FOMO in L.A.

635632533085433148-1786151281_FOMO.imgopt1000x70.jpg

FOMO in Los Angeles

There are a lot of people in L.A. who basically tie their entire hopes and dreams in life to what mortgage they’ve either qualified or been denied for.

Though it is stupid simple to get a mortgage when you have the appropriate down and income – regardless of your credit – many are fearing they are missing out on a great property investment boom of some sort in Los Angeles.

This is called FOMO (or fear of missing out), is based on manipulated emotions and gets significantly worse when we refuse to do math.

FACTS:

The median home price in West Adams is $638,000

The median home price in Los Angeles is $603,900.

The median home price in Inglewood is $441,600

Lets take the median for L.A. for a second.

First – the 5 year holding costs on a $603,900 house with 4% down:

PMI – $476/month

Insurance – $67/month

Taxes – $554/month

Maintenance, repairs and upgrades – $1,509/month going into a MRU fund

Principal and Interest (mostly interest) – $2,918/month

Costs: $5,523/month

– mortgage tax deduction ($554)

= $4969 total holding costs each month.

$4969 x 60 months = $298,140 over 5 years.

$298,140 IS THE PRICE OF AN ENTIRE HOUSE IN OTHER AREAS.

AND ALL YOU DID WAS PAY INTO INTEREST OVER 5 YEARS WITH LITTLE PRINCIPAL.

What about initial out-of-pocket costs on a $603,900 house?

1) $21,137 downpayment

2) $18,117 closing costs

= $39,254 total ($18,117 of which you will never get back)

Opportunity cost on a $39,254 out of pocket sum:

$39,254 invested by itself with no other additions would have grown to $62,361 over 5 years.  In other words, applying the out-of-pocket costs to a house alone cost you over $20k over 5 years.

Credit card interest:

The average L.A. household with credit card debt owes $11,042.

If over the course of owning a home, half of your expenses from the Maintenance, repairs and upgrades portion of your real estate expenses are placed on a credit card instead, that balance can balloon to $20,096 per household.

Average credit card interest rate is 15.07%.

This means that a household would pay an additional $8,633 over 5 years in credit card interest payments.

Other debt:

By having low liquidity, you’re much more likely to take out car loans, personal loans and even grad school loans.

This is an entire other level of principal and interest added to your load.

Your freedom:

“Now that I just bought this $600k house, I’m free to quit my job!” – said noone ever. Its actually quite the opposite.

Psychological effects of being tied to 13 hour days at the office to afford housing costs are incalculable. Add that to being tied to offices you may want to desperately break free from, and there isn’t an amount of money on earth worth years of your life you cant get back.

When the bubble bursts:

You know all the costs we mentioned above? Well outside of property taxes which can be adjusted on falling property values, these costs are yours and yours to bear alone regardless if your house drops in market price.

In other words – real estate costs can’t keep going up forever, its simple economics. The median individual income in L.A. is just $27,749.

You’re already paying significantly more than you’re earning from buying primary residences in L.a.

What happens when even the price appreciate stagnates…or gulp…decreases…

Now again, just like the latest edition of Brass Knuckle Finance says – none of this is about NOT buying a house. This, specifically for L.A. is about knowing WHY you’re buying said house. Buy whatever the hell you want when you can afford it and know why you’re doing so.

But chasing any price – regardless of what it is – is the quickest way to fool town.

Thinking a house $600k house is an investment when it costs over $300k over 5 years, aka HALF of the damn price of the house –  is a quick way to fool town.

Now what about buying rental property?

Well thats an entirely different set of circumstances and benefits and for another post.

This is about your primary residence.

www.BrassKnuckleFinance.com | 3rd Edition | “Home Loanership”

Ps: real estate agent fees to sell the house in 5 years or income taxes if house is sold in less time has been included in these numbers.

Stop leaving valuables in your car near Christmas!

**Attention: stop leaving valuables in your car! This is generally for all times of the year but ESPECIALLY for the entire month of December. Same deal every year.

If you don’t listen, you can consider those items gone.

Thiefs know the risk reward of finding something valuable after breaking into your car during the busiest shopping season is heavily tilted towards their favor.

Don’t give them an easy play. Malls are easy play. Shopping centers. Apt garages.

As a matter of fact, its smarter just to completely stay away from parking your car at the mall, regardless of whats in it, during the entire month of December.

If you want to be broke and go further into debt, use Amazon prime. “Choose your dumb”, as we say.

If you want to jumpstart your new life free of debt however, stop participating in the hyper consumerism madness they call “Christmas” in the first place.

No one who gives a sht about you will want you to go further into debt to buy them anything. Trust me.

http://www.ThisIsWhyYoureBroke.com

STOP USING YOUR PIN NUMBER FOR PURCHASES


And be VERY vigilant against it.
Got damn. I don’t know how many times I gotta say it.

If I get one more message from ya’ll about your entire balance being wiped out, especially during this scam happy time of the year, there’s gonna be furniture moving.

It doesn’t matter if you have a chip, a dip, or a damn flip card. They are capturing your PIN number every time you use it at stores, restaurants, gas stations, weed shops, greens, beans, potatoes, tomatoes …you name it.

Then they use that pin with a visual copy of the strip on the back of your card to go to your bank’s ATM and withdraw EVERYTHING. When your main account is tapped, they’re using the ATM to transfer from your other accounts at that bank.

Never use your PIN number in public unless its at your bank and be even careful with that. And during the holidays, don’t use your PIN number AT ALL.

-Always maintain TWO checking accounts – one for spending (risky purchases) that has a smaller amount strictly for spending and one for bills that has a higher balance.

-Never keep two checking accounts at the same bank. Ever.

-Never keep a checking account with overdraft pro-theftion on it.

-Don’t use your PIN number. If a store is acting like they require it, act like you refuse to shop there any longer. 

-Always swipe as a visa or MasterCard debit card purchase.

**Stay the FCUK away from credit cards.**

-Be vigilant about each of the above.

-Prosper.

Make sure to share this with everyone you know. Even the scammers.

The True Cost of Having “Good Credit”


The true cost of maintaining “good credit”.

(Phase 1) I don’t have credit yet so my parents will have to co-sign on these student loans for this school I should have never gone to. *+$35k in additional school loans

(Phase 2) Now I’m turning 18 and need to open up a credit card so I can build credit myself. *+$80/year in annual fees

(Phase 3) Oops, after they’ve emailed and mailed me a billion times to participate in reward bonus after reward bonus, I fell for the trap and charged up about $6,500 worth of things I can’t pay back.*+ $270/month in minimums

(Phase 4) I need a car but can’t save for a car and pay all of these credit card payments. I’m going to have to take out a first time buyers program for a loan on a car at 14% interest for 60 months. *+$450/month car note

(Phase 5) Damn, I’ve been paying on a used car for 3 years and haven’t paid off a quarter of the principal. Looks like I need to fix it soon. Luckily I have great credit now so I can just open up another credit card to pay for repairs while I scrounge for the car note at the same time. *+$150/month in payments for the new card + $50annual fee

(Phase 6) F*… I have at least $700 in debt payments making shit money. And thats before my student loans payments kick in later this year. I’m looking at $88k in debt …and thats if I paid it off all at once. Either way I need to keep afloat so I can keep my credit in tact for this mortgage everyone told me I need.

(Phase 7) They told me I couldn’t qualify for this mortgage before I got my debt (payments) to income lower so I refinanced everything outside of my student loans into a personal loan. What sucks is now the interest portion of that loan starts from scratch so I’ll be paying less APR but no principal whatsoever.

(Phase 8) Whew…$38k in debt payments and 8 years later I juggled my credit well enough to get this house! Woohoo! Since my credit is so great I didn’t put anything down but my closing costs.

(Phase 9) Cot damn these real estate expenses are tough to do with all this consumer debt and student loan payments. Didnt put anything down so my mortgage is thick AF. I’m two months late on the mortgage and a few payments late on everything else. But I have to keep up juggling these payments to avoid default. *+ thousands in fines, late payments and penalties each year on various debts

(Phase 10) Stressed out, pimped out and ready to quit. But I’mma make this post on Facebook about my 850 credit score and clown the #NoDebtMovement before Jarim deletes my comment.

Heres the truth of the matter:

You can find these so called “cost of having bad credit” images all over the place. But what people rarely ever talk about is the other side of this.

Truth is the person who filed BK early in these steps and switched to cash and investing (the BKF Philosophy) is infinitely more well off than the person depicted above.

Plus anytime someone charges you for something you know isn’t right (like a medical payment etc), you’re 5 times more likely to try to work out a payment of that item instead of the person who lives cash only that simply says…”report me b*tch”. lol

Renting a car like you’ve got some sense

“But I can’t rent a car without a credit card!”
Really? Reaaaally?
What is this 1988? All winner’s circle members do is travel and rent cars. These credit card commercials really have folks jacked up in the head huh?
In 2016 you have so many options its not even funny. Whatever you allow someone to do, they will do it. You cant just allow society to dictate things and you not ask questions or say “I refuse”.
Step 1: stop renting like its 1988. There is no good reason to rent from traditional car rental companies. Use the Turo app (including my discount of $25 off your first rental).

Use the Skurt app – they’ll actually bring inexpensive cars TO you.

Use zipcar and cars2go.

Use any of the other billion and one competitors that do the same.
Step 2: Use uber/lyft and others and skip the car in the first place, save a ton of time not knowing how to get around a new city, paying for parking and not being able to drink.
Step 3: And if you feel you must use traditional car rental companies like you’re a baby boomer, 4 out of 6 of those companies don’t require credit checks.
You’ve got to live life saying “I refuse” in order to win at the constant sucker sh* that is thrown your way.
This is in every aspect of your life.
I mean if you simply allow folks to run all over you, just wait till you find yourself in a car dealership and the salesman is like “oh I’m sorry, the ad you saw on TV doesn’t apply to the cars we have here”
Bull f*cking sh*
http://www.ThisIsWhyYoureBroke.com

Considering an electric vehicle? Here are some things to figure out first…

Considering driving electric?

Congratulations! You’re about to save yourself a ton of money and positively impact the environment.

So… now how does one go about GETTING an electric car?

To be able to answer this, you have to figure out WHICH electric car.

But even before that, you have to understand your lifestyle. You need to essentially know who and where you are in life.

Are you someone who’s worked hard to pay off their consumer debt and you’ve centrally located yourself to most things you do within a 100 mile radius? Then you are free to lease any new EV using our tutorial here* –> https://thisiswhyubroke.wordpress.com/2015/07/31/how-to-lease-a-car-without-worrying-about-a-credit-score-negotiating-a-car-lease-like-a-tiger/

Are you someone who’s worked hard to pay off their consumer debt but live greater than 100 miles away? First consider moving closer (long commuting sucks and will kill you) and if not, go for the new Chevy Volt (which has a gasoline generator built in to recharge the battery when it runs out. This is different from a prius that switches constantly between the two and is not an electric vehicle). If not the Volt, go for the BMW i3 with generator similar to the volt. And if you can wait, you can hold off for the completely electric 238 mile Chevy Bolt coming in December.

Are you someone who’s still in debt but working to get out? Understand that once the next generation of EVs (200plus mile range lower priced EVs) are released shortly, the price of gen 1 EVs will be even more rock bottom than they currently are. This means you can consider driving a used Leaf for less than $10grand–>https://www.cars.com/vehicledeta…/detail/673792585/overview/
If you get a high mileage/out of battery warranty leaf for even cheaper, set aside a small buffer for any battery maintenance you may have to do.

Also, some other great inexpensive used EVs are:
Chevy spark –>https://www.cars.com/vehicledeta…/detail/676812620/overview/
Kia Soul EV –>https://www.cars.com/vehicledeta…/detail/670316748/overview/
Fiat 500 E–> https://www.cars.com/vehicledeta…/detail/675201600/overview/

A full list of electric car recommends are here (for leasing): https://thisiswhyubroke.wordpress.com/2015/05/14/electric-car-recommends/ 

Note: most of the above car makes (outside of Nissan) are generally not recommended for used cars. However, EVs aren’t exactly cars with the same number of moving parts that can break like internal combustion engines do. There’s generally only a few moving parts and are generally fool proof if you maintain your battery.

14322239_10153681932810810_7865620664244692052_n.jpg

*Excluding any available Teslas currently on the market