Subprime Hits Home

We had agreed to purchase another rental house and had a signed purchase agreement with the seller, but we had not arranged financing. Since we have other rental houses and since we felt that the bust wasn't too bad here in central Indiana, we didn't think financing would be all that different from the last several years. Central Indiana never really participated in the huge increase in home values. Thus, we didn't think there would be a bust.

Well, apparently the tightening of lending standards is hitting everywhere. We had talked to someone from Countrywide and it turns out that many of the loan products are gone. We were being offered products like 11.25% for 40% down on a purchase price between 100,000 and 120,000. Can you believe it? So, I guess we won't be doing anything for awhile except tuning up the personal balance sheet and waiting for the real estate/subprime mess to blow over.

Merry Christmas

I hope everyone had a Merry Christmas yesterday. We had a ton of chaos in our house with 6 adults, 7 children, and 3 dogs. It was very noisy and chaotic during the opening of presents. Trash was everywhere. I am sure everyone had a good time, though. One of the nicest things about the Thanksgiving and Christmas holidays is getting together with family and just hanging out.

We played lots of games yesterday. Games on the computer, board games, video games. It was nice to relax and forget about the concerns of everyday life for a day. Of course, today it's back to work, pay the bills, get the oil changed in the car, and clean up from yesterday. But, I try to be thankful for everything we have and enjoy while I am able. It won't be long, relatively speaking, and the kids will be grown and out of the house. Then holidays might end up being too quiet. So, here's to noise.

Oldest Daughter

Ok. So my oldest daughter wanted me to write something about her since she felt the rest of the blog was boring. This is the same one who asked us how long the CBS news program "60 minutes" was on. She does know some good blonde jokes, though. Now that I have written about you, you can stop bugging me about it.

In the meantime, I continue to learn a lot about the internet since I am considering a venture in that area. As things get going, I may post more. It is amazing the amount of information that needs to be considered.

Yesterday, I worked out again. Did not lose any weight, but didn't gain any either. I am getting close to my end of year goal but don't think I will quite make it. I am making progress, however. Otherwise, I don't have much to say. I have been quite busy but not with anything very exciting.

Learning on the Internet

It is truly amazing the amount of information that can be found on the internet. Two weeks ago, I had little idea that it was so easy to publish and create a blog on the internet. In doing this, I have also been looking up information about hosting and domain names. I have learned about the registering process and how domain names expire. The best thing is that I am able to do this over a wireless connection while watching Monday Night Football. Minnesota is beating Chicago by a touchdown with 2:45 left in the 4th quarter. It's nice to sit down after a very long day. Maybe tomorrow I will have something more profound.

Butch O'Hare

World War II produced many heroes. One such man was Lieutenant Commander Butch O'Hare. He was a fighter pilot assigned to the aircraft carrier Lexington in the South Pacific. One day his entire squadron was sent on a mission. After he was airborne, he looked at his fuel gauge and realized that someone had forgotten to top off his fuel tank. He would not have enough fuel to complete his mission and get back to his ship. His flight leader told him to return to the carrier. Reluctantly, he dropped out of formation and headed back to the fleet.

As he was returning to the mother ship he saw something that turned his blood cold: a squadron of Japanese aircraft were speeding their way toward the American fleet. The American fighters were gone on a sortie, the fleet was all but defenseless He couldn't reach his squadron and bring them back in time to save the fleet. Nor could he warn the fleet of the approaching danger.

There was only one thing to do . He must somehow divert them from the fleet. Laying aside all thoughts of personal safety, he dove into the formation of Japanese planes. Wing-mounted 50 caliber's blazed as he charged in, attacking one surprised enemy plane and then another. Butch wove in and out of the now broken formation and fired at as many planes as possible until all his ammunition was finally spent. Undaunted, he continued the assault. He dove at the planes, trying to clip a wing or tail in hopes of damaging as many enemy planes as possible and rendering them unfit to fly.

Finally, the exasperated Japanese squadron took off in another direction. Deeply relieved, Butch O'Hare and his tattered fighter limped back to the carrier. Upon arrival, he reported in and related the event surrounding his return. The film from the gun-camera mounted on his plane told the tale. It showed the extent of Butch's daring attempt to protect his fleet. He
had, in fact, destroyed five enemy aircraft.

This took place on February 20, 1942, and for that action Butch became the Navy's first Ace of W.W.II, and the first Naval Aviator to win the Congressional Medal of Honor. A year later Butch was killed in aerial combat at the age of 29.

His home town would not allow the memory of this WW II hero to fade, and today, O'Hare Airport in Chicago is named in tribute to the courage of this great man.

So, the next time you find yourself at O'Hare International, give some thought to visiting Butch's memorial displaying his statue and his Medal of Honor. It's located between Terminals 1 and 2.

SO WHAT DO THESE TWO STORIES HAVE TO DO WITH EACH OTHER?

Butch O'Hare was "Fast Eddie's" son

"Fast Eddie"

I received the following story in my email today:

Many years ago, Al Capone virtually owned Chicago. Capone wasn't famous for anything heroic. He was notorious for enmeshing the windy city in everything from bootlegged booze and prostitution to murder.

Capone had a lawyer nicknamed "Fast Eddie." He was his lawyer for a good reason Fast Eddie was very good! In fact, Fast Eddie's skill at legal maneuvering kept Big Al out of jail for a long time.

To show his appreciation, Capone paid him very well. Not only was the money big, but also, Fast Eddie got special dividends. For instance, he and his family occupied a fenced-in mansion with live-in help and all of the conveniences of the day. The estate was so large that it filled an entire Chicago City block.

Fast Eddie lived the high life of the Chicago mob and gave little consideration to the atrocity that went on around him. Fast Eddie did have one soft spot, however. He had a son that he loved dearly. Eddie saw to it that his young son had clothes, cars, and a good education. Nothing was
withheld. Price was no object. And, despite his involvement with organized crime, Fast Eddie even tried to teach him right from wrong. He wanted his son to be a better man than he was. Yet, with all his wealth and influence, there were two things he couldn't give his son; he couldn't pass on a good name or a good example.

One day, Fast Eddie reached a difficult decision. He wanted to rectify wrongs he had done. He decided he would go to the authorities and tell the truth about Al "Scarface" Capone, clean up his tarnished name, and offer his son some semblance of integrity. To do this, he would have to testify against The Mob, and he knew that the cost would be great.

So, he testified.. Within the year, Fast Eddie's life ended in a blaze of gunfire on a lonely Chicago Street. But in his eyes, he had given his son the greatest gift he had to offer, at the greatest price he could ever pay.

Police removed from his pockets a rosary, a crucifix, a religious medallion, and a poem clipped from a magazine. The poem read:

The clock of life is wound but once,
And no man has the power
To tell just when the hands will stop
At late or early hour.
Now is the only time you own.
Live, love, toil with a will.
Place no faith in time.
For the clock may soon be still.

The rest will be posted tomorrow.

Weight Loss

Today was Thursday, the day I exercise with Vee. I think he was trying to prove a point today since I posted his video (see Dec 9--Planks by Vee). He had me start with negative chin-ups after putting 50 pounds on the belt around my waist. I was able to do 2 good ones for about 15 seconds each, then nothing. So, he had me take off the weight and do some more with just my bodyweight. I did two more good ones and that was it. Then it was right to planks again. Ouch again. After that, shoulder press, leg press, inside thighs and lower back rounded out the routine.

The temperature in the exercise area is always kept at 62 or 63 degrees. By the end of the workout, it feels like it is about 75. Then the hallway feels like a sauna and makes me feel like I want to puke. I always drive home with the air conditioning on in the van even in the winter.

Oh, about that weight loss. I weighed in at 203.4 pounds. I started in August of 2006 at 230 lbs and lost down to about 213 by the end of this summer. That's when Vee started weighing me each week before my workout. He also gave me an eating plan (not diet). Well, I'm not always good at following the plan but when I do eat junk, I try to eat less--two slices of pizza instead of four. Anyway, it's nice to have someone to be accountable to (nor do I want to mess with Vee of 2 minute chin up fame). I'll try to drink more water this week, Vee.

Dollar Cost Average into Real Estate

Many people have heard about dollar cost averaging. It is technique where one invests a set amount at regular intervals. Typically, this takes the form of stocks or bonds. For example, one might invest $100 monthly in an S & P 500 index fund. When the fund is up, the $100 buys less shares and when the fund is down, more shares are purchased. Over time, this lowers the overall cost basis of the shares.

But, how many actually invest in real estate in this fashion. One of the things we have tried to do is to purchase a single family home for investment, on average, once each year. Then, when the real estate market is strong, one pays a higher price, but when real estate softens, we can get more for our money. Of course, in central Indiana where there wasn't a huge real estate bubble, it may not make much of a difference. But I believe this can be a potentially useful technique for those who want to buy and hold for investment purposes.

On a side note: I want to thank everyone so far for their support of my blogs so far. Currently, there are two, and I hope to announce some new blogs with specific themes in the near future.

Gymnastics and Football

Yesterday, I drove to Kentucky with my son to watch him compete in "Little League" type gymnastics. He competes at Level 5 in the 8 year-old age group. At this level, all the kids do the exact same routine. As the kids improve and are able to add certain types of skills and moves, they move up to the next level. The kids compete based upon the ability to correctly execute the required skills and with good form, etc. However, because they all do the same thing, the competitions aren't the most exciting. It's great to watch your son and see the progress that is occurring. The other great thing about gymnastics at this age is the conditioning and strengthening the kids get. Both of my sons have their 6 packs, while I spend time with Vee working on my 2-liters.

So what does this have to do with football? Two things. First, my oldest loves to watch football and wants to play. I remember being there. He tends to be a little small for his age. We certainly wouldn't discourage him but are trying to explain that the effort he is putting into his gymnastics training is developing his strength and athleticism. We explain that he can always learn many aspects of the game when he is a little older. I didn't play until college (albeit a small college). The second thing is that one of my fondest memories is my dad driving to Iowa from Indiana to watch me play football my freshman year in a JV game. Well, it turns out I didn't get to play, and I was very disappointed. But my dad did eat dinner with me and tried to encourage me. So, I hope someday that even if they aren't the best at what they do, I hope my kids remember that I was there to watch and encourage.

Planks by Vee

What is a plank? And what does someone named after the 22nd letter of the alphabet have to do with it? Well, Vee is my trainer, and he is a good one at that since he practices what he preaches. Vee can be seen in the video (along with Bo, owner of Exercise, Inc.) doing a super-slow chin up. I describe him as Samuel L. Jackson in appearance.

Every Thursday, for 20 minutes, I pay Vee for the privilege of receive a super-slow workout. Don't let the name fool you, however. Super-slow refers to the repetition speed. The idea is to take 10-15 seconds doing a positive movement with the weight and 10-15 seconds for the negative. The slow movement requires an incredible amount of control and works every fiber in the muscle, both the fast twitch and slow twitch fibers. You end up working the muscle to total exhaustion. The slow motion is also safer for your joints, and injuries are rare.

I have been doing this for about three years now and am stronger than when I played football in college. Lately, Vee has been having me step on the scale each week, encouraging me to eat healthier. If any of you lives in the Indianapolis area, Vee works out of Exercise, Inc. There is a facility in Brownsburg and Avon. The sessions are one-on-one and usually private. They are only 20 minutes since that is about all your body can take. It takes about a week to recover for more super-slow, but you still can feel good enough to engage in sports activities.

Oh, what is a plank? Lay on the floor like you were going to do a push-up. Get up on your elbows and toes and keep the rest of your body off the floor and straight like a board (plank). Hold as long as you can. Ouch. Thanks, Vee.


Email me at kgcaroffer@gmail.com to find out how to win a car!

New Phone

I got that new phone today. I went to the Verizon store and picked an LG Chocolate phone in black. It looks really cool. My kids seem to be playing with it more than I have gotten to use it so far. It has song identification software, and they are playing music on the internet and watching it ID the songs. Obviously, I am going to have to spend some time with the manual so I can figure out all the features.

Also, I am working on a new blog reviewing business related books from my bookshelf. As soon as I get a few posts, I will place a link on this blog. If you wish to email me, you can do so at kidgas@gmail.com.

Assets and Liabilities

I enjoy reading a lot and try to take away some useful information from everything that I read.

One of the biggest things that I have been able to get from Robert Kiyosaki and his books relate to his thoughts on assets and liabilities. He defines an asset as "something that puts money in your pocket" and a liability as "something that takes money from your pocket". I think this is a very useful way of looking at investments since cashflow is a major determinant of the financial health of any institution or individual.

So, when looking for my major assets, I see:
- Profession. Despite taking a majority of my time, the majority of my cashflow comes from this part of my life.
- Real estate investments. This is not always true since on occasion cashflow is negative due to repairs, vacancy, etc.
- Stock investments. Dividends can be a nice source of cashflow. Obviously, if I had more dividends, I could spend less time on the profession.
- This blog. It's not making much yet but as people read and click on ads, maybe.

For liabilities, I see:
- Housing and related expenses.
- Transportation and related expenses.
- Taxes...a major expense that I hate.
- Loans, both school and credit, etc.

So, part of the consideration for investing should be: Does this put money in my pocket?

Buy & Hold

The central Indiana real estate market never really did participate in the real estate bubble. When United Airlines went bankrupt, the maintenance center in Indianapolis shed many jobs pushing many of the homeowners on the westside of Indy into foreclosure. There has also been a lot of overbuilding in the area, so buying for appreciation has not been part of our strategy. Instead, our plan has been to buy and hold becoming landlords.

I will try to outline a few of our investing philosophies. The first thing we look at is our intended demographic. We try to look for people who might not quite be able to afford a home but would otherwise live in one. This includes young couples with children who might be starting out. We also frequently rent to people who are building a house after moving to the area but need a rental during that process. The houses that we tend to look for have 3 bedrooms and 2 bathrooms. This would be large for an apartment but represents a quality starter home.

Another consideration is that we do not rent anything that we would not be willing to live in ourselves. I think this creates a feeling of mutual respect between ourselves as landlords and our tenants. This means we have clean, well-cared-for properties. We also tend to rent at or slightly below market. This gives us a ready supply of potential tenants when one of our houses becomes available. We rarely have vacancies lasting longer than a week or two. That is despite the fact that we don't show a property until the previous tenant has moved out. This gives us time to have the place cleaned for sure and painted if needed. There is nothing like a fresh coat of paint to make a place look good. We have heard many times that our houses are the nicest and cleanest ones people have seen. All our houses are also in neighborhoods which makes them family friendly. We try to keep them looking nice to maintain property values as well.

Those are just some of the things we do since we can't count on rapid appreciation and don't have the time to engage in a large remodel and flip project.

Accidental Landlords

In this post, I hope to convey some of my experience in real estate investing. I will post from time to time on related topics as well.

My wife and I are what I have seen referred to as “accidental landlords” . Essentially what this means is that, when we outgrew our first house, we were unable to sell and ended up having to rent it out to show income to the mortgage company since we couldn’t carry two mortgages. We ended up renting it out to some acquaintances, but did not do a credit check. Well, things worked out OK for a while but then rent started coming in a few days late, then a few more days late, then a week or two late. I’m sure you get the picture. Eventually, we sent a notice that we would evict, and the family moved out on their own. We had to clean out the place, repaint everything, and replace carpet. It cost about $3000 to get back into rental condition. From this experience, we learned the following:

- Try to rent to strangers (we did rent to some good friends later and that worked out OK, although we were hesitant and explained that to them)

- No late rent. I have a short fuse now for putting up the eviction notices and have been to court to evict one other time.

- Always check credit. Nice people aren’t necessarily responsible people.

Despite the rough start, my wife and I actually enjoy our landlord experience now. We have gotten better at selecting tenants through reviewing credit, personal references, and personal interaction. We also have declined to rent to people that caused us concern.

I will post more info on real estate investing in the future. Please feel free to comment.

Good News and Bad News

First, the good news. My sister-in-law had a follow-up ultrasound today to look at the baby's heart. There was some question after an ultrasound two weeks ago. Well, everything is OK. The second bit of good news is that I was able to get AdSense approved, up and running, and the little bots ran over my blog. Now they are putting out some good ads. I even made $1.72 so far. This is great. As soon as I am able to make some more and get a check from Google, I will start to implement a good idea that I have for a website.

I want to thank everyone who has come by to visit and hope that you will continue to check in periodically. I plan on posting some useful information about investing. I also plan to detail some of what I am learning about blogging as well.

Now for the bad news. I slipped on the ice while taking out the trash cans and landing right on my phone. Needless to say, I need to get a new phone now. There goes all that $1.72 I have made.

New Computer

I bought a new computer at Wal-Mart yesterday. It is a Toshiba laptop to replace my current laptop which happens to be dying and turning totally black at random. I am not sure why this is happening. It has been a great computer. It is a Compaq Presario 900 with an AMD processor. I bought it in 2002, so I have gotten plenty of use out of it. But I am somewhat saddened. It is like saying goodbye to a trusted friend knowing that you will never see each other again. I was able to get many of my files onto a memory stick the other day and will put those on the new computer. Hopefully, this thing will survive long enough to double check everything to see if I got what I need in the future.

I plan to work on getting the AdSense up and running as well. It looks complicated to me, but I am sure that it is simpler than it first appears. I am excited about the prospects. I have a few ideas for websites that I think are good. I want to use this blog to learn my way around the computer a little better. I have been able to set up a wireless network at home. Of course, it took some time on the Linksys help line. They were very helpful. I appreciated their customer service and would recommend their products to anybody. Well time to post this and start working on getting some ads to pay for it. Once I start making some money, I plan to use that to fund my website ideas. Wish me luck.

Getting Started

Well, here goes! This is my first attempt at blogging and creating anything on the web. It certainly seems like I have a lot to learn. I have lots of ideas about different websites, but I thought this would be a good way to get started without spending anything except some time. I also hope to make this pay for itself somewhat by using Google's Adsense. I have been looking over the information related to the program. Some of it looks confusing, but I look at this as a learning experience. It is getting late, and I need to get some rest. I hope to be able to publish some useful articles about different investing topics since I have a tremendous interest in that area.