Monday, January 28, 2013

Dog Vacay #Review

If you haven't noticed, the sharing economy is kind of turning into a big deal. The classic example is AirBnb, a service which lets travelers stay at someone's home instead of at a hotel. The idea is to make better use of resources that already exist. Why build another hotel when there are already vacant rooms in existing homes? If everything goes to plan, the visitor gets a nicer room and/or better pricing, and the host gets to earn some money off an unused room. Or, you can go the altruistic route and use CouchSurfing which doesn't charge anyone money. I haven't used AirBnB or CouchSurfing yet, but someday I would like to (I need to actually travel first).

Another big area in the sharing economy is transportation. Think about all the cars on the roads with a single driver... all headed in the same direction. Then think about all the homes with cars sitting in the driveway. There MUST be a better way to allocate these resources. The utopian view is a society with less cars, generating less pollution, decreasing road congestion, and yet remaining convenient. Companies like Getaround, Uber, and SideCar are each tackling this space. I would LOVE to use these services, but alas, I don't live in a big city where these services operate.

If you haven't figured it out by now, this is a space I've been watching. I love that it's a way to better allocate resources, and for someone to generate a little bit of fun money on the side.

Enter DogVacay.

What is DogVacay?
DogVacay is a website, which they call a community, that helps connect dog owners to care for each other's pets. Instead of leaving your dog at the vet's or a boarding house, your dog can stay at someone else's home. Think "AirBnb for pets".

How Does It Work?
You visit and search for homes in your area. When you select one, you'll see a profile like mine pictured above. You can check their calendar, see where they're located, send a message, and make a reservation. The host gets to choose the rate and accept/decline reservations. I must admit though, that I'm horrible about keeping up on my busy/free days.

How Much Does It Cost?
It's free to join and list your place (here's my listing). The only cost to the customer is the amount the host charges ($20/day/pet for me). Then DogVacay charges the host 15% of the income. 15% is pretty reasonable when you consider Apple charges their developers 30%.

Great, But Does It Actually Work?
Yes. After 3 almost-bookings (like I said, I'm bad at keeping my availability up-to-date) we recently had our first booking. We had 2 dogs visit us for the day while the owners went off on a trip to Portland. It was so much fun! Vinnie and the dogs played pretty much all day. They ran around the house and chased each other in the backyard a bunch. A few days later DogVacay sent us a check in the mail. Easy. We were a little nervous at first about opening up our home to strange animals, but it turned out to be a great experience.

A Few Other Observations

  • I'm glad that we got to ease into it by booking for only a single day. I think I could do multiple days now.
  • We noticed after looking through some other listings that you don't have to own a pet to host other pets. Actually, that might even be better. (?)
  • You might be tempted to try and save 15% by making side deals, but I really think it makes sense to play within the online system. First, you get their insurance coverage and customer support. Second, actually having bookings helps you rank higher in their results, helping you earn more.
  • I got an email from DogVacay requesting I email some photos to the owners (by simply replying to the email). I did it, but don't actually know if they got it. Perhaps this feature works better over multiple days. (?)
  • The message system works pretty well. In each of my interactions, it started with a message before making a reservation. I think people using this service are looking for someone they can trust.
  • I like profiles with lots of pictures and a medium-length description. I don't know if that correlates to a better host, but that's who I tend to be attracted to. It also helps to be the only one in your city (like I am).
  • Since I don't travel much and, again, I'm the only one in my city. I haven't left Vinnie with anyone yet, but if someone joined near-by, I would definitely give it a go.

Should you try it? Definitely. Setting up a profile is easy and hosting dogs is fun. Depending on where you live, don't expect to be inundated with requests, but you will get a few. In general, I support the sharing economy. I think it's a great way to use resources you already own and provide value back to society.

Monday, January 21, 2013

Is Being Debt Free Financial Insanity?

I saw a tweet recently by Robert Kiyosaki and wanted to comment on it. Here's the tweet:
My first reaction: If being debt free is financial insanity, what about someone who has BAD debt? OK. OK. That isn't fair. I realize he only had 140 characters and wanted to grab people's attention. If he had more than 140 characters, here's what I think he would say.

Of course BAD debt is... well... bad. We should strive as much as possible to get out of BAD debt. That's a given. Yes, doing that is much harder than saying it, but this isn't even the purpose of his tweet.

Kiyosaki is claiming that if you want to build wealth, being debt free won't do it (it's insane). I get the impression this is a dig towards Dave Ramsey who really pushes for people to become debt free.

In the end, balance is key.

First, you must spend less than you earn to build any sort of wealth. BUT, you can't spend so little that you're miserable. Start here: experiment by changing one of your regular habits: make coffee at home, switch to a smaller cable package, or ride your bike to work.

Second, you should strive to pay off BAD debt. BUT, you don't want to neglect having an emergency fund and potentially put yourself in a worse situation when life happens. Start here: tackle high interest credit cards. Then roll that payment to other debt. If you have a lot of debt, it's OK if it takes a few years to pay it all off.

Third, you should invest in assets and leverage those assets with debt. BUT, you should not leverage yourself to the point that you can't make payments when life happens and the assets don't produce as much as you want. Start here: stock market index funds are great because you buy companies that have GOOD debt (excluding a handful of tech stocks that have no debt), and are managing that debt well. You're personally debt free, and take advantage of organizations that have GOOD debt.

Will that build wealth super fast? No, but it'll work over the time of your career. The best way to speed up the process is to figure out how to improve the world and start doing that. That might be in the form of a side business, or increased responsibilities at your primary job. Either way, if you make the world better, you will be rewarded. Instead of increasing your standard of living, you can buy more assets and build wealth faster.

Being debt free isn't insane. It's a safe and proven path to building wealth. Though, it does take longer than leveraging yourself and it may mean you never get to drive fancy cars or go on exotic vacations.

Using GOOD debt within reason, also builds wealth. Though it does mean you'll have to actively manage something/someone and is riskier if you don't have the skills/time to do a good job.

What we do

Our current strategy is to spend less than we earn and use the extra money to get out of all our consumer debt (including student loans) as soon as possible. Then we'll focus on buying assets that are leveraged with debt (I like actively managing our assets). Then we'll let those assets pay their own debt down. Eventually, it'll make sense to pay off our GOOD debt too. That point in time will be when our assets, if they were debt free, will be able to sustain our standard of living. Technically, we won't be maximizing our potential wealth, but we're trying to find a balance between building wealth fast and risk.

I had a friend make a comment on Facebook I thought worth sharing:
"I think it would be helpful to specify that Good debt is debt that allows you to make more money by utilizing it's power in situations where you would others wise have no power to purchase said capital. Like buying a multi-unit property, where you don't have the capital to purchase it outright but make the Good debt work for you!"


Wednesday, January 16, 2013

2013 Goals: Focus!

As promised, here are my 2013 goals for the year. I actually started writing this post 3 times earlier and just couldn't focus my thoughts.  If this is any indicator, focusing this year is going to be a challenge. It's going to involve a lot of no's, but I said "no" today to something, am feeling good about it, and so I'm riding that success. 4th time's the charm!

1. Read all Bible reading plan Assignments
Told you this one would be back. I made it a 3rd of the way last year and want to make it another 3rd this year. I have a strategy I know works and I'm going to keep at it.

By the way, I'm using the Bible iPhone app by YouVersion (iTunes). In addition to a bunch of translations it also has a bunch of reading plans to choose from.

2. Increase my income this year
Last year I focused on the expenses side of our budget. This year I want to focus on the income side. This is a lot tougher of a goal and the reason why I'm choosing to focus only on this. In previous years, I've wanted this, but did a shot gun approach with a little bit of everything. I grew a lot, learned a lot, added a little bit of value, and now it's time to focus and add a lot more value.

Jessi informed me recently that I need to clarify what I mean when I say, "I want to increase my income." It's not a "I want more money" statement. Instead, it's the external measurement of something much more important: Value being provided by either making or doing something people want. How do you measure "value provided"? In the business world it's often by the amount people are willing to pay you. So if you provide more value, you will get paid more for it. It may not be instant, but it will happen over time.

So when I say, "I want to increase my income". I'm saying, "I want to add more value to the world, and my measurement of success is the amount of income I earn." I don't want to coast through 2013. Instead, I want to purposefully challenge my personal status quo and make a big impact on the lives around me. With that in mind, here are a my areas of focus (Yes, 3 is "focusing" for me):

  • I want to double down on my contributions for HP by looking for places to contribute even more. This is the place I believe I can make the biggest impact for the world. That might mean expanding my current role or finding a new one. I've come to a point in the last few months that I'm ready to take on more and contribute at a higher level for HP. Thankfully, the people within HP are awesome at helping someone like me grow.
  • Monetize the Furlo Bros Tech Podcast. I've thought a lot about this, and I think I finally have a way to monetize that I, and our listeners, would like. I don't have any details to share now, especially since I only recently suggested it to my brother, but I think it'll be good if we can pull it off. We're also addressing the feedback we get most: "I like listening, but it's too long". Starting the beginning of this year we're breaking the full show into shorter clips. I've finally automated the post processing to a point that adding additional clips is reasonable on my time. Hopefully this will help the podcast appeal to a lot more people. The point of monetizing isn't really to increase my income, but rather to further justify spending a few hours hanging out with my brother and buy a couple gadgets to review. :)
  • Jessi and I spend a lot of time working with tenants, church members, and friends on their finances, and we believe there is a broader opportunity to help people improve their financial situation. I'm not talking about complex investment strategies (though that is fun to talk about), but rather foundational strategies like spending less than you earn, and getting out of credit card debt. Lots of blogs and programs already exist, but for many reasons people aren't taking advantage of them. We think we have a way to effectively reach part of that "unreached" segment of the population. It's still in the very early stages, but we definitely think there's something of value we can provide. This is totally a spare-time project that might be a significant contributor to our income in the future. Right now we're focused on making a valuable product.

So that's it. Hopefully you can see I'm trying to be more focused, and also a lot more in-depth than compared to previous years. There are smaller goals, like paying off another student loan and flossing daily, but those goals will take care of themselves since it's all automated or part of my normal routine.

Friday, January 11, 2013

Personal Finance Reporting

I wanted to dive a little deeper into one of my 2012 goals: Spending Less in 2012 than in 2011. I spent some time putting this together and I'd like to share it.

First, I track everything using I link all my accounts (except one loan company who doesn't want to play nice). Mint automatically pulls all my transactions in and adds labels. I find the labels are correct 90% of the time, so I go through my transactions twice a month just to make sure they're right. Mint also has a budget section which I use for all of our expected expenses. That way if something is wrong, I'll know about it (for example, once the garbage company didn't charge me and I got it resolved before it was a messy issue). I also get alerts when there's high spending or I get a fee (which seems to happen too often) so I can take care of it right away.

If you're not signed up for Mint, stop reading and sign up. Knowing how you're spending your money is a powerful way (the only way?) to get control of your finances. For most people, that will be enough.

And then there are people like me.

Once a month I take all the aggregated spending information from Mint and put it into my own spreadsheet. Personally, I use something similar to what Robert Kiyosaki uses in his game Cash Flow. It just makes intuitive sense to me. Here's what one of the character sheets looks like:

It's pretty easy. Income on top, expenses on the bottom. Subtract the 2 to get your monthly cash flow. Then you list your Assets and Liabilities. The difference between those 2 is your net worth. Hopefully that one goes up over time. Clearly, this example is very simplified.

I use Mint's labels for my expenses (plus a couple of my own labels I made). I also have 2 columns for using cash (well... checking/debit) and credit. Here's what it looks like (Yes, I changed every single number - I wish it actually looked like this).

I also have a statement from the previous year so I can compare how I did. I also have one that gives me year-to-date totals so I can see how I'm tracking.

Of course, Jessi sees this and freaks out. So I made a summary chart for her. Yes, I purposely removed the axis, but the lines are real. The faded lines are 2011. As you'll see, at the end of 2011, our cumulative net income dropped below the zero line. We didn't spend less than we earned. Hence my goal to spend less in 2012.

Jessi can look at this and instantly know how we did. A couple interesting points (in my opinion):

  • Our spending is pretty low, except for a few months where we have BIG expenses. May was the Prius, October was the Jackson property. The only reason September was high was because of inspections and appraisals.
  • There are a couple times during the year when our income peaks. One is during tax time (we spent so much last year, it was unusually high in March this year. Another is at the end when HP is doling out bonuses. The spike in August is when I sold the truck.
  • Had we not bought the Jackson property, we would have stayed above zero the entire year. We'll see if we can make that happen this year. :)
  • I love charts like this. I could stare at it for hours. I need to make more of these this year!

So that's how I do the reporting on our personal finances. That's how I know, to the penny, what the differences in spending are from year to year. You don't need to get this detailed - Mint already does a lot - but you sure learn a lot if you get this detailed.

Wednesday, January 09, 2013

2012 Goals Review

It's time to look back at my previous year's goals and see how I did. Here's what I said originally, and now let's dive in.

My mantra for the year was to "work diligently, wait patiently". I did work diligently most of the time, but I must admit I got impatient near the end of the year on some of these goals.

1. Read all Bible reading plan assignments
Done! I used the Bible app on my iPhone and stayed on top of it. Basically, I would listen to an assignment when driving or washing dishes. It worked great and I really liked it. I'm going to keep this going for the next 2 years and get completely through the Bible.

2. Manage 1 other property
Done! I already wrote about the property we bought in October. This wasn't exactly what I had in mind when I set this goal, but I'll take the win.

3. Decide the fate of Univera: Fly or Die
Done... but not the result I wanted. My criteria for staying on this was to find > 10 new customers. I built a sweet online tool (in my opinion) and started promoting. I gained about 1,000 visitors a month, but never got any takers. I also tried calling leads, but also got no takers. I might share more of my experience later, we'll see... I still love Univera's products and will be a customer for life. I'll also remain an associate if someone expresses interest in the business, but I won't be actively working on it like I did last year.

4. Spend less money than last year
So... We didn't buy multiple Jeeps, but we did buy a Prius. Technically we spent $1,855 more this year than last year, but I would argue the money was better spent. For example, we paid an extra $4,449 towards student loans, we also spent money buying another property & car (which halved our monthly fuel costs, saving $1,010 last year). Some areas we saved money were $1,392 on travel and $12,314 on our Columbus property by refinancing and only doing one major project.

If you're like me, you're shocked by these super high numbers too... it's amazing what 12 months of spending adds up to! In the end, we also increased our income (despite what happened with Univera) and ended the year with more savings than when we started. In all, I'm happy with the direction.

5. Run 10 miles in <= 100 minutes
Done! It was glorious. I did it in 95 minutes. Jessi and I don't have any plans for running a half marathon this year, but I'll keep running on occasion.

6. Transition Bob the Autographer fully online
I set aside time to do this, but never got around to it. I suppose it's safe to say it actually wasn't too important to me. Ultimately, it was fun and I'm ready to fully move on from this. You'll learn more about why I didn't do this when I share my 2013 goals.

7. Teach Vinnie 3 new skills
I wanted Vinnie to learn 3 tricks: "Come", "Stay" and "Lay down". Vinnie is awesome at "come": 100% inside and about 80% outside. I would like him to "stay" longer than he does, but I'm happy with it for now. I never really got him to master the whole "lay down" trick, but I did teach him to spin in a circle and go outside to the bathroom on command.

Overall, I'm happy with my 2012 accomplishments. I did a whole bunch and feel like I'm in a better place today because I reached these goals. Stay tuned for my 2013 goals.

Friday, January 04, 2013

Is It Worth Buying A Manufactured Home?

In December Jessi and I considered buying a manufactured home to live in. It would be a temporary home that would enable us to shovel more cash at our student loans. The price was listed at $30,000 which meant we could potentially save a bunch of money due to small payments. We ultimately decided not to pursue that specific deal, but I learned a lot about manufactured homes in the process.

What Is A Manufactured Home?
A picture is worth a thousand words. Here's a classic one:

A couple things to note in this picture:

  • See the vertical paneling around the bottom? That's called a skirt. Almost all of them have this. Sometimes it's brick, but 99% of the time it's wood. That's the crawl space. It's like having an above-ground pool.
  • Notice how close all the other homes are? This is also fairly typical. Often developers will build a bunch inside a "park" and then people rent spaces (think of it as an HOA - more on this later). I know this picture is in a park because of the address: "H35". That's the unit number.
  • They tend be smaller in size, though they do make "double wides" which are two halves put together (see the top picture).
  • See the other home to the right? Notice they're adding a section. Yep, they can be expanded just like any other home.
  • Not shown here is a carport or garage. Garages aren't as common, but they can be added.
  • Finally, the shape is often a rectangle. That's because they need to fit on a truck trailer and cruise down the highway. Perhaps you've passed one of those "wide loads" before.

Manufactured homes are also called mobile homes, but I would argue that after 1976, they stopped being mobile homes. You see, in 1976 manufactured homes became HUD-approved. That means they have to be built with the same standard quality as stick-built homes. Today, manufactured homes are only mobile in the sense that they're moved after they're constructed. Before 1976, they were the cheap trailers often depicted in movies. That "cheap" stigma still remains. But today, sitting inside of one, you wouldn't be able to tell that it's manufactured. I'll go deeper into this in the Appreciation section.

Can you tell this is a modular home?

Yeah, me neither. Here's a picture of one being put together:

Unlike manufactured homes, these are designed to look like a classic stick-built home. A foundation is built in place, and the the modules of the building are set on top. These have all the benefits of manufactured homes (more later), and few of the detractors... Except price, these actually tend to be the most expensive of all the options.

Stick-Built Homes
This is the type of house most of us live in. These homes are built on-site. Another thousand words:

So, manufactured homes are like boxed-up versions of stick-built homes. They have all the components of a regular home, but tend to be smaller and have a fairly standard look. Modular homes are the tweaner: They're made to look like stick-built homes, but are constructed off-site at a manufacturing plant.

Do Manufactured Homes Appreciate In Value?
Since we were planning on buying short-term, I actually cared about this question (normally I don't care since I focus on cash-flow and holding long-term). It turns out the answer is complicated.

As I stated earlier, homes built after 1976 have to follow all the same standards as stick-built homes. So the initial quality is just as good, if not better than stick built homes. Here are some of the benefits:

Benefits Of A Manufactured Home
  • The buildings are manufactured inside, in a moisture/temperature/machine controlled environment. This often produces better quality - also a perk of modular homes.
  • They're designed to travel at 55mph down a freeway. So all the braces are stronger and everything is tightly integrated.
  • When buying new, you can literally design you're home by walking through examples and piecing together all the components.
  • Plus, when buying new, you get a warrantee where the manufacturer will fix anything and everything. From what I learned, this is a pretty awesome perk.
Wow! That's sounds great! So what's up with the "complicated" answer and the pervasive thought that they're not as high quality?

Manufactured Homes Are Cheaper
Part of the stigma is that the homes are cheaper. Surely something that costs $30,000 can't be as high quality as something that costs $300,000. Maybe...

  • First, the buildings are smaller. Less material = less cost.
  • They're made assembly-style. You don't have to hire an appraiser, or draw up plans. The only added cost is transportation. Standardization = less cost.
  • If you buy in a park, you're not buying land. No land = less cost.

Here's the bottom line: IF you buy a manufactured home after 1976, it was at least in compliance when it was built. If you're like Jessi and I, having a smaller place is preferred. IF the dwelling was maintained properly, it will appreciate in value along with the rest of the market. If homes go up 5%, your manufactured home will go up 5% too. But 5% of $30K is only $1,500 which seems like nothing compared to $15,000 for the $300K home.

Furthermore, people tend to buy manufactured homes because they can't afford stick-built homes. As a result, they also tend to not be able to afford proper maintenance once the warrantee ends. So, IF you don't maintain the dwelling, the value will depreciate, fast. Stick-built fixer-upper homes can get away with selling at a decent price because of the land - it appreciates because no more is being made. As Lex Luther would say, "It's all about the land, Superman."

Can You Get a Home Loan For Manufactured Homes?
IF you buy the land in addition to a manufactured home, you can get a home loan. If you're buying in a park, you cannot. Instead, you need to get something similar to a car loan. It'll feel like qualifying for a home loan, but it'll be a different type of loan. Not all lenders deal with manufactured loans. We had to find someone special for our deal.

Obviously, banks like lending on new manufactured homes, and become more strict with used homes. If it's new, you can get a 20-year loan. As the home gets older, the length of the loan gets shorter - all the way down to 5 years. After the dwelling is older than 20 years old, the bank will not lend on it (the place we looked at, turned 21 this January).

So the price might be cheap, but the terms of the loan might make it such that you're still paying a hefty payment (though you will pay it off faster, so that's nice).

Manufactured Parks
I specifically wanted to call out manufactured parks since most of the ones I see are in parks. Think of these parks as closed-gate communities with an HOA (home owners association) you pay rent to. The difference is that it's a single owner of the land you're paying to. That rent includes a space and could also include water, garbage, and lawn care. Lots of times they also have age restrictions, like 55+ communities, and pet restrictions. In the Corvallis-Albany area rents are in the $400 to $500 range, with regular annual increases. If you're going to have a loan the entire time living there, it might actually cost you more cash each month relative to just renting.

Final Thoughts
My goal was to buy a cheap place, live in it while we paid off our student loans and then re-sell it to re-coup my equity. So over the entire time, my only cost would be interest, taxes and utilities. Once I learned about the park rent and that they're difficult to re-sell because of the financing barriers, I became less interested. Especially since we don't have a ton of cash right now since it's going towards student loans, so I can't afford to pay $30K up front.

If we were going to stay for the long-term (30+ years) and I had the cash, I would definitely look into buying one. Ideally, I'd like to find something that includes land for a garden and our dog. I mean, if I'm going to be paying an extra $400, it might as well be towards a mortgage. Then, I wouldn't care about appreciation/depreciation because that's not the reason why I bought it.