After the whole subprime mortgage catastrophe, credit card issuers are worried too, and have startedslashing credit limits at the first sign of trouble (a single late payment, for example). The ratio of credit used vs. credit available is used in calculating people’s credit scores, so this may have a negative effect on many people’s scores. That, and if you don’t notice that your available credit is lowered, it could be pretty easy to accidentally go over it. Also not good.
I’ve been known to take advantage of the deals that my credit cards give me, and use them to my advantage. A year ago, I refinanced my 9% (now 10%) HELOC to a fixed 2.99%, for a fee of only $135 using balance transfer checks from one card, and a balance transfer from another card.
Now, I have a new low-rate balance transfer offers on an existing credit card, and am planning on making a little extra money from mr. Visa.
I was just paying my (sigh) credit card bills tonight (actually it’s not that bad, because they’re all fixed at 2.99% for the life of the balance), and saw an ad on the citibank page to sign up for an online savings account. They’re offering a 4.65%APY, which isn’t bad (although not as good as the 5.05% that I get at Emigrant), and if you sign up and fund an account, they’ll give you $50 for your trouble. Not bad.
So, I read this article on yahoo news today, talking about how a house is actually (contrary to popular thinking) not so much an investment as a liability, or at best, not a very good investment.
I read an article on yahoo news today about piggybacking — getting added as an authorized user to the credit card belonging to someone with good credit to improve your own bad credit. Something that’s commonly done by parents (to improve their child’s credit), or spouses, but now being offered to strangers through internet-based services. These services claim to “improve your credit overnight,” and apparently it works(!)
So, I’ve been biding my time, not really thinking too seriously about buying the duplex next door (but thinking about it, nonetheless). It went up for sale a month ago, and the sign is still there. I haven’t seen a great deal of activity there (both units are currently vacant), although they do periodically mow the grass (not really as often as they should when trying to sell the place, however.). All of this cashflow 101 playing has gotten me wondering a little more seriously about it…. and doing the math over again.
I recently got hooked (ok, not quite as hooked as the person who introduced me to it) on the computer game “Cashflow.” Designed by Robert Kiyosaki (well known author of “Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money–That the Poor and Middle Class Do Not!“), it’s an interactive game that teaches the value of passive income. And it actually got me to sit down and work out what all of my actual costs were on my duplex, and figure out what I was paying in rent these days (I did this at the beginning, when I first bought the duplex, but taxes have since gone up, insurance has gone down, and I’ve raised the rent a bit).
(Not likely.) While I was standing in line today to purchase exactly 47 two-cent stamps (due to the recent two-cent rate increase, which I was unaware of when I stocked up on stamps for the office two weeks ago), I considered the forever stamp. Jokingly, I declared to my friend, “I’m going to buy $5,000 worth of forever stamps, and sit on them for 20 years before reselling them on ebay and turning a huge profit! I’ll become a stamp tycoon!” (Well, as much as a tycoon as one can be on a $5,000 initial investment.)
I originally bought my duplex on an ARM with no money down. Knowing that rates would eventually go up, after a year I had enough equity to refinance for a reasonable rate — I got a 30 year fixed mortgage for 80% of the value of the house, and a home equity line of credit (HELOC) for the rest of what I owed on the original mortgage (about $20,000). I got a 6% rate on the fixed mortgage, and started out at 4% on the HELOC, with very low payments.
However, short term rates quickly started to jump upwards, and within 9 months or so I found my HELOC rate pushing 9% — my monthly payments had doubled, and I wasn’t even paying off any of the balance on the HELOC (!) I looked into refinancing everything (again), but long-term rates weren’t really good enough to justify that, given the expense of closing costs, etc. I also looked into refinancing the HELOC to a fixed rate Home Equity Loan or similar, but still, rates weren’t going to get much better — I would just be guaranteed that they wouldn’t continue to climb.
So, given this dilemma, for a couple of months I simply did nothing.
Then, one day when I was paying my credit card bill online, I had an idea…. a complicated idea, but ultimately a good one.