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Economy

Choose your own financial adventure

I posted a hypothetical question over on the Bend Economy Bulletin Board. It was the direct result of a conversation with a buddy. I am always of the opinion that the more voices I listen to, the better my decision will be. And would encourage anyone who is interested in their financial future to think about using the forum to ask questions. Plus, there are several smart people who frequent it, so that helps.

Keep in mind, no one is saying you have to actually use the advice. So ask yourself “what can it hurt?”

LINK

How to calculate the true cost of Real Estate

I have several articles that you probably should read concerning real estate, here and here.

Now for a long while (over 6 years) I have been bearish on RE. For those who may not understand the term bearish, it pretty much means that I think that purchasing a property has NOT been a good move. But things are changing.

Take these homes for example.

Some things I know after researching the homes using DIAL and the CLERKS records are.

  • They are both short sales
  • They are right next to each other
  • They were built for $106k in 1996.
  • Annual tax is around $2k

Now how can we distinguish if this is a good deal? Well lets lay some ground work.

I currently rent a crappier home than either of these for $775 a month. So if my net monthly cost is less than $775 a month, this tells me that I should consider “buying” a home. So I go to bankrate.com and open up their mortgage calculator.

The homes are asking $89k, and I would put down roughly $20k in cash. Making the loan amount $69k. And with a 15 year fixed and good credit, you should be able to pull close to 4.5% on the interest. You can see that the monthly payment is then $527.85. This may lead you to think “Jared, you would be saving $250 dollars a month, what is stopping you?” and that is a reasonable question.

If you look up the properties in DIAL, you will see that the annual taxes due on the homes is roughly $2k. Dividing that by 12 gives you your monthly tax rate at $166 a month.

$527.85 + $166 = $693.85

Monthly Mortgage Payment + Monthly Tax Rate = $693.85

Which doesn’t look quite as attractive, but is still interesting. Finally you should calculate maintenance costs. Which most people say the bare minimum is 1% of the purchase price. Realistically, I think we probably should go with 2-3% of the purchase price for these older homes, but for the sake of this post, we will just use 1%. 1% of $89k is…$890 which we will divide by 12 to get our monthly maintenance cost. $74.16.

$527.85 + $166 + $71.16 = 765.01

Monthly Mortgage Payment + Monthly Tax Rate + Monthly Maintenance Cost = $765.01

Yes, this looks really attractive, but I also want to add the transaction cost (The amount you pay in fees to the RE agent, Mortgage broker). I will have to guess a little bit here, if a real estate agent can shed some light I would appreciate it. So lets say that the total fees paid, is roughly 7% of the purchase price.

$89k x .07 = $6230

Now divide $6230 by how many months you will have the mortgage loan for. In our case, it is 180 months.

$6230 / 180 months = $34.61

Keep in mind that if you roll any of the fees into the loan, then you will pay interest on them.

$527.85 + $166 + $71.16 + $34.61 = $799.62

Monthly Mortgage Payment + Monthly Tax Rate + Monthly Maintenance Cost + Monthly Transaction Cost = $799.62

This is the basic math I use to figure out if I really am getting a deal or not. The interesting thing here, is that an investor could potentially buy this place. I mean they could maybe rent it for $850. So they would make ($577.85 x 12) $6934.12 annually on a $89k purchase. Roughly 7% +/-. Not a terrible investment using this math.

I did call about these homes, supposedly they have several offers. Thing is, with over 400 Notice of Defaults in January, we all know that there is plenty of inventory. Meaning that there is absolutely no freakin rush to “buy” a home.

Anyway, just some thoughts for people to consider before they purchase and please comment if I missed something.

The old, the young, and the dead

Posted on August 11, 2009

pile the bodies over there
the stench is filling
you’re so young, but you’re all that’s left

just pretend they are
deep in slumber
stiff ol’ lumber
thus so easy to move

so grab their wrists
and i’ll grab their ankles

we’ll carry them
then bury them
not far from here, not far

* * *

LINK

 Alleged US massacre in Afghanistan ‘provoked by false information’

An alleged civilian massacre by United States forces was deliberately provoked by false information from villagers pursuing a feud an investigation claims.

As many as 91 civilians were killed when a neighbouring villager lied to US special forces about Taliban positions it was claimed.

The deaths in a night assault by US planes last summer provoked outrage among Afghans and severely strained relations with Hamid Karzai’s regime.

US commanders initially said no civilians had been killed in the village of Azizabad in Herat province despite United Nations and independent human rights group investigations putting the civilian toll at up to 91.

A later US military investigation admitted 30 had died in the assault, but maintained the forces had attacked and killed 22 Taliban fighters.

However a film for Channel 4’s Dispatches reports there is now doubt any Taliban were present and the strike was instead part of a feud based on competition for lucrative jobs at the nearby Shindand airbase.

Seven months after the attack, Mohammed Nader of neighbouring Kalask village was sentenced to death by a court for knowingly giving US special forces false information about Azizabad. Residents had testified to seeing Nader with the raiders that night.

US soldiers entered the village in the early hours of August 22 last year following reports of Taliban sheltering there. They said they called in a heavily armed AC130 gunship after coming under fire, however villager told the programme US troops opened fire without provocation.

Gul Ahmad, a villager, said: “The women and children tried to run away from it. They killed everything, everyone, the elderly, anything that moved.” The film also reports the feud has continued with provincial officials accusing US special forces of siding with the Kalask faction.

Afghan police officers told the programme that after a further clash between the villages in December, US special forces had demanded police hand over men from the Azizabad faction who had been arrested.

One Azizabad man was bundled away by Afghan guards and his badly beaten body returned hours later.

Afghan authorities allege the US has refused to co operate with demands they hand over the guards involved.

Maj John H Redfield, a US military spokesman, said it stood by the findings of its investigation into the Azizabad deaths. He did not comment on the wanted men.

* * *

 In Memory Of 

“Feeling” out the local economy

Posted on June 30, 2008

I have to say, I can actually feel the slowdown happening. Truly feel it. In 2005 I thought Bend,OR would never take a breath. Now though, this city is gasping for air. It bums me out.

Here is just a list of ancedotal stuff.

  •  Getting my hair cut by the same barber I have gone to for over 3 years, I ask “How is business?”. He says that he has only cut one person’s hair that is a tourist. Usually he does 20x-30x that amount ($400-$600) .
  • On July fourth we went out on our friend’s boat. We got to Billy Chinook at 12:10pm and had no problem parking. Also, the lake didn’t seem any where close to as busy as last year.
  • Wal-Mart’s parking lot has few or no RVs parked in it for over night stays.
  • Craigslist car adds. The asking prices are way down. I have been keeping my eyes on the SUV market for about 2 years speculating that it would take a fall. Boy am I glad I didn’t buy one.
  • Downtown Bend seems like a ghost town. I am down there every day at the school admin building. Again just a feeling statement.

Yet we are still trying to prop this town up on pipe dreams.

It makes me realize how lucky the District is. If you have never met Brad Henry (Fiscal Service Director:Bend La Pine Schools) he is a helluva guy. I have heard him on several occasions talk about “controlled growth”.  Taking the money from the boom or growth years and using it to cover you during the tough ones. Brad is a very smart and incredibly gracious person and I have learned a lot from his example. I just hope that he can keep the District on the road to financial success while many local entities are having to issue reductions in their work force.