Scott Bush

Commuting sucks (and it’s expensive with gas prices around $3.45). I was on the bus crossing 520 on my commute when I saw this guy’s ingenious idea: move your house closer to work. Forget driving or busing the same distance each workday. Just get your house on a barge and move it closer to your office. No more worries about “the floating bridges are parking lots,” on the morning radio traffic report. Your house is already there, floating merrily along. I wonder what he pays in moorage for that thing? And, did his basement flood?

Whoever said Seattle real estate is crazy is right.

(Sorry for the poor-quality image. It was taken through a bus window, it was raining, and my phone’s camera is old. Please consider buying me an iPhone to improve my blog imagery. Please?)

“The happiest day in a boat owner’s life is the day he buys his boat. The second happiest day in a boat owner’s life is the day he sells his boat.”

Exchange “boat” for “rental property.”

I heard this morning that the Dow Jones Industrial Average hit a new record: 14,111. Is it just me, or are you confused, too. I thought we were likely to head into a recession? Didn’t Alan Greenspan say so about two weeks ago? Okay, to be fair, he said we had greater than a “one in three,” but “less than 50%” chance, but still. And what is going on with diary prices? I buy organic milk so I’m used to paying an exorbitant amount for a quart but it’s still  not good news. Oh, and since I work for a homebuilder I know first-hand about the falloff in new housing starts. Throw it all in a pot, stir in some unease about global warming, add a pinch of worry about terrorist plots, and you’ve got yourself a nice hot cup of economic uncertainty.

Hmmm. Guess I’ve been thinking about the economy when I’ve not been thinking about Cammoflauge Back Massage.

As my wife and I continue to pursue our real estate investments, we often hear terms that are either unfamiliar or only vaguely understood. To ensure I’ve actually learned these terms, I’m going to post each term and its definition. And since the concept behind a term is usually more important than simply its definition, I’ll come up with a brief scenario or example to help put it into context.

I’ll start this series with the term wrap-around mortgage.

Wrap-around mortgages are a kind of seller financing. It is so named because it’s a new mortgage the covers (or “wraps around”) an existing mortgage, plus an additional amount. Typically, the wrap-around mortgagee would make a payment and out of that amount, the first mortgage would be paid with the difference being income to the seller offering the financing.

An example: My house is now worth $100,000 and I owe $65,000 on a mortgage. I sell the house for $100,000 with $10,000 cash down and I offer to carry the buyer’s mortgage for $90,000. The buyer’s payment covers my original mortgage’s payment and leaves additional amount. This is beneficial to me because of the differences in the interest rates. Suppose my $65,000 loan was at 6.5%, but the new $90,000 loan I offer is at 9%. I earn not only the 9% on the $25,000 residual between my original mortgage and the new amount, but also on the 2.5% interest rate differential on my $65,000 mortgage.

There is a lot more to this topic, and I’m not sure I fully understand how I’d put it into practice. There’s the whole issue of mortgages not being assumable (though I’ve heard this often isn’t enforced as long as the bills are being paid), among others. Read more at Wikipedia or Google’s definitions.

My wife and I attended our first Foreclosure Group, LLC meeting of the year last night. Okay, honestly, it was the first in probably four or five months. In 2005 and early 2006 we were actively trying to buy a foreclosure as an investment, but our attendence at the weekly meetings had dropped off a bit due to our lack of cash (thanks, Florida investments!). We always log in and check out the listings on the site, however.

The Foreclosure Group promised a revamped site in 2007, too. I was pleased to notice one addition right off: the addition of the “Zestimate,” a valuation of a home based on numerous factors compiled by Seattle’s own Zillow. It’s great to see a local REI group enhance its offerings by incorporating another local company’s product. This is especially true when people like me can gain from such synergy.

In a few days (Feb. 8) Zillow “turns 1,” marking one year of leveling the playing field for all—whether buyer, seller, agent or merely spectator—into real estate. Redfin, an online RE brokerage, also started in Seattle. (Both companies service other US markets, and will likely expand, much like Amazon started with books and music, then offered DVDs, then toys, and now I can One-Click everything from truffles to kitty litter.)

Also, I’d be remiss if I didn’t offer some kudos to Zillow’s designers/coders for their commitment to web standards. Their site looks great and performs well because of this commitment. More importantly, they are serious enough about accessibility to post a page explaining how their site complies with W3C standards regarding this topic. They even list access keys for important site functions—I think someone’s been reading this article at 456 Berea Street!

Striving for wealth often inspires people to label you as “greedy” or “money-grubbing.” Unfortunately, such accusations are often justified. But it doesn’t have to be that way. Wanting (and working to achieve) financial freedom doesn’t mean you have to sell out morally or lose sight of what’s truly important: compassion, empathy, family, fairness, etc. That’s what is meant by “enlightened” wealth.

A set of percentages puts this into understandable terms. Being an enlightened investor means, among other things, committing to bettering the community with every investment return. Here’s how:

Imagine you buy a piece of property and later sell it a year later for an after-tax windfall of $30,000 (hey, it’s just an example!). Of that money,

• 5% ($1,500) goes to reward yourself (new iPod or TV, a cruise, etc.).
• 10% ($3,000) is invested in your continuing education (conferences, etc.).
• 10% ($3,000) goes to a charity of your choice (I’m partial towards ending hunger).
• 75% ($22,500) is re-invested into vehicles that earn money/reduce debt (paying off borrowed money, investing in UEF or a high-yield mutual fund, etc.)

Some people adjust the percentages a 10% reward and 70% reinvestment. Whether it’s the orderliness of three tens or a just stronger desire to pamper oneself, it doesn’t matter; find a formula that works for you and stick to it.

I’ve only sold a property once, but it was an amazing feeling to write a hefty check to my favorite charity. Let me tell you: anyone who says striving for wealth isn’t good hasn’t had that feeling. Yes, greed can consume you; no, it doesn’t have to. Trust me on that.