Welcome to Chez Cliff!

This is a continuation of yesterday’s article.

Engineer X:  Does the demotion of Pluto from its status as a planet
make you feel
less secure about our own position in the solar system? What steps, if
any, should we take to retain our position? 

Clifford:  The demotion of
Pluto was actually a smoke-screen to divert our attention away from the real story:  The dismissal of Tom
"I’m a freak" Cruise’ from Paramount Studios.  The secret
group of men that control the entire world realized that the story of
Tom Cruise could disrupt millions of people who follow that Hollywood
junk with almost a cult-like fascination.  One suggestion to divert our attention:  Get rid of
Pluto.

I personally feel that Pluto did not deserve to be tossed to the
wolves, discarded like an old banana peel.  Pluto has always been the
underdog of the planets; it has even had a Disney character named after it.  Most children can’t tell you half of the names of
the planets but they always remember the fun one:  Uncle Pluto.  Pluto and Uranus.

Engineer X: Compare and contrast the early ’90s collapse of the Southern
California Real Estate market, and its subsequent comeback, with the
situation that exists today.

Clifford:  Nice choice of words there "collapse".  Maybe I should
refer to you as "Journalist X" from now on.  All kidding aside, I would
be blind if I didn’t acknowledge that there are similarities between
what happened to the housing market in the early 90’s versus what is
happening today.

First off, I see that there are more "flippers" today than there
were back in the early 90’s.  With the popularity of shows such as
"Flip this House", almost anyone has realized that they can buy a home,
fix it up and sell it all within a matter of weeks.  This works great in an up market.  But when the market slows down as it is now?  A decent portion of
what we are seeing on the market these days are these houses that are
being flipped.  These are, what Kiyosaki refers to as, speculators.
And these are the people that are going to lose their shirts.  This is
at a nationwide level.

In Southern California, we’re not seeing 30% price increases
anymore.  Inventory is at record levels.  Houses aren’t selling in 30 minutes: morelike 46 days.  Those that are
priced to sell are obviously moving quickly.  Those that believe that
they are entitled to 30% increase from last year are the ones that are
sitting and waiting.

In my specific area of interest, Long Beach and Signal Hill, there are still many great deals out there.  Long Beach is going through a gentrification process.  So far, it’s at the cusp of 7th street making it’s way to the 405 freeway.  This area provides plenty of opportunities for those that know how to invest.

Overall, I’m optimistic about this market.  Sellers realize that they have to up their game if they are going to sell.  One aspect:  Sellers are paying all (or most) of the closing costs.  I’ve seen some houses sold at a loss, just to let the seller out from underneath a huge mortgage.  Factors such as these are going to favor buyers and hurt sellers.  In other words, it’s a buyers market.  People can shop, compare and take their time.  A year ago, this wasn’t the case.  For those of us that follow Kiyosaki, this should be a grand time.  After all he states that money is made when the property is bought, not sold.

Anyone getting into
real estate now should consider holding long term.  With prices doubling  every 7 to 10 years, why wouldn’t you?  And believe it or
nuts, this is exactly what Kiyosaki teaches in his Rich Dad books.  Purchase property, rent it out and hold onto it.

Thanks to those of you who took time to submit some questions.  I’m grateful for the fact that I said that I would select a few questions to answer.  Some of those submitted by Engineer X scared the poop out of me.

I’ve broken this article into two days.  Some of my responses became quite lengthy.  The first of the questions will be answered today and the rest will be answered tomorrow.

Ladies first.

Paty asks:  When you financed this property, was it treated as a primary residence or as an investment property?  Clifford:  I financed the property as a primary residence.  In the loan world,
there are a lot more financing options for a primary residence versus
an investment property.  Investment property requires a 20% down
payment which I did not have at the time.  So "Owner Occupied" was the
avenue I pursued.

Paty:  Do you know how long it takes for a closed account to drop off of your credit report?  Clifford:  There’s this fable floating around that items typically fall off your
credit report after 7 years.  I don’t understand this because I have
closed accounts from 10 years ago that still appear on mine.  Truth is, I don’t know.

Mr. Ken:  Cliff, mind posting your total costs for the home remodel?  Clifford:  Not at all.  The total cost of the home remodel was $38,000.

Mr. Ken: How is the
housing market where you live?  Clifford:  I’ll discuss more about the housing market tomorrow.

Mr. Ken:  Do you think your home will sell fast
when you list it? Clifford:  Mentally, I’m prepared for 6 months.  While my agent, and all my
friends, are convinced that the houses will sell quickly I am not.  As far as the housing data is concerned, inventory of houses on the market is quite large.  Property is still moving but it’s not moving very quickly.  Average time is 46 days for Southern
California.

Mr. Ken:  What are you going to do when it goes under contract?   Clifford:  Drink champagne.  As far as my living arrangements go, I’ll probably be renting for a few months.  As a growing and learning investor, I’ll be learning something I think will be really cool: the 1031 exchange program.   

Mr. Ken:  Are you going to start looking for a new home? Clifford:  Yes.  I have 45 days, under the 1031 exchange, to put an offer down on my
next project before Uncle Sam nails me for taxes.  My next project will
probably be almost identical to the first project.  The only difference
is that I now have capital to get better financing on the loan.

To be continued . . .

The nature of the gas leak has been discovered.  Or uncovered.

When the ground-level clean out was installed, the plumber (or one of her lackeys) hit the gas line, causing a hole to appear.  And we’re not talking about some little pinhole here.  Oh no.  We’re talking about a full-on, "suck in the known universe" size hole.

When the plumber dug this area back up, she immediately saw what the problem was.  As usual with this breed of contractor, she immediately decided to go home and get drunk.  I appreciate this because, after all, getting drunk is a sure-fire way of getting my problem fixed.

She has agreed that since she caused the problem that she’s going to fix it, free of charge.  This made me happy.  However, the pipe is quite old and there’s a lot of rust.  This is not an easy fix.  As a matter of fact, it’s impossible.  The whole pipe should be replaced.

Once the repair work is complete, the gas company will come back out and turn the gas back on.

So what’s the problem?

The plumber is busy with other clients.  She’s going to try and work me in over the next couple of days.  This means that the tenant will have been without a gas stove for a week.  The only saving grace is that we share the same hot water heater, which is located in the front house.  The gas in that house works perfectly.

The Real Estate Agent was standing in front of my house, looking at it.  "You did good kid."

Being self-diagnosed with a slight case of OCD, I envisioned the Agent ripping my place apart.  Why?  Because it’s filled with imperfections.  Splash of paint here, uneven boards there, non-matching light fixtures . . .

I stood with paper and pen in hand, ready to take notes.  At any minute, the Agents mouth would open and problems would abound.  Everything, of course, would have to be fixed right now because he would obviously want the houses on the market ten minutes ago.

Agent:  Replace the three lighting fixtures and get the grass growing.
Clifford:  That’s it?
Agent:  Yep, that’s it.
Clifford:  Nothing more?
Agent:  Nope.

That’s good news for me.  My list of 20 things to fix suddenly was reduced to two.  And one item I can’t do myself.  But that’s ok.  A quick phone call to WonderWoman and everything was done.

Standing in between the two houses, I was staring at the street.  A huge grin was plastered on my face and had been for a few days.  This was going to work.  All the effort, trials and tribulations had paid off.  The houses were looking great. 

Standing behind me was TileGuy.  He was present to see the finished kitchen and was quite pleased.

TileGuy:  This looks really good.
Clifford:  I am Spartacus.
TileGuy:  What’s that smell?
Clifford:  What?
TileGuy:  Yeah man, I smell gas.
Clifford:  Are you sure it isn’t something else you smell?  Your car looked pretty cloudy when I pulled up.
TileGuy:  No man, I smell gas.
Clifford:  Holy Cow!  That is gas!  Where’s it coming from?

It’s amazing how quickly the Gas Company responds when you report a leak.

GasMan:  Yeah we had to shut off gas to the tenant’s house.  Your leak is like a Category 5 leak.
Clifford:  Category 5?!?!  Like the Hurricane Category 5?
GasMan:  Let’s put it this way.  This leak is 9 cubic feet an hour.  That’s the equivalent of leaving all the burners of your stove wide open, burning constantly.
Clifford:  Did you fix the leak?
GasMan:  Nope.  I just tell you how bad it is.   Your plumber fixes that.
Clifford:  How did this happen?
GasMan:  Well your gas line is awfully close to where the plumbing work was done.  I think your plumber might have bumped or nicked the gas line.

If it’s not one thing . . .

I’m still having champagne this weekend!  ROAR!