On my previous blog entry about HELOCs I forgot to mention a pretty important point.

You use a HELOC as an Asset Protection Strategy. Suppose someone decides they want to sue you. The first thing that happens when they go to a lawyer is the lawyer runs an asset check against you. He finds you own several properties. If you have 20% equity on each property, the lawyer is much more likely to take on the case for free without a retainer. However, if you’ve mortgaged them to the hilt, he’s going to ask for a big retainer and the likelyhood of a frivilous lawsuit drops dramatically.

Thats where a HELOC comes in. If you’ve put 20% down on a property, you atleast want to put a HELOC on it so that it APPEARS as if you have a 2nd loan. You may not have drawn a penny out of it but on paper it looks as if you’ve taken that money out.

Besides, if you do get sued, you can use the HELOC to pay for your attorney’s fees!

Ouch! Just tallied last months expenses. Apart from the rent,food, $600 for new tires/brakdes and $900 insurance premium, I had quite a lot of expenses.

$6k landscaping
$16k unexpected request for a downpayment on a house [1031 shortfall that the loan officer should’ve caught, but she was in the hospital for 3 weeks]
$9.8K 10% downpayment on a house in indiana
$4.4k 5% downpayment on another house in indiana
$4k in plane tickets
$2k lawyer fees for misc stuff.

Out of these, i was expecting only $20k in expenses so i’m over by $24k, which leaves me without sufficient reserves in case I have a few properties vacant for more than a few months. Time to get a HELOC out on my investment properties and pull some cash out!

You always want to do this before you need money. When you do need, the bank won’t lend it to you.

I was browsing the Internet and I came upon Harry Newton’s “In search of the perfect investment” site. Harry’s an accredited investor with advanced trading tips and stock charts on his blog. However, there were some silly thoughts that I thought I’d share with you.

Harry’s Silly Thoughts to Ponder:
Number 9 – Life is sexually transmitted.
Number 8- Good health is merely the slowest possible rate at which one can die.
Number 7- Men have two emotions: Hungry and Horny. If you see him without an erection, make him a sandwich.
Number 6- Give a person a fish and you feed them for a day; teach a person to use the Internet and they won’t bother you for weeks.
Number 5- Some people are like a Slinky…..not really good for anything, but you still can’t help but smile when you see one tumble down the stairs.
Number 4- Health nuts are going to feel stupid someday, lying in hospitals dying of nothing.
Number 3- All of us could take a lesson from the weather. It pays no attention to criticism .
Number 2- Why does a slight tax increase cost you two hundred dollars and a substantial tax cut saves you thirty cents?
Number 1- In the 60’s, people took acid to make the world weird. Now the world is weird and people take Prozac to make it normal.

Saw a billboard today at a major intersection and got a flyer in the mail today. It proudly proclaimed “Buy a Condo and Get a Car Free”.

Whats wrong with this picture? Maybe the builders are just generous enough to be giving away free cars to new home buyers. I think not!

These condos were already extremely highly upgraded – granite counter tops, stainless steel appliances, 3-tone paint, expensive carpeting, washer-dryer. However this wasn’t enough to overcome the recent slowdown in the San Diego housing market. So some communities started offering plasma TVs as part of their already luxury-level “standard” package. The problem is once one community does it, everybody copies them and the product no longer has any differentiation. So these smart sellers decided to throw in a free car. I can see that making a lot of fresh-out-of-college kids real happy.[and broke in a few years.]

Of course, people don’t realize that the condos that sold for $350,000 last year, which sold for about $340,000 this summer after all the phenomenal upgrades thrown in free, now cost $335,000 with an additional $15,000 free car added into the mix. If that isn’t a significant price drop, I don’t what is. But of course agents will look at comps and say its just a minor seasonal price decrease.

Well good luck to all the investors who think San Diego is still a good place to invest. If you’re one of them, let me know. I have a friend who wants to sell his multiplex. He’s selling it at a very generous-for-san-deigo 6.5% CAP rate.

As you all know I’ve started researching about oil and how to profit from the idea that the price is just going to keep on rising.

Today I spent several hours reading what seems to be a 5 million word essay on how we’re running out of oil. There were links to probably 75 other articles supporting this claim. The site called Life After the Oil Crash paints a very dismal picture for the future. For the few of you that have better things to do on a Saturday evening, here are a few salient points.

1. We took 125 years to consume the first 1 trillion barrels of oil and 30 years for the next trillion.
2. We’ve peaked in oil production.
   Demand is increasing by 2%/year while output is decreasing 3%/year.
3. Renewal sources of energy aren’t as good at producing energy as oil is, and will
   barely dent the dependancy on oil over the next several decades
4. “Big Oil” already know about this and are trying to do something about it. In fact a lot of them own alternative sources of energy companies.
5. Oil will hit $200 per barrel and gas prices $10/gallon at the pump in the near future.
6. The so-called war on terror will last 50 years because thats as long as the major oil-producing countries have to produce most of their oil.
7. Once we run out, it’ll end civilization as we know it.
   Thats what the site says anyway. The incredibily high fuel prices will affect all major aspects of our society and might cause a global economic meltdown.

I though it was an exceedingly well-researched report and after going through countless of supporting articles I can’t really find a whole lot to dispute. Of course I’m optimistic in my belief that we’ll discover an alternative to oil and life will be peachy. However I’m still going to hedge my bets and continue my efforts to find a way to invest in oil. [Kind of like the profound “Trust in God, but lock your car!” phrase]

If you’re interested in learning more without spending your whole weekend, I recommend watching this DVD – The End of Suburbia: Oil Depletion and the Collapse of the American Dream

I made it to the Carnival of Personal Finance – 25 hosted by Frugal Underground. Woohoo!

The same post was featured on BusinessPundit.com way back in October.

I used be such a sweet, sweet thing
Until they got a hold of me
I opened doors for little old ladies
I helped the blind to see
I got no friends ’cause they read the papers
They can’t be seen with me and I’m getting shot down
And I’m feeling mean
No more mister nice guy
– Alice Cooper.

In my previous post I described it was time to get nasty with the tenants. on wednesday I faxed them a letter saying they hadn’t paid up for months and they had 3 days to pay up or move out. They email back asked for 5 days to move out and I said ‘NO’ but gave them 4 days. I also said I’d have someone stop by on the 3rd day to pick up the keys.

Well, I just got a call from them. Apparently they just got paid $1550 and want to overnight me a cashiers check. They just wanted to know if I’d accept it. Sure. I’m not one to say no to a cashiers check. Lets see how that works out.

Also got into an argument with the landscaper last night. He sent me a quote for $5400. I negotiated with his wife to bring it down to $5200. I signed it and sent it back, and that constitutes our contract. Afterwards I told him to adjust the stone wall on one side which was crooked if he could do it for a thousand bucks. I also told him that the builder was going to pay $1200, leaving my grand total at $5000. Well he did his stuff and told me I needed to pay him an extra $864 for the sod. I paid him $5200 which is $200 more than agreed on and told him to stuff himself, I wasn’t going to pay anything more than that. Then he claimed I owe him $5400 plus $1000 plus $864 and if i didnt agree to pay he was going to make me come all the way to SLC to show up in court. But he did say he was willing to offer me a payment plan. How sweet of him!

I told him he had it all wrong. The quote I signed was for $5200. There’s no mention of any sod and I’m willing to split the difference but if I had known it was so expensive I would have opted for hydroseeding which is much cheaper than laying sod. Anyway I told him to check his paperwork and call back tomorrow. I’m going to have to be tough with him.

I spoke to my wife’s uncle today. He never ceases to surprize me. He’s a Chemical Engineer but he’s owned business, hotels, motels and is currently into land development. He’s one of the many people who’s opinion I greatly value.

I asked him if he knew anything about oil wells and he said he owned 15 at one time. But the margins were too skinny, the development costs too high, the evironmental regulations to difficult to comply with, too much slippage in selling the oil, the life of the wells too short, and so on and so forth. He advised against going that route and suggested I stick with what I’m going at – Real Estate. He suggested I look for some convenience store business to generate my requiste $2,500/mo passive income.[Thats one of my goals for 2006].

While thats good advice, I’m not smart enough to learn from the mistakes of others. Infact I’m barely smart enough to learn from my own mistakes!!!

Anyway, I’ve found someone who’s already done a ton of research on the subject and is extremely knowledgable on the subject. I’m meeting him on Saturday and I’m taking along a friend whom I’ve partnered with on some deals. He’s the MBA-VP types and is quite smart. He’ll figure out if the deal is worth pursuing or not.

Lets see how it works out.

Got a letter from one of the builders I’m building a house with in Salt Lake City. Apparently they decided they weren’t making enough money from the houses so they decided to disband their company Big Canyon Builders and regroup under a new banner called Bristlecone Builders. But of course, now they no longer need to keep their end of the bargin and stick to their contract price for the homes. They’re just going to jack up the prices 25-35k.

I know a few other investors who are caught up in this and are really pissed. Some of them are keen on suing the builders but I don’t know if this will accomplish anything.
Lets see. I have so many homes tied up, the loss of 1 or 2 of them doesn’t make too much of a difference. Going to court takes money, time and a great deal of stamina! I’d rather figure out how to make more money than chase after the loss of 20k in one deal.

One of the tenants on my Salt Lake City properties are late on the rent. Well, they’re not late, they just haven’t paid for a few months. Nothing but excuses and sob stories. I had taken them to court in June for non-payment of rent and instead of leaving, they requested the judge for 2 weeks during which they paid up. Its not that they’re flakes. They have an option to purchase the house and they really want to do that. Its just they’re have poor money management skills and no concept of financial planning. They had promised me some money by the 25th November. Today I got an email with some more sad tales of family trouble. Its either that or the husband health problems.

I basically told them that they had to tell me when and how much they were going to pay me the next week or I was going to have them move out. No one likes to evict people the day before christmas so I’m trying to get a head start!

Should’ve been more stern with them but I felt sorry for them. The husband had genuine heart problems. Anyway, if I don’t get paid soon i’m going to be in the hole myself. I just paid $6k for the landscaping on the same house plus i haven’t received rent for a few months. Atleast the house has great curb appeal and should rent out much quicker now.