation costs and how the local market holds in the next 6 months. A 3rd-party appraisal gave a estimated after-repair value of roughly $240,000, which is probably a conservative number but suggests a potentially tight profit opportunity for the developer.

In the end, I do believe it likely that the loan amount of $179,000 can be recovered from this property in a liquidation scenario (see below). It is important to note that the developer doesn’t actually get the final $55k until the renovations are completed and thus the home will be worth more.

Property details. Single-family home in West Sacramento, California. The address is 508 Laurel Lane. You can look up details from public records using sites like Zillow or Trulia. Built in 1954, 3 bedrooms, 1 bath, 1,675 sf living area, 7,000 sf lot. The pictures provided suggest a house that is definitely in need of a kitchen remodel and light repairs, but it wasn’t destroyed inside. The house is about the same size and appearance of other houses in the neighborhood.

I am not familiar with the Sacramento area. The zip code of 95691 appears to have slightly above-average selling prices compared to West Sacramento overall. According to Google Maps, the neighborhood is relatively close to freeway access and downtown Sacramento. I also looked at Google Street View and I liked that the neighboring houses all appeared to have well-maintained houses and manicured lawns. That suggests pride of ownership and/or a certain level of peer pressure to keep your house looking nice. Based on a quick Craiglist search of comparable rentals, this house should support roughly $1,400 to $1,500 in monthly rent, which is not bad compared to the ~$245,000 that I’d like this house to sell for once fixed up.

In the end, there are a number of risks in this deal, but otherwise it wouldn’t pay an 11% annualized interest rate. From my vague understanding of hard money loans, I was hoping for much lower LTVs in the 50% range instead of the 80% range. Perhaps the lessening of loan standards from new money flooding this new asset class is already happening. It would be educational to see how they handle a liquidation… but I should just sit back and quietly cash my interest checks.

Hard Money Loans: The Next “New” Asset Class?

paperbillsBloomberg has a new article about how hard money loans to house flippers are the next asset class to be both crowdfunded and taken over by institutions. Like peer-to-peer loans and LendingClub, it may have started out with individuals lending to other individuals, but there is still a lot of money looking for higher yields and that means Wall Street is coming. The catchy title is now House Flippers Are Back Together With Wall St. What Could Possibly Go Wrong?.

First, a few quick terms and definitions:

Bridge loans, also known as hard-money or asset-based loans, give flippers cash for home purchases and construction with about a year to repay, and are backed by the real estate. […] Fix-and-flip investors have generally gotten funding from local private lenders as banks have shown reluctance to extend credit for speculative real estate deals. Borrowers are forced to pay high costs in exchange for the quick cash.

Next, some interesting stats:

[Hard money loans] represent an opportunity of about $30 billion in origination annually, according to LendingHome, an online mortgage marketplace that makes short-term loans and sells them to investment firms

The average gross profit for completed flips in the first quarter was $72,450, up from $61,684 a year earlier and the highest in records dating to 2011, according to a report Thursday from RealtyTrac, a real estate data firm. Markets with the highest average gross return on investment included Baltimore, central Florida and Detroit.

I’m assuming gross profit is just the difference between the buy and sell prices, which is easy to find and calculate. Those numbers don’t include any fix-up costs (repairs, remodeling, or construction) or carrying costs (loan fees, interest, and taxes).

Finally, the risks:

The hard-money market is getting crowded, which may lead companies to loosen their standards, said Mark Filler, CEO of Jordan Capital Finance, a lender acquired by credit investor Garrison Investment Group about six months ago. His business has more than 300 approved borrowers with credit lines.

“Everybody just jumped in,” said Filler. “The risk is people start to relax underwriting guidelines to chase loans. As this becomes more competitive, there will be more pressure to do that.”

I just received the first payment on my crowdfunded real estate loan experiment, but I’m already concerned with all the money flowing into this newly-accessible asset class.

Employee or Student Discounts for AT&T, Verizon, Sprint, and T-Mobile

celldiscount

Updated 2015. Every major cell phone provider offers discounts for large groups, even when it’s an existing personal line. You could qualify through your employer, educational institution, or even affiliation with certain organizations like AAA or credit unions. So grab your work or school e-mails, check out these links, and find out what discounts are available to you. You may be pleasantly surprised.

AT&T Wireless. BusinessDirect Premier Discounts

Submit your work or student email address to find out if you are eligible to receive exclusive AT&T offers and discounts on your wireless bill through your employer or school. Once we validate your email address, you will receive an email to start shopping in your own personal AT&T online store!

We need your work, school, or organization email address to determine if you are affiliated with an organization that qualifies for additional savings. AT&T has business agreements with thousands of corporations, government agencies, and educational institutions to offer wireless products to their employees at a significant discount.

If we match your work, school, or organization email address with our list of qualified companies, we’ll send you an email so you can start taking advantage of applicable discounts and benefits for which you qualify. (We are unable to match personal email addresses such as Yahoo!®, Windows Live™ Hotmail, or AOL®.)

Verizon Wireless. Employee Discount Program

Verizon Wireless offers you discounts on wireless products and services based on your employment or affiliation with an organization that has an agreement with us.

If you are new to Verizon Wireless and have an employer issued work email address, you can enter the address below to check your eligibility status.

T-Mobile. In 2014, T-Mobile changed their corporate discount program for consumer lines. Existing corporate discounts were mostly left grandfathered in. The T-Mobile Advantage Program now gives a $25 gift card per device instead. If you have a work phone directly paid for by your employer, you may qualify for Business Family Discounts.

Do you work for a company that is part of the T-Mobile Advantage Program? You could be eligible to receive a $25 T-Mobile Advantage™ Reward Card with every purchase of a new smartphone or tablet.

Does your company directly pay for your voice line on the T-Mobile network? Your family can save 50% off your first two lines on an eligible Simple Choice family plan—and pay just $10 per line after that. Is your family already on a T-Mobile Simple Choice Plan? Great! Because they’re eligible, too.

Sprint. Sprint Discount Program.

Did you know that Sprint provides a discount to a range of occupations and membership programs? Thanks to the Sprint Discount Program you may be eligible for a discount of at least 10% on select regularly priced monthly data service from Sprint. Just enter your work, school or organization email address below to see if you could be saving. Switch and start saving today!

Here are specific links for the Sprint AAA 10% discount, and Sprint credit union 10% discount. LoveMyCreditUnion.org also offers credit union members Sprint monthly plan discounts and waived activation and upgrade fees.