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5 Quick Investing Tips

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Investing in stocks and mutual funds (really, anything non-real estate related) is not something where I claim to be an expert. However, I’ve done pretty well by following a simple system, where I invest in some very low-risk models. Generally, I’ve done better than the standard 8% returns on our stocks year after year. And my husband and I have done this all without using any type of financial planner or money manager. (We are cheap and don’t want to pay fees to have someone else manage our money!). Plus I figure if I put my mind to anything, I can learn it.

Climbing the investment ladder to success!

1. Invest in Blue Chip Stocks

I started investing after reading “Investing in Stocks for Dummies”, which I borrowed from the local library. I learned right away that investing in Blue Chips stocks is the “Warren Buffet way” of investing. Buffet is a billionaire from his investments, so I thought, let’s follow his lead.

Blue Chip stocks are not the flashy new kids on the block that have just sprung out of nowhere. Tesla, Nvidia, and Redfin are all trendy, successful stocks, but they are too recent to be considered Blue Chip. Although these stocks have been producing solid returns today, who knows what they will do in ten years.

Blue Chip stocks are the opposite of the flashy, young stocks.  Instead they are the tried and true good old boys and girls of the market. Think of Blue Chip stocks as the members of the Rat Pack, like Frank Sinatra. They’re still as good today as they were in the 60s. These Blue Chip stocks have proven their reputation over the last decade as solid earners.  Most Blue Chip stocks pay solid dividends, quarter after quarter, allowing for heavy re-investment (see tip #4 below). A list of current Blue Chips stocks can be found here. My favorite has been Johnson & Johnson, which has produced solid dividends and returns for us over the last 6 years.

No fancy day-trading skills are needed with Blue Chips. They are a long-term play. Just buy and hold.

Investing with dollar bills in any currency!

2. Invest in ETFs

ETF is short for Exchange Traded Funds. I learned about investing in ETFs when reading “ETFs for Dummies”, a follow-up to my “Stocks for Dummies” book. ETFs are traded just like stocks and have their own ticker symbols for the market.

Think of these guys as a collection of stocks under one name.  For example, instead of buying Blue Chip stock like Coca-Cola, Johnson&Johnson, and General Electric individually, you may find an ETF that houses all of them underneath one ETF ticker symbol. There will be a smaller portion of each Blue Chip stock under the ETF than if you bought them individually, but you will still see the same overall increases in the market. Since the ETF houses more than one stock, they are generally less vulnerable to market shift than individual stocks. Prices for ETFs are also generally lower than buying stocks individually, which also makes them pretty appealing.

Trading fees are much lower for ETFs than stocks, even my Blue Chips. In fact, some banks, like Charles Schwab, allow ETF investors to buy and sell ETFs without charging any trading fees. Sites like Vanguard and Charles Schwab also have free tools to compare returns on ETFs, which lay out the returns over the past month, past year, and past 5 years. It makes it pretty easy to select the ETF that is the least risky. Just type in the ones you are looking at and use the tool to compare their returns. My husband and I started investing in ETFs about 3 years ago by using these tools and we’ve had consistent gains year over year. I tend to favor healthcare ETFs and he tends to favor technology based ETFs, since those are our sectors of work. ETFs also produce dividends which can be reinvested. (Hooray!)

Aim for your target and protect your investment

3. Reinvest All Dividends

ETFs and Blue Chip stocks pay dividends to their investors. Paying dividends means that each quarter we generally get a small payment (dividend) from the company’s profits. This dividend is deposited directly into the brokerage fund that we use to fund our investments. Generally, this dividend is way less than $1 per share, so it won’t make you rich. But it’s still free money that can be used for investing. And it adds up over the years. Think about getting free money to reinvest quarterly for 6 years like we have on Johnson & Johnson. It definitely adds up to additional shares over time.

Set up your brokerage account to automatically re-invest dividends, which is what we do. Generally when you buy an ETF or stock, there is a box to check to automatically reinvest dividends. Check it! I’ve never seen a dime from my dividends because we throw them right back into our Blue Chip and ETF investments. These dividends add up to free shares overtime, which only helps build your earning potential.

Investing in dividends can multiply your earnings! Four is always better than one!

4. Invest in Your Company’s ESPP

Most publicly traded companies offer their employees the ability to purchase the company’s stock at a discounted price through an Employee Stock Purchase Plan (ESPP). Mine allows me to buy company stock every 6 months at a discounted rate of 15%. So, if the company’s stock is trading at $100 per share, I can buy it for $85. (Free $15 per share for just buying ESPP!) Imagine if I bought 10 shares, I’d have spent $850 dollars but have a stock profile worth $1,000. Woo-hoo!

This is a no-brainer for me. so I’ve invested in my ESPP since the first period I was able. If I can make $15 per share just by buying through my company, I’m all in. And since I’m employed at the company I generally know when things are looking up or looking down, so my investments are pretty safe. My husband does the same with his company’s ESPP. We try to invest as much as we can.

Be aware that most ESPPs have a vetting (waiting) period that you must meet before you can sell your shares. I recently sold off a large amount of my ESPP so my husband I could participate in our first capital venture, which I will be posting about soon.

Be like this goat. Enjoy the view from the top.

5. Invest in Your Company’s 401k

401ks are the name for the retirement plan offered by most large companies. Since 401ks are run by the company or the company’s contracted money management firm, this is the only time I invest and let someone else manage my funds. I use this loosely since really, the money manager is using an algorithm to invest. The algorithm is based off of selections the employee makes when enrolling in the 401k plan. Generally these selections include: predicted retirement year and level of risk tolerance. Then the algorithm matches the risk and retirement year to some pre-selected mutual funds. Technically, I could do this myself, however, there’s the potential for free money (a favorite thing of mine!) here too.

So where’s the free money? A lot of companies will match up to 3% on an employee’s investment in a 401k plan. (An extra 3% of my investment matched by my company, why yes, I will take that!) This is another quick way to earn an additional 3% on an investment you are probably already making in your retirement. Even if your company doesn’t match, 401k investments are generally taken pre-tax, which makes them a great investment route.

Personally, I selected the most high-risk group for my 401k investments. This works for me since I have diversified into the other areas above. But no matter if you want to play it risk-adverse or risk-tolerant, start investing now!

 

 

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Step 1: Have the Money Conversation

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Step One

The first step in any path to success is to set a goal and be proud and vocal about it. Tell people your plan and have frank conversations about it.  Don’t be afraid to share your goals and hopes with other people. In this case, the goal will be how to use money and assets to create the life you want. If you want to retire early, tell people, especially those close to you. Or if you want to save up enough to take a year off and travel the world, tell people and say it out loud to yourself.  This money goal conversation may happen between you and a partner, you and your friends or family, or between you and yourself. But not matter who it’s between, this conversation needs to happen. This is Step One in anyone’s journey to saving for early retirement.

Having the conversation with those important to you, makes the journey more real. Saying it out loud makes your goal come to life and it allows people to ask you about it and hold you to it. Plus those most important to you ideally should support your goals and help propel you forward. (There’s no room for those who hate on your plans.) My husband has obviously been supportive and our friends have been equally supportive as well! They get very excited for us when they talk about our early retirement. Hopefully we can convince one of them to join us in it!

Maybe one of these ladies will join me in early retirement!

Did I Have this Conversation?

Oh yes, I did.  I was in my early twenties when I first started considering what I wanted my 30s and 40s to look like. At that time, I was single so I didn’t have to consult anyone else. I just had the conversation with myself. I grabbed a journal and just wrote down all the things I wanted to do one day and calculated how much money I’d need to do them. It was a very basic plan, but I didn’t have much debt so I figured everything on my list was obtainable.

Plus, what I wanted was really simple. I wanted a little brick house with a dog and to live in the city, where I could walk everywhere. I wanted to be able to travel to Australia, South Africa, and anywhere else my heart pleased without having to sweat about money. And I didn’t want to retire and then have to go back to work. I saw 70 year olds working the cash registers at Target and thought, I don’t want that to be me. It looked so depressing! Finally, I didn’t plan on getting married or having children so I didn’t budget for any of that. I figured I’d just take care of me.

Did My Financial Plans Ever Change?

Of course. In my twenties, I met the man I would someday marry. My plans about getting married changed. I wanted to spend the rest of my life with this guy (still do!). So my plan couldn’t just be my plan anymore. It had to be ours. So when we realized our relationship was serious, we (reluctantly!) decided it was time to have the money conversation.

And having the money conversation was not fun. I would categorize it as an uncomfortable conversation. No one enjoys it. I certainly did not. But it’s necessary because if a couple can’t talk about finances think of all the potential issues down the road. What if he’s never put money into a 401k? Maybe he lives month to month off credit cards. Perhaps his goals for his next decade or his retirement are much different than mine? It’s better to know these things up front. I love surprises, but not on the financial front.

Same shared goal! Climbing the money mountain together!

When Did I Have this Conversation with my Husband?

I can remember exactly where my husband and I were when we had this first conversation about finances. It’s easy to remember since we were both super uncomfortable having the conversation. Both of us came from families that didn’t talk about money, so this was new territory for us.

It was bright and sunny with blue skies and we were sitting in the pool at our apartment complex in Las Vegas. The topic wasn’t that specific to early retirement yet. It was more geared towards what we wanted in our 30’s and 40’s. My dreams hadn’t changed from when I was single. I wanted a small house in the city with a dog and the ability to travel.  My husband’s goals were similar to mine. Through this talk, we realized reducing debt would make it possible for us to eventually travel and have all the things we wanted in life.

I’ll be honest that I didn’t bring up the conversation about what we wanted our financials to look like in our 30s and 40s. My husband brought up the conversation, although back then he was my boyfriend of just over two years. We had lived together for several months and realized that in order to get all the things we wanted from life, pooling our money would be the best way to make that happen.

The downside was that he came into the relationship with way more debt than I did. Over $80,000 more to be exact. His ask from the conversation was simple. Let’s talk about all the things we want in life, then pool our money to pay down debt, and make those things happen. In other words, my money would go towards his debt and his would go towards paying down my much smaller debt. The dreams of travel, the house, and dog would have to be pushed back a bit. This did not excite me. Like most people, I want things quickly. Patience is not my best trait.

I always wanted to travel like this! Hello Old Town Stockholm!

What happened after the conversation?

Up until that. conversation, we’d never even discussed combining finances. Our savings, checking, and loan accounts were very much separate. And just because the conversation was over didn’t mean the decision of what to do with finances became easier. Honestly, I had to think things over for almost two weeks.

Imagine being asked to pay down a lot of debt that didn’t technically belong to you. It’s a big commitment with an element of risk. We weren’t married and I was in my mid-twenties and all I had was someone’s word that we’d pay down debt together and then have all the things we wanted in life. That’s a big leap of faith for anyone. I’ll admit that I was so not excited about pooling money and paying down someone else’s debt. I’m sure my husband wasn’t excited to have this money go towards my debt either. But in thinking it over, I agreed that our plan was worth it to have the life we wanted one day.

Sunny skies ahead!

So how did I come to this conclusion?

I asked questions and lots of them. We talked a lot about what paying down debt would mean for us. Believe me, once you have that first financial conversation, which is really hard, the next one will get easier. Then we found a plan that we were both comfortable with implementing.

I wasn’t comfortable just paying down debt with no reward. I wanted to have nice meals when we finished paying off a debt and I wanted us to take a nice vacation together when it was all paid down. My husband was on board with this and so we went for it.

Our financial plan probably doesn’t match up exactly with anyone else’s plan, and that’s okay. But everyone should have a plan that works for them.

This seems easy. Why doesn’t everyone do this?

Well, it’s not easy. It’s awkward and uncomfortable. Money is something a lot of people just don’t talk about for one reason or another. I never talked to anyone about my finances prior to having the conversation with my husband in the pool. It’s even harder to talk about money when you are talking about combining finances with someone who could seriously screw you over. Not that most people would, but when your spouse or boyfriend has all your financial information and access to your credit cards, it’s a possibility.

No one wants to talk about money and the sacrifices they may have to make in the short-term to get ahead later on. But do it and do it sooner rather than later. We had our conversation when we were in our mid-twenties and now we are in our mid-thirties and have no debt and can do the things we want. If we’d never had that conversation, who knows where we’d be right now.

Going to baseball games! An activity way more fun than talking about money.

What happened after the decisions were made?

Simply put, stick to the plan.  If the plan gets uncomfortable, talk about it. Communication is key for success in life. My husband and I wouldn’t be in the position we are in today without having had that long talk in the pool. When we pooled our money, we were very detailed on how we would do it, and we stuck to that plan. It took us almost 4 years for all of our debt to be gone, but when it was, that uncomfortable pool conversation felt like one of the best conversations we’d ever had.

 

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I’m Retiring Early and You Can Too!

Rockies 2015

I think it’s important before we get too far into how we are retiring early, that people understand my husband and I are derived from completely average backgrounds. I’m a normal 34 year old (soon to be 35!) who has no special circumstances that would allow me to retire early. My husband is 35 doesn’t have any magic income either. If  he and I can make this retirement plan happen, then  you can too. Below is proof that I am just as average and normal as any other person!

 

I Grew Up in a Small Town That Didn’t have much in terms of Opportunity

I grew up in a town of 13,000 people in Northeast Wisconsin. Milwaukee was the closest city with over 1 million people and that was 90 minutes away. Milwaukee was the only city in the state that had skyscrapers. The tallest building where I grew up was a factory that was about 6 stories tall. There wasn’t a mall in my hometown, not even a Walmart, and the nearest moderately sized airport was 45 miles away in Green Bay. (I am being very liberal with “moderately sized”.)

I’ll be honest that I absolutely 100% did not like living in the town where I grew up. It was small and there wasn’t much in terms of opportunity for careers. Everyone looked the same, worked the same jobs, drove the same cars. I knew at a young age I wanted to travel more than I wanted to work.  I didn’t want to be like everyone else. But, I knew no one in my hometown that wanted those same things, let alone did them. (If there are early retirees in my hometown, please feel free to let me know. I never heard of any and with how small that town is, I think I would have heard.) So when I was 19, I moved away for college and never looked back.

Bustling streets in my hometown! Even the Pizza Hut is gone now.

My Parents Were Not Rich

My parents both worked in local factories performing labor intensive jobs. They still do. Factory wages allowed my parents to live comfortably but they are far from rich. My parents are on par to retire just a few years before my husband and I do. They’ll be in their mid 60s when they retire, which is pretty normal. Factory jobs were the most common jobs in the town where I grew up.

Most people in my hometown didn’t have college degrees and nearly everyone’s parents worked factory jobs. My parents woke up early every morning to punch the clock by 6am. It was not the norm to be in management in my town. There was, and still is, a clear divide between factory workers and office workers. Of the two options, even as a small child, I wanted to be an office worker. Wearing fancy clothes and being in charge of the work being done sounded much more appealing. Ideally, I wanted to be my own boss and control my own schedule.

My Mom and I in Colorado

I Was the First Person in my Family to Graduate College

This is something I’m extremely proud about in terms of accomplishments. I was the very first person on my mom’s side to graduate college. I was third in-line on my dad’s side after my two slightly older cousins. Since I was the first person to attend and graduate college on my mom’s side, I went into college not knowing what to expect or how to take advantage of certain things like internships. I certainly didn’t understand anything related to college debt or what I’d have to pay off after I graduated. My parents did help me with college, but I ended up falling in love with a man who was over $100,000 in debt from college, so he had enough debt for us both 🙂

I left college like most people do, with some debt and very little idea on how to budget or live like an adult. When I got my first real job out of college all I could think about was how much money I’d have to spend. Turns out the real world is much more expense than I thought. FYI, my husband worked as musician and then as a help-desk technician, so we were not rolling in the dough.

I did not like paying bills, still don’t. Using money for travel and fun was not possible when I was in my mid-twenties. Yep, it was a bummer. I remember talking with my husband about how we’d ever have enough money to do the things we wanted to do in life. We were in our mid-twenties and hadn’t even thought about retirement at that point. But we came up with a plan to make our money work for us. He shared my dream of traveling around and being in control of our time and finances.

 

I Started as a Bedside RN and Paved my own way into the Corporate World

Nursing is a rewarding profession a lot of the time, but it’s not glamorous and nurses certainly don’t get rich working bedside. I worked at the bedside for several years when I worked in a hospital’s pediatric oncology unit and later in the pediatric emergency room. For five years, I missed Christmas with my family. I missed New Years Eve out with my husband. I missed many weekend activities. After a while, it got old. I didn’t want my life to be controlled by someone else’s schedule. (Are you sensing a theme here?)

I thought, hey, the front office people work normal hours and get all holiday and weekends off. Plus they make more money. So I decided that’s what I wanted to do. No one said to me, hey want to go work in administration? I asked to do it and talked to my managers,  joined committees, and networked like hell. And when I found an opportunity to move into healthcare compliance and have a normal 9 to 5 job, I took it. I had absolutely zero qualifications. However, I learned I was actually pretty decent at figuring out what people were doing wrong. (Also, the flexible 40 hour work week is amazing and I make way more money now than I did!)

Hard at work as a nurse!

I Never Received an Inheritance or Other Lump Sum

I have heard people say that my husband or I must have inherited money in order to retire early. The short answer here is that we have never received a giant lump sum of money. We’ve both lost family members during our 13 years together, which has been awful. But we’ve never profited from a loss or received a penny from an inheritance. I’d rather keep people alive than get money anyway! Within the past few years, we lost my grandma pictured below. I wear her ring everyday and would never sell it and I’d actually give money to have her back.

The money we have in our accounts is from our own hard work. It’s from paying off debt, buying properties, and investing in stocks and ETFs. How did I learn about investing? Books from the library, which we rented for free.

Grandma Barb and I on my wedding day in 2013

My Family did not Own Rental Properties

My husband and I didn’t have families that did any of the things that we currently do. Neither of our parents owned rental properties growing up. My parents own one house. It’s the one where I grew up and the one where they still live today. My husband and I certainly did not receive an instruction manual on how to make money or have people pay our bills through buying real estate. In fact, a lot of people, including friends, thought we were crazy. You only hear horror stories about being a landlord. Thankfully, we don’t listen well to others when we want to do something. That’s the great thing about making life your own adventure.

No one taught us any of the things we know today. We learned them all through trial and error. However, I would love to help guide others down this path. It’s very much worth the hard work to have control of your life. We are well on our way to being our own bosses and it’s pretty awesome! So join me, on being an ordinary early retiree like me and my husband!

One of the many things I learned to love as an adult! Yep, our parents didn’t do this either.
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Retirement Beginner’s Guide: Keeping on Track

race 2015

I have fallen off track.

It’s been nearly a month since I’ve written a post. And I’m disappointed in myself for that. When I started this blog, I told myself I’d never go longer than a week without creating a post and I have failed. Failed miserably. I wanted to be committed. And for the past 30 days, I haven’t been.

I wanted to help people find the success that my husband and I have found. It’s important for me to teach others how to make the most of their money and get on the track to early retirement. I didn’t have anyone to do that for me. Neither did my husband. Everything we currently know, we learned through trial and error. I’d love if people could skip some of the mistakes that we made and my goal is truly to help readers avoid some of these pitfalls. (Believe me, you’ll thank me later!)

 

Kiwi and my husband at the Mount Sherman trailhead. They are on track! I will get back there today!

How’d I get so far off track?

This last month, I fell into the rut of daily life as we prepared for some big changes in our little household. My husband started a new job. We are moving to a new city. I am starting remote work to keep my current job. We put bids in numerous offers on investment properties, and got absolutely none of them. (I’ll give you the full story on this in another post!) These were good offers too. One of them was even accepted. But it turns out the sellers were shady. The house had a flooding problem that hadn’t been addressed. So we just pulled out of that contract and are awaiting our earnest money to be returned to us. And to top it off, a close family member of mine is getting ready for a biopsy. Honestly, with everything going on, I felt exhausted by the time I got home from work. So I stopped writing. (By the way, I totally get that everything I just wrote is a first world problem!)

Turns out, you don’t realize how much you miss something until you stop doing it for a while. I am laying in my bed tonight when I should be sleeping. But this feels good. It feels like I’m contributing again. I could have fallen asleep instead of writing, but what’s the point in waiting even one more day. So I’m starting now.

What I’m doing right now.

My Promise going forward

You need a partner, whether it be a spouse or a good friend, to put you back on track. My husband reminded me why I set out to do with this blog.  He is very good at pushing me forward and he knows exactly how to motivate me.

And so despite how busy life gets, I’m back. I am promising to write and publish at least 2 blog posts per week that will teach you about how to retire early. In there, I’ll teach you some tricks I’ve learned along the way on how to make your money work for you, especially as it relates to travel.

So hopefully you’ll welcome me back with open arms and together we will walk the path to early retirement!

Ah, it feels good to be back!

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Get Great Mortgage Terms Just for Being You!

dog camp

If you want to own multiple properties, saving 30% to put down on the property isn’t easy. Good thing there are other options. Home Mortgages don’t have to be a burden. In fact, many mortgages are designed to make getting a home mortgage easier!

Here’s how I get some sweet mortgage terms just for being me!

I got it from my momma!

Section 184

You wouldn’t know it by looking at me, but I’m Native American. My mother is a mix of Polish, German, and Chippewa Indian. I can thank her for passing on her genes and her Chippewa blood line. Being Native American has it’s advantages. One of them is the Section 184 housing program, which helps Native Americans obtain home mortgages.

The Section 184 program allows Native Americans to buy 1-4 unit properties with only 3% down, regardless of income. It also slashes Private Mortgage Insurance (PMI) for these properties. For those not familiar with PMI, it is for for loans with loan-to-value (LTV) percentages in excess of 80%. For most loans, the buyer puts down more than 20% of the home’s value upon purchase. PMI is required when the buyer puts down less than 20%.

Section 184 loans only work in designated areas that are approved by the program. You can find the list of approved areas on their website. Luckily for my husband and I, all of Colorado is approved to participate. Be warned that not all banks will write Section 184 loans. But a simple Google search with show approved lenders.

As a side note, in case anyone is wondering where I got my ginger hair, my father is Scottish and English and a ginger, just like me! Fun fact, Scotland has more redheads than Ireland!

My Dad and Mom, their dogs, and my Blondie!

Based on Careers: Nurses

Yep, I am a nurse and still licensed in Colorado. Like police officers, firefighters, and EMTs, nurses get lumped in (rightfully!) with other life-saving professions . Theses professions are eligible for the Mortgages for Champions program. This program provides special loan terms for those who work in the medical field. The Mortgages for Champions program eliminates many out-of-pocket costs and a lot of hassle. With the Mortgages for Champions mortgage program, the following costs are eliminated, saving borrowers up to 3%: Loan Application Fee, the Loan Processing Fee, the Mortgage Underwriting Fee, and the Mortgage Commitment Fee.

Who couldn’t use an additional 3% savings on loan origination fees?

I’ve worn many hats, including a parrot hat and a nurse hat!

Here’s how a few of my friends could benefit:

I have a lot of friends and family who have teaching degrees. Teachers can benefit from the Teacher Next Door program. Moreover, The Teacher Next Door offers home buying grants available for teachers and other eligible public service professionals (again including nurses like me!),and also military and law enforcement.

You can also obtain a loan as a recent college grad and also as a Veteran.

Loans for everyone!

Where can I find more information on these loans?

Do like I did and search random facts about yourself to see if there are home loans that are available for someone with your background or career. I only found the Section 184 loan by googling “Home Loans for Native Americans”. Do the same. Google loans for “Single women”, “First Time Home Buyers”, or “Loans for Pilots”. There’s something for everybody. You don’t have to settle for a regular mortgage. Go see what’s out there! In fact, there are more possibilities than you can even imagine!

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What’s a Non-Conforming Home Loan?

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Most home buyers have only heard of the conventional 30 year fixed loan and the FHA loan. Many folks consider these types of loans their only options when purchasing a home. However, there’s a large inventory of non-conforming loans that exist out there. Below are a few examples of non-conforming loans and how we’ve used them to our advantage to buy homes after our short sale. These types of loans may help you out too!

The home that helped us learn about non-conforming loans.

What is a non-conforming home loan?

The loans most people use are conforming loans such as VA loans, FHA loans, and conventional loans, which all adhere to Fannie Mae and Freddie Mac guidelines. Fannie Mae and Freddie Mac are federal guidelines set by the government.

Think of a non-conforming loan as creative financing! A non-conforming mortgage is a home loan that does not adhere to the loan purchasing guidelines set by the Federal National Mortgage Association /Federal Home Loan Mortgage Corporation (Fannie Mae and Freddie Mac). In other words, these non-conforming loans fail to meet the government- set bank criteria that is necessary for funding. Some reasons that a non-conforming loan may be needed include:

  1. The loan amount is higher than the conforming loan limit. I’ll discuss this more in the Jumbo Loan Section below. But the short version is that people can only get loans for certain purchase amounts in each housing market. For example, maybe the maximum purchase price for that county is $600,000 but you want to buy a home for $680,000. Sometimes, buyers (especially those buying multi-unit properties) need to buy the home at a higher amount. A non-conforming loan allows the lender to provide this to the buyer.
  2. The buyer has a lack of sufficient credit or sub-par credit. This happened to us after our short sale. The short sale left a mark on our credit, pretty much saying we were risky buyers. To prevent another housing crash, the government put out strict requirements on who could get a mortgage. And those with a short-sale (like us!) weren’t on the list of great buyers. The only way we could get a loan was through someone who would take a chance on us based on our debt-to-income ratio. Thankfully, our debt to income ratio was pretty stellar!

Why do I need a non-conforming loan?

You might not. We needed to find one after our short sale. Like I said above, a non-conforming loan is great for people who have no credit, have went through a short-sale or other credit damaging event, or want to buy a property valued higher than the conforming limit. Think of these non-conforming loans as Plan B when your Plan A doesn’t work out.

Home before our short sale in Nevada.

Portfolio Loans

We used a portfolio loan to buy our four-plex in Denver. Portfolio loans are a risk for any bank who writes them. A portfolio loan is written in-house at some banks and often at credit unions. We got a portfolio loan through BBVA Compass back in 2014. They have a small section of their business dedicated specifically to writing portfolio loans.

For background, when we went to buy our four-plex, we were only 3 years out from our short sale. Since we were only 3 years out, we didn’t qualify for conventional loans or FHA loans yet. (Short sales don’t fall off your credit record until 4 years after closing!).

Credit unions are also a great place for obtaining a portfolio loan. Credit unions don’t have to adhere to the same criteria as those national banks because credit unions write their loans in-house. We used a portfolio loan from the credit union to buy our cabin, when were only one year out from our short sale. The credit union wrote us an in-house loan for 20% down. We couldn’t use our credit union who gave us the cabin loan either since didn’t have the 20 percent to put down on our four-plex.

Portfolio loans are essentially a risk for the bank. The credit unions and banks who write portfolio loans have to make sure they vet their borrowers heavily. These banks and credit unions understand that some buyers have had a financial hardship which they have overcome. Short-sales and foreclosures were pretty common between 2008 and 2012. Be prepared to demonstrate to the bank how you’ve overcome your financial issues and show the bank that you make money now. We had to write letters and provide multiple references and bank and income statements. It was a long process, but so worth it!

Yep, a non-conforming loan helped us get some nice rentals!

Jumbo Loans

Jumbo Loans are for what it sounds like. These are a type of non-conforming loan that do not meet the guidelines for conforming Loans because of their enormous loan size. The amount that qualifies for a jumbo loan varies by market. For example, the limit for a jumbo loan in Anchorage, Alaska is much different than the limit for a Jumbo Loan in Manhattan.

A simple internet search of “Jumbo Loan Limits” will provide information on the Jumbo limit home loan amount for your market or you can get basic information here. We qualified for a jumbo loan in Denver, because we needed a loan for over $450,000 for our four-plex. The limit to qualify for jumbo loan in Denver is now $458,000, but it wasn’t in 2014.

There’s even some loans that go into “Super Jumbo Loan” territory. These are generally for properties valued at over $1 million dollars.

The process for getting a Jumbo loan is very similar to getting a portfolio loan. Be prepared to show income statements and provide projected forecasts for rents (if it’s a multi-unit).

 

Hard Money Loans

These are completely different than the portfolio and Jumbo loans mentioned above. These hard money loans aren’t even offered through banks, but through individuals. Because of this, these hard money loans have stupid high interest rates, but can be good in a pinch. Think of hard-money loans as what loan sharks used to do back in the day. These lenders are generally individuals who have money to spare. They loan their money to individual investors at a high interest rate and over a shorter period of time.

These hard money loans can come in handy for a small amount for a down payment for a home. There’s tons of these lenders in each urban market. And it’s a great deal for the lender, who gets a hefty return on the amount they loan.

 

Jumbo loan…yep, I’d say so!

Is there any down-side to a using non-conforming loan?

Yep. Although there are some great perks associated with using a non-conforming loan, there are some downsides too. The biggest perk is that banks will finance your home purchase. (Hooray!) Down-sides of using a non-conforming loan include the following:

  1. Increased Interest Rates: Non-Conforming loans usually have higher interest rates than compared to Conforming Loans. This is due to the higher risks associated with non-conforming loans. We paid over 4% for our loan when most people were getting near 3.5%.
  2. Slow (like a turtle on sedatives speed), slow underwriting processes: Blame this on the extra documentation and paperwork needed to get an approval on non-conforming loans. The underwriting of non-conforming loans may be more detailed, which may require the borrower to produce more documentation. (We have a whole file of documents we provided!) This increases the time and cost needed to close a loan.
  3. Time Consuming Approvals: To lower their lending risk, the lender usually requires non-conforming loans to be approved by additional underwriters. This increases the time needed to close a loan. And underwriters constantly lose things, so be prepared to send the same document multiple times.
We’d need to do creative financing for this property too!

How do I find a lender in my area?

When we were going through the process, I searched on the internet for a list of non-conforming lenders. There wasn’t one then and there still isn’t one now. My suggestion, do what we did, and simply do a search for “non-conforming lenders in XXXX” and put your city in the “XXXX”. That’s how we found lenders in Denver. And then we literally called down the names we say listed on Google. Was it time-consuming? Yes. Did we get told no a lot? Yes. But did we get a non-conforming loan to buy our house? Yes!

Remember, no one will give you a loan unless you ask. Keep asking until you get a yes. Where there is a will, there is a way!

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Getting StartedPlanningRetirement

Surviving a Short Sale

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How Do I know Anything about Short Sales?

My husband and I lived in Las Vegas during the housing crash in the early 2000s. We were in our mid-twenties and we had just purchased our first home together. We purchased our house in Henderson, Nevada, just outside of Las Vegas in 2008. It was a 4 bedroom, 4 bath house with a pool, hot tub, and covered patio. Looking back, the house was way too big for us and our two dogs. We bought that house thinking that buying a big house in the suburbs was the way to go since that’s what everyone else did.

We bought our house in Henderson for $300,000 in 2008. Then the recession hit and the housing market crashed. By 2011 our Henderson home was only valued at $180,000. That same year, in 2011, my husband accepted a new job in Colorado, which forced us to move from Vegas. We couldn’t sell our house for anywhere near what we bought it at in 2008. And we didn’t have $120,000 to cover the difference between the values.

We painted our Henderson house and gave it lots of TLC!

What is a Short Sale?

Per Wikipedia, a short sale is, ” a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished.”

In simple terms, it means that the seller agrees to sell the house for lower than what they owe on the property. The buyer agrees to buy the house knowing there is outstanding debt. This outstanding debt can be an issue if the bank doesn’t agree to short sale the property since the seller and buyer would have to split the outstanding debt. In our case, the bank approved us to the do the short sale.

How did we get approved for a Short Sale?

We did a lot of reading online (tons!) and went with a real estate agent who was well-versed in short sales, which was not hard to find in Vegas. Our real estate agent helped walk us through getting all needed paperwork over to our bank. In our case, we had to write a letter explaining why we needed to sell our house which I wrote quickly one afternoon. It was pretty easy since we honestly couldn’t afford both our property in Henderson and a new property in Denver.

Side note: The bank still thought we made too much money and could afford both properties. They told us we needed to show more expenses so we ended up buying a new car to show debt. Ridiculous, but it got us approved for the short sales.  Also, he bank was slow (so slow) in getting anything done so closing on our short sale took an hour longer than expected.

Don’t Short Sales only happen to Irresponsible People?

Nope. It happens to every day people who don’t know a lot about the housing market. We were very uneducated about how to spot a housing bubble back in 2008. We just assumed the high housing prices would continue to climb forever. Looking back, there were a lot of clues that the bottom would drop out in Vegas. The housing prices shot up quickly over night, there was way more supply than demand, and prices were over-valued compared to similar markets. This was evident in other areas as well but we had to learn the hard way, like a lot of other people.

Here’s what two people with no knowledge about the housing market looked like in 2008…

How long does a short sale stay on your credit report?

Four years is how long a short sale affects your credit record. For us, our short sale closed in January 2012. It cleared off our credit in January 2016. Our credit score also dropped about 100 points after our short sale closed. Luckily, we had pretty good credit prior to the short sale so we could stand the drop. Even after the short sales was listed on our credit, we had no trouble buying our car, getting approved for credit cards, or renting an apartment.

Did we have to wait four years to buy again?

I’m happy to say we didn’t have to wait four years to buy again. I won’t say it was easy to get a loan but we were able to do it. We bought our cabin in 2013 and also our four-plex house in 2014. Each time we went to buy a home, we had to disclose our short sale to the bank giving us the loan. Some banks, especially national banks like Wells Fargo, wouldn’t even work with us once they heard about the short sale. National banks have to adhere to certain rules about writing loans.

Certain banks like credit unions can write loans in-house. Because these credit unions don’t have to adhere to the same rules as national banks, they can choose which loans to write. Credit unions were one of the few banks who would work with us. We bought our cabin by putting 20% down (the standard amount) with an in-house loan from a credit union. To buy our four-plex, we also used some interesting financing (putting only 10% down) for our four-plex. Watch for future articles on how we did that.

Do we regret doing the Short Sale?

No. It saved us from years of trying to pay for a house where we no longer lived and honestly couldn’t afford. The house we short-saled in Vegas still isn’t valued at the price we bought it for in 2008 so we would have been paying money on a loss for years by now. From this experience, we learned how to spot a housing bubble and how to avoid it in the future. We learned a great deal from our experience and we will not repeat it again in our adult lives.

 

 

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Should we buy a College Rental?

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We traveled back to visit our families Northeast Wisconsin for the holiday season. While we were there, we toured college properties in Oshkosh, Wisconsin. University of Wisconsin-Oshkosh is where my husband attended college so he is very familiar with the market.  University of Wisconsin-Oshkosh is a state-funded school known for its nursing and teaching degrees. The school’s student population has remained consistent year after year, making for a steady rental market.

www.uwosh.edu

A healthy rental market is a great starting reason to buy in a specific market. But there’s always other factors to consider. Here’s our list of pros and cons of buying, owning, and managing a college rental.

Pros

College Populations are Very Stable

This is true in most college areas, especially for state-funded schools. Generally these school campuses are pretty land-locked and running low on student housing. Finding out the school’s student population is very easy. A simple google search of the school will show the student population as well as the amount of on-campus housing. For example, on University of Wisconsin-Oshkosh’s homepage, it lists the student population as 14,000 and lists less than 8 student housing options. For those students that can’t live on campus, they generally want to live within walking distance of the campus. Living in close proximity is convenient and many college campuses lack parking. The closer to campus the rental, the better. We try to stay within a 6 block radius of the campus for maximum walk-ability.

Rentals are Always in Demand

Students need a place to live. Rentals give them a place to live. As long as there are students, the demand for housing will continue. Also, many students book their housing well in advance. This means students looking for the fall semester of 2017 will be signing leases around winter and spring of 2017. It allows for rentals to be booked well into the future and creates low vacancy rates.

Advertising Housing is Easy

Not only do the usual methods of Craigslist and the rental sign in the front yard work, but there’s also student associations to take advantage of to attract renters. Oshkosh has the Oshkosh Student Association (OSA) which posts student housing options for off-campus living. Posting on sites like this are free and make for easy advertisement. RentCollegePads.com is another great free posting site to use to attract college-age renters.

Students don’t need or want Luxury Living

Unlike the young urban professionals who rent our downtown properties in Denver, students aren’t concerned with granite counter tops, exposed brick, and hardwood floors. They are concerned with living in a place they can afford. Students still want a nice, clean place to live, but don’t necessarily have the means to pay for luxury. This is great for the landlord since upgrades won’t be needed and repairs can be done with rental grade materials.

Students will shovel snow, mow the lawn to save money

Again, students are generally budget conscious because they have to be that way. They won’t want to pay extra to have someone else shovel snow or mow their lawn. They’ll do it. In fact, most student leases require students to shovel snow and keep the lawn in shape. The landlord may provide a shovel and cheap lawn mower, but those are one-time costs. Monthly costs for the property owner are kept lower by not having to hire third parties to perform these types of tasks.

www.snowbrains.com

Cons

Students like to party

I’m not saying all students party hard. But I was in college once and I know the types of parties we threw at our place. The basement had a bar in it and was absolutely disgusting. But we did not care because the basement had blacked out windows and cops couldn’t drive by and see our parties. We cleaned the basement up only when we moved out and it took forever. I imagine this is what happens in a lot of college houses. Expect there to be some wear and tear to your property based on these types of events. Security deposits will generally cover these damages. And be prepared to have a cleaning crew come through when students move out.

This beer might actually be too expensive for college students….but you get the point!

Students are poor

College students have limited incomes. I sold plasma for money in college and worked low-paying part-time jobs. This is pretty consistent with most people I know who went to college. Everyone I knew had just enough money for rent, beer, and Ramen noodles. This means that students may have to borrow money to pay rent or worse yet, not be able to pay it. Yes, there is some protection in the lease for not paying rent, but that gets into messy territory, possibly leading to eviction. And no one wants to deal with that.

My college dinners!

Appreciation is Not Likely

Student housing isn’t going to be in the next “up and coming” area in any city. Families and young urban professionals don’t want to live in the same neighborhood as students because of the reasons listed above. Since these neighborhoods will remain a student housing area for the life of the college, it’s unlikely housing prices will appreciate much. For example, in Oshkosh, housing prices have remained the same for the past 10 years. The houses we looked at over Christmas break, had remained within $5000 of what they sold for in 2004.

If buying a property for appreciation is on your wishlist, these are not the types of properties to buy. These properties are strictly cash-flow properties. This means, their list price is low enough that rents will easy cover the mortgage plus some extra, generally a couple hundred bucks.

So will we invest in student housing?

That remains to be seen. Stay tuned to see if we do!

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CaribbeanCentral AmericaDestinationsEuropeInspirationMexicoPlan Like This GingerRetirement

Check out Our 2017 Travel List

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Our retirement search continues into 2017 and much like 2016, it continues to center on Central and South America. Here’s what’s on our radar for 2017:

Cozumel and Tulum, Mexico

This will be our first retirement trip for the New Year. Tulum and Cozumel are both scuba diving havens that are a quick flight from Denver. Southwest Airlines (my preferred airline due to my husband’s work points) flies from Denver into Cancun with only a short lay-over in Houston. From Cancun, it’s a quick 90 minute trip to both locations (by boat for Cozumel and by car for Tulum).

Tulum is located on Mexico’s mainland, right on the coast of the Caribbean sea. Tulum is home to some of the most well-preserved Mayan ruins in Central America and has a plethora of jungle trails to explore. It’s also undiscovered compared to Cancun and Cozumel. Only 10,000 residents currently call Tulum home, which makes it a place to get away from the hustle and bustle. Scuba diving is only 15 minutes by boat from shore, which means a quick trip for swimming with sharks and turtles.

Cozumel is an island off Mexico’s Caribbean coast. Ferries shuttle tourists and residents alike from Cancun to Cozumel multiple times throughout the day. Cozumel is a tourist mecca, which means it could be prime for rental properties. The island is full of large-scale hotels and there are numerous shops touting scuba diving, kite-boarding, booze cruises, and paddle-boarding tours. We worry this town may be too much of a tourist trap for us.

We plan to check out both Tulum and Cozumel on a 2017 trip to Mexico.

Beautiful Tulum coast
www.istockphoto.com

Granada and San Juan del Sur, Nicaragua

Nicaragua will be another two-city trip for us in 2017. We will fly into Managua, Nicaragua and drive to both Granada and San Juan del Sur. (Unfortunately Southwest doesn’t have any flights that go into Nicaragua, so we will be on another airline.)

Granada and San Juan del Sur are two very different cities located within driving distance of each other in the same country. Granada is laid-back local town located high in the mountains and San Juan del Sur is an ex-pat surfer’s paradise on the coast of the Pacific Ocean.

We want to try both and see if either one feels like our retirement home! After we loved our stay in the jungle in Nosara, Costa Rica, we decided to check out not just beach front locations, but those in the jungles and mountains as well! Hence, why we are checking out Granada. Once of the most exciting things about Granada is that it is located on a volcanic crater lake, Lake Apoyo. Nearby is Lake Nicaragua, both of which have plenty of scuba diving (one of our must-haves in retirement!). Lake Nicaragua even has fresh water sharks!

San Juan del Sur is supposedly what many beach towns in Costa Rica were over twenty years ago. Prices in San Juan del Sur are still very low, with houses that overlook the ocean selling for less than $100,000. Ex-pats are starting to discover this place, so there’s a few nice local amenities such as a microbrewery (yum, yum, yum!) Plus the rental market here sees some pretty solid business, especially during the American winter. That works out well for us since we plan to live in a warm place during the American summer and stay in the US to ski during winter.

The Golden Gate Bridge of San Juan del Sur! www.adventurouskate.com

Roatan, Honduras

This is the number one location on my scuba diving bucket list and one of the top five locations my husband and I want to explore for retirement. Roatan is an island about 90 miles off the coast of Honduras, right in the Caribbean Sea. It’s situated at a latitude that shelters it from most hurricanes and inclement weather. The weather is consistently warm throughout the year and the waters are constantly clear. Scuba diving with sharks, dolphins, and whale sharks (seasonally!) are all possible here. Plus, cost of living is still affordable.

Of the above locations, Roatan is the most difficult to reach. Currently, there are no direct flights from US cities, except Miami. Most flights connect from the US to Roatan through El Salvador or Costa Rica. The thought is that we probably won’t make it to Roatan until the end of 2017, maybe for our annual Thanksgiving trip!

Dolphins in Roatan www.royalcaribbean.com

Ecuador

Although it’s a long shot that we will get to Ecuador this year, I’m keeping it on the list. Ecuador remains one of our top locations to explore.  Ecuador is still incredibly cheap. A person can get a full-course dinner for less than $10 dollars and a stellar AirBnb for less than $30/night. Also, it’s home to mountain ranges, sea-side towns, Amazon jungles, and diverse flora and fauna. Ecuador is home to the Galapagos Islands after all 🙂

One of the places we’d most like to explore in Ecuador is Los Banos de Agua. If you’ve never heard of Los Banos de Agua, Ecuador, you’re missing out. Los Banos, which literally means “the baths”, is home to some of the most amazing clear springs in the world. Some are warm, some are cool, perfect for fitting whatever mood you are in that day. Los Banos is also an adventurer’s paradise, complete with giant tree swings over canyon floors! Yes, I want to try it!

Swinging over Banos Ecuador http://www.life-in-ecuador.com/casa-del-arbol.html

Sweden and Norway

And separate from our Retirement-search travels, we will be headed to Scandinavia! This was a present for my husband’s 35th birthday. He’s always wanted to see Radiohead live in concert. Since Radiohead are only touring in Europe next year, I bought us tickets to see Radiohead play at the Globe in Sweden. (Watch my next article on how I kept lodging and airfare under $2000 for a full two weeks!)

My husband has always wanted to kayak the fjords in Norway too. Since we will only be 1.5 hours by air, we will be heading over to Bergen, Norway to experience the fjords for ourselves. We can’t wait to see the cool, clear waters surrounded by gorgeous jaw-dropping mountains.

Finally, we are doing one of my bucket list items, which is to stay in the Ice Hotel in Sweden. The Ice Hotel will be open in summer for the first time ever in 2017, thanks to solar cooling. We will be spending one night sleeping in an igloo under reindeer pelts!

Ice Hotel Room
www.discover-the-world.co.uk

Happy New Year Everyone! I can’t wait to share more with you in 2017!

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Central AmericaDestinationsRetirement

The Number One Country on our Retirement List is…..

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Covered in Lush Jungle

There’s not many places more beautiful than the rain forest. It’s littered with pink, orange, and purple flowers and covered in a canopy and green and yellow leaves. Plus, the whole place smells amazing. It should be no surprise that many of the world’s most famous perfumes, like Chanel No. 5, come from scented plants in the rain forest. Chanel No. 5’s main ingredient of unique flowers is actually from this country’s rain forest!

Isn't this gorgeous?? And it smells great too!
Isn’t this gorgeous?? And it smells great too!

Alive with Beautiful Flora and Fauna

Over 10% of the world’s animals and plants live in this country. How amazing is that? And some of the animals I’ve never even heard of, much like this guy, in the picture below! How cute is he? This animal is called a Bizote and he is the country’s fire department mascot. I just wanted to cuddle him because he was so cute, like a fluffy anteater/raccoon combination. Other pretty animals in this country include howler monkeys (who roar like a lion), Capuchins, bright green iguanas, and also sea animals like devil rays and white tip sharks!

The Beautiful Bizote, the Fire Department's mascot. Or as my husband calls them, Simas!
The Beautiful Bizote, the Fire Department’s mascot. Or as my husband calls them, Simas!

Adventure Driven

Ziplining is one of the most famous activities in this country. We were fortunate enough to get to ride one of the longest, highest courses in the world. There’s not even platforms, it’s literally just flying from mountain to mountain, with one zipline extending 900 feet above the jungle floor! The view is amazing and better yet, the guides helped me experience it upside down!

Surfing and mountain biking are also popular! In fact, we spent most of our time here outside, just like the locals did. I may have been covered in sweat everyday, but it was so worth it to enjoy the pure adrenaline rush!

Getting ready to soar over the jungle canopy!
Getting ready to soar over the jungle canopy!

Full of Scuba Diving

Everyone knows the scuba bug has bitten me hard! I won’t live in a retirement location that doesn’t have it readily available. Although diving here was much colder than in the Caribbean, the underwater world was still spectacular. I swam with the largest school of fish I’d ever seen and witnessed devil rays jumping from the sea.

Tanks ready to dive with the devil rays!
Tanks ready to dive with the devil rays!

Packed with Friendly Locals

The people were incredibly welcoming. We met people who wanted to chat wherever we went, whether it was for a beer or to hang out on the beach. They didn’t all speak English but we still managed to communicate and have a good time.

Not only are the people wonderful, puppy dogs and horses roam the streets and beaches so it’s easy to find a friendly animal to pet. Dogs and cats walk right into the restaurants and beg for food. They are all plump and well-fed, which makes them even cuter.

Roadway friend!
Roadway friend!

A Great place to Practice Spanish

There’s no better way to learn than diving right in and trying it out. We had to order food, ask for directions, and request to participate in activities, like turtle viewing on the beach. And we had to do it in Spanish. And we did, pretty easily! We ordered our Thanksgiving meal from the counter below.

Where we bought our nightly dinner!
Where we bought our nightly dinner!

And that’s why we love Costa Rica!

We plan to go back next year and check out other areas. We didn’t get a house this time, but we found a jungle casita which we loved.  Costa Rica has a Pura Vida life style, which makes every day pure relaxation, fun, and bliss. And a side note, even the money was gorgeous. This time we hit up Nosara and Tamarindo.  I’ll do a write-up on what we loved about both them soon. Next time, Punta Arenas! If you have any suggestions on where to go in Costa Rica or want to share your experience there, please feel free to post a comment.

monkey-money

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