Becoming a landlord: the details

With the purchase of my new house I am essentially becoming a landlord. I just happen to live in the property I also rent out. I have been doing some research and found that I will need, at a minimum, the following items:

1. Lease from each room tenant. I plan to use the nolo.com $14.99 lease form to get started. This protects both me and the renter in a dispute and puts everything in writing.
2. Taking deposits. I plan to hold each tenant's deposit (equal to one month's rent) in an interest bearing account for the duration of the lease. Any damages at the end must be taken from this and detailed to the tenant.
   
3. Maintenance. I am responsible for making sure everything in the house is in working order. It must be safe, secure, and livable at a minimum by law. I will make sure that everyone is happy. A happy tenant is one that pays on time!

I expect to have both of my spare rooms rented out within the next couple of months. I currently have one tenant ready and am looking for another. This will definitely be a learning experience but hopefully a good one. I am also looking into more rental properties as a way to earn extra income.

I have always thought about getting into real estate and I think this house is a great first step. I got a great deal on it and there are more deals to be had. I will see how this goes and look into getting another. I have the vision and now just need the means!

How much is your car worth to a dealer?

Most people have no idea how much their car would be worth on a trade-in at a dealer. I have heard stories of purchasers getting far less than what it is worth from a dealer due to ignorance. This is sad but it does happen. Be sure to look it up before you trade in!

Kelly Blue Book gives trade-in values for cars free online. You look it up and be honest on it's mileage and condition and click on "Trade In Value" when prompted. You will instantly know if a dealer is trying to pull wool over your eyes. Print out the report from the website and have it with you.

Dealers use this number as most of them sell the car you trade in at auction to other dealers. They love to make a profit on selling you a car AND selling your old car too. They have their own "black book" that tells them what any car is worth based on mileage and condition. They know about what each car will bring at auction.

If you are in the market for a car do not leave money on the table! It is a big investment and you need to save every dollar you can. Knowledge is your best ally.

Free boxes for moving or storing!

Over the past few years I have moved around Atlanta for various reasons. As a result I have gone through many moving boxes. I cringe when I hear of people buying them. There are so many ways to get boxes for free! I decided I should share my tactics with you as a responsible frugal finance blogger.

Here is the list of places where I get boxes for free:

• Work - we get lots of shipments at work. I save the boxes if I need them and bring them home.
• Liquor Stores - They get cases of alcohol and these are strong boxes and great for moving. I use these for books and another heavy objects.
• Friends - Know someone who moved recently? Chances are they have boxes that they are looking to get rid of!
• Warehouses - If you have any in the area they probably have tons of boxes that they will throw out. It costs nothing to ask!
• Craigslist.org - People advertise moving boxes in the free section all the time. You can find way more than you need here too!

With all of the above options you have no reason to buy boxes unless you need an odd shape or size for a special purpose. If you do buy some because of this reason be sure to hang onto them so you don't have to spend the money again. You can always get some tape and cut of some boxes to create the one you need as well.

Moving can be expensive. Don't waste money on boxes if you don't have too!

CD Ladders Explained

I have had some friends and family ask me about how a CD ladder works. I am currently holding one with part of my emergency fund. They are a great investment tool to utilize to keep your average interest rate up over the years. You won't always get the best rate but you will consistently get a good rate.

Here is an example that I started back in September of 2008 with ING Direct. They actually have the ability to create a ladder on their site and you can pick the maturities. It is very easy to use and great for someone starting out. Always check rates at other banks as convenience usually costs you in the form of lower rates. They were the best rates I could find at the time for the amount I could invest.

1 year @ 4.00%
2 years @ 4.00%
3 years @ 4.00%
4 years @ 4.00%
5 years @ 4.25%

These are very good rates that I locked in before they dropped off. Normally you would roll each maturing CD into another 5 year CD (which typically has higher rates than the shorter terms). This, in turn, means you maintain a good rate over the long haul. After the 5th year you will be holding all 5 year CD's with each maturing every year in turn.

My one year is maturing on September 8th of this year and they are offering 1.65%. That is barely more than my current savings rate so I will move it over my savings until rates rise. If rates were better I would have rolled into another 5 year CD. I do admit that I am a bit of an interest rate chaser and want better than a "good" return.

I am using part of my emergency fund to invest in this ladder as I am banking on not needing it in the near future. One must be careful here as the penalties for early withdrawal can be steep! My current ING CD's would cost 3 months interest to take out early except for the 5 year which would take 6 months. This can really add up on a large amount of money and you can actually take a loss if you withdraw quickly after openeing.

Credit Card Review: Delta Skymiles Platinum American Express

I have been carrying this card for a long time and I love to travel. Getting 1 mile for each dollar spent allows me to use miles for my vacation airfare and save tons. I use miles for all of my vacation flights and still add to my balance. I take advantage of all of the bonus offers that come my way, too.

I decided to post this review as AMEX's site makes it fairly difficult to get all of the details on the benefits you get from the card. I have dug through it and highlighted the major benefits here. I am normally not a fan of annual fees but this card is the exception for me. It carries a fee of $150 per year which sounds steep until you add up the benefits you get.

The major benefits are:

• Earning Delta Skymiles - This is the most obvious but their are some details behind it. Any Delta purchase gets 2 miles per dollar spent. All others get 1 mile per dollar spent. There are bonus thresholds of $25k and $50k in spending where you get 10,000 bonus miles and elite qualifying miles for each milestone.
  
• Pay With Miles Option - Delta allows you to use your banked miles to pay for all or part of your purchase. This is handy because for each 10,000 miles you apply it is $100 off the ticket price. The minimum you can use is 10,000 and increments of 5,000 ($50) after that. This is only available to Delta AMEX Gold or higher cardholders.
• No Partner Airline Award Ticket Fee - Delta charges a $20 fee if you book an award ticket (using miles) if it is on another airline aside from Delta (for example Air France). As a cardholder this is waved! $20 per airline can add up!
• Fee-Free Amex Gift Cards - The usually carry a fee but are free to all AMEX cardholders most of the time.
• Fee-Free Traveler's Checks - I don't use these much but it can be handy if you are going somewhere that has little or no ATM access.
• Bonus Offers - Delta AMEX cardholders get constant bonus miles offers from Delta. Right now, for instance, you get double all miles flown through the end of the year.
• Fraud Protection - AMEX is one of the best companies when it comes to reversing charges with little hassle.
• Free overnight delivery if card is lost or stolen - I have used this a couple of times. They will overnight you a new card at no charge if needed (inside the USA).

This card has other smaller benefits that I don't utilize as much. The ones above I have found to be most important and well worth the $150 annual fee as an avid international traveler. I also travel for work so I earn even more miles and extras from Delta as well. Being based in Atlanta Delta is the best overall choice for me.

I am no longer immediately turned off by annual fee cards. I do my own analysis and see if I get more than the cost of the annual fee back in things that are actually useful to me. With so many different rewards cards out there you have endless options. Find a card that fits what you enjoy most and go for it. Just be sure to pay the balance every month!

Nolo.com: cheap legal documents and more!

Nolo.com is a great resource for common legal documents. They offer wills, trusts, and other estate planning documents. They also do landlord/rental documents, business documents, and even small claims and criminal documents. They also have "nolopedia" on common issues that most of us have on various subjects. Nolopedia is free to read.

They also sell software and books for creating the above documents for much less than what it would cost you from an attorney. I have personally used their LLC maker and will creation software for myself. I have had an attorney look at them and they are well done and legit. I will use them in the future for leases since I will be renting rooms in my house.

The site can also help you find an attorney for whatever law needs you may have. I also recommend calling the state bar to get a referral to an attorney for your specific needs.

Tip: Get free digital photo prints!

I keep most of my digital photos on my hard drive. I do like to print my really good ones to share and to have as a backup. All of my prints thus far have been free. Free definitely fits the budget! A quick google search for "free photo prints" got a lot of results.

There are tons of websites out there that print your photos and mail to you. I see promotions all the time for 25 free prints or free photo books. If I need some printed I will take advantage of this so I can get them for little or no out of pocket. Most of the deals are $1 for 25 standard prints or you just pay shipping. I have even seen deals from Walgreens and CVS where you order online and pick up at your local store.

Sites I have gotten free prints from in the past:

• Snapfish.com
• Walgreens.com
• Artscow.com
• Clark Photo
• Shutterfly.com

All of the prints I got were good quality. I keep a couple albums of my travel photos around for friends and family to look at. They make great coffee table books and best of all I paid next to nothing for the pictures! Printing your photos is the best backup you can have!

ebates.com: Earn money for purchases you already make!

I am always looking for a way to make an extra buck. ebates.com allows me to make online purchases and get rebates for shopping at their 1,100+ affiliates. You accumulate money as you shop (using links from their site) and they will send you a check or pay by paypal if you prefer. Payments are made quarterly on set dates. I prefer check so I don't have to eat a paypal fee (upwards of 3%!).

They have lots of big names such as Kohls, Sears, eBay, Orbitz, Old Navy, and the list goes on and on. It is free to join and you get paid to buy things you would buy anyway! This goes great with a rewards points or cash credit card (assuming you pay your balance each month). This is a great way to pad your savings a bit by shopping normally.

I am kind of upset that I did not know about this sooner. I could have saved hundreds over the years! I am just happy that I am signed up now and can start using this money to help reduce my debt. They give you a sign up bonus of $5 cash. Click here to join and get your $5 today and begin saving!

Staying on top of auto emissions and upkeep

Emissions testing is done every year in most areas subject to it. Here in Georgia they only require it for metro Atlanta counties. My car is still in co-ownership name with my dad so I get to use his county (a more rural one) and do not have to test each year. It is a 2003 model so I am pretty sure there is no issue environmentally. The test here is $20 so I like saving that money each year.

One thing I have found out, at least in Georgia and probably all other states, is that if you have a check engine light on in your car you automatically fail the test. The machines used in testing look for this. The problem could be simple (such as a gas cap) or more complex (such as an oxygen sensor or catalytic converter). The only way to find out is to get the code from a scanner.

You are in luck because you can go to Auto Zone (and probably the other auto parts stores too) and they will pull the code and tell you what it is for FREE. It is normally a "P" code such as "P0407". If they cannot tell you what the code means you can google search for the code and you will find your answer. You can then talk to your mechanic or multiple shops if you do not have one to see how much the repair cost is.

Your should always get the code checked if the light comes on as soon as possible. Most of the time it is some sort of sensor that needs to be replaced but sometimes it can be more serious. The general rule is the longer you wait the more expensive the problem will be to fix. If you have your tag expiration coming up you are better of solving it now so you don't have to pay a late fee for the new tag because of repair delays or worse a traffic ticket.

If the code is not emission related it is always best to get it repaired. A lot of problems can reduce the power your engine produces or waste fuel. This ends up costing you more in the long run and reduces the value of the car if you wish to sell it. A check engine light is a red flag to any potential buyer.

Keep up with the maintenance of your car and all should go smoothly for you overall. Oil changes, tires, belts, and fluids should all be done regularly. Don't let your brakes get too worn out or it costs a LOT more to replace. If they make the "squeaky" noise then get them changed. Being smart with your car(s) is being smart with your money.

Propser Note Trading Success!

Since prosper.com has resumed operations they have added the ability to buy and sell notes that have been issued since they have come back online. I just bought a note of what I think is high quality at a 0.9% discount. I love this trading idea!

The system works much like the secondary mortgage bond market and/or eBay. When selling a note the seller can choose between an auction style listing or a fixed price. The listing lasts for one week. I am going to look for cases where I can get them at a discount and make a larger profit.

I also like having the option of selling some notes down the road if I need the money for something pressing. It only takes 1 day for the trade to settle so you get access to the money quickly after the auction ends. The added liquidity of the notes essentially lowers the risk a little and you are not stuck with them for the full 3 years.

The system is just in it's infancy. All notes for sale now are brand new. It will be interesting to see if notes sell for significant discounts after a year passes and notes are nearer to maturity. I will keep my eyes open for opportunities to profit on having my money tied up and try to leverage it even more.

August 2009 Prosper Lending Update

It is the middle of the month again and it is time for my update on prosper.com lending. I have invested some money (payments received) since bidding resumed and have some loans that are a little late.

Here are my stats as of today:

Outstanding Loans: 44
Late: 2 (< 15 days)
Late: 1 (> 15 days, < 30 days)
Current: 41

Closed Loans:

Charged Off: 1
Paid Off: 3

Open Bids: 0

Total currently invested: $1594.07 (Principal Value)
Cash in Account: $48.74

Total Principal: $1642.81

I have 2 more "late payers" than last time. I have invested in 3 new loans with the payments that I have received over the month. Next month I will report an increase or decrease in account value so we can see my returns!

Tip: Getting your Prosper loan funded

I am an lender and borrower on prosper.com and I see a lot of bad listings. I have decided to write a post on how to create a good prosper listing to increase your chances of getting funded. There are many factors that go into funding a prosper loan and they should all be addressed by the borrower.

A good prosper listing will include:

• A picture of you. Not your dog or cat. You and maybe your family. Lenders like to put a face with the loan just like a normal bank.
• A thorough explanation of why you need the money and what you will use it for. The more your write the better your chances! "Pay off card" is not enough!
  
• Detailed monthly income and expense data. This needs to be truthful and as accurate as possible. All lenders need you to demonstrate in numbers that you can afford the monthly payment. A bank would require the same thing from you.
• If you are refinancing some debts you need to provide the current interest rate, amount borrowed, and current monthly payments of each balance the loan will replace.
• Make sure the title for your listing is descriptive and not just "buy a car" or "pay off some credit cards." Lenders are looking at hundreds of listings and you need to catch their eye!
• List your loan at the rate that prosper suggests. You may think it is too high but if you attract enough lenders it will be bid lower. If you start it too low (IE the rate you want) then you will get a LOT less bids on your loan and may not get enough to fund it. You always have the option to decline the loan after bidding is over if the rate is too high. No loss to you!
• Be sure to answer any questions from potential lenders. Make the answers public so other lenders can see. A responsive and attentive borrower is a good borrower in their eyes.
  
• If possible get a friend or family member to bid on your loan. Lenders like to see others put faith in your ability to pay and will bid accordingly.

Aside from the above be truthful and forthcoming about your credit history. If you have had trouble in the past be sure to explain it. People make mistakes and lenders know this. If they ask you about it be sure to answer completely and don't be discouraged. They understand that mistakes happen and just want clarification. Honesty is always appreciated.

Finally, remember that people investing in prosper are putting up their own hard earned money. They may seem nosy but you would be too if you are putting your own money on the line! It is a business transaction and you should treat it as such. We, as lenders, do not expect anything that a bank would not expect. Good luck!

Online Banks Make Saving for Goals Easy!

I bank with ING Direct as they have a fantastic website for accessing accounts, free bill pay, free direct deposits to anyone's account, and best of all: no checkbook!

You can also use them to separate out your savings accounts for different purposes. You can open multiple savings accounts (no minimums or fees) and label them. Here is the list of accounts that I have:

• Emergency Fund
• Rental Deposits
• Vacation Fund
• Irregular Bills

This makes it very easy for me to see where I stand on all of the above. I can tell quickly if one is too low and act accordingly. I (will) rent out rooms in my house and require 1 month's rent on deposit. I put a little away each month to cover my vacation incidentals. My "irregular bills" account is used for my HOA fees (due every 6 months) and water bill (every 2 months) so I will always have the right amount when due.

I used to track all of this on a spreadsheet but it got too confusing. I decided separate accounts is the way to go so I don't need to be at my personal computer to see where I stand. I also don't have to divide up the interest earned on any of these each month since they all get their own deposits.

I highly recommend using an online bank for savings goals since they have no fees and no minimums to maintain. They also have the best interest rates out there and also offer CD's for more long term saving. If you want to sign up for ING Direct, the best online bank I have found, please click here.

Happy Saving!

Cheap Vacation Destinations

I love to travel and I am always looking for more. I have been to 33 countries so far and counting. I have been to both expensive and very cheap places in my travels. Today I will share my favorite cheaper places to visit.

• Thailand - So far this is one of my top 3. I will be returning there in November for an extended Thanksgiving break. I am using my miles (60,000) to go there. Taxes were around $50. When I was there last I spent about $10-20 per day for everything! Amazing country and very cheap. Let's not forget the great food!
• Las Vegas - I went in July for a friend's birthday and they are practically giving away rooms! I found them as low as $30 per night! I don't gamble so I focus on the cheap drinks and entertainment in Vegas. I like people watching on the strip and the nightlife. Also keep an eye out for package deals that include airfare.
• Romania - I visited Romania in May of 08 and was surprised how cheap it can be there. Restaurants are reasonable and rooms not too expensive. It is good to go before they move over to the euro and prices will rise quickly. Brasov and the mountains are great to see. Bucharest is boring and only good for the airport.
• Berlin, Germany - Berlin is a great city with lots to see and can be very cheap. If you stay and eat in the former East Berlin you will find quality just as good if not better and half the prices of the old West Berlin. For western Europe this is as cheap as it gets!

These are some of my favorite places. I have been to Thailand and Berlin multiple times. I will return to them again as well. With tighter budgets and cheaper airfares these destinations are even cheaper now. Happy Travels!

Saving Tip: Grocery Store not always cheapest!

Most will be surprised to hear that the grocery store is not the cheapest place for all food items. I shop around for my most commonly bought items and found a few that I can get cheaper elsewhere.

Examples:

• Soda - I drink Coke and found that my local gas station sells 12 packs 2 for $6.99. My local grocery puts them on "sale" for $4 each. This saves $1 on two and I buy them when I stop for gas. No special trip needed.
  
• Produce - I go to the farmer's market which is a lot cheaper and fresher. The produce is also a lot more diverse and even tastes better in my opinion. If you don't have a farmers market around look for produce sales in church parking lots from local farmers. Always cheaper AND better!
• Wine - I skip the grocery's wine section (unless they have a clearance) and go to the liquor store. Almost always cheaper. The farmer's markets tend to have good wines too at reasonable prices.
• Meat - Grocery stores have good sales sometimes but I found that Sam's or Costco have better deals if you buy bulk and freeze in smaller bags.
  

The list could go on and on but these are the major things I tend to look for while shopping for food. Food is one of my largest expenses that I can control so I am constantly on the lookout for this. Do you needlessly overspend on some items?

Get $20 Free from Virtual Bank!

I got a referral from a fellow blogger to sign up for Virtual Bank savings account and you get $20 after 30 days as a bonus. This is a 20% return on investment in 30 days. That is really good!

If you want to get $20 for yourself then click here!

I love bank bonus money and take advantage any time I can. I have collected over $500 in new account bonuses along the way and counting. I consider it part of my alternative income since I actively did something to earn it (i.e. not interest or dividends).

Enjoy the free money!

Strategy: Stopping yourself from impulse buys

I admit that even I have the temptation from time to time to buy things without thinking it through. Most of us don't notice it until after the fact. I have come up with some strategies that can help you rethink your decision:

• Think of the cost of the item in terms of something else you could buy. Example: I could have this $50 XBox game today or I can save this $50 to have as spending money in Europe for my vacation next month. Which do I really want?
  
• Buy the item and wait: Keep the receipt, do not open it, and wait a few days. Really think it over and decide if you still need / want it. You can return it if you do not use / open it yet.
• Research it: Find something you like at the store and look for it online. This will force you to think it over and chances are you will find it cheaper if you still want it!
• Adjust your budget: If you can discipline yourself then you can have a spending money budget each month. Do whatever you want with the money and not worry too much about it.
• Entering a store: Assure yourself that you are just looking and not going to buy anything. Also tell yourself that you will make a list of what you want and think about it for a few days.
  

These simple steps can curb your spending and save you money. Impulse buying is a tough habit to break and you must take active steps to stop. It is the only way to get ahead financially!

Own Apple Products? Cheaper Apple Care on eBay!

I am an avid Apple/Mac user. We use them at work and it is all I have at home. I work in the IT Industry and Apple products are by far superior. Stability, speed, and quality are all at very high levels and consistent. For computers and electronics in general their is one rule of thumb: you get what you pay for. Get a cheap one and it will not last as long.

Since Apple products are significantly more expensive and I want to use them longer I buy the AppleCare warranty extension. It can be expensive depending on the device but I have found a much cheaper way to get it and it is 100% authentic and legit. It also increases the value of the device if you decide to sell it later on eBay.

Apple allows companies to become resellers. They get everything at a discount. A lot of these resellers are selling AppleCare on eBay for far less than Apple's retail price. Most of them email you the code that has to be entered on apple.com within minutes of purchase. It is fast and very easy. No need to spend time and gas going to an Apple Store or other reseller.

You simply go to ebay and search for "AppleCare MacBook" for example. You will find many sellers that have the warranty available. Looks for ones with lots of positive feedback (My rule is 200+) and look at it. If they have been selling AppleCare for a while you know it is safe. I have found that the MacBook AppleCare on eBay goes for about $120 and is $249 from Apple. That is a big savings!

You can do this for all Apple products. AppleCare for iPhone, iPod, iMac, etc are all available on eBay all the time. This can save you hundreds in the long run. You get the same warranty a lot cheaper and if it breaks you have $0 out of pocket. I highly recommend this for any Apple product!

Website: The ITA Software Matrix

I would like to share a tool I use to find the best deal on airfare. I found this site one of the easiest and most flexible to use. It searches nearly all of the airlines to find the lowest fare between destinations. It is also very fast!

http://matrix.itasoftware.com

It is free to use for anyone. Simply click "Log in as guest" and you can begin searching. When booking vacation I like to use the Full Month search or Weekend search so I can see which days are cheapest. It even mixes airlines to get the best price. Very handy!

You can also specify a certain airline or airline alliance so you can get points for your particular program. I am currently an elite member of Delta Skymiles so I focus on Skyteam airlines, for example. The fare has to be a lot lower than a Skyteam member for me to buyoutside of it. Elite status has many benefits that I value as a business and leisure traveler.

I should note that you cannot book the flights from this site. It is a search only tool meant for travel agents. Once you find the fare you want you have to go to the airline's website and book it from there. It is a lot less of a hassle than it sounds like. Just jot down the times and flight numbers and make sure it matches up when you book it.

They are also working on a new version, matrix2, which is supposed to be even better. I look forward to seeing what new features they add to the already great tool. They provide links where you can have a look for yourself. So far I have only seen layout changes but have not used it enough to make a complete evaluation.

Today is my birthday!

Today I turned 27 and have decided to take the day off from money blogging. This is one of the very few days per year I try (key word here) to not think too much about money. I call it a vacation from the bank account.

Birthdays are certainly not what they used to be. I remember looking forward to gifts, parties, and getting nice surprises. These days it is work, having a few beers, and dinner with the family. Just another day of the year in comparison.

Rule of 72: How it works

I have had a few friends ask me about how the rule of 72 works in the investing world. It is a quite simple tool used commonly with investing. It tells you how (approximately) many years it will take for your to double your money at a given rate. It is great for demonstrating why the stock market is the best investment for retirement funds.

Here is an example: Let's say you have $10,000 in cash ready to invest in something for the long term. I will apply the rule of 72 to determine how long it will take to make the $10,000 initial investment $20,000.

Savings account: Average rate for online accounts: 1.50%

72 / 1.5 = 48 years

Bonds: Average return on the bond market as a whole: 7.1%

72 / 7.1 = 10.14 years

Stocks: Average return on US Market: 10.5%

72 / 10.5 = 6.86 years

As illustrated in the above numbers it becomes obvious why people invest heavily into stocks. It only takes 7 years to double your money in stocks while a savings account takes 48 years. This shows how your money is working for you. Retirement assets are invested aggressively for this very reason.

This is a useful tool to use when deciding your asset allocation as well. You can split up your investments between cash savings, bonds, and stocks to come up with a weighted average return on your entire portfolio. Here is an example:

10% Cash Savings (at 1.5%) = 0.15
30% Bonds (at 7.1%) = 2.13
60% Stocks (at 10.5%) = 6.3

Average Return = 8.58% (total of numbers above)

You can set this up in Microsoft Excel or any other spreadsheet program and play with the portfolio breakdown to come up with the right mix for you. Use the rule of 72 on your average return to see how long it will take you to double your investment.