Welcome to Chez Cliff!

It’s time once again for credit Tuesday!

Relax.  I can’t talk about this forever.

I worked with a loan officer for about two months.  The business was (or still is) really booming for refi’s of houses and she felt I would make a good loan officer.  At that time I was desperate to do something new so I agreed to work with her.

A client had given her permission to run his credit (-10 points) and she was glancing it over.  She let out a sigh.  There was a lease on his credit report.

With all the manipulations you can do with your credit, a lease is something that you can do absolutely nothing about.  Pay your lease off early?  Not possible.  Part of the lease program is the number of miles you have on your vehicle when you turn it in.  No one will know the number of miles until you actually give the vehicle back to the dealer.

Much like the balance on a credit card, your credit score gradually increases the more of the car you have paid off.  What helps is the fact that at some point, you owe less than what the car is worth and this greatly affects your score.  When your car is paid off past the 50% mark, your score jumps and then jumps again at the 30% point.  When it’s finally paid off, you’re back to normal.  But this only applies to purchases of vehicles.

With a lease, it doesn’t work that way.  Your credit score does not reflect that you have 50% of your lease gone or even 30%.  It doesn’t have a total amount that you owe and how much you have paid off.  On your credit report, the lease of a vehicle looks like a giant black hole with no end in sight.  And I mean that literally.  Nowhere on your credit report does it say that your lease will terminate in November of 2007.

What makes leasing an automobile so attractive is that the payments are significantly lower than buying.  Everyone knows this because there’s only 5,267 commercials on television that tell us that.  But, as usual, they don’t tell you that it’s going to blacken your credit report for the entire duration of the lease.

This isn’t a debate on whether you should purchase or lease a vehicle.  This article was only written so that you understand what’s going on with your credit when you go one way or the other.

This last March, I talked to my Loan Officer for the first time about getting a loan.  The first question she asked me was "How much is your car payment?"  I smiled and said "None.  It’s paid off."  She smiled and said "If you keep it that way, I can get you into a investment property."

The proof is in the pudding.

By the by – my car is from 1993.  It’s 12 years old with 137,000 miles.  Runs like a champ and I won’t even think about replacing it for at least another year.

On my post "Middle Class Conversation", I received some "interesting" emails.

As I stated, the Rich Dad readers would find the conversation interesting just as I did.

If you’re choice is to go after a higher paying job to raise your income then that’s fine.  That is your choice.  But that defeats the purpose of what I’m doing.  My focus is quite clear:  increase passive income from my assets.

Let’s imagine this scenario.

Donald Trump is sitting around with his staff and they are contemplating their next big deal.  After crunching all their numbers, they realize that they are a few dollars short.  The question comes up "Well, how can we get more money?"

Donald Trump says "Well, I’ll update my resume and look for job that pays more."

????????

No.  I don’t think so.

I looked at my visitor stats the other day and noticed several people found my blog through Google.com.  I didn’t know that I had made it onto their search engine!

So, I played around with magical combination of words until my blog appeared.

Go to Google.com and type in "Christmas party mentor starfighter".  Guess who shows up as number one?

This guy!!

Cashflow 101 and Cashflow 202 are these great games that I use to play a few years back.  They are kind of like monopoly on steroids.  With these games, anyone can learn the basics of investing.  It not only deals with real estate but for stocks and businesses as well.

Every time I played these games, I tried to walk away from the table having learned something new.  One night, as an experiment, I included other players as partners on my deals.  This allowed me to keep more cash in my pocket to do other deals.  The results were astounding.

At the Real Estate Agent’s Christmas party, I was speaking to my mentor.

Mentor:  "Dude, when are we going to do a real estate deal?"
Clifford:  "Well, I’ll be done with the houses in December so January will be good."
Mentor:  "January then."

On my next deal, I would like to have a partner.  More importantly, I’d love to work with my mentor.  I tucked this little conversation into the back of my head.  At that time, the only thing I needed to get completed was the Master bedroom.

Well, that’s done.

The other day, my cell rang.

Mentor:  "Yeah, Donald Trump told me to call you.  He said that you were the real estate man."
Clifford:  (laughing)  "Well, I told him that I already agreed to work with you on a deal.  He’s slightly miffed about that."
Mentor:  "Too bad.  So are we doing something or what?"
Clifford:  "I’m ready.  I talked with the Real Estate Agent and he’s ready."
Mentor:  "Good.  When are we going to meet?"

I love this.

Details are coming.

There’s a new character being introduced into my blog today.  His name shall be Google.  I call him this because he rants at least twice a week that "If I had bought Google at $185 per share, I’d be a jillionaire!!"  All in all, he’s a good guy. 

I will preface this conversation by saying this:  If you have read the Rich Dad, Poor Dad (RDPD) books, then you will find this dialog entertaining.  I know I did.

Google and I were having lunch.  During this time, we usually chat about ideas regarding just about anything.  On this day, I was telling him the latest on my real estate stuff.

Google:  (bites burrito)  "So you have a choice to make."
Clifford:  "That’s right.  I can either sell the houses or keep them and take the equity out."
Google:  "If you keep the houses, how can you get at enough to get your next house?"
Clifford:  "I’ll have to raise my income level.  I will-"
Google:  "-get another job."
Clifford:  (smiling)  "That’s interesting.  Why would I get another job?"
Google:  "That’s what we do."

I’m stunned because this is exactly what the author of RDPD talks about.  People with middle class mentality raise their income level by going after a higher paying job.  They, in turn, wind up paying more taxes and after a few months find themselves back in the same position they were before.

Clifford:  (shakes head)  "That is Middle Class thinking for ya."
Google:  "What were you thinking?"
Clifford:  "Renting out the front house as well."
Google:  "The front house?  The one you’re living in now?"
Clifford:  "Yep.  I know I could easily get X amount a month for that house."
Google:  "If you rent out the front house, where are you going to live?  Your car?"
Clifford:  "Minor detail."

In the RDPD book, the author writes that "rich people mentality" involves creating assets which produce passive income.  If one wants to increase their income, create an asset to do it.  In this particular case, I want my asset to produce more passive income.

I am particularly proud of myself.  When I asked myself how I could increase my income, the thought of getting another job never crossed my mind.