Welcome to Chez Cliff!

The last time I did this I enjoyed it.  The doors are opened yet again.

It’s question and answer time.

If there’s a question you’ve been wondering about: whether it’s something I did, or didn’t do . . . or something in general you’re curious about click on the "Comments" link below.

A hand full of questions will be picked.  Responses will be in subsequent posts. 

Same rules apply as last time.  No questions regarding:

• If the second shooter in the grassy knoll was me (classified)
• Why I was drunk in the look-out tower on Titanic  (lawsuit pending)
• Who really turned in the Unabomber (FBI Witness Protection)

The cut off for questions is November 2nd.

I’m looking forward to it!

In the late summer of 2005 my first duplex was bought.  For a number of years I had talked at lengths about procuring property.  Finally, I got up the nerve to actually do it.  And because Lady Fortune favors those who take opportunities, I got a nice deal right off the bat.

Craftsman Bungalow with a small "mother in law" house in the back. Both were two bedroom, one bath.  A fenced in yard, complete with nice grass.  The neighborhood itself has been going through a period of gentrification.  All in all, it had potential.

For me: there were changes.  No longer an apartment dweller, I was now a responsible home owner and a landlord.  In addition, both houses were in need of a make-over.  Project Manager for a house renovation.  Overwhelming for a first timer?

It’s my nature.  I perform best when the situation appears over-whelming.

The back house went easy enough.  Only a fresh coat of paint and new carpet were required.  To save money, I did the painting myself.  Patching holes, repairing cracks my life suddenly became "On the Job" training. 

A different story for the front house.  The walls had been painted some wild and bright colors.  The hardwood floors: buried underneath years of carpet.  The kitchen area, as it was, nearly non-existent.  This meant knocking down walls.

Money was tight.  There was simply not enough funds to redo the entire house.  As with everything, there was an opportunity.  The decision was made to repaint the exterior of the house, redo the hardwood floors, and paint the interior.  The biggest expense, the kitchen, would have to wait.

New colors were selected, the exterior repaired and patched.  Finally the painting began.  The transformation of the house was a near miracle.  By cleaning up the yard, hacking away bushes, the house completely changed.

Months and months of
renovations: contractors disappeared for days, even weeks at a time.
After changing out a few laborers, progress was made.  The results were
nothing short of a miracle.  (Here are some photos).

My running joke at the time:  I bought the worst house on the street.  Now I have the best looking house on the street!

During the ten month renovation, the market had changed.  Two options:  either wait until the possibility of a sale took place or borrow money against the property and move tenants in.  The second option was taken and new tenants were found for the Bungalow.

One question always asked: how did I afford to do all this?  I qualified for a 3% down program.  Once the exterior was painted and hardwood floors refinished, the value of the property increased 23%.  At that point, the property was refinanced and my loan program changed from 97% to 80%.  This allowed me to take out a HELOC against the equity to finish the house.

With the duplex fully rented, and myself homeless, the quest started for the next property.

Duplex #1:

Current Status:  Fully Rented.

Legal Stuff:  I am in no way advocating the use of this program
as an investment nor a way to make money.  The information below is
just for you to read, digest, contemplate.  If you take action based on
this information, you do so at your own risk.

ick

Prosper.com made it’s debut.
Most financial blogs have talked it to death.  But there’s
something I
saw the other day which I found worthy of sharing with the class.

For those that don’t know, Prosper.com is where people go to either
lend or borrow money.  Based on the need or the reason, lenders can
chose how much to loan out and at what interest rate.  I’ve seen interest rates as high as 29% and as low as 7%.  The repayment period is three years (36 months).

The borrowers are ranked by credit score, which Prosper.com actually runs.  Based on your credit score, you’re assigned a credit grade.
“A” if you’re really good, “E” if you’re dangerous and don’t play nice
with other kids.  When you take out a loan from Prosper it appears just
like any other loan.  If you’re late or default, it shows up on your
credit report.

While pursuing the website this caught my eye:

Lending purpose:  Re-invest in Prosper.

There’s this group of people who borrow money in Prosper and then
turn around and lend it out . . . in Prosper.  These people are usually
in the “A” or “AA” category of credit and are asking for loans at 8 or
9%.

Let’s run some numbers.  We’ll pretend Bunny is looking to try this.

Bunny is lent $5,000 at 9%.  Her monthly repayment is $159 with a total repayment of $5724.

Bunny turns around and loans the money out averaging 15%.  She needs
to take higher risk if she’s going to make any money.  So at 15%, her
monthly income is $173 with a total repayment of $6,228.

Each month Bunny makes $14 and over three years she’s made $504.

That in itself may not be very impressive.  But she made $504 without spending a dime of her own money.

I realized after I ran the numbers that this would benefit the first
lender more than it would benefit Bunny.  To get the 15% return, Bunny
has to loan to those with “B”, “C” or even “D” credit crowd.  These are
the ones who have the track record of either paying late or going into
default.

So as the lender to Bunny, will you get stiffed?

Bunny has “A” or “AA” credit for a reason.  She manages debt.  If
Bunny gets stiff by some guy in the "D" or "C" group, Bunny is not
going to stiff on her loan.  People with good credit scores typically
fight to keep them.  In a way, Bunny is personally guaranteeing the
loan. 

Interesting how that works.

Lowes versus HD versus IKEA.

Up today: IKEA

Per the computer program on IKEA’s website, my kök with appliances will cost $2795.  For those who don’t know what kök is, it is Swedish for "kitchen".  It is also Klingon for "death".  Take your pick.

The kitchen software program is horrible.  But I did manage to capture some screen shots.

The first is the overall layout.  Yes, the numbers are upside down.  After the design was done, I realized the kitchen had been drawn backwards.  Rather than battle the software for another hour I decided rotating it was faster. "Not too bright of Clifford", you may be thinking.  Well just remember I’m an aerospace engineer.  I work on airplanes.

The second is a "3-D" view of what the kitchen will look like.  The refrigerator is facing the wrong direction.  Oops.  Because I am college educated, I can figure out the "correct" direction for the fridge before it’s installed.

The price tag of $2795 is encouraging.  Taxes not included.  And knowing IKEA, this probably doesn’t include screws, nuts or bolts.  I can see it now.  All the cabinets, spread all over the place, ready for installation.  Suddenly, the realization hits:  Where are the screws?.  This means I would become angry, curse and swear, go buy them, then complain about it in a blog entry.

Too much drama.

I can’t remember what my natural skin color is.  There is paint, more paint and now primer which separates my skin from the air around me.

Can primer mummify someone?

The exterior has been put on hold for the moment.  For the back house: the walls are "primered" then painted.  After having painted a few dozen times, I’ve got the hang of it.  The work advances quickly.

With new drywall, the primer takes two really thick coats.  The drywall sucks the primer right in.  Almost as if it was never "primered" to begin with.  But the second coat sticks around.

As we all know, it’s better to put two coats of primer on instead of two coats of paint.  Primer is definitely cheaper than paint.

The interior colors are a play off the front colors.  In particular the high-noon color.  Shades of that will be around the house.

Hopefully within the next few days, that job will be finished so I can, once again, get the front of the house painted.

Here’s a picture of some progress.  Click to enlarge.