Halfway to a Pension

Spoke to a college buddy that I hadn't been in touch with in over a year yesterday. He's been with IBM for 9 years now, which is an eternity for our age group and works in their auditing group. He did an internship with them during college and then spent 2 years traveling throughout Asia on auditing assignments, another couple of years in North Carolina and then has now been in Austin, TX for several years. It's a pretty impressive resume but, for some reason, I don't envy him. He's always been a smart, modest, quiet spoken guy but goodlooking too. Got married several years ago to an Indonesian gal he met while overseas. I'm pretty surprised they're still together because they had all kinds of issues shortly after getting married, mostly stemming from cultural issues and related financial issues.

He's midway through a full-time MBA program which IBM is paying for 100% but requires that he stays 2 years after he completes the degree. He sounded tired from 1.5 years of working full time and going to school practically full time too. I know that I couldn't do it. I was surprised that he was disappointed with work. He felt that he'd been passed over for promotions several times in the last few years. I really can't imagine being with a company for that long, especially if you aren't really happy and feel slighted. I'm sure his benefits must be great after having been there for years though so it gets harder and harder to leave. It's funny how just 5 years ago, I would have traded places in our careers but not for a million bucks now (ok, maybe for a million bucks but you get my point).

Total spent Monday:
$0 brough lunch
$86 but went to South Coast Plaza and bought 2 pairs of slacks on sale
$24 dinner (delivered pizza)

Total spent Tuesday:
$0 brought lunch

Total spent Wednesday:
$0 on lunch (expensed lunch for me and guest)
$37 gas
$3.50 blended coffee drink
$13 2 travel books from liquidation bookstore
$37 dinner for 3 (favorite Thai restaurant, Thai Specialty II in Tustin, saved $7 with Entertainment coupon)

Total spent today:
$11 lunch at Acapulco

Cleaning Up

Weekends are really way too short. They’re too short when you’re relaxing on the beach. Not long enough to read a book and watch some DVDs. Two days too short when trying to get out of town. And definitely too short when spending it cleaning up after a tenant.

Ok, it wasn’t so bad this time. Spent half of the day yesterday cleaning up a studio for a new tenant. It’s actually a guesthouse that’s part of a rental home. The property is about 2 miles from our principal residence. We’ve owned this property for 1.5 years now and bought it from motivated sellers. The previous owners had lived in the house for over 10 years. Houses in that tract are on very large lots for Orange County. This lot is 14,000 sq ft which is well over ¼ acre. The average lot for an older home in OC is about 7000 sq ft and newer homes can be on even smaller. This particular home has a permitted “mother-in-law” addition. At about 600sq ft, it’s actually fairly spacious and has a small kitchen and bathroom larger than those of most small apartments. While the studio is attached, it has a separate entrance from the large backyard. The fact that the house had a studio was probably a turnoff for some of the families that saw the house because might have preferred a traditional layout. For us, it was perfect as we prefer homes that have guesthouses for the stronger cashflow. The owner was also already in escrow for a new home in Riverside county so they were anxious for an offer. The home was listed at $550k and we offered $514k. Low but not insulting. They countered at $525k and we countered at $516k, showing that we weren’t willing to move much. They accepted. Yay!

Our offer was also low based upon the fact that the listing agent was not from the area. She was probably the agent that represented them in their purchase in Riverside. Using an agent that is not familiar or local to the area is definitely a disadvantage. An obvious point is that she doesn’t know the area well other than what the comps indicate but not other factors such as the best school districts. Secondly, in my opinion, a non-local agent is not as likely to negotiate as aggressively for a higher price. Servicing the listing with open houses and other visits is inconvenient when you have to drive a distance. They would rather just sell the house rather than extend the negotiation process or wait for other offers. Seller’s loss, our gain!

We spent less than 2 weeks with minor improvements such as paint and cleaning. Fresh paint and some warm, neutral tones always make such a huge difference. We also divided the large yard with a wood fence so that both the main house and studio would have completely separate and private yards.

We leased the main part of the house to an older couple. The wife is in her early 60s and husband in his early 70s but they both seem healthy. They were financially hurt by the 9/11 bombings that had an impact on their business and caused them to declare Ch. 11 bankruptcy a few years ago. When they submitted their application to rent, they included a full letter stating their situation. The letter was well written and sincere and we made a judgment call based upon their character to extend a lease to them. They have since been excellent tenants and pay their rent on time and treat the home as if their own. They are both educated and it’s a shame that they were affected so late in their lives when I’m sure they were hoping to retire soon.

The studio was initially rented to a good friend’s teenage son. She assured me that she would make sure he paid rent on time and take care of the house. It turned out that it would be for him and his girlfriend but we gave them a year-long lease anyway. The rent was always on time but there were other issues. The main house tenants complained several times about noise and loud music. After he broke up with his girlfriend, he tended to have more friends over as well. It was with a little relief that he decided to move out at the end of the lease. The place was left a bit of a mess. The brand new carpet looked like it had not been vacuumed during the entire year. There were at least a dozen cigarette holes in it as well and large stains. There was no choice but to replace it but he paid for the entire cost. His security deposit didn’t cover it entirely but he made good by sending a check for the balance. He was always polite and respectful though. His mother and I are still good friends.

The second tenant was there for 6 months and just moved out yesterday. He was an excellent tenant and we never heard a single complaint about noise. The carpet still looks near new and the yard looks excellent. He’s moving because his company moved to LA county and he’ll be moving in with his aunt to save money and be closer to work. Thankfully, we only needed to spend a few hours to clean it up as we had less than one full day to prepare for the new tenant who started moving in last night. Let’s hope that this one doesn’t play in a band, have potheads over on the weekends and cook and shower late into the night.


Total spent on Friday
$18 2 movie tickets (1 student discount. Yes, I’m long past my college days but that old student ID comes in handy. How does a family of 4 afford to go to the movies anymore? At the AMC at The Block, an adult ticket now costs $10.50. 2 adults and 2 children would run $34 and probably another $15 in popcorn and snacks.)
$41 Dinner for two Wolfgang Puck Cafe

Total spent on Saturday:
$5.50 (fastfood lunch, saved $3.50 with Entertainment coupon)
$55 Lowe’s Home Improvement (stuff for rental property)
$66 Dinner for 2 (Italian restaurant, change of ownership and so they didn’t accept Entertainment card!)

Total spent today:
$10 Starbucks for 2
$37 Sav-On Drugstore (misc. toiletries)

Another Gadget

Someone in the office had the new Sony PSP multimedia gaming device which was just released today. It'll be the hottest piece of machinery for the next several months. I'm not a gamer myself but this thing can do so much more like play mp3 music, play entire movies on special little disks, has built in wifi wireless and act as a portable hardwire with its Sony memorystick slot. And it looks and feels very sleek to boot. You wouldn't expect this to be available to the masses but the price is amazingly only about $250. It's not at all nerdy or plasticky looking which is what comes to mind when I think of a Nintendo Gameboy. I must have it.

I was planning on getting a new mp3 player anyway so it will be worth it to spend another $50 for this uber-techno-gizmo. And this time I'm going to use it. Not like the electronic keyboard that collects dust. Or the PDA with the irreplaceable internal battery. Or the Sony eMarker. Or the brushed stainless steel ice cream maker. Or the Juiceman (okay, I received that as a gift). Or the elliptical aerobics machine. Or the portable DVD player. Or the little notebook computer. Or the automatic litter box (the cat feared it). Or the clothes steamer. Or the electrostatic air purifier. Or the wireless headphones. Nothing is going to stand between me and my PSP.

Total spent today:
$0 Lunch (at TGI Friday with customer and expensed $23)
$29 Dinner for 2 (southern Indian cuisine, had a dosa, a thin filled crepe, for the first time,
saved $11 with Entertainment card)

Lunch Adds Up!

This was the 5th day in a row that I ate out for lunch. I think that it's a symptom of various frustrations from work. I usually eat out for lunch no more than twice a week. Not only does the $10 per meal average add up quickly but also the thought of all of those restaurant calories isn't very appealing. There are a couple of people in our small office that eat out every single day. That's take a look at what that costs. $10 per day x 5 days a week x 48 work weeks yearly = $2,400 annually. Assuming that your income is taxed at 30%, $2,400 is actually $3,428 in pretax wages. For someone with a salary of $40,000, $3428 is 8.57% of the entire income! Think about THAT the next time you're chowing down that gyro!

Add a $3 Starbucks daily into the mix and suddenly you're spending $3,120 annually or $4,457 in pretax salary. That's a whopping 11.1% of that $40,000 salary.

What do I do when I don't join colleagues for lunch? There's a nearby park where I eat a sack lunch, talk a mile-long walk and read. This is where I finished most of Rich Dad, Poor Dad. There's a nearby Borders bookstore where I often spend an entire hour perusing travel and personal finance books (although I usually end up buying something). South Coast Plaza is around the corner so there's never a shortage of places to check out. And of course there are the chores like getting the car washed and other miscellaneous things.

Total spent today:
$8 (lunch at Vietnamese noodle shop with two colleagues)

Battle for the House

As I've done for many years, I like to peruse the real estate section of the weekend newspapers. I've had my real estate license (although non-practicing) since 1998 and review the MLS for market activity in a several cities at least once weekly. Because I pull up data for only a few key cities in which I am interested, it's good to glance through the print ads to see what's available in other cities. The MLS also doesn't allow you to review headlines quickly as you can in the papers such as "rambling ranch house" (read: single story shoebox) and "walls of glass with to-die-for views" (read: single pane sliders with view of neighboring roofs).

In late December 2001, between Christmas and New Years, I came across an ad for a house in North Tustin. At that time, we lived in our first house in Fountain Valley. We actually liked our house quite well as we had recently finished some minor remodeling. Neither of us was familiar with North Tustin which is actually a large, unincorporated community within Santa Ana. The dimensions of the house were large, close to 3000 sq feet on a 10,000 lot with swimming pool. I decided to drive by the house by myself just to check out the neighborhood. The house ended up being located directly on a semi-major street. It is the beginning of a residential area but the majority of homes are on side streets rather than being directly on the main street. From the front, the house looked rather large and, for the price, I was really curious but needed to set up an appointment.

My sister is a part time realtor and she agreed to show it to me and contacted the owner. My sister had to cancel the appointment at the last minute but the owner suggested that we come over without her anyway. So we drove over to meet the owner and take a look. Both owners were not home but just the wife. She was probably in her early 30s which is very young for the neighborhood which is an established area with larger homes on large lots. Custom, multi-million dollar estates are in the surrounding hills. Our first impression was that the house was vacant. The living room was completely unfurnished and the family room and kitchen just had a small dinette and little Christmas tree. One bathroom had 70s style metallic wallpaper. Upstairs, the large master bedroom (close to 600 sq feet) had a bedroom set and was the only room of the house that looked lived in. The 3 car garage was carpeted with dirty green carpet. It also had paneled cabinets that had been added and prevented use of the 3rd garage space. Another space was taken up by an inoperable junker. The house wasn't a classic, run down fixer, but every room needed some serious updating.

The owner was very pleasant and we ended up chatting with her. The house had belonged to her husband's parents for over 15 years but he had inherited it about 2 years earlier. It was obvious that they were anxious to move as they could not even afford to furnish the place. It doesn't get any more obvious when she told us "if we got any offer, we'd probably take it." The house had been on the market for 3 months and traffic was especially slow because of the holidays. We told her that we'd consider the house.

On the way home, we were quite excited about it even though we weren't even in the market to buy a new house in the first place. The listing price was $435k. The comps suggested that similar homes in the area ranged from $500k-700k. It was by far the lowest price home of its size and amenities in the area. The reasons were that it showed poorly and it was located on the busy street. We decided that we wanted to make a lowball offer and then fix it up for $30-50k and then flip it. We didn't have any experience doing this but were confident because of the minor remodeling we'd just completed on our own house. I called the owner to let her know that we were interested but that the price was out of our range for an investment property because of all of the remodeling that we'd have to do. I told her that I had estimated that it would cost probably $40k to fix up. On the other end of the line, she calculated that $435 minus $40k would leave $395k which would probably be acceptable to them. Lesson of the day: telling the other party the amount you're willing to accept isn't a very good negotiating technique. She sounded really sincere in wanting us to make an offer so I told her that we would think it over.

Making an offer with the goal of fixing it up would have been a big move for us. The next day, I re-evaluated the comps and reaffirmed that at $395k, it would be a good value. We wanted to get an offer written up in a hurry before New Years because we feared that househunters would be out again after the holidays. I asked my sister to write up an offer for not $395k but $365k. She was a little embarrassed and advised us to increase our offer to at least $385k. We held our ground and she faxed the offer to the listing agent with 2 days to reply. We would go up to $395k but not above that because we weren't in love with the house and were only doing this with the hope of making $20-30k in profit from fix and flip. A day and a half later, I got the call from my sister. She was excited and dumbfounded. The listing agent had just called her and was equally dumbfounded that the offer was accepted without even a token counteroffer! Unbelievable! Granted that the real estate market in December 2001 wasn't as hot as in December 2003, it was still an active market.

Over the next two days, we arranged for the home inspection and my sister dropped off the disclosures and deposit check with escrow to open soon thereafter. We started planning the extent and cost of the remodel (which we should have done prior to offer but we were complete amateurs).

Things suddenly came to a halt. The listing agent had called my sister and told her that they received an offer $20k above ours. He faxed her a counteroffer and gave us 24 hours to make a counteroffer! Unbelievable again! Our first reaction was that this wasn't fair. Our offer had been accepted and both side had already gone through the motions of putting it into escrow. We decided reluctantly to just let it go and not make a counteroffer. However, as the hours passed, we realized how unjust the situation was and that we really did want that house for $365k, dammit! At $395k we would let it go but not for $365k. We were going to put up a fight. This is when it comes in handy that your partner is an attorney. He drafted a letter directly to the seller with a cc: to the listing broker (not the agent) and sent to via registered mail to both parties. We pointed out that the offer had been accepted, that disclosures had been provided to us and returned and that the listing agent had our deposit check in his possession. We strongly hinted at legal action if the seller decided not to honor the executed purchase contract.

My sister heard back from the both the seller and the broker the next day and they both caved. The sellers felt that they had received poor advice from their agent but that it was not our fault. They didn't have ill feelings against us but against the listing office. They did receive two offers within days of our offer and the agent had recommended that they back out of our deal. The listing broker ended up forfeiting their office commission to salvage the relationship. I'm sure the sellers will not be dealing with that well known brokerage ever again. Over the next couple of days, we spent a little time in the new neighborhood and decided that we wanted to sell our house in Fountain Valley and move. Thus ends the chapter on buying the house and the longer chapter on the remodel.

To this day, I continue to scan the real estate section for clues like "abandoned, anxious seller, make an offer and vacant."

Total spent today:
$10 Lunch with two ex-colleagues

Entertainment Book

I love the Entertainment Book. Since discovering it a few years ago, I'm an avid user. When I first started using it, I felt funny about it but now I take it as a challenge to use it as many times as possible. Two years ago, our CTO gave everyone at our company a copy (small company of 60 employees). One gal actually created a spreadsheet of all the restaurants within 5 miles of the office. There were several times that 6 of us went to a place and used 3 cards together. We live in Tustin and I work in Costa Mesa so there are plenty of restaurants just in those two cities not to mention all the other nearby cities. Several restaurants are within 2 miles of our house. To take advantage of all our favorite restaurants that we would go to anyway several times over the course of a year, I actually have 4 copies of the book. Last year, we used the card a total of about 40 times. Many of the restaurants are quite nice with entrees in the $20-$35 range. Not only has using the card gotten us out to places we wouldn't have known about or tried, but it saves us on average of probably $80 a month on dining out, movie tickets and even Ralphs supermarket coupons. We probably eat out for dinner twice a week and rarely go to restaurants that aren't available on the card. I almost feel cheated paying for 2 full meals but of course there are many good restaurants that aren't on the card. I think it's rather ironic that we have money and income so that we don't need to use the card but like to use it anyway. But people with 1/2 our income think it's tacky and could never "lower" themselves to use a discount card. It's not that we're cheap but rather just think it's foolish to pay list price when you can often pay 1/2 price. Ok, I am a little cheap but I'm getting better. Let the schmuck behind me pay full price.

Total spent yesterday:
$4 Starbucks
$81 Target (misc t-shirts, clothes)
$32 Vons supermarket (saved $24 dollars with double coupons)
$37 gasoline (I drive my car until the tank is virtually empty)

Total spent today:
$8 lunch at Greek cafe
$52 MicroCenter (Business Plan Maker software, want to get out of the corporate rat race)
$4 Green Burrito (2 burritos, buy 1 get 1 free coupon)

The Cars that Go Boom

One area that we've splurged on during the last several years has been on cars. I'm on my second Infiniti lease, a 2003 M45 and partner has a 2002 Mercedes C32 AMG on lease. Yeah, yeah, yeah, yes we know that leasing new luxury import cars every few years is the most expensive way to get around but it's been our weakness. And within the last 3 years, we also had a Jeep Grand Cherokee (the highest priced one with the V8 5.6L engine), an Infiniti I30t and a late model Nissan 300zx. But no more! Or at least we've come to the realization that expensive cars = high monthly payments...duh! The lease payment on the C32 is about $850 including tax monthly. The M45 is $450 but I can live with that. We don't exactly want to drive a Corolla but don't need to upgrade anymore and will probably downgrade next time. Cars in the $25k to $35k have noticeably improved in both horsepower and refinement. I still scratch my head over that $850 monthly payment on the C32 (and that is on top of the significant initial down payment). That's what you get for leasing a limited availability model that has way too much horsepower. My mom was right (although I won't admit that to her of course) that leasing new cars is the work of the devil.

The monthly payments on the C32 are especially painful because we don't particularly want the car anymore but rather just finishing out the lease which ends in Dec 2005. If you've read any of the vehicle quality surveys, you've probably noticed that Mercedes is surprisingly near the bottom of the list. But it's no surprise to us. Over the last 3.5 years, there have been half a dozen aggravating quality issues that range from persistent check engine lights to a fairly major issue with the front suspension. I've been very satisfied with both Infinitis though as they were both relative good values versus other cars in their respective categories. Didn't have a single issue with the Infiniti I30t during the 48 month lease either. At the end of the M45 lease in 2 years, I'll strongly consider buying it outright. With 9 months left on the C32, only have about 4k miles left before reaching the mileage limitation and having to pay 23 cent per mile overage. Not a pretty thought. So we're planning to get a replacement vehicle within the next few months so that the C32 isn't driven as a primary.

Flipping through the paper this morning, came across an a loss leader ad for a Dodge Durango. It's a reasonably equipped mid-sized SUV that has some good reviews. Because of the ridiculous gas prices the last couple of years and increasing popularity of hybrid vehicles, sales of gas guzzler SUVs has fallen significantly. This $28k Durango was advertised for $18k. It's not the souped up trim model with leather and the high end features such as heated seats (yes, heated seats come in very handy even in southern California). But, for a base model, it was fairly well appointed with quality cloth seats, CD and a nice fit and finish to the dash and a powerful V8. The dimensions of the Durango are large but not enormous. Noticeably bigger than a Jeep Cherokee but smaller than an Excursion. We took it for a drive and it handled well especially for its size. We were interested but not enough to do the whole "let's go into the office and discuss some numbers" game. The ad was actually for a dealership in Cerritos and we were a dealership near home in Tustin. If we decide we want an SUV that large, it'll be a no brainer for $18k.

Next, we hopped across the street to the Acura dealership to see some Acura MDXs. Acuras retain their value much better than Dodges to say the least. A 2001 MDX was still around $23k. A 2005 MDX is around $40k. We didn't take one for a drive but will keep an eye out for a used one from a private party. The size is just right and the styling is modern if not on the bland side.

One last stop was the Infiniti dealership so I could check out the new 2005 M35/M45. The interior is very high tech but a bit fussy. Too many buttons and gizmos. It's an interior that won't fail to impress even the most jaded though.

On the way home, went to Costco to pick up a couple of items. $93 dollars later, we were out of there. Who knew that we would have to have, amongst other things:

1. a 12 pack of canned tuna $7
2. 32 oz jar of minced garlic $3
3. gourmet crab cakes, $10
4. post-St. Paddy's Day corned beef brisket $5
5. hmmmm....where'd the other $70 go??

I don't even remember what I had originally planned to pick up there in the first place.

Total Spent Today:
$5 for quick lunch for two at Costco (they make a mean chicken bake)
$93 in misc Costco food (enough for at least 12 entrees though)
$12 for 2 evening movie tickets (saved $7 with Entertainment coupon for Edwards Theaters, snuck in 2 cans of soda and some candy)
$13 for 2 combo meals at quick casual restaurant (only had 15 minutes to eat before movie)

$3 teabag?!

On most days, I'll try to remember to log when and where I spent money. It's a good thing I'm starting the spending log today because I've spent a lot of money uncharacteristically lately. I used to use Quicken to track every dime spent but I never did it for more than a few months at a time. It was interesting to see how money flowed out and how insignificant things added up but I would miss inputting info some days and then would abandon the whole thing.

Spent too much on eating out today. $14 on lunch ($3 for hot water and tea bags!?) at Habana in Costa Mesa. At least the food was good. Had a roasted half chicken with Cuban rice and fried plaintains and beans. Went out for dinner at a bbq restaurant in Orange. The ribs were mediocre tonight so it's a good thing we used the Entertainment card. Saved $14 and paid $32 with tip. I usually don't eat out twice in the same day but had an ex-coworker come by. Eating out that often just gets tiring and is a sure fire way to gain a couple of pounds every week. Then went to Starbucks to read and each had a caramel machiatto for $7.

It never ceases to amaze me how teenagers can afford frappuchinos and smoothies at $4 a pop. When I was their age, $4 was an entire meal. I don't know how much teenagers get for allowance these days but it would have to be a lot to pay for cell phones, Starbucks, gas and Abercrombie & Fitch. I guess I'm just jealous because I never received any kind of allowance growing up. The concept of an allowance isn't common among Asian families. (Or maybe just not common to poor Asian families??) I was jealous back then anyway but looking back, I'm glad that I didn't receive one. Otherwise, I wouldn't have worked through high school and college and might have ended up dependant upon my family still as an adult.

I've just started reading How to Make Money with Real Estate Options that I got through Amazon a few weeks ago. I liked that fact that it was written and published just last year. Only on page twenty but so far it seems to be well written without too much hype. The mantra hasn't been "become a millionaire overnight with little effort and using everybody's money except your own. I read a lot on personal finance, real estate investment, some fiction, a lot of magazines. A few weeks ago, I finished Rich Dad, Poor Dad. The common sense nature of the book had quite an impact on me and I found myself telling others about it. If you haven't read it, do so! It's not a "how to become rich book" at all but rather how to look at money making in a different light. Make your money work for you instead of working for money. Trying to make that my mantra.

Total Spent Today:
$14 lunch
$32 dinner for two (with Entertainment card)
$ 7 two Starbucks

How It All Began

I recently read an article in the LA Times Real Estate section (or was it The OC Register Money section??) about personal finance blogs. Wow, cool, never knew they existed. I've gotten inspiration to invest through those around me and by reading personal finance books and so hope something in the following journal will help someone else. I've been there and done that with a lot of experiences and can laugh (and gasp) looking back. I'll share with you my finances, my spending habits, my cheap bastard traits, my likes and dislikes and my observations on those around me.

I'm a 31 year old male. Wait a second. I'm 32. I can't believe I wasn't sure and had to calculate it. How does time fly like that? Anyway, I'm 32 and live with my partner in Orange County, California. I've been working as a sales rep for a software developer since June 2003. I like my job 70% of the time but that figure is decreasing month by month. More on that later.

I certainly don't consider ourselves rich, although some may consider us so. I guess it's all a matter of perspective. Ten years ago when I was just finishing college and had lots of student and credit card debt, I couldn't imagine being financially "successful" without lots of college degrees and climbing the corporate ladder. My priorities have evolved quickly as I've read more, learned more, earned more, spent more and slept less. We'll never attain (nor strive to attain) the lifestyle of the rich and famous but we'll never worry about the rent again either. I don't have an above average IQ and don't really work as hard as I used to but am blessed with the most important thing of all: common sense. Although it doesn't make sense to start writing my first entry close to midnight. Tune in for future tales of growing up with 9 brothers and sisters, intermittent college, exactas at the racecourse, internet day trading (and the ensuing depression), cheese and cappuchino in Paris, becoming a slumlord and other various experiences in my life.