Tuesday, March 31, 2009

Rich Brother, Rich Sister

Rich Brother, Rich Sister - Robert & Emi Kiyosaki

This book is like a memoir of the two authors retracing their life and how they find their own path to wealth or spirituality.
This is an easy read, and show the life path of these two interesting characters. Below are a few quotes I liked.

There have been only 29 years in all of human history during which a war was not underway somewhere.

Methodists are going to heaven and Catholics are not. Because our cross does not have Jesus hanging on it. The Catholics still have jesus on their cross, which means they do not believe in the resurrection, which means Catholics will not go to heaven.

While my sister was looking for spirituality in the wilds of the Big Island, I was looking for sex in the wilds of Waikiki.

Many people believe in god, but very few people trust I god.

It took getting cancer to wake me up to the reality that money is useful.

What is the quickest, easiest, most convenient thing to do so I can reach enlightenment right away?

We would not be happy being poor, working at a job we did not love, working with people we did not like, living below our means in a dangerous neighborhood, not being able to afford health care or the finer things of life.

Suggested reading:

R. Buckminster Fuller - Critical Path

Monday, March 16, 2009

The Don't Sweat Guide To Your Finances

The Don't Sweat Guide To Your Finances - Planning, Saving, and Spending Stress-Free (2004)

This is an introductory level book on finances.
It's principaly a list of simple difinitions and well known/obvious tips.
I disagree with several of them, or rather judge them not worth of being given.

The author is too much trying to convince people, that if they have debts, it's not their fault, it happens, and it's almost normal.
He's also full of saving money tips that starts by buying more.

Also several of his points sounds already outdated.

Still for people with little knowledge about finance, the book covers a wide range of aspects with a 1-2 minutes description of it.

Few notes:

Before investing look for some market indictors such as:
- the Labor department unemployment report (released 1st friday of each month)
- the Department of Commerce consumer activity report
- Inflation rate

You can take a credit line out of your home equity, you should get a loan with low rate. In case you need money for something else this could help you pay for it at a low rate, also interests are tax deductible.
It is sometimes interesting to get the paperwork done but not take the money out, if an emergency situation occurs, the loan is already approved and the money is available.

Dow Jones Industrial Average (30 largest stocks of NYSE) (Blue Chips company)

Growth stock/fund => no/low dividend, its value is expected to raise.
Value stock/fund => for dividends
Stocks are taxed at a lower rate than traditional income, and typically are protected from inflation (value grows with inflation)

Define your goals with deadlines and let people know what they are and update them on how far you are to reach them.

Corporate bonds are usually less interesting than stocks.
=> if a company gives you 10% over 10 years for your money, it means they believe they will make better than that.
So if they are right, you'd better buy their stocks and get that better return (on dividends or value).

Can be purchased via Treasury Direct website.
You get interests every 6 months, at the end you get your principal adjusted to inflation, interests are calculated on bond value adjusted to inflation.
Deflation doesn't change the value of the bond.

Friday, March 13, 2009

Getting Things Done

Getting Things Done by David Allen - "The Art of Stress-Free Productivity"

GTD is an interesting book, that gives you advises on how to become more efficient in your everyday life.

More efficient meaning
- 1- always know what you have to do
- 2- always know the things you are not doing
- 3- Focus better because your mind stops worrying about 1 & 2

Basic idea stripped down to its core is to use to-do lists.
The author explain several ways of creating, organizing and processing them for maximum optimization.

Most of us already do lists, or more probably one list, however we would gain more by doing this if were following this process all the way.
=> do not leave anything unlisted
Then your mind really stops worrying, and you will feel better and be more focused.
Also don't only list the things you have to do, list also the things that you are waiting for (from others, or at a particular date/event)

Another good advise that I will keep is that, you should write your to-do list(s) in terms of actions. You should write the first physical action you need to perform to get that project going. The thinking and decision making must be done beforehand so your mind won't mind picking up the task anytime and doing it.

The first part of the book explains this theory.
The second part of the book is very detailed explanations and tip on how to implement it. This part is probably better for people that feel like they can't manage with a single list or that they are still overwhelmed and need more rigorous methods.
You will spend more time getting things off your head, but if it is what it takes to free your mind this is what you need to do.

This organization will help you trust yourself on what you choose to do and what you choose to not do. You will feel better with your decisions, knowing that you sacrifices item X for item Y because it was more important to you.

It is crucial that your list must be available anytime, anywhere, simple and fast to update.

Maintain your email inbox at less than 10 items: act on, file, delete or put in to do list all emails as soon as possible.

One state of mind that the book tries to convince you to adopt is that everything that will take more than 2 minutes should be done immediately. You will waste more time to postpone it, add it to your to do list or keep worrying about it and finally do it.

so do not delay any short tast that you can do right at the moment, work, personal, even something misplaced.

Having a list of short /easy things to do will allow you to multi-task better in dead times (waiting for someone, on hold, etc).

This need to become systematic, a habit, you will be seen as a more reliable personne and with this gain of reliability and efficiency you will son be doing much more, and be given more to do. Be ready!

Wednesday, March 11, 2009

.NET Web Services incredibly slow

Recently I was working with a customer that had very poor performance with an application using web services.
After studying the network trace, it seemed like every call would lag some 20 seconds between the time it goes out from one server and the time when it reaches the other server.
However, when doing the same call manually, we would not experience such a lag.

Traces within the application would not show any lag either.

Thankfully it is possible to activate traces at the .Net Framework level as explained here.

basically you can add the following to your machine.config file
      <source name="System.Net" tracemode="includehex" maxdatasize="1024">
          <add name="System.Net"/>
      <source name="System.Net.Sockets">
          <add name="System.Net"/>
      <source name="System.Net.Cache">
          <add name="System.Net"/>
      <add name="System.Net" value="Verbose"/>
      <add name="System.Net.Sockets" value="Verbose"/>
      <add name="System.Net.Cache" value="Verbose"/>
      <add name="System.Net"
    <trace autoflush="true"/>

Add it for example just before the </configuration> tag.
then restart your .NET application (if it is hosted in IIS, IISRESET)

You can also change network.log for C:\network.log.

This will give you great details about what .NET is doing after the call left your part of the code.

In my case, the application was running as a service under a specified user account which had an invalid proxy server defined in its Internet Options, thus every call was timing out trying to use that proxy before being successull with the DIRECT route.

Don't forget to remove it once you're done debugging :) 

Robert Kiyosaki: October 2008 teleconference

Presenting the Rich Dad's point of view on the current economy.

Robert is foreseeing a depression. He compares the current stock market crash to the 1989 crash.
It is time to start investing. Keep your emotions low and look for opportunities. Invest at the bottom of the market.

It is not time to save, Hyper-inflation is about to come.
FDIC doesn't protect anyone, they have no money, they will only keep printing more money and devaluating more and more the money.
"The U.S. Federal Reserve Bank isn't federal, there are no reserves, and it's not a bank."
The bailout is going to top $5 trillion. The Bailout rips savers off. FDIC increased insurance to $250k because there is no money, they don't want people to come ask for it, and so repeat it is safe 'in the banks'. FDIC doesn't protect your money, it protects the banks from crashing.
Banks have no money, this is why they don't lend. Today cash is king, but soon cash will be trash.
We have 2-5 years to get rid of our cash before the inflation comes.
There is a risk that the currency completely collapses, this just happened to Iceland, their currency is worth nothing.
Gold, silver, oil, Real estate are good stores for your money, get stocks in solid companies. Don't do all of this, pick a domain and become an expert at it.
Invest for cash flow & dividends, not capital gain, don't hope to sell an asset for more than you paid for it.

Affordable B class Real Estate is more interesting, people can afford to rent it.
high-end is riskier.

Get Trained, follow courses in Stock trading, Real estate investment, Sales, accounting.
Look for very depressed markets that have a chance to go back.

401K workers are screwed:
forget about compounding interests, look at compounding mutual fund expenses, inflation and taxes at the exit.

Young people think "it's OK, retirement is far away, I have time to catch up..."
=> It's gone take 25 years to go back up and it's gone happen again moron !

(Suze Orman says the opposite, keeps advising to save in 401k, but her targeted audience is people who are already deep in bad debts)

The last depression lasted 25 years (1929-1954). Statistically there is one depression every 75 years. You're gone live through it.

5 Things entrepreneurs should know

notes from Robert Kiyosaki: November 2008 Webinar

Entrepreneurs should work ON the business, not IN the business, they should not do the work, they can't handle everything.

1) Have a Global Phylosophy
Remove borders worlwide, have an unselfish goal.
Create a brand and stick to it.

2) Public Relations
Be media trained, know how to speak to television, to a journalist, to the internet.
Know how to lie.
Investors that get PR go way further than those who don't.
One of the best way to promote your brand.

3) Marketing
Umbrella around your promotion, events, advertising

4) Sales
If 1, 2, 3, are strong, sales are easy, and then money pours in.

5) Money

Tuesday, March 10, 2009

Rich Dad TV Podcasts

I have listened to the 11 Rich Dad TV Podcasts.
These shows are about 30 min longs and here are the ideas I found valuables:

If you have an idea, protect it with the help of a lawyer, this means copyright, trademark, patent and more!

There are several type of companies that will provide different advantages:

Sole-proprieatorship is bad
=> good for taxes but not protection

general partnership is horrible...
=> you are responsible for all partners !!!

C-Corporation has no protection and more taxes

S-corporations are good.

Use LLC & LP to hold assets, to protect properties.
You should use 1 LLC for each property.
$675 attorney fee for LLC + filing fee
Create your corporation in Wyoming or Nevada => These states have the best asset protection laws, then qualify the corporation in your home state.

Investing in stocks is not too risky if you use tools like "put" and "calls"

If a stock starts to go down, you can set automatic sell order.
"Stop losses" use "put" and "calls"

If a stock goes up buy a put at current value, it's like an insurance.
buy another one later on if stock keeps raising...
if market drops... you get your stock at put value...

Mutual funds or stocks should be insured => automatically sell if loses 5%.

The rich are trying to get deeper into debts.
A bad debt, is the debts you pay off yourself.
A good or investment debt is paid by tenants.

Get Rich by taking companies public!
You wanna be a private investor in a company before it goes public
You wanna be a "selling Shareholders" (sell for 10 times what you paid)
Company going public => IPO Initial Public Offer ("buying shareholders" get the share, usually multiply by 2 or 3 quickly)

How to find companies that might go public soon?
=>Ask brokers what's hot, then find out which private companies do that, and try to invest in them and take them public.

Real estate could give you 100% return
$100 000 property
$20 000 down
$10 000 net income after expenses.
=>cash return 50%

If you could get the same house if $10 000 down your return would be 100%

Investors looks for apartment complex which are badly managed then fix the problems: reduce expenses, increase rent, reduce vacancies, restore the property...

After some time, mainly if you fixed the property and the asset value or equity has increased, you can refinance, and get the down payment back tax free because it's a refinance and you improved the equity, so no need for down, then your ROI is infinite (0 down payment)
Take your down, start something else.

In real esate, flippers are losers.
=> They have lot of work, pay a lots of taxes, and risk that the house depreciates

Rich move their money, The velocity of money.
example, you start investing in a 10 units => 100 units => 800 units => 1200 units... and you don't pay any taxes building your wealth thanks to the 1031 program.
=> cash flow of $50k / month (passive income)

Debters are winners with devaluation of currency
saves are losers with inflation

Fiat Currencies don't store value. They are not money. Fiat Currencies have value because an authority/the government says so.

If you would measured the stock market in Gold Value instead of Dollar Value, it shows that the stocks are crashing, down 50% for more than 10 years.

Government keeps printing more currency and devaluates the existing.

You should put some of your portfolio in gold, when the value of the currency goes down, the value of gold goes up.
Gold is a tool to help stabilize your portfolio.

Avoid Negative People.

When you take the money out of 401K (growing tax free), you are taxed as earned income,
so unless you are planning on retiring poor (meaning taking out a little money every year) you will pay the highest rate of taxes!

Hard Work will not make you rich.
You don't wanna be a 'W2' worker, no tax advantages, nothing to save you !

You want to convert earned income into passive or portfolio income.

The Game 'CashFlow' Punishes you for making more money, buying doodads and rewards you for investing.

Fast Track => When your passive income is higher than your expenses, then you become free.

"Mutual fund morons think they are investors"

"Diversifying is like going to a horse race and betting on every horse. The only way you win is if the darkest of dark horses wins."

How to pick a Location to invest in Real Estate
- Jobs
- Demographics, Population retiring, Population Growing
- Affordability

(Las Vegas will grow, baby boomers will go soon and keep working for cheap as they can't afford retiring fully)
(Location with lots of immigrants, they are good renters and don't buy houses)
(21 Year olds population)

Proforma financial Statement = As If = best case scenario = Lies != Actual financial Statement

Opening a franchise is an easy way to go on the B side (business owner), the franchise will help you, but don't do it your way. build a good team, hold people accountable, show leadership

Choose your advisors but take the decisions yourself and assume them.
Women investment clubs beats Men investment clubs

My assets buy my luxuries.
My goal is to create a business, then buy 2 houses a year.

Suggested Readings

Why We Want You to Be Rich: Two Men - One Message by Donald Trump & Robert Kiyosaki
Rich Dad's Advisors®: The ABC's of Real Estate Investing: The Secrets of Finding Hidden Profits Most Investors Miss by Ken McElroy
Rich Dad's Real Estate Advantages: Tax and Legal Secrets of Successful Real Estate Investors by Sharon Lechter
Rich Dad's - How To: Get Your Banker to Say "Yes!"
Rich Dad's Advisors: Own Your Own Corporation: Why the Rich Own Their Own Companies and Everyone Else Works for Them by Garrett Sutton

Tuesday, March 3, 2009

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Monday, March 2, 2009

Real Estate Investing Fundamentals

Real Estate Investing Fundamentals (ShowMeHow Videos)

This movie repeats a lot of concepts and quotes from Rich Dad, Poor Dad.

Pay Yourself First
Location Location Location

Jobs, different industries, view, growing colleges, Low Unemployment...

Looking for a deal:
Make Aggressive Offers = whatever is left to pay on the mortgage. This way the previous owner gets back his equity, the bank gets its money. A realtor could find this number.
Look for a house for sale where the owner already moved out (pays 2 rents).

Flip Houses
=> Look for old houses unsold for 6 months or 1 year...
Buy for less than 65% of the value once rehabed
Make them new. re-sell them 15-20% higher (should be at least 30K as it is complex)
(kitchen, bathroom, windows, heating, conditionner, roof....)

Some Lenders tends to ask for higher down payment or higher interest rates for investors.

Your First buy will have the best rate. A Loan could be called back... don't screw up a loan ?

Select a realtor with experience, He should be specialized in investment property and he will help you find the houses. He should also own investment properties himself.

Ask the Real Estate agent do evaluate the price of the property, work with many real estate agent. You will deal with whoever finds you a good deal.

find a good tax accountant to explain the advantages of investment property, holding time, repairing the house, buying, selling, closing cost, expense.

1031 tax exchange programs, re-invest your profits into another investment property (defer capital gain taxes)
=> Take a course
=> special qualified intermediary required for the exchange (service fee paid at the close at the sale, so agreement with the intermediary should be set after you found a buyer)

The sales and purchase contract should state that you intend to complete a 1031 tax deferred exchange, the buyer will cooperate at no cost or liability

Don't buy a house that has
- been modified (2nd floor added, add-on room... probably bad job)
- deferred structural maintenance
Make a house lead-free is an easy way to increase the value of your asset

Create a LLC even for only one house. Carry large Insurance policies. check the cost before buying, it is substantial.
Create one LLC per house, use the address ad LLC Name, LLc loans are more expensive, but protection is worth it. (example someone gets hurt on the property and sue you, worst case scenario you can only lose one house)

Get only a structure insurance,
tenant should get insurance with 300K liability insurance required (in case someone gets hurt in their house)

FSBO - For Sale By Owners
=> Use compliant contract, often this is pretty much illegal, buyer and seller don't know what they're doing.
=> get an attorney or know what you are doing.

Buy a first house in a newly built section, very good, buy early.
=> make sure the builder is strong
=> make sure market is strong, growing, good area. keep for few years and resell.

Multi Units properties have better cash flow. (2-8 units)
can only be sold to investors, low appreciation.
Split utilities if no individual meters, more complaints in between tenants.

When you start investing, it's better to buy single family house, they tend appreciate and build wealth, Multi-units, give better cash flow.

Loan harder to get, interest rate higher, higher down required.

Get a lender approval before shopping for houses, ask them details / good faith estimate of the fees before shopping.
Pre-qualification vs / Pre-Approval
Pre-qualification => conversation + credit history
Pre-Approval => + Evidence of income, assets, check the loan approval

There are interests only loan (you pay 100% of cost of loan before paying the principal)
Once you have equity in a house, pull it out on a loan and use it as a down for another.

Sometimes there are very high fees to get the best loan rates.
Application fee, + appraisal, credit report fees + flood appraisal fee, tax service fee, processing fee. underwritting fee
(sometimes loan origination fee, or loan discount fee to get lower %)

if you don't have 20% down, you need to pay mortgage insurance upfront + monthly
=> also very often you would be pushed to ARM or interest only loans.

sometimes you can ask the seller to finance (easier, faster, you could get better rates, he could get a safe an easy investment at 8% or so)

On FHA loan, the seller can not pay closing cost

VA & conditionnal Loans, you can get the seller to pay the closing cost (6-7% of sale price)

Debt to income ratio = total monthly debt / gross monthly income (if you get rent only 75% of it is included)
Debt to income ratio should be <>
TNT = Tenants and Toilets
Keep the house clean, you will get better tenants.
bad Tenants = unhappy => listen to their complaint.

Put in the lease that you will do an annual inspection (watter damage, molds, leaks, it's cheaper to do preventive maintenance before they complain)
It's a business, don't be too nice to tenants.
Credit report, verify income with employer, references from previous landlord (did they take care of property, pay on time, would they rent to them again)
Send them a Christman card, make your tenant like you.

Find tenants => put ad in local newspaper

=> work with rental agencies, ask them to send you their Overflow tenants (offer them a referral fee)
tenants that are ready to go to rental agencies are better, more chances they had no problems. tenants who had problem stay oway from these rental agencies as they know for sure that there will be a full background check.
(as opposed to ad)
ask 2 months deposit=>serious tenants

you need to warn your tenants about lead base paints (before 1978)

www.epa.gov/mold => if there was a claim on CLUE report, it will be hard or expensive to insure the house

CLUE report show history of property, insurance claims, floods, molds, water problems....
=> ask home inspector
Watchout for safety issue, electric, people falling, tripping, smoke detectors, have tenants sign that smoke detectors are not wired together.
To set the rental price, go to MLS system look for economic rent, price yourself just a bit lower => allow you to select the tenants.
Do like an 1hour open house, and take application, select the best one.

Always have a signed lease. with tons of addendums and all...bankrupcy protection...
define scope of their responsability/maintenance (real estate agent provides comprehensive lease that you can use)
make sure the tenant understand the lease.

Shorter than 6 months lease might have additional taxes.

Don't rent to smokers, don't take pets unless the unit is about to be renovated. (small pets only, check references for pets, barking, additional deposit)

Even a fish tank can damage your apartment. Pets will ruin the carpet => increase rent, have them pick up poo around the house.

Vacation rental is harder, more maintenance needed, more furniture, more management fees (15%)
Fair housing, non-discrimination contracts

Section 8 housing, lot of paperwork, bad tenants, but rent is insured?

If all your properties are close together you get discount from vendors (plumbers...)
It's easier if propertie is close to you, so you can look over it, or you should get a manager. (8%)

Pre-foreclosures are easier to find than foreclosure and everybody is happy to avoid it.

Foreclosures are not offered to investors for the first (30-60 days)

REO, Real Esteate Owned property, bank owned

Network in banks foreclosures departments, court, auctions, attoerneys, lawyers (inherits), doctors (medical emergency needing cash).... tell everybody you are an investors and ready to buy fast.
Express Auction,...
Rosenbert Associates => attorneys website, see foreclosures date, contact ppl before to help them resolve before they foreclose.
for example search for contrywide Owned Properties.... tell the bank to tell the guy to contact you to avoid foreclosure
Homesales.gov => government sites like VA, Hud, ...
If people can't pay the property taxes =>
Tax Sales, you buy the house... probably the owner will buy it back from you... and give you a 10% or higher interest on your money
=> go to courthouse and ask

Find a good experienced REALTOR
put contigencies in the contract depending on results from home inspector, termite inspection, financing... Seller should pay to fix
Pay an appraiser to evaluate the house.
have contractors come to evaluate the cost of repairing and be ready to fix the property ASAP to rent it.

if there is competition, to be a better buying candidate provide pre-approval loan, and remove the contingencies

sale tyipcally settle in 30 to 60 days, put in the contract that you are allowed to show the house to prospective tenants during that period.

Concrete structure needs less maintenance.

Suggested Readings

Cash Flow
Thomas Stanley & William Danko - The Millionaire Next Door

The Road To Wealth

Suze Orman - The Road To Wealth

- Her short talk is pretty beginner oriented, the Q&A question is quite interesting.
- It's more of a get rich slowly attitude, don't do stupid things and save.

"Stage In and Stage out of the market/stocks"

If the stock drops 20% => sell 20%, if it drops again, sell another 20%.

Every one should get a Living Revocable Trust, get a specialized lawyer that only does trust.
He should give a Quote depending on the number of assets you want to put in the trust (bank accounts, real estate, stocks...)
The lawyer will take care of automatic transmission of ownership.

For Roth Ira, get a Index No Load Mutual funds with all the stocks from the Wiltshire 5000 not only S&P 500!
specially good for roth ira a you pay no taxes on the growth on the fund.

Funds outside of tax free IRA, will create income tax on its growth even if it loses money.

For a married couple, if one dies, transmission of all properties to the one left alive is State-Tax free but this for US-citizens only.

Money is the cause of 50% of the divorces => get a prenup to state clearly how the couple should handle money.

If you die, your beneficiary won't pay taxes to inherit your ROTH IRA, => so take the money out of it last, use 401K first.