Eric & Sara - Trading Up for the Same Price

Web Designer, Eric Nance and his wife Sara needed a bigger home.  They had two young boys, two large dogs and Eric's business, Epiphany Graphics (http://epiphanygraphics.com/), all operating out of their 2000 sq ft home.  Eric needed a separate work space, away from the rambunctious play of their boys and accessible enough that he could help out if needed.  Sara had done her research on schools and was intent on being in the Divinny school district of Jefferson County.  They are avid gardeners and given the dogs a large and sunny back yard was also in their top 5 "must haves".  And of course they wanted a great deal!  To achieve their goals we needed to sell their current home and finding the perfect new Live/Work home to accommodate both Eric's growing business and their expanding family.  

Sara & Eric went to work completing the work we'd identified together that needed doing before going on the market & the TAA team got busy putting together the marketing materials to sell Eric & Sara's home.  In April we went active in the MLS.  Two weeks later we received a full price offer and began the transaction process to close on the sale.  Once past the inspection phase for the sale we began in earnest to look for their new home.  All together we looked at approximately 20 homes over the course of a few weeks.  Working with TAA lender, Matt Hanson, http://hansonplanninggroup.com/ they got a great mortgage and chose a 5 bed, 3 bath short sale house that met all their criteria but desperately needed some TLC.  The house was ideal in every way - 3 beds on the main level including a master suite, formal living & dining rooms, a working kitchen with an opening overlooking a large playroom that opened out on 2 sides to a wrap-around deck & the huge back yard.  And downstairs - a fantastic TV/Media room w/ fireplace, laundry w/ tons of built-in storage and best of all towards the south end 2 bedrooms and a 3rd bath easily divided off from the rest of the downstairs space and perfect for Eric's offices!  

Comparing Basics      Current Home          New Home

5 Must Haves:

Sq footage:                     2,108                        2,940 Beds:                              4                              5 # of Baths:                       2                               3 Lot Size:                        10,057                       10,541 DOM:                             15 days                     92 days Appraised:                       At list price               $10,000 over purchase price

• Separate work space for Eric • School District • Generous Family/Play room for the boys • Sunny Back yard for gardening • Master Suite w/ private bath

Were there challenges? YES! The biggest being that short sales take longer than usual to close.  In this case, 2 months longer.  So Eric & Sara stayed with friends while we worked with the bank through the bureaucracy of a short sale.  The in June the family moved into their new home.

I just met with Eric and Sara for their first anniversary in their new home.  Life is unfolding even better than they'd imagined.  Eric's business has gone through a focused evolution specializing in marketing for the medical community (http://omnimedicalmarketing.com/), baby number three is on the way!  They've renovated the master bath, put wood floors in the playroom, added a dog run to the back yard, installed A/C and completed some upgrades to the kitchen.  From start to finish the process took about 5 months.  Eric & Sara got everything they wanted for the sold price of their previous home with $10,000 in instant equity and great terms on their mortgage.

The 4 Stages Of Wealth Building As A Homeowner

One of the primary objectives of owning a home is to let the home appreciate over time and become a pillar of a family’s financial strength.

But before we can discuss “wealth”, we need to identify the stages to get there.

Stage 1

Having “Emergency Cash” is the first stage. It’s having $5-7,000 liquid for life’s inconveniences (the boiler breaking down, the car needing work, etc). When faced with the inevitable challenges that arise, many people are forced to run to their credit cards to make it through. They become stuck with high interest rate, non-tax deductible borrowing.

Stage 2

The second stage is the elimination of “Bad Debt”. We define “Bad Debt” as any debt whose interest is not tax deductible. Obviously, those high interest rate credit cards must be the first to go. But we also want to divest ourselves of the borrowing associated with car loans, boat loans, student loans, and personal loans because it typically can be done cheaper.

Stage 3

Shockingly, when you arrive at stage three, you will be considered in the Top 5% of Americans in terms of financial security. Stage three is accomplished when you have 3-6 months of your total expenses in reserves. The average homeowner (who is logically financially better off than the non-homeowner) has less than one month’s expenses in reserve! When life shows them more than a minor inconvenience (like a job loss, an illness/disability, or worse), most people are in a panic situation. With 3-6 month’s reserves, you will have time to weigh options and make better choices.

Stage 4

True financial security is attained when you become “Debt Free”. But not without debt. We consider our clients “Debt Free” when they have enough liquid assets to pay off whatever mortgage they have outstanding. Wealth building almost requires utilizing the tax benefits of having a mortgage in combination with strategies that utilize The 3 Miracles of Money…

The 3 Miracles of Money

1.       Compound Interest – The impact of money left to grow upon itself can be dramatic. If you had $1 on Monday and you could double it every day ($2 on Tuesday, $4 on Wednesday, etc.), by the end of 20 days, you would have $1,048,576.00!!! Now, you can’t double your cash every day, not even every year, but the concept holds true…..compounding interest is a good thing!

2.      Tax Free Growth – The ability to accumulate assets without giving Uncle Sam a third of it (in the form of Federal and State Income Taxes) is how the $1 became $1 million. If the growth was taxed at 33% ($1 on Monday gave you $1.67 on Tuesday – instead of $2- and so on), your $1 would only grow to $28,466.20 after 20 days!!! THAT IS NOT A TYPO! You would have “lost” over $1 million.

3.      Leverage and Arbitrage – If you can put up a minimum of cash and take title to a significant asset (like a down payment on a home….the smaller the down payment the better), you can leverage that cash investment to large returns. At the same time, if you can take the cash that you don’t bury in home equity and effectuate a spread between your “after tax cost of money” (mortgage payment) and your investment options (hopefully, in a tax free environment), you can gain the exponential growth that creates wealth.

Special thanks to Dave Cook for providing this information.  

Want to know more about home ownership?  Call me, Laura at 303-726-1051.

Earn While You Learn

Investing in real estate is one of the most powerful ways to earn money while you learn how to make more money.  When you consider the cost of higher education today and then factor in the chances of gainful employment once you’ve completed that $40,000+ education the amount needed to get into real estate investing begins to look pretty sweet.  Our current success story, Matt A. saw the opportunity and jumped on it.  His journey was not all roses.  I asked Matt what he came up against and what he learned from the bumps in his investing road.

"In addition to what you can get out of books like Your Castle Real Estate’s “Investor’s Guide” & Gary Keller’s “Millionaire RE Investor”, I’ve learned several things that don’t come in the books.  How to listen to my gut, who I need on my team and when to listen to them, the importance of controlling fix-up costs & remaining flexible, and the one that saved my butt - having multiple exit strategies.

“The first several months were about learning how to look at property – first on paper and then while walking through the houses.  Looking at property on paper can be deceiving.  The pictures often times make the homes look really nice.  But then we’d get to the house and realize it was a total shambles.  Pictures can lie.  You had told me I’d need to look at 100 homes on paper & then go see 10 to write one offer.  It’s tricky because there are so many variables.   But after seeing several dozen properties those variables became less intimidating & more familiar.

"The biggie is location.  But I found that even in the less desirable areas there can be pockets that are great.  With my first three deals we were in three different areas: North Aurora, Montebello & South Denver.  Each area had its own set of influencing factors.  Now I know that it’s important (at least in my case) to choose an area and learn all I can about it: avg. price point, quality of schools, acceptable level of fix-up.  And perhaps the most important – do the inspections before you close!”

Ah Yes, I remember.  Would you like to share that story?

“Sure.  We’d just closed on the 3^rd flip and one of those “too good to pass up” deals came to our attention.  It was back in the east Denver/north Aurora area that I really liked, a 2 bed/1 bath for $70K.  I knew the area was running low on properties under $100K and we’d had some down time between a couple of the earlier deals which I didn’t want to do again.  Having my money sit in the bank wasn’t getting me any closer to my goal.  If we wanted the house we needed to close in 48 hours to save the house from its foreclosure sale.  So I jumped on it.  The comps were showing resale in the $140K range.  That’s $70K in wiggle room – how could I loose, right?

“So we closed Tennyson on a Tuesday & bought Willow on Thursday.  Then we did the sewer scope.  (insert the sounds of fate here- “dun, dun, dun, dun” in a descending scale)  And of course it was trashed so I had to replace it to the tune of $5000.  Then we decided it really needed a garage - $11,000.  By the time we got it fixed & back on the market it was mere days before the tax credit expired and I had little room to reduce the price and still make some money on the deal. 

"We had the house on the market for 6 months with very few showings when you and other investors I know started talking about keeping the place as a rental, re-financing to pull out equity and picking up a couple of other rental properties.  This was the “remain flexible & multiple exit strategies” lessons in practice and it lead to my best buy to date."

We’ll save that story for the next Success Stories installment.  In the meantime, if you’d like a FREE copy of the Your Castle Real Estate “Investor Guide” give me a call – 303-726-1051 or shoot me an email at ludmilla303@msn.com

CREATING NEW WEALTH - Seek First To Understnad!

Last night I watched a Tony Robbins’ interview with Eben Pagan, Internet marketing wiz kid. I say "kid" because he's only 38 and yet he's generated millions from internet marketing of his products. His products? He started with a "how to" on dating and is now into business development, how to hire the best employees, mastermind materials and all manner of improvement e-books. The product isn't what caught my attention. What snagged me came at the end of the interview and upon hearing it all that came before slammed into place.

Eben operates from a true abundance mentality. He talks about the 80/20 rule. Traditionally this concept addresses the notion that 80% of one's income comes from 20% of one's activities. Pagan's use is radically different. Having coined the concept of “moving the free-line”, Pagan promotes the idea that by giving away for free the value that I have to offer, I still retain that value and now another person has what I gave them AND I receive more in return. For instance: I have a lit candle, which I use to light your candle. My candle is still lit and now yours is lit AND there is MORE light because 2 candles are burning. Make sense?

So how does this translate into generating Wealth? The trick is to break out of the “scarcity mindset” (there’s a finite amount of money in the world and I’m going to get my share) and re-focusing attention on creating and then providing value. Once you are providing genuine value the money will follow. How do we know what’s of value? Look for a “yes” answer to the following 3 questions:
1) Does what I’m offering alleviate a pain my target client is experiencing?
2) Is my target client actively looking to alleviate that pain?
3) Does my target client have few or zero perceived options for alleviating that pain?
If you get 3 “yes” answers then you have a product that will sell itself.


How do I come up with a product/service that provides real value? Pagan’s answer: “Seek first to understand”. Talk to your client/people in your target market and find out where their pain points are. Dive deep in the conversation with an authentic intention to discover what their needs are. Once you know what they are in search of and cannot find then you insight into what you can create/offer as a product/service.

So what is “The New Wealth” and how is it created? New wealth is money made from a product or service that provides real value and the money is generated by the principal of – when I give it away I still have it and now you have it and I’ve gained from the act of giving. The key: SEEK FIRST TO UNDERSTAND!