I think that I am finally approaching a point in my life where I can start saving and investing in the market. Instead of investing in something like the stock market, I want to start a ROTH IRA. I knew that this form of investing in mutual funds and national and international portfolios made sense; I just didn’t realize how much sense it actually made. Check it out:

1. You invest after-tax money. All of the money you withdraw is tax free. You never have to pay taxes on the interest!
2. You can pull the money out early if you need to without being taxed as long as you’ve had the account for five years.
3. This year, you can invest $4,000, and you have until tax day in April to consider your money a 2007 investment. In 2008, you can invest $5,000.
4. The IRAs and 401(k)s require you to start withdrawing money at age 70½. You’re never required to withdraw this money, so if you don’t need it, you can keep doing tax-free investing.
5. When you die, your heirs don’t have to pay ANY taxes on what they inherit from your Roth.

Seems like a logical savings plan to me!

Non-organic feed lots devise highly sophisticated system to make sure that every cow is getting her ration of food. Some heifers run the show, and those that aren’t the bosses wouldn’t get their fair share of corn according to the farmers.

Cows are just like us–not that we diet on corn and antibiotics, but that the leaders push everyone else around.

A boss doesn’t want to give you a raise. Big business doesn’t want to give you extra time off. You’ve heard the complaints about WalMart employees who try to form unions, gain health care, and get raises–can’t happen.

The funny thing about these farmers who notice the little guys getting pushed from the food is that small farmers don’t see how they’re getting pushed around, too. Their purchasers demand cheap meat. And so do we.

Todd and I established Aridni as a base for ideas on ethical money making. After all, we grew up next to one of the world’s largest superfund sites, an area so polluted that the acidic waters kill any animal that ventures near. The soils even dissolve a miner’s boots!

Sometimes I get so caught up in counting my net worth that I forget the worth I have the potential to bring. Saving ten bucks on a shirt made through child labor. Or buying twice as many eggs for half the price because the chickens were molted (ie starved for 10 days so they could produce 3 more months of eggs). Is it worth the addition to my net worth?

In Germany, everything is recycled–from your cardboard and candy wrappers to your dinner scraps. Figuring out the system is tough at first. But tying your shoes was tough at first now. Who think of that process any more?

What ethical choices are worth the nickels and dimes that you can add to your net worth? I guess I’m finding worth in different choices.

Today’s guest writer is Houston Neal who works with City Light Financial. He has a few basic ideas for expanding with your investment properties and the financial basics of getting started.

HELOC For Investment Property

There has never been a better time to be a homeowner. From continued performance in the housing market to the availability of online mortgage resources, you now have the upper hand and are in a good position to cash in on the value of your home.

Many homeowners and investors have taken advantage of market performance by taking out a home equity loan to finance other property investments. Specifically, a HELOC or home equity line of credit, provides a way to ‘cash in’ on the value of your home and it allows you to borrow money against home equity.

So why not put your home equity to work? With a home equity line of credit you can use the capital from your home to begin earning returns from two properties instead of one.

Understanding Equity

An important consideration for any homeowner in the home equity loan process, is to understand how to build equity in your home. Equity is simply the difference between your remaining mortgage balance and the value of your property. So, as your property value increases and your mortgage balance is reduced, your home equity increases.

Equity is a significant source of net worth for many homeowners and it continues to provide new sources of revenue. Housing prices have appreciated over the past years and the national market has seen considerable growth. Certainly some states have witnessed greater gains than others and an extreme example is the ongoing increase in California property value. The state jumped 27.18 percent in home value during the third quarter of 2003 alone while the national housing market reported 12.97 percent growth over the same period. Overall, home prices are still up and homeowners have an opportunity to use equity for other investments.

HELOC vs Home Equity Loan

A home equity line of credit is very similar to a home equity loan and shouldn’t be confused for the latter. The main difference between a heloc vs home equity loan or mortgage refinancing is the way you are able to access the line of credit. A home equity loan or closed-end home equity loan differs in that the loan is typically set for a fixed amount of time and a specific amount. Mortgage refinancing is similar and gives you the equity in a single check. A HELOC, on the other hand, provides you with an open-ended line of credit or a revolving line of credit. Similar to a credit card, you are able to borrow an amount whenever you need to as long as that amount does not go over the credit limit. A home equity line of credit only requires you to pay back the amount you borrowed and is a practical and flexible type of mortgage loan.

Overall, a HELOC is a great resource to utilize for investment opportunities and other financial ventures. It helps you establish what you can afford first and provides the opportunity to manage your investment by reducing the line of credit. It can open new sources of revenue and allows you the flexibility you need for investing in property.

An elderly man once told me that every person should hold a real estate license. “Sure,” I answered, feeling quite indifferent.

Several years later, I am here about to earn a real estate license. I finally understand what the man meant (or should have meant). Every intelligent person needs to take the time to understand real estate. Getting a real estate license is one method, though not the only strategy. Read books, blogs (hint hint), talk to people, and jump into the market yourself. A real estate license will teach you the rules; the license won’t teach you a thing about real estate investing.

The reason you need to know about real estate investing is that it usually comes through. Around 30 years ago, the federal government started tracking average home prices. Some areas have experienced a downfall here and there, though these spots are rare. Average home prices have yet to demonstrate a year-to-year decline.

People sell for money, and people buy with emotion. If you know nothing else about real estate, know this fact. Of course, you buy and sell just about everything with the same feelings. But a house holds far more impact than a candy bar that’ll disappear before the next stoplight, anyway. Every property is unique.

In a recent post, how to purchase a rental property, a frequent contributor, Danielle, reminded me of her father’s experience. The real estate agent pushed him to forgo the home inspection so that he wouldn’t miss the hot deal. He took her advice, bought the house, and found himself over his head with maintenance and structural problems. Some things can be fixed; many things can’t.

Know when an ugly property holds potential.

As you purchase properties, start with easy projects. Buy a property that needs a fresh coat of paint, new flooring, and a bit of scrubbing. I can’t stress this point enough: it’s easy to get yourself into more than you can handle, but you have to start simple. Ever see those property flipping shows? The people who always go over budget and over their estimated time are the people who haven’t been in the game for a while; they’re the people who can only envision the quick buck. Focus more on what you’re capable of doing.

As you purchase more properties, you can become more comfortable with bigger projects—fixing a porch, redoing drywall and roofs, updating the electrical. Sweat equity is the way you make money in this business; hiring subcontractors to do projects for you is a huge expense. The liability and workers’ comp insurance alone are out of most restoration budgets.

But is the expense worth it to hire these guys? I guess that’s something you have to calculate for yourself. We’ve hired subcontractors to dig sewer lines, put gas lines in, and install windows. Of course, we’ve also done all of those same projects ourselves once we gained the experience.

Know when an ugly property means you run.

If your first property has too many projects, you’ll get discouraged. You won’t want to be in the business any longer. Projects as simple as cleaning the bathroom sink take five times as long as they do in your own home… that’s why these properties are so cheap. I spent over eight hours scrubbing a claw bathtub once. If every project in the first house is of that magnitude, your “quick project” will be nothing but speedy. Months will roll by… and roll by… and roll by. You’ll start to wonder when you’ll ever be done. And worse, everyone will always be bitter and quick to yell.

I’d never advise someone to skip the home inspection unless that person has enough skill to be a home inspector himself. If you read plumbing handbooks and electrical code books for fun, then you might be on your way to going without the home inspector. We’ve hired a home inspector who did a very thorough job. But like I mentioned in my last post on real estate investing, you’ve got to crawl through the attic and wiggle through the crawlspace yourself, too. (Or have your partner do it! My next point…) My husband found a bit of mold growing in the depths of our crawlspace. Did the home inspector do a poor job? No—our discovery was above and beyond the requirements of his report. Should you perform your own thorough inspection? Absolutely.

Have a partner

As a girl sponsoring poetry contests, you can guess that I’m not one to slip into a one-foot deep crawlspace. Luckily, I have a partner who will. I’ve got someone to carry my 5 gallon bucket of plaster and open jammed windows. But more than anything, I have someone who equally invests himself in the work that interests me. The support system of having someone working with you in your nasty looking property often makes the difference between wanting to work and not wanting to work. A blasting radio while you paint isn’t enough.

The perfect partner has a different skill set than you. But more importantly, the partner has to be as equally committed. Buy those easy-to-do properties first. Your team will grow together before getting stressed out (or divorced!).

Seems like a lot of people are making money through becoming landlords. Thinking of taking the plunge yourself? Landlords have to put up with a lot of crap… yet I’m finding that the crap may very well be worth the effort if you’re smart and know how to work the numbers. I’ve also written several pieces about how to buy your first house and what to do when considering real estate investments that may be useful to you.

What to look for in a good deal

The best piece of real estate that you can buy follows the rule of tens:

Don’t put down more than 10% on the property

Don’t pay more than 10% interest

Buy at least 10% below the market price

1. Don’t put down more than 10% on the property
The coolest thing about being a landlord is that tenants pay off your property. The entire mortgage is tax deductible. If you don’t have a lot of cash sitting around, use leverage—let the bank’s money make you money. The less money you invest in the house, the more banks carry and tenants pay off.

2. Don’t pay more than 10% interest
Investment properties hold higher interest rates with banks because they’re a bigger risk. Investments don’t hold much sentimental value. If you’re in a pinch, banks know that you’d rather pay off something that matters to you personally—like your own home.

3. Buy at least 10% below the market price.
Rental homes don’t need to be the nicest on the block. And the misfortune of leasing your property is that it’ll probably be in worse shape than when you started. As I said in the point before, you take better care of things that you are emotionally attached to. Since tenants don’t own your property, they’re less likely to be as meticulous about the home’s care. Plus buying undervalue property means that when you sell at value, a few extra dollars will come your way.

When you’re ready to make an offer

The person with the highest offer isn’t necessarily the person who the owners want to sell to. Sellers are interested in the extras. A few of those brownie points that I have found helpful are:

Keep your offer simple

Offer a quick closing

Buy “as is”

1. Keep your offer simple
You can line up a lot of contingencies on a property purchase: home inspection, mold inspection, lead-based paint inspection, bank financing… The list goes on and on. Owners get nervous when you start checking off that list of contingencies. They just want to sell the property! Keep the number of check points smaller; it equals a quicker sale in the minds of an owner

2. Offer a quick closing
Sometimes, a closing can drag on forever. It can take months. Owners have already detached themselves from the home, and they’re ready to move on. They want the money. You know that phrase: a hen in the hand is worth two in the bush? Why’d that line come about? Because we’d rather have less now than wait for more later. People are impatient, which is great for you. Offer less, but offer it now.

3. Buy “as is”
Owners want to sell. But what if the house is filled with problems? The electrical needs some work, the carpet is stained, the windows in the back bedroom are cracked from baseball games. Say you’ll take the house as is! (With a lower price, of course) Be sure to have a home inspector evaluate the severity of the home’s faults if you’re not well experienced. The last thing a seller wants to think about is making all those minor repairs.