June | 2010 | Ryan S. Taylor

Archive for: June, 2010

The Truth About Home Ownership

Jun 22 2010 Published by ryanstaylor under Finance, Goals

Where did the idea that owning a home was part of the American Dream? It’s a myth. It always has been. During the bubble, when prices were skyrocketing, homeowners were in heaven. When the bubble popped, many of the same homeowners are in the lower rings of hell. They’re not really homeowners anymore. In fact, they never were. They were, and still are, in debt to the banks that own the mortgages. And many of them own more than their homes are worth. This is the American Dream?

The mainstream financial media have finally caught on to the myth of home ownership. The Wall Street Journal ran an article entitled, “Home Ownership in the U.S.: Rethinking Big Part of the American Dream.”¹

The author, David Wessell, states, “It’s time to have a serious conversation about the American approach to home ownership and mortgages. A system once celebrated for putting so many families into their own homes and for making mortgages so widely available has become, as one housing economist puts it, ‘a case study in failure.’” Failure is the operative word.

As usual, the federal government has its grubby paws all over this. From 1918 on up, presidents have been harping on the benefits of home ownership as a ticket to the vaunted “middle class”. “Herbert Hoover, Franklin Roosevelt, Bill Clinton and George W. Bush all talked as if owning a home was the only way to join the middle class. Not only did it promote social stability—recall Mr. Bush’s ‘ownership society’—and build well-maintained neighborhoods, home ownership became a hedge against inflation and a way to save for retirement. Until it didn’t.”

Ah yes, until it didn’t! Here are some of the myths:

Home prices always go up, until they fall.

A home is an investment. No, it’s a liability. It’s not an investment unless you are renting it out for income, or you are selling it at a profit.

You build equity in your home. Only if prices keep going up and you stay in your home long enough to make a sizable dent in your mortgage. And it’s still just a paper profit.

The government exacerbated the problem by creating the 15- and 30-year fixed rate mortgage. Before that, most mortgages were only 3-5 years with a balloon payment. In the 70s, the government began encouraging, or better yet, forcing, banks to lend to minorities. This led to the creation of subprime mortgages. During the Federal Reserve-induced boom, anyone with a pulse could get a sub-prime mortgage, driving housing prices through the proverbial roof. Millions of people who could not afford a home, bought one. Now they are stuck in an upside-down mortgage, or are in foreclosure.

I do not advocate owning a home. Millions of people still buy into the myth of ownership. They still think it is an investment. They still think that home prices will go up. They still think they’re building equity. I know too many people who are upside down in their mortgage; people who took our second and third mortgages to build add-ons or buy more stuff; people who bought vacation homes; people in foreclosure. People are frantically trying to refinance to remain in their homes. Banks will try to refinance since they do not want to foreclose and deal with reselling an asset. They only want to deal with debt. Unfortunately, while these people will stay in their McMansions, they will be in debt for the rest of their lives. Then there is the cost of owning a home: mortgage insurance, home owner’s insurance, home owners association fees (if applicable), utilities, maintenance, repairs, property taxes, security, and the list goes on. There’s a reason why Robert Kiyosaki called a home a liability.

Is there a good reason to buy a home? Maybe. But I can’t think of one. I’m not counting buying a home for rental income. That’s different. I’m talking about buying a home to live in. First off, do you want to live in the same home for the next 15-30 years? Can you find a city and neighborhood where you could live for that long? Unless you can pay cash for your house, know that you will be in debt for a good 15-30 years. Forget all about building equity and all that nonsense, do you want to be in debt for up to 30 years? Do you have a 10-20% down payment? Will your income and future income support the mortgage, insurance, maintenance and property taxes?

If all this sounds good to you, then plunk down the cash, sign the mortgage docs and move in! Or, you could just rent the same house! No maintenance, no property taxes, no down payment, no mortgage and freedom to move. But what about building equity? Use the cash you’re saving to invest in other things, like gold and silver!

My two big reasons for never owning a home personally are: I do not want 30 years of debt, and I want the freedom to move without the hassle of selling a home. Renting gives me that freedom. Should a new opportunity present itself, I can move quickly. Right now, I’m starting to look for a house to rent after years of living in apartments. I have nothing against apartment living, I rather like it. However, the city of Burbank is getting ready to pass a smoking ban that would prevent me from smoking my cigars on my patio. Hence, I’m being forced to move to a house. I don’t want to move out of Burbank since my office is here and I walk to work. Everyone has their priorities. What are your priorities? Does home ownership make sense to you? I urge you to consider renting and get out of the perpetual debt trap.

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Connecting with Colleagues

Jun 15 2010 Published by ryanstaylor under Goals, Motivation, Success

An article¹ in the latest issue of Bloomberg Businessweek discusses a new book about connecting with colleagues in the office. The book, Click: The Magic of Instant Connections ², talks about the ability to click with one another. You know when you click with someone you meet. There’s an instant connection, a common bond. The authors argues that your ability to click can help propel your career. Some people are more natural at clicking, and they are more like to succeed.

This insight is not new. However, the authors wanted to know how clicking occurs outside of a person’s natural ability. The authors claim that where your office is located can make a huge difference in your clicking ability. If you sit “where the action is” rather in the corner someplace, you have a greater ability to click with your colleagues. This also makes sense when you think about it. But it doesn’t really help if you’re somewhat of an introvert, like myself. I have a small corner office and I usually keep the door shut so I can do my work in peace. That said, I am not shut off from my colleagues and clients. A big part of my day is spent on the phone in conference calls and one-on-one conversations with colleagues and clients. My office is is Burbank but the majority of my clients are on the east coast. I’ve clicked with a number of them even though I sit no where near the “action.” I do have a number of close colleagues in Burbank that I talk with regularly and see almost everyday, but I’m not the type to go out and make friends with everyone I come in contact with.

I’m not knocking the book; I haven’t read it, only the author’s excerpt article in Bloomberg Businessweek. I’ll read the book as it sounds interesting. I feel it’s important to click with colleagues. It obviously makes working in an office much more pleasant. You don’t want to be the person everyone despises or talks behind their backs!

One final note: I hope the book addresses home workers. They are away from the action most of the time but are clicking in other ways: phone, instant messaging, social networking, Skype video calls, etc. There’s more than one way to click.

Author’s Note: All hyperlinks are now posted as footnotes for easier readability and less distraction. I’ll be writing about this later.

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A New Coat of Paint

Jun 05 2010 Published by ryanstaylor under Goals, Motivation, Success

My apartment building is getting a complete external makeover: new paint, new landscaping, new flooring, the works. The building is only 20 years old and its had the exterior painted at least a couple times in the 6 years I’ve lived here, but this is this time, the color is different and the common area is getting completely redone. It’s a much-deserved renovation and the building looks more modern now. This got me thinking that we all need a new coat of paint in our lives every now and then.

What part of your life needs a new coat of paint? Is it a touch-up job or a major undertaking?

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How to Sell a Smart Phone

Jun 02 2010 Published by ryanstaylor under Leisure, Success

I’m in the market for a new phone. I’m torn between the upcoming iPhone HD or 4g, or whatever they’re going to call it–I’ll know for sure on June 7–and the HTC Incredible, and maybe the HTC Evo 4g. The decision also means whether or not I switch from AT&T to Verizon or Sprint. If I choose to switch, I have to wait until November when m AT&T contract expires. I’m not happy with AT&T’s network, no surprise there, but November is a long ways off and the iPhone is very compelling. So which phone will I buy? I don’t know yet, but the way the phones are sold may sway me.

Walk into an Apple store and what do you see? Crowds for one, regardless of the day. You see tables filled with Apple products, all turned on and ready to be touched, fondled, played with, and lusted after. You can walk right up to a table filled with iPhones and begin using it as if you’d bought it. Of course, you can’t make a phone call but you can use everything else the phone has to offer. You can surf the net, browse photos, run apps, try out the keyboard, watch videos and listen to music. In essence, you can fully demo the phone before plunking down your cash. You can do the same with the iPad, the Macs, the iPods, and Apple TV.

I walk into Best Buy’s mobile phone section and what do I see: rows of phones segmented by carrier. Each phone is locked to a bulky security device so it’s difficult to handle normally, and the battery is removed so you don’t really know how heavy the phone is. Each phone is turned off and has a fake plastic screen showing what the home screen would look like if you could actually turn it on! You can’t demo it! You have no idea how it will work until you plunk down your cash. Sure, you can watch and read the reviews online but it’s not the same as holding the phone in your hands and playing around with it. You’ll be carrying this phone with you all the time for the next year or two. Surely you would want to actually use it a little bit before you bought it?

Apple knows how to sell a phone. Hell, it knows how to sell product, period! Customers can actually use their products before they buy! Once they experience the user interface, they realize how it can work for them. Hence, they plunk down $200 and buy one. I can read and watch all the reviews I want about the HTC Incredible or Sprint EVO but I can’t actually demo the phone if I go to Best Buy, Walmart or Costco. Now, I have not been to a Verizon, Sprint, or AT&T store so I don’t know if they have actual working demo phones. If they do, let me know. Hell, even walking by my local Radio Shack, I can see they have non-working phones. But, millions of people buy stuff everyday from the big-box retailers, the least they can do is provide working demos! It makes sense to me that if you really want to sell a lot of phones, do what Apple does, and let your potential customers use it! How hard is it to have every phone turned on? You don’t need phone service, and you don’t even need Wi-Fi, but if your store has internal Wi-Fi, it should be enabled to let customers surf the web.

Is it that hard, or are phone manufacturers afraid people will discover their phones suck before buying them? Who knows? If I was HTC, I’d make damn sure every stores that sells an Incredible or EVO had multiple phones on display, all turned on, all connected to the net, and all ready to be used by potential customers. Instead, my Best Buy store has the Incredible lumped with all the other Verizon phones stuck in the back row, turned off with a fake screen. Incredible.

Say what you want about Apple. They’re tied to a crappy carrier, though that may change. But they know how to sell and market their products. If the new iPhone is compelling, I know I’ll be able to decide for myself when it hits the Apple store. Then I’ll make the more difficult decision of staying with Apple and AT&T’s crappy network, or wait until November and switch to Verizon. Decisions decisions…

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