Should You Rent Out Your Home Instead of Selling It?

With the current housing slump, should you slash the price of your house to sell, or should you rent it until prices come back?

Unfortunately, many people have chosen to rent out (rather than sell) their homes. This has created a renter's market - which means that, if prices take time to come back, you might lose money anyway.

You might not be able to charge enough rent to completely cover your monthly expenses, and you may have to consider renters with damaged credit. You will lose a few month's rent per year to tenant turnover. You will have to hire a handyman and deal with repairs.

Finally, your home owner's insurance might go up and you will have to spend at least 1% of the selling price to fix up the house for sale after renting it out.

For these reasons, some real estate experts advise you to "take your lumps", slash your asking price, and sell.

Apple Passes Microsoft As #1 Tech Company

I have owned Apple stock since 2006, and I have a Macbook and Apple TV. I would never consider buying another Windows machine.

Apple's products are great examples of elegant simplicity and minimalism.

That is why I really enjoyed hearing this news.

From the New York Times: Wall Street has called the end of an era and the beginning of the next one: The most important technology product no longer sits on your desk but rather fits in your hand. As of Wednesday, Wall Street valued Apple at $222.12 billion and Microsoft at $219.18 billion. The only American company valued higher is Exxon Mobil, with a market capitalization of $278.64 billion.

National ID Cards for Illegal Immigration?

Some in Congress are advocating a national id card - justifying it by saying its necessary to combat illegal immigration.

There is a simple, minimal, and elegant alternative to national ID cards.

This uses the simplicity pattern of "rewarding correct behavior rather than creating bureaucracy to catch and punish".

In other words, instead of creating a national id card to catch illegals, reward the first illegal from each company who turns himself in:

1. Require all employers to post a notice in English and Spanish where workers can see it saying that the first illegal employee to turn in his/her employer gets a green card.

2. Any employers caught employing illegal aliens will get fined a % of quarterly revenue. This will automatically scale the fine to mean something for companies like Walmart.

3. If, as I suspect, it is found that employers really need the labor, then create a guest worker program that does not lead to citizenship. Have a certain size pool of worker passes, hand them out on a first come/first serve basis at the border (as long as they pass a finger print check for a criminal background). If they leave the country to visit home, they have 30 days to reclaim their guest worker pass, or else it goes back into the pool.

Another Basketball Player Mismanages His Money

A few days ago, I wrote about how, according to an article I read, former NBA players Kenny Anderson and Derrick Coleman went bankrupt - despite each of them earning over $60 million from their careers.

Today, I read that current Knicks player Eddy Curry may be heading in the same direction.

According to this Yahoo Sports article, Curry made a little over $10 million this year, and over $57 million so far in his career.

Yet, the article says that he defaulted on an $850,000 loan, and has been ordered to pay back $1.2 million to Allstar Capital, Inc. (they may take his Rolls Royce and Land Rovers).

The article references court documents which show that Curry's outgoing payments include:

• $30,000 a month for "household expenses."

• $17,000 a month to various relatives including his parents, sister and father-in-law.

• More than $1,000 a month for cable and satellite television.

• $207,000 a month in garnished wages that haven't been elaborated upon, but adds up to almost $2.5 million that Eddy Curry never sees over the course of a year.

• $350,000 to NBA player Juwan Howard.

It seems that pro-athletes have the same issues as lottery winners - they come from lower or middle income backgrounds, don't possess financial knowledge, and are suddenly handed large sums of money.

Perhaps they need to follow these 6 steps for lottery winners (and others who receive windfalls).

Haunting Images of the BP Oil Spill

These photographs give a hint of the magnitude of this disaster.

So what is the solution?

I value simplicity and minimalism in government, but that is different than being a strict libertarian.

Mainstream democrats and republicans (i.e. today's congress) will hold hearings and purpose new legislation. The problem is it probably won't simplify the existing law by weeding out the ineffective rules.

We already have multiple government agencies involved in offshore drilling (EPA, U.S. Minerals Management Service, and the Department of the Interior) - yet we still had this disaster. They probably have too many laws - most of them covering trivial issues.

If you have complex laws and bureaucracy, it is too easy to "miss the forest from the trees" (enforcing nitpicky stuff but missing bigger issues.) There also might be loopholes inserted by lobbyists.

The libertarian view, of course, would be that BP should never be overseen in the first place. They are taking a publicity hit for this disaster, and it should be left to the markets to punish them.

But there is a third way - the simple, elegant way. We should go for quality over quantity:

1. Eliminate loopholes and trivial rules. Enforce a few, basic practices to prevent a repeat of this disaster.

2. Let oil companies be aware that future incidents will result in massive fines. By "massive", I mean a percentage of quarterly revenue - so if a company the size of BP is found to have cut corners, they will pay billions of dollars.

Warren Buffett's Secret Millionaire's Club

Warren Buffett has created a new online cartoon show to teach children about economics, saving, and investing. It's called "The Secret Millionaire's Club", and is about a group of kids who find and sell sports memorabilia worth millions to save their community center. An animated Buffett then helps the kids invest the money they have left over after saving the center.

Real Estate Agent Sells House - and Herself!

A 42 year old divorced real estate agent in Palm Beach, Florida - named Deven Traboscia - is offering both her house - and a chance to marry her.

This is probably the ultimate in stunts for a desperate real estate market...

New FHA Requirements for Condo Associations

The Federal Housing Administration (FHA) will no longer approve condo mortgages unless their condo associations are certified.

Here are the requirements for FHA certification:

1. All units and common elements need to be completely built.

2. No single entity can own more than 10% of the units, or more than one unit (whichever is greater).

3. At least 50% of the units must be owner occupied.

4. No more than 15% of units can be behind on their assessments.

5. No more than 25% of the total floor space can be used commercially.

6. At least 10% of the condo association budget must go into reserves.

7. It's ok for associations to have a right of first refusal, as long as they don't use it for discrimination.

8. Associations must submit copies of their budget, insurance policy, declarations / bylaws, plat of survey, any management agreements, analysis of any litigation, and minutes from the last 2 board meetings.

There are two ways for a condo association can become FHA certified. One way is to wait for an FHA buyer to attempt a purchase, and then let the buyer's lender to the work.

The second way is for associations to apply directly to the U.S. Department of Housing and Urban Development (HUD). Associations who do this frequently hire lawyers and/or consultants.

Why might a condo association go through all this trouble? Well, in the last few years, FHA-insured mortgages have gone from 2% of all mortgages in 2007 to 30% in 2009. This means that condo owners without an FHA certified association will lose access to a large, and growing, pool of buyers.

Improving Your Finances Through Fiscal Discipline

Ex NBA players Kenny Anderson and Derrick Coleman have been in the news lately. Despite each of them earning over $60 million during the course of their careers, they both ended up declaring bankruptcy.

Ironically, they forgot the basketball axiom that, while scoring is important, defense wins championships. The same lessons apply to personal finance.

No matter how much you earn, what really counts is how you spend your money,and how much you save. It all comes down to fiscal discipline.

You may want to create a budget worksheet. You can use it, along with budgeting software to track your finances and expenses.

Before you buy something, think carefully if the price is worth it. Is this an item or service that can really add to your enjoyment or quality of life? Will it serve as an investment and provide a passive income?

If the thing that you want to spend money on will only bring short term pleasure, then you may want to skip it.

A caution is in order. You shouldn't completely cut out pleasurable activities. Having fun is important. You don't want to deprive yourself and become a miser. That will reinforce a sense of poverty or lack.

Financial Planning

Dan was a single guy living at home with his father and working in the family business.   When he found out he was going to inherit a fortune when his sickly father died, he decided he needed to find a wife with whom to share his fortune. One evening, at an investment meeting, he spotted the most beautiful woman he had ever seen. Her natural beauty took his breath away. "I may look like just an ordinary guy," he said to her, "but in just a few years, my father will die and I will inherit $200 million." Impressed, the woman asked for his business card and three days later, she became his stepmother.   Women are so much better at financial planning than men.

Festival of Stocks - May 10, 2010 Edition

The latest edition of the Festival of Stocks is up. It's hosted by The Magical Penny blog.

Simple, Elegant Site for Auto Insurance

I have found that people can generally save money on auto insurance by shopping around on a periodic basis. The company / policy that was the best value today may not be the best tomorrow.

Your circumstance can change, companies change plans and/or prices, etc.

The problem is that our lives today are hectic, and it seems too much effort to gather quotes. However, the internet makes it quick and easy because auto insurance policies tend to be standardized. This makes it easy to compare plans side by side.

AutomobileInsurance.me is a very well designed site that makes shopping for an auto insurance quote quick and easy.

Three Good Stocks Made More Attractive By The Recent Market Activity

The following three stocks were recommended in the most recent edition of Forbes. I have included the price at which Forbes recommended them, because all three are now trading below this price - due to the recent market activity.

In fact, I just bought two of them (W.R. Grace and Gentiva Health Services) today, and plan to manage them with my Stock Trading Riches system:

W.R. Grace (GRA,28) Grace is recovering from bankruptcy (related to asbestos claims). Those are behind them now, and they are a $2.8 billion (2009 revenues) chemical company. They make catalysts for refining and silica-based products for paint, beer, and ink-jet paper. Almost 70% of their sales are outside the U.S. They have 36% gross margins and a lot of tax-loss carryforwards. At $28, it is trading for 15 times estimated 2010 free cash flow (vs. 19 for its industry).

Gentiva Health Services (GTIV,30) This is an Atlanta-based provider of skilled nurses, therapy, and hospice services. Companies that deliver health care to the home are not expected to be hurt from "ObamaCare". Fourth quarter 2009 revenue was up 16% from the 4th quarter in 2008, while Ebitda jumped 25%. At $30, the company trades at 11.2 times the 2010 earnings forecast (vs. 21 times historically for home health care companies).

Insituform Technologies (INSU, 26) It installs and upgrades pipes: from sewers to industrial conduits. It has its own technology and machines that can lay or fix pipe without having to dig trenches - which saves utilities money. From 2008 to 2009, sales increased 35% and net income was up 21%. At $26, it is trading at 17.4 times expected 2010 earnings, which they don't consider rich because INSU's earnings are forecast to compound 23% annually over the next 5 years.

Importance of Your Credit Rating

It's very important to have a good credit rating. A bad credit score can really hurt your financial life.

For example, it may prevent you from buying the house of your dreams. Even if you can get a house or car on credit, you may have to pay a lot more in interest - which is money down the drain. You may also have to pay more for insurance. Insurance companies now routinely check your credit score because they have found a correlation in low scores and more claims.

Therefore, you should monitor your credit score. There are a lot of sites that can give you a free credit score, but some may be more helpful than others - especially if they offer any extra services, such as credit monitoring.

To help you select one, you can check out FreeCreditScore.com - they review these free credit score sites.

If you need further incentive to take action, you should realize that maintaining a good credit score can improve your chances of getting a job. With the recent recession and global financial crisis, a lot of people are unemployed, and there is a lot of competition for jobs. A lot of companies now check applicants' credit history.

Wild Day In The Market: Death of A Hedge Fund?

Today, the market plunged, and went for a wild ride. Intra-day, the Dow was down a record 998 points, but recovered to close down 347 points. Incredibly, Accenture stock went from $42.17 down to 1 cent, and back up to 41.09. One reason for the decline is worries about Greece, and that it's money problems may spread to other European countries - such as Spain. However, it doesn't explain the full story: At 2:20pm ET, the Dow was down about 400 points, and then plunged another 600 points in minutes. There was speculation about a trading glitch, but famous options trader Jon Najarian speculated that it was caused by the liquidation of a hedge fund. Once the markets started dropping quickly, trading programs began selling stocks, thus fueling the decline.