Yakezie Carnival, Part 2

On Sunday, I posted part 1 of my Yakezie Carnival listing. However, because of the copious amounts of entries, I decided to run a part 2 to accommodate all the other entries and their terrific posts. So here is my part 2, enjoy:

• Personal Finance by the Book with Stretch the Life of Your Mower by Giving Him a Name, what a concept!
• Free from Broke with Costs in Buying a Home Besides Your Mortgage; I need to read this post myself.
• Rainy Day Saver with Your Financial Metamorphosis: Change is Possible; a refreshing look at how anyone can become financially free.
• Christian Common Sense with 5 Reasons to Get Netflix and Cut the Cable; I personally love Netflix and would whole-heartedly agree.
• Money Crush with Being Able to Afford Something vs. Making Payments — “Can I Afford It?” from a Different Point of View; Great topic.
• Eventual Millionaire with What I did with a $10,000 Refund; I could think of lot’s of things!
• Financial Samurai with Why are President Obama and the Democrats Against Charity?
• Personal Finance Firewall with How to Cut Costs at the Dentist; This would be a very helpful article if you are paying out of pocket!
• Money Funk with 8 Simple Steps to Having an Organized Life; Who doesn’t want to be organized?
• Car Insurance Comparison with How to Find the Best Auto Insurance Agent; I use esurance and so don’t personally have one of these myself, but I’m sure there are plenty of others who could benefit from these tips.
• Simple Life in France with The Slippery Smell of Clean and Its Costs
• Money Help for Christians with How to Safely Store Passwords; I need to read this, STAT!
• Car Negotiation Coach with 10 Expensive Car Negotiating Mistakes
• Money Reasons with Crucifying Goldman Sachs, Start of The Witch Hunts; I hear this is quite a tantalizing read.
• The Millionaire Nurse Blog with Your Emergency Fund: Let’s Fine Tune That Baby; Another must read.
• Free From Broke with We’re Buying a House!; I wish I could say the same . Congrats, though!

Whew! I think that covers everyone who submitted an article for the May 2nd Carnival. Enjoy your Wednesday!

Last week my in-laws were visiting from a neighboring state. They had a fantastic time and we enjoyed hanging out with them for the few days they were in town. While at dinner one night, my mother-in-law described how they love vacationing in Hawaii and staying at their timeshare. They were basically trying to convince us to take a vacation with them. But then, my slightly tipsy mother-in-law blurted out how amazed she is that they own property on a Hawaiian island. At that moment, my mind started turning. Does she really own that apartment at the resort they call their “timeshare?” How does owning a timeshare compare with owning actual property? Is this a good investment?

While probing my mother-in-law’s (MIL’s) husband, he began detailing what they pay annually. Basically, it sounded like they pay for maintenance fees and property taxes. I did some quick and dirty research, I really need to come up with my own research terminology lingo, and found that many timeshare companies do give out deeds to the properties they sell. However, the property doesn’t appreciate, so owning one as an investment property is a moot point. Here are just a few pros to owning one (in my opinion!):

• PRO: For frequent travelers: It saves a lot on hotel costs. When you own a timeshare, because you pay maintenance and property taxes, you usually don’t pay for the week or two that are yours.
• PRO: Transfer weeks for cruises: This is something my step-mother does. (I have a very large extended family!) She and my dad have cruised the Mediterranean for free by giving up their Florida timeshare for a cruise instead. They’ve also been known to take cruises to the Caribbean and the Mexican Riviera this way.
• PRO: Build up weeks for a longer vacation: For people who can’t get away as frequently as their timeshare is available, sometimes you can save up those weeks and use them together for a longer vacation.
• PRO: Tax right off. Because you actually own the property, I’m guessing it can be used as a tax right off. Right? Does anyone know about this for sure?

Now for the cons. In my case, because I have two family members who own timeshare units, I could just borrow their week(s) when I want. They’ve already offered multiple times, so owning one myself may be a waste of income. Based on my biased opinion, here is my list:

• CON: Why pay the maintenance and taxes when you could rent a week from someone else? There are a few sites where timeshare owners “rent” out their weeks for much less than a hotel. You also may find that someone close to you, a relative or friend, may own one and give your their unused week somewhere.
• CON: Since the property doesn’t appreciate, you won’t make any money on it when you sell it. And that’s IF you can sell it. Not surprisingly, they are hard sells.
• CON: Many people purchase timeshares thinking it will make them travel more often. This isn’t always the case. Circumstances can change and make it very difficult to visit your lovely timeshare property.
• CON: Pushy sales people. A couple of years ago while on vacation, my husband and I went on a timeshare tour. Mainly because we wanted some of the “free” goodies they were giving out as an incentive to sit through their spiel. We had an awful experience because they had over-booked their tour. We ended up with some of the freebies, but it really wasn’t worth our time.

So are timeshares worth it? In my opinion, no. There are plenty of travel deals out there that cost way less over the long run. Since timeshares don’t appreciate, the owner ends up not profiting on their purchase and may in fact lose money if they are unable to sell an unused property. Quick math based on information from MIL’s husband: $3,500 per year maintenance + $800 property tax x 10 years = $43,000 for the cost of owning a timeshare for 10 years. Yuck!

Anyone have personal experience with a timeshare, good or bad? What about a contrasting opinion? Did I leave some important details out? I love comments!

Town Home Triplex (illustration credit: Pardee Homes)

For some reason, Southern California has some of the most over priced homes on the market. I don’t know if it’s the temperate weather that makes home builders think people will pay top dollar for cookie-cutter homes, or LA’s obsession with living the illusion. And for some reason unbeknown to me, people are still paying for these ridiculously priced homes. For instance, take a new development that is being built in Ventura County, not far from Los  Angeles county. These new homes are currently selling for $626,000! (Some of them are listed for $686,000 up to $725,000). The homes appear humongous from the exterior street view. However, there is a bit of a charade going on, for once you are inside, the home is still large, but only about 1/3 of the size you thought it was.  How does this happen? Well, the builders are really building triplex town homes, in addition to stand alone homes.

What’s equally distressing is that the town homes are butted up against each other. So new home buyers aren’t paying for the land so much as they are paying for the structure, and only 1/3 of the structure to be exact. I tried doing some research on the exact size of the lot, but given that this is such a new development, many online websites aren’t stating the lot size. The homes, on the other hand, range in size from 1,800 sq. ft. to 3,100 sq. ft. This new community has also walled itself off and in turn reduced the once gorgeous view of the valley below. So for over $600k, the price doesn’t include a view.

I guess what I am most flabbergasted by is the fact that there are people who can afford to purchase these homes even in our down turned economy. I did a breakdown of the costs associated with these homes, minus any HOA of homeowners association fees, which I’m sure exist. Here is what it would cost to purchase one of these homes:

• Cost of home: $626,000 (The most recent one sold in the community)
• 20% down payment: $125,200 (Whoa! I guess there are a few people out there with mega-savings accounts!)
• Mortgage: $500,800
• Monthly mortgage payment on a 5.7% APR 30-year loan: $2,875 (This isn’t too bad.)
• Annual Property tax (1.5% of the cost of the home): $9,390 (An additional $782 a month if added to the mortgage payments.)

I didn’t factor in homeowners insurance or HOA, which I’m guessing would add a few hundred dollars more a month. The total monthly payment, with everything included, would be somewhere in the ballpark of high $3,000 – $4,000 a month. The biggest kicker is that 20% down. I’m assuming that if one were to put only 10% down, they wouldn’t be able to qualify for the lowest APR and they would have to also include in private mortgage insurance or take on a second loan. The monthly payments would be even more.

Based on Michael Bluejay’s “How Much Home Can You Afford” calculator, you would have to be making $13,000 a month to comfortably afford a $626,000 home. This calculator also confirmed my predictions on what the monthly cost would be, it calculated $3,940 a month. Obviously, there are people who do make this annual salary of $156,000 a year. I guess I shouldn’t be that astonished by this. Heck, I choose to live in the second most expensive city in the nation.

Correction: The triplex town homes are selling in the low $400k’s, but the houses  in the same community are selling for $626,000 to low $700,000’s.

For the past 10 months, my husband and I have been working to pay down our debt, increase our credit scores, and save for a down payment. We live in the second most expensive city in the United States, so houses are a wee bit expensive as well. Earlier this year, housing prices dipped to their lowest price in about 10 years. This, along with really low interest rates,  is what prompted us to get serious about purchasing a house.

As I have been keeping track of foreclosed homes in our neighborhood using RedFin, I have noticed a startling trend: Prices are creeping up! And we’re not quite ready. Of course, houses are still much more affordable than they were, say, two years ago. However, this trend is making me reevaluate the price of home we can afford. My original estimate of what I felt we could comfortably afford was about $250,000. I am now realizing that there are very few, if any, homes available in this price range.

Therefore, my new ballpark figure, which is slightly higher than I originally wanted to settle for, will be closer to $300,000. In many states, 300K gets someone a terrific, large, newer home. However, in my case, I’ll be lucky to purchase a 1,000 square foot fixer upper. This new, higher price also means that to save 20% for a down payment,  I will have to save MORE money than what I originally had planned. This probably also means I won’t be putting 20% down on a house, it will most likely be closer to 10%. After using some mortgage calculators, here is the breakdown of what our payments would be:

• Down payment of $30,000 on $300,000 home (or 10% down)
• Monthly mortgage payment $1500 on a 5.25% 30-year home loan
• 1.5% property tax divided by 12  months $375 per month
• Homeowners insurance monthly payment approx. $125
• Total monthly payment: $2000 (only $200 more a month than what we are currently paying for our rental house)

This monthly figure is about $100 more than what I had actually hoped our monthly mortgage would be, and this is based on a very low interest rate. Of course we could always opt for a 7/1 ARM (which is not my favorite option), or perhaps find a major fixer upper for less than $300,000. What I’m finding though, is that the major fixer uppers don’t qualify for a home loan, they are cash-only sales.

Our original goal was to get into a house by summer of 2010. This goal still seems feasible providing the housing market doesn’t spike up or interest rates increase greatly within the next 8 months. Of course, if this does happen before we are able to purchase a house, we could always go with plan B; purchase land, then build on it later. Of course there is always plan C; change our lifestyle and go with an alternative housing idea.

Walmart, a Big Box Store

I don’t really enjoy shopping. I have to admit, I really despise it. However, it’s a necessity due to the fact that I don’t grow my own food or manufacture my own clothes or beauty products. This weekend, my husband and I decided to stock up on paper goods and beauty products, or HBA products, like shampoo, lotion, and shaving cream. The best price we can find on these items in our area is none other than Walmart, one of my least favorite stores for many reasons.

We purchase in bulk when we visit Walmart so we don’t have to frequent the store any more than absolutely necessary, this also saves us money in the long run.  So, this weekend we stocked up, piled our cart high, and pushed our way through a very crowded Walmart. There are only two Walmarts within a 5 mile radius of our home. One Walmart is in a slightly better neighborhood than the other. Unfortunately, we were closer to the less desirable neighborhood Walmart and decided we didn’t want to spend the time or gas money driving clear across the valley to the other one.

Parking is a nightmare and a little nightmarish at the less desirable Walmart. We always park far away, we don’t mind walking and prefer to keep our car door-ding free. We parked on the side of the store, as far away from other, beat up vehicles as possible. We walked in and were reminded immediately why we avoid this particular Walmart. It was beyond crowded, people everywhere. My husband also observed that this store was laid out terribly, which made it appear more crowded than a more open floor plan would. We headed directly for the HBA section. Many of the products were out of stock, to my disappointment. It looked like someone had cleared out some of the isles, or the store hadn’t had time to restock the empty merchandise. There were few brands of mascara left to choose from. I don’t wear much make-up, but mascara is a necessity on light-blond eyelashes. I ended up settling for a brand that I don’t usually wear.

Hair color is another item I like purchasing at Walmart. I only color my hair twice a year and keep it close to my natural color. But again, the brand I usually purchase was out of stock. I opted for a well-known brand, but one I haven’t used in years. Hopefully it won’t make a mess out of my hair. The last thing I need on my ultra-fine hair is something that will turn it into straw!

Shampoo, conditioner and paper goods were in adequate supply. We purchased enough toilet paper, Kleenex, and paper towels to last us 5 to 6 months. We also stock piled the deodorant and shaving cream. Thankfully we have a large linen closet to store all of our paper goods and HBA products.  We checked out spending a little more than usual, but the amount we purchased should keep us out of Walmart for at least 5 months.