Hunting Happiness

By opening a new Citi account and funding it with $1000, you can receive $150 free. Then for the first year, you can get TRIPLE ThankYou Points each month for 1 year for your debit card purchases and checking relationship with linked products like: Direct Deposit, CDs, Savings, Money Market, Online Bill Pay, et cetera.

To qualify, you must make your $1,000 deposit by 7/31/08. Also, within 60 days of account opening, you must (1) enroll your new checking account in ThankYou® Network and (2) complete one direct deposit per month, two electronic bill payments or five signature debit card transactions and continue for three consecutive months

Not a bad deal. Visit Citi’s website or call 1-866-422-0334 and mention code: CYJK.

I know what you’re thinking — is this guy nuts? Well, no. I am referring to the market for REO/bank-owned/foreclosed properties in our neck of the woods. Such properties that are selling “as-is” but are priced well are receiving multiple offers within hours of listing.

One such example happened recently. A foreclosure in a neighborhood desirable with first time home buyers appeared in the MLS around 2PM. Our real estate investment company made an offer by 8PM and it was competing with two other offers received in that same six hour time period. We eventually submitted a best and final offer and the bank accepted another offer.

We don’t know the terms of the winning offer. We are not to the point yet of wanting to make cash offers and it is possible the other offer was cash. We also came up to a few thousand below the asking price while the winner may have offered full price. We figure this property would be bought for $100-110K, require $10K of work, and be worth $140-150K.

We didn’t bid more aggressively because of some issues timing cash flow and availability of the repair team. We also have taken the philosophy that we’d rather risk missing a deal (and an opportunity to make money) than risk rushing into a potential disaster (and losing money, perhaps a lot).

The bottom line is that while the market for homes at a normal level of repair and price remains very soft, the market for good investor deals is extremely competitive.

As the rates of foreclosures in many areas continue to increase, there is a dark side that is less often talked about.  Obviously families being evicted are affected, but there are effects beyond that.

Foreclosed properties often eventually sell at auction or via the traditional MLS but at seriously discounted rates.  In our part of the country, such a property is usually sold as-is (without any warranties) and for 25-50% off the normal per square foot price.  If you are trying to sell your home normally, potential buyers or their real estate agents will run “comps”, looking to see what the average selling price per square foot recently has been.  If there are one or more foreclosures or short sales, this can dramatically lower the per square foot price.  While it is not an apples to apples fair comparison, in a lousy market the buyer has more leverage.

Also, if a property is bank-owned it often falls into disrepair.  These eyesores can drag down the overall curb appeal of the neighborhood, which is especially critical in tough markets.  If it gets bad enough, vacant properties can bring vermin, both of the four-legged and the two-legged human kind.  Some communities and cities spend tax payer dollars to perform basic upkeep on unoccupied properties, and can put liens on the properties.  These liens have to be satisfied before the property can be bought.  The problem is the owner of the vacant property doesn’t feel any immediate pain, and the penalty ends up being close to what they would have paid to perform the upkeep themselves.  Essentially they are getting a free loan from the taxpayers.  But more and more cities and communities are looking to the legislature for assistance.  California’s senate recently passed a bill allowing cities to penalize vacant property owners (typically banks) up to $1,000 per day per property for failing to keep it up.  As a tax paying citizen, I completely agree with this.  As a real estate investor, I agree even more.  If banks have to pay to keep properties up, or face stiff penalties, they will be even more motivated to quickly unload properties at a discount.

A while back, I wrote a post about what living frugally meant and mentioned some debate between me and SomeGal about getting a more fun car. Prices on the most likely contender (used) have been dropping like rocks due to its relatively poor fuel economy and the rising gasoline prices. Well, even so, I have decided to stick with my current car.

My current vehicle is about two years old and is paid off. I average around 35mpg which is quite good given my non-freeway commute, and it takes regular unleaded. I filled up today and had my first $50 fill-up with 87 octane right at $4 per gallon.

SomeGal also drives a very fuel efficient vehicle that is paid off. We both traded in very fuel inefficient (under 20mpg real driving) vehicles and are pleased we did. It dropped our monthly gas budget from over $400 a month down to around $100-150, depending on road trips, et cetera.

Consumer Reports ran an interesting article analyzing if it makes sense to actively trade in a gas hog for a hybrid or some other efficient vehicle. The cost of depreciation combined with acquiring a “new” vehicle led them to determine that it did not make sense. Obviously, if you would be in the market for a vehicle anyway as SomeGal and I were, it definitely makes sense to consider fuel efficiency in your purchasing decision.

Madam X over at MyOpenWallet has a post running about basic emergency preparedness and mention has been made of portable generators. I have been considering for some time adding a whole-house natural gas generator and looking at options. Consumer Reports did a ratings a while back and the Kohler 12 KW and Coleman 9.7 KW models came out on top by a wide margin. They both cost around $4K, while the two much lower ranking models were closer to $2K. One of these was the Guardian, which is carried by DIY stores like Lowe’s or Home Depot. The Kohler and Coleman stationary units also blew away all the portables in the rankings.

They have an automatic transfer switch (ATS) and typically their own mini breaker panel. For breakers/circuits that you want on during a power failure, you move them from your main breaker panel to this one. If the power fails, the generator senses this and automatically comes on. Once it is up to speed, the ATS switches over the circuits in the mini panel from mains power to the generator. So you will have a short outage, typically under 10 seconds, even on protected circuits. When the mains power returns, the generator stops and the ATS cuts back over.

The obvious advantage is that everything is automated. If you are not home, you won’t lose the freezer or fridge (assuming you put those on the generator). Also, even if you are home, if it happens in the middle of the night you don’t have to do anything.  If we got a generator, I would also make sure it was sized large enough to accommodate our central heating and cooling system.  We’ve had several extended power failures where the house got hot enough to be very uncomfortable.

I found some online resources for sizing the generator.  The furnace is natural gas so it would only need the blower (about 800W).  The A/C requires substantially more, probably around 5,000W.  I figure another 2,000 W for lights, refrigerator, garage door opener, and miscellaneous other needs.  So we are right around 8 KW, probably 9-10 KW just to be safe.

Something else to consider is making sure your propane or natural gas infrastructure can adequately supply the generator up to its stated capacity.  If your natural gas feed is 1/2″, you may not be able to handle the larger home generators.  I am still investigating this aspect.

Two to four thousand dollars is a lot of money.  But it would buy quite a lot of peace of mind.  If we were in a home we were sure to stay in, I think it would be almost 100% a given.

SomeGal and I took a vacation last week and had a horrendous car rental experience.  We arrived after midnight and there were two counters open and seven or eight in line in front of us.  An hour later, we finally got up to the counter and then had another 10-20 minutes despite having a reservation.  There was a manager on duty who seemed quite busy surfing the internet despite the obvious slow moving line.   He finally opened a station himself just in time for us to be served by one of the other slow-moving representatives.

Maybe I’m just getting old and grouchy, but it sure seems like customer service has gone down the tubes recently.  Is it possible that all the focus on bottom line price is causing a general shift away from any semblance of good service?

CNN has an interesting article about myths that purport to but don’t actually save gas.  Much of it is “borrowed” from this Consumer Reports article.

1. Filling up in the morning.  The theory is that the metering mechanism in pumps is calibrated for around 70F and temperatures in the morning have been lower overnight and therefore the gas is likely to be more dense.  CR says there is very little temperature variance at the nozzle and therefore no measurable gain in filling up in the morning.
2. Air conditioning (or the non-use thereof).  CR talks about this and Myth Busters has also tested it.  Logic suggest that low driving speeds may see some MPG benefit to rolling down the windows and turning off the A/C.  As speed increases, wind resistance increases exponentially and logically the windows being down would eventually increase drag to offset the MPG savings of having the A/C off.  If you believe CR the differences are so minor that it’s not worth debating over, and since A/C will be more comfortable it’s the clear choice.
3. Dirty Air filters kill MPG.  Apparently modern cars have computers that are smart enough to detect decreased air flow and adjust the air-fuel mixture appropriately.  The net effect may be less horsepower, but not less MPG.
4. Tire pressure.  All sources agree that tire underinflation definitely hurts MPG.  Some of the hyper-miler online forums advocate raising tire pressure above the manufacturer’s maximum to the tires’ sidewall maximum, or even higher.  This would raise MPG slightly due to less tire on the road.  Having less tire on the road will also affect braking and handling performance, and could conceivably throw off ABS and vehicle stability control mechanisms.   A better solution would be to switch to low rolling resistance tires which can save 1-2 MPG according to CR.

With gas prices high, it is tempting to go to extremes to conserve gas.  However, it is important to keep in mind that some savers are really just myths, and that some techniques could even be dangerous.

Money Under Thirty is hosting the Carnival of Personal Finance this week and was kind enough to include some of my posts on Real Estate.

Borders has a decent credit card offer through VISA.  It includes a free $20 card and 1,000 free points.  Purchases of $1 at it and affiliated stores earns 3 points, gas and groceries earns 2, and everything else earns 1.  There is no limit on points earned.

It is hard to read or listen to any news without gloomy proclamations that prices are spiraling out of control on essential items like gas and groceries. Stories abound telling of families unable to buy sufficient groceries, or having to cut back hugely on driving.

Rather than look at prices for essentials, I thought it would be interesting to look at our monthly spend on such items. So I made a custom report in the ever-handy Quicken to compare our actual spend on gas and groceries for the past 30 days versus the previous twelve 30-day periods. I wasn’t sure what to expect but the results are telling. Our average over the past 12 months is $580.15. In the past 30 days it was $588.01, a virtual tie. I recently posted that SomeGal and I are not really feeling any effects of the possible recession we are in. The graph below backs this up. We have certainly not actively attempted to spend less on groceries or do less driving. So either prices have not really gone up that much, or we have subliminally cut back, or some other unrelated trend has caused us to drive and eat less. I originally was going to include the dining out category because it is conceivable that we have recently eaten out more and therefore bought fewer groceries. Unfortunately I could not include it because the dining category varies wildly from month to month due to normal activity and things like treating family for holidays or birthdays and rewarding employees. I also do not change the allocation of dining out when we are on vacation (where it tends to spike, obviously).