Common sense perspectives and finding a way to retire

Post featured on Real Estate Investing Carnival

Posted by Paul on January 15, 2007

One of the posts I’ve written here has appeared on the Carnival of Real Estate Investing


Posted in real estate | Leave a Comment »

moving blog

Posted by Paul on January 12, 2007

I’ve decided to move this blog to googles blogger site. The link is ExtremePerspective.

I’ve done this for a number of reasons

  • traffic is higher
  • ultimately I want to make money at this and wordpress doesn’t allow this option
  • blogger is easier to customize for me.

I know there is lots of debate here about the money issue and thats OK. I chose to move.

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Freedom to eat Trans-fats Vs Nanny State

Posted by Paul on January 11, 2007

C.S. Lewis’ Mere Christianity:

“One of the marks of a certain type of bad man is that he cannot give up a thing himself without wanting every one else to give it up. That is not the Christian way. An individual Christian may see fit to give up all sorts of things for special reasons—marriage, or meat, or beer, or the cinema; but the moment he starts saying the things are bad in themselves, or looking down his nose at other people who do use them, he has taken the wrong turning.”

One of the things that annoys me in politicians and public discourse is the notion that I need to be told how to live my life. The current wave of hysteria in New York these days is about banning “trans-fats”. This supposedly to protect “the people” from their own lack of self-control. Now in the interest of disclosure I am not fat (135 lbs and 13% body fat), so it is difficult for me to sympathize with people who struggle with their weight. But the greater point is not whether we should ban trans-fats, but whether the government should be in the business of imposing their will on everyone on whether they need “saving” or not.

In this aspect, both the left and right politically in this country behave in much the same way. Each operates with religious fervor to “save” the general population from the evils they perceive – whether it be second-hand smoke, pornography, carbon emissions or gay marriage. The religious right thinks that God justifies their position. The left think that because they are not religious that their position is “holier”. In fact, both sides are mirror images of each other.

I think C.S. Lewis got it exactly right in the quote I referenced above. As a Christian my first responsibility is neither to judge nor impose my will on others, it is to change myself. I try my best to be a good role model for my children in my ethical behavior. I am more likely to try to lead by example then give lectures to my kids. Now when in public discussions with others about moral, ethical or political issues, I don’t lay down and just let others opinions go unchallenged. Whether the topic is religious, global warming, morality or anything else controversial I will state my opinion and the reasons for it. But I do not get into arguments and try to convince others to adopt my opinions. If after hearing my opinion, others choose to lead their lives differently, so be it. We all have free will.

It would be nice to live in a world that respected others free will, but I guess that is too Utopian an idea to have much merit. For now we are dropping more and more into a Nanny State that will force us to live the way the left and right zealots insist. Will this make us happy? Not really, happiness will only come when you become empowered to control your life.

Posted in politics, religion | Leave a Comment »

Hard Money Approved

Posted by Paul on January 10, 2007

One of my real estate goals for 2007 has been to find sources of money to fund purchases. I had applied to Community Preservation Corp but they can’t seem to make a decision. I had also applied to BrookViewFinancial. Today they finally approved a $150K line of credit for me!

When I first read about hard money lenders the line was that they didn ‘t care about the credit of the person applying, just the equity of the property. Now it seems they are becoming more like banks and want people with good credit scores and adequate cash flow. I was not going to get approved at first due to my cash poor balance sheet. However, thanks to the sale of some property, I have some cash on hand now, so Brookview decided to give me a line of credit. They will fund up to 75% of ARV (after repaired value) including purchse price and repair costs. Funding repairs is something a conventional lender will not do.

I think that with the cash on hand now I also could get conventional financing since I have about $75k of equity in the house I have rented, but I know this type of loan takes about 6 weeks to process. Since my focus is on foreclosures I need to be able to close much faster than this. None the less, I feel I am about 40% of my way towards my goal of having $500k available for funding deals.

I am becoming more and more convinced that I need to build up a war chest of private money funding to build a successful real estate business. I’ve got an audio CD from Don DeRosa’s Private Money course and have made up a Brochure to hand out with it. Now, I’ve got to talk to people. This week I have sent out the CD to friends and family that might be in a position to invest. I also made up a Power Point presentation and want to to a luncheon seminar.

Right now I have two deals I am working on. Both sellers in foreclosure and neither has equity in the property. Both properties have mulitple loans, so I am going to make short sale offers to the junior lien holders and see if they will bite.

Posted in real estate | 1 Comment »

The Illusion of Knowledge

Posted by Paul on January 8, 2007

“The greatest obstacle to discovery is not ignorance, it is the illusion of knowledge”
Daniel Boorstin, 1984 Librarian of Congress

I am a naturally skeptical person (probably why I am an engineer) and I tend to analyse everything to death before I make a decision. But unlike many people I try to analyse things impartially and do not depend on opinions of the uneducated to form my ideas. Nearly everyone has opinions that are mis-informed about everything whether it is health, sex, marriage, money, business, network marketing, real estate and especially science (its really sad to me how poorly educated we are about science in the US since many of the political decisions of the day are being made based on poor scientific knowldege).

Global Warming is my personal scientific pet peeve. We have less than 100 years of fairly good scientific data on temperatures, yet we try to extrapolate that data over the life of the planet and think we can predict some disaster. Understanding normal variation is not something people seem able to grasp. Every weather event is treated like a unique event. This only demonstrates to me a foolish lack of perspective!

Getting good data is also of paramont importance when evaluating a new business as well. Now when you are investing $1,000,000 into a business you probably will do some due diligence. However, for businesses like Network Marketing with low entry costs, nearly no one does due diligence. So I found that people asked their “expert” friends about the business and they got information on how prices are too high or the market is saturated or whatever. When I got involved in the Amway business I did not ask one unsuccessful person what they thought of it. I investigated the pricing structure, the quality of the products, the payouts, the franchise “system”, and interviewed people that had made the business work.

Likewise, in the real estate business, I’ve investigated lots of different systems, bought several and evaluated how they work. I only like to talk to successful people about what works. I like real knowledge, not theoretical knowledge about what might work.

Know that doesn’t mean I won’t listen to people that have failed at something. Certainly they can provide valuable insights. However, most people really didn’t fail because they really didn’t try. So 99.9% of their opinions are worthless.

Meanwhile thousands of people listen to Barbara Streisand rant about global warming while flying around in her private jet ruining the atmosphere.

Posted in business, finances, investments, money, Network Marketing, real estate, science | 1 Comment »

Success Will Not Attack You

Posted by Paul on January 7, 2007

I heard the title of this post often at Amway meetings I attended back in the 80’s. I don’t suppose I knew what it meant back then but now I can assign some meanings to it based on years of experience in both Network Marketing and real estate investing.

  • Afraid that being successful will change you

I remember when it occurred to me that I might become very wealthy in Amway. It actually scared me to death! I wondered how I could be responsible for handling millions of dollars and dealing with hundreds of thousands of distributors. I thought that I could not change into the type of person I observed as successful in that business. Now I don’t know what the heck I was thinking. We grow as we accumulate wealth and the changes are gradual. Success wasn’t going to suddenly attack me in the middle of the night and change me into someone I am not. In fact, the changes happen first, then the success follows. Looking back now, I realized how much I personally grew during my years in Amway.

Now some people do fall into lots of money, so I suppose it attacks them and they can’t handle it. This is probably due to our subconscious belief that we are not worthy of the money since we didn’t earn it. If so, then you can turn that success attack around by changing your thinking. Change your thinking to prosperity consciousness.

  • Success takes commitment

I think that the most apropos meaning of this phrase is that you are probably not going to become successful without a real commitment on your part. I’ve blogged elsewhere that I was 99% committed to being successful in Amway. That didn’t cut it. I think real success takes going the entire way. Holding back just a little part of ourselves sabotages our efforts. In my first real estate venture I never really committed at all to success. After the first year I was just going through the motions and didn’t have a plan to succeed nor was I committed to doing everything I could to make the properties profitable. In my current real estate venture I feel 100% committed and have been working like it.

  • Success mean taking responsibility for your failures

When I was in Amway I was able to observe hundred of people in my down line directly. I could see their words and (in)actions. What I mostly saw was people that failed to take responsibility for anything that happened. Blame, excuses, laziness, lack of commitment and failure mentality all permeated everything they said and did. I don’t have any ill feelings towards Amway or anyone involved for my failure to become rich. I lay the blame entirely on myself. People don’t fail in that business because its saturated or the products are too expensive. They fail because they fail to take responsibility to succeed. Likewise, for my first real estate venture. I could blame the WV economy, but in reality, I could have made it work despite the economy. Buffalo’s economy is just as bad as the one I encountered in WV, but I believe I can be successful here because of the same reason.

Success will probably not attack you. You have to attack your goals and dreams as if everything depended on your success.

Posted in money, Network Marketing, real estate | 1 Comment »

Quixtar Amway Prices and Poverty Thinking

Posted by Paul on January 5, 2007

I’ve read a couple of posts recently about how the price of the products sold in the Quixtar/ Amway business are “too high” by JLP at AllFinancialMatters and the GettingGreen. I think both of these bloggers are demonstrating a poverty consciousness of sorts.

Prices in and of themselves are neither too high nor too low. Now I don’t think that you should pay an excessive price for a product just to prove you have a prosperity consciousness. On the other hand I think that people that routinely buy exclusively based on lowest price without considering value are demonstrating a poverty consciousness.

I investigated the value of the Quixtar/ Amway products quite extensively when I was involved with that business (I don’t think that their pricing philosophy has changed but can’t vouch for it now.) What I found was that the products really performed far in excess of comparable products. Many companies make good quality products and people buy them. Some would say that a Mercedes or BMW is too expensive but these companies sell a lot of cars due to the value they provide.

GettingGreen seems to think that he can buy good stuff from Walmart. This is absurd. As my Chinese wife lies to point out to me China ships their crap to Walmart and keeps the good stuff for their own citizens. She gets so disgusted by their poor quality and high prices compared to what she was able to buy in China. Do you really feel that treating yourself to the cheapest crap on the planet feeds into a prosperity consciousness? (By the way – I don’t hate Walmart, I think it’s an excellent business – but the fact is that they just sell the cheapest crap made.)

When we don’t charge a fair price for the products we sell and think we have to sell everything on the cheap, we are buying into the notion that the world is experiencing the same lack that we are. This comes from the common emotional conflicts people have about money – that somehow we are taking something away from the buyer. That the world is a zero-sum game and we are cheating the buyer out of their money.

But if the buyer is getting a good value for their money, we are doing them a favor. We think that we should judge what is best for the buyer by convincing them they don’t need something of greater value if they can save a few dollars. This is a very presumptive and condescending attitude towards others.

The world is an abundant place. There is a surplus of food, money and resources. Affirming lack only re-enforces poverty thinking and dis empowers people.

Posted in money, Network Marketing | Leave a Comment »

Recovering Financially from a Divorce

Posted by Paul on January 5, 2007

I went through a divorce which started in 2003 and last about 18 months before the final decree was issued. It was the most financially stressful period of my life. I lost about 25 lbs (good for some people, but my weight was down to 125 at one point). Me ex did not work and so all the financial burden was on me. During one 3 month period a Judge ordered me to pay all of my take-home pay to my ex. I literally had to beg for money from my relatives in order to eat.

Legal fees were atrocious. I paid over $20K to my lawyers (I fired the first one after he failed to get me weekend visits with my kids) and after the divorce was finished the Judge came back and ordered me to pay nearly $10 to my ex’s attorney. I had to assume responsibility for all of our mutual non-secured debts and at one point had over $70K in unsecured debt. On the plus side, my attorney negotiated a good financial settlement. I got the tax exemptions for the 3 kids, most of my 401k and a 85% of payments to my ex are counted as alimony rather than child support (good for tax deductions). I still own half of our house which will be sold when my youngest graduates from high school.

You may feel I screwed my ex, but she is not suffering either. She does have to work now and is quite capable (she has a BS in Engineering but doesn’t use it). She also receives about $35K a year from me and still lives in a 3100 sq ft home and drives the newer car.

Now many people going through divorce take years to recover. I first participated in, than latter led a DivorceCare group at my church for a couple of years. It was an eye-opening experience. It certainly helped me get through the divorce emotionally and spiritually much faster than most people might. However, I did see many people struggling financially for many years after their divorce.

My assessment of their financial situation was that it was largely self-imposed despite their constant complaints about the lack of support from their ex’s. Most lived in homes or apartments that they could not afford or would go out and buy new cars or new clothing. They had no plan on how to recover financially or improve their lives – just anger at their situation or depression. They did little or nothing to change their financial situation, beyond trying to work more hours at a low paying job.

Now, I wouldn’t be honest if I didn’t say that there were times I felt overwhelmed financially, but I never felt hopeless. Instead I developed a plan that has propelled me back to a better financial situation then I was in before. Here’s what I did:

  1. I moved to the cheapest apartment I could find and scavenged furniture.
  2. I liquidated every penny I could and put all my energy into paying off unsecured debt
  3. I tried to move as much of my debt to zero or low interest rate loans
  4. I drove an old car
  5. I never ate out – I cooked everything myself from scratch whether alone or when my 3 kids visited
  6. Once my debt was down to manageable levels, I bought a real estate course and started searching for a distressed seller
  7. I used a loan from my 401k to buy a house that I found at $33K less than market value – so “nothing down”. The payments were slightly higher than my rent but offset by the interest and property tax deductions on my income tax turned this into a wash
  8. I used the “instant equity” I had created from my house purchase to get a HELOC loan and found a second house at far below market value from another distressed seller. We spent $16K fixing it up in our spare time and created more net worth
  9. This year we are focused in expanding our real estate investments and expect to create another $50-$80K in net worth.

Has it been hard? yes! Has it been a lot of work? yes! Did I have time? No! I’m now married with 4 teenagers. I still attend almost all of their after school sports meets and other school activities. I spend time with them helping with homework. But I don’t watch TV or waste time on non-essential activity. I still don’t spend money on non-essentials (my only purchase has been a new bed when I re-married). Now I have to give credit to my new wife as well. She has supported every decision and worked along side me while we rehabbed our rental property. Her love and support have been essential to my financial recovery.

Can you do what I did? Sure. Will most people? No. I learned while in Amway that most people would rather complain then act. God created an abundant Universe and I believe we have the right and maybe even obligation to take advantage of that.

Posted in finances, money, personal | 1 Comment »

Update to NetWorth IQ

Posted by Paul on January 4, 2007

 I’ve updated my financial information for year-end 2006 on the site NetworthIQ. Last year was a pretty good year after the setback of my divorce – my net worth is up 59%. My 401k was up 12.7% and real estate equity was up due to the purchase and rehab of a property (There’s not much appreciation in the Buffalo area-3.5%).

My major financial failure was my inability to fund my 401k enough to get the complete company match. My cash flow has been very marginal the last 3 years and even though I inched up my contributions during the year I only averaged 3.7% Vs my goal of 6%.

Credit card wise, I did increase my debt but all nearly all was for real estate investment.

Compared to others in my education or income level I am doing better than the average on that web site. Compared to others my age I still need lots of work to catch up. But I’m optimistic with the start of my real estate venture that I will do as well or better in 2007.


Posted in finances, money | 1 Comment »

Is Quixtar/ Amway a good or bad business?

Posted by Paul on January 3, 2007

I read a post linked from Carnival of Personal Finance today by a bloger called Getting Green about the Amway/ Quixtar Network Marketing business. It seems that this blogger has either some grudge about the Quixtar business or they are just closed minded. For someone who claims to be writing “for people who want to be millionaires” he is way off base.

I’ve blogged about my experience in Amway before. I spent over a decade involved with it before they changed their name to Quixtar. Getting Greens big objection to Quixtar is that is “hard work”! Well – duh!!!! (He also thinks the products are expensive – but I’ll get to that.)

This blogger must be a very young person who has no clue about success. (Maybe today with the Internet you don’t need hard work to succeed – I don’t know about that yet.) But any business takes hard work in order to achieve real success. You are fooling yourself if you think you will get rich easily.

As far as business models go, the Amway model has a number of key components that really can help you succeed. The downside is that the cost of entry to this business is so low that people think it will be easy. Among the excellent attributes I saw:

  1. Access to millionaires – I always had the opportunity to listen to and meet and personally talk on the phone to people that were extremely rich. If you want to be rich – you have got to associate with wealthy people. Broke people think like broke people.
  2. A good “franchise” system (see E-Myth Revisited). One of the criticism’s of Quixtar is that people make money on tapes. Well, the tapes are part of the success system that leaders in that business have put together. When you purchase a Franchise, what do you you think you are buying – hamburgers? Heck no, you are buying the system. What does that franchise system cost? From $10,000’s to $1,000,000’s. The Quixtar franchise system is a bargain.
  3. Good quality products. The Green blogger complains about the cost of the products. When I started that business I too was sceptical about the prices. What I found out was that the products are very high quality and very good value for what they did. Now when you start a business you can have a low cost pricing structure like Walmart (My Chinese wife claims the Chinese ship all their “crap” to Walmart – the quality of goods in China is much higher :)). Certainly Walmart makes a lot of money, but so do stores that cater to high-end customers like Neiman-Marcus. When you are in sales is it easier to justify good quality or have to explain poor quality? I always found it very easy to justify the higher quality products to people – much easier than handling complaints.

When I was involved with that business, I probably had about 500 people pass through my organization. Probably 90% of the people did nothing but buy some products – no work at all. Like any business it is a numbers game. It is also a people business (my great failing). Success requires hard work, good people skills, perseverance and adherence to the system. Is it saturated? Hardly – the potential opportunity is worldwide and they have fractions of a percent of market share. In fact, I have never been contacted about it by anyone in my 54 years ( I sought it out).

Disclaimer: I am not now affiliated with Amway or Quixtar or know of anyone who is. I have not been involved with that business since 1995.

Posted in investments, Network Marketing | 1 Comment »