Ben Stein is wrong about Real Estate Investing

Ben Stein is an incredibly smart guy. You might know him by any one of these titles: actor (he was the boring economics teacher in Ferris Bueller's Day Off), host of Comedy Central's show "Win Ben Stein's Money", author of 16 books, speech writer for presidents Richard Nixon and Gerald Ford, or university law professor.

Ben also writes a financial column every other Monday at Yahoo! Finance, and it's usually full of sage advice. This week's article "A Home Truth about Real Estate Investing" was an exception.

As a part time real estate investor, the title of this week's column caught my attention. I was teased by the short description which reads, "Owning real estate brings great joy and even makes a good investment. For long-term gains, though, stocks are better." I was dumbfounded. I've owned stocks & mutual funds for 15 years, but the returns on my investments in several single-family rental properties have beaten my returns in the stock market, hands down. Could I be a smarter real estate investor than Ben Stein? This fleeting thought was unfathomable, so I read on.

It was only after completely reading his column that I realized the source of my disconnect: I can't recall ever hearing an economist, particularly one who is a "commentator on finance", consider the purchase of one's own domicile to be real estate investing. Mr. Stein's article does a disservice to the practice of real estate investing, which most consider to be the act of acquiring real estate for purposes of generating rental income or profit from resale after capital appreciation (my definition). My own real estate investing has delivered consistent positive cash returns each year, not to mention the huge tax benefit in being able to offset rental income with that most wonderful non-cash expense, depreciation. Once rented, without exception, each property has been cash flow positive while consistently showing a tax loss because of depreciation and section 179 expenses.

Considering his argument for a moment, however, I would challenge Mr. Stein to look at the alternative to purchasing a house/condo. I see a flaw in his logic because buying stocks on broad indexes isn't the alternative to purchasing a house/condo to live in; renting a house/condo is the alternative! I'm fortunate that I don't live in an expensive real estate market (metro Atlanta), but even still, I can't see how, with tax considerations, buying a house is less "profitable" than renting.

And on the topic of real estate, today I learned that Zillow has just begun providing Zestimates for many homes in metro Atlanta!

Give to God what is God's... but get a receipt

Today the freemoneyfinance blog addresses the subject of how to calculate a 10% tithe. Reading it reminded me of something I've noticed the last couple of Sundays at church during offering. While a large number of people write checks, there are plenty of others who still place cash in the offering plate (bucket).

Unless it's in an envelope with the giver's information or donated in some way that the giver can immediately receive a receipt, I find donating cash to a church or any charitable 501(c)3 foolish because such donations are not tax deductible. Understand that I have an accounting degree, so my brain is wired differently than most, but I believe in giving unto Caesar what is Caesar's... and not a penny more. When giving to God, I want the tax deduction.

In case you're wondering, I never put anything in the offering plate. I seldom carry cash or checks, so fortunately North Point Community Church offers scheduled ACH withdrawals which I use and like.

10 ways to travel smarter

Last year for work I flew over 60k miles on 4 different airlines and spent over 80 nights in various hotels throughout the U.S. and Canada. After years of this, I've established some habits and learned about little things that help make business travel tolerable.

I've condensed these down to a list of 10 and have interspersed my habits along with a few other tips to reduce the stress and inconvenience of travel:

1. PACK: Bring along a roll of quarters. They come in handy for parking meters, vending machines, and even a valet's tip if you're out of singles.
   
2. HABIT: When booking air, get the best seat on the plane. I always check LoveMySeat prior to making a seat selection, though I hate bulkhead which these sites tend to love.
   
3. TIP: Maximize your frequent flier miles by not joining every frequent flier club. How? If you regularly fly US Air and only occasionally fly United, don't add the United miles to your Mileage Plus account; instead, because both carriers are members of the Star Alliance, have the miles credited to your US Airways Dividend Miles account. See also the oneworld alliance and SkyTeam for other airlines.
   
4. PACK: If you travel with a laptop, keep a spare battery and power cord pre-packed in your laptop bag/backpack.
5. TIP: If you're wanting a hotel room upgrade, check in as late as possible. In my experience, the later it is, the more likely the hotel will be to grant this request should you ask.
   
6. HABIT: I print out reservation confirmations for every aspect of my trip and keep them in an 8.5"x11" envelope in my laptop backpack. As I accumulate expenses during the trip, I drop the receipts into this envelope to minimize the risk of losing these in the black hole that is my wallet.
   
7. PACK: Buy & keep in your laptop bag/backpack a short 3-outlet power adapter since no hotel ever has enough electrical outlets.
8. HABIT: Place travel-sized toiletries in a quart-sized zip-top bag to avoid checking bags if possible. Just last week a coworker had to wait 6 hours for US Air to deliver his checked bags after they weren't loaded onto his direct flight to SFO (an x-ray machine was out of service in PHL, which created a backlog in getting bags screened promptly).
   
9. TIP: If you use a laptop when traveling then get a Sprint Mobile Broadband subscription, especially if you can expense Internet charges. It may even save you money because it eliminates the $9.95 daily hotel Internet charges. I just dumped my T-Mobile HotSpot Wi-Fi service because, despite the decent number of HotSpots, its coverage is limited. When you're sitting on the tarmac at DFW Airport because of a two-hour air traffic control delay in Atlanta, HotSpot will be of no use but Sprint Broadband will be.
10. PACK: I've learned to keep a very small travel umbrella in my backpack. This gets used on at least 25% of my trips.
    

And of course I'd never travel without my Briggs & Riley luggage which I discussed last year. Any other suggestions?

It never hurts to ask

I'm often surprised at people who are willing to take what life gives them, which runs the gamut from "Well, I was born poor, so I'll just stay poor," to "I was given a dumpy hotel room, so I'll just take it." Nonsense. Whether it's learning how to get out of poverty or getting a nicer hotel room, it never hurts to ask.

I arrived into San Francisco last night during a month when hotel occupancies may hit 60% if they're lucky. Granted, knowledge is power, but it doesn't take a rocket scientist or a seasoned hotelier to know that demand for hotels in San Francisco is soft in the middle of January when temperatures are unseasonably cold (in the 30's), the midwest is covered in ice (limiting the ability or at least the desire of corporate road warriors to travel), and a nice 4* full-service hotel like The Argent is available on a Monday for just over $100 a night.

Upon checkin, the front desk agent asked the usual questions. As I offered her my credit card for incidentals, I asked one of my own, "Do you have an upper floor corner bay view room with a king bed?" I'd booked a room with two double beds because the rate was cheaper, but I prefer a king bed. The front desk agent's response was one I've heard innumerable times, "In fact we do. Would you like one key or two?"

And for those like me whose favorite hotel brand is Westin because of their heavenly beds, heavenly showers, and smoke-free air, you'll be happy to know that The Argent will soon become The Westin San Francisco Market Street.

Monetizing your frequent flier miles

What? I travel quite a bit for business, and these travels usually result in a premium status with an airline or two as well as accounts full of frequent flier miles at the end of the year. Having young kids makes it really inconvenient to travel by air for leisure trips, and you can forget about taking a spontaneous weekend trip to... well, anywhere unless it's within driving distance, so these frequent flier miles accumulate.

It's not unusual for one or more of my frequent flyer account(s) to have balances of 100,000+ miles. When I've accumulated 75k+ miles, I do what I've done for the last 10+ years--I contact my ticket brokers to convert my frequent flier miles into dollars.

Why? If you choose to embark on this path of selling frequent flier miles for cash, expect to earn 1.5 to 1.75 cents per mile, making a 25k redemption ticket worth $375 to $437.50. When load factors are high, your ability to squeeze more money out of the broker goes up. In addition, I've found that the more miles you have, the more bargaining power you have with a broker. And brokers can move your miles faster if they're from an airline with a global footprint rather than from a regional carrier. From miles earned through flying, airline rewards credit cards, dining, and airline affiliate partners, it's pretty easy to accumulate and sell over 100k miles in a year, worth over $1,500.

How? First off, understand that you're not really selling miles--you're selling a ticket which has been redeemed with miles from your frequent flier account. For this, you'll need a minimum of 25k miles and preferably 50k+ to make it worth the while.

Selecting the right ticket broker is key. Don't use just any ticket broker; I use brokers I've worked with for years who I trust and who I interviewed to ensure they only sell my miles/frequent flier tickets to those they trust so as to not raise the suspicion of airline personnel who can deem a purchased frequent flier ticket void and cancel it on the spot.

Should you choose to work with a broker by selling miles, here are some questions to ask:

1. What is the broker's vetting process to ensure the traveler purchasing my miles/ticket (via this broker) understands they should be silent about how they acquired the ticket?
   
2. Will I know/have the name of the individual traveling on my miles along with their itinerary information? You should. If you're ever questioned by the airline, you need to know who's using your miles.
3. Has the broker ever been investigated by an airline for being a broker?
4. Have any sellers (to the broker) ever had their frequent flier accounts suspended or penalized for working with the broker?
5. How are the service charges for the frequent flier tickets paid? My recommendation is to have these charged to your (the seller's) personal credit card to be reimbursed by the broker.

Note: This is a work of fiction, since the practice described violates the terms & conditions of participating in an airline's frequent flier program. There is a good article here which summarizes the risks, and I can vouch for its accuracy (including the tenacity of the airline they mentioned to crack down on the activity).

Saving $ on telephone costs with VoIP

In 2004, Comcast was my telephone, high-speed Internet, and cable service provider. Because these three services were bundled we saved money over BellSouth, but the telephone bill was still ~ $45 + an average of $15 in long distance charges. For years I'd tried unconvincingly to persuade my wife to ditch our landline telephone and just use our cell phones to save money, but safety (being able to dial 911 & have them know our address) and inconsistent cellular coverage were always barriers.

I've used the Yahoo instant messenger voice feature since 1999, so I was aware of and tried to keep up with advances in voice over IP (VoIP) technology. One company I kept an eye on was Vonage, which launched in 2002. By 2004, Vonage had several hundred thousand customers and was reported to have good call quality along with the "best of the worst" in customer service and was the only VoIP provider able to handle 911 calls. Like most VoIP providers, Vonage also offered unlimited local and free long distance (for North America) calling. The one caveat to being able to use a VoIP provider is that you must have a high-speed Internet connection.

I ran the numbers and thought we could shave half off our telephone charges by switching to Vonage. I shared the information with my wife, and to my surprise, she agreed to switch as long as it had no impact on her when she picked up the telephone to make a call. Fortunately I'd installed a 66-block in the house earlier that year (using Phone-man's website as a guide), which was going to make it really easy for me to connect the VoIP router to my home telephone wiring.

On June 17, 2004 I submitted the paperwork to Vonage for transferring my telephone number from Comcast, and by July 1 the process was complete. My telephone charges fell from over $60 per month to just $27.24. And I never had a problem with Vonage.

Over the summer of last year, I was reading in one of the FatWallet forums about SunRocket having a $99 per year special. While I was happy with Vonage, my loyalty is in saving $, so I again ran the numbers. The $99 SunRocket special was for the first year only + a $39.95 equipment charge = $138.95 per year or $11.58 per month, a savings of over 50% vs. Vonage. It was a no-brainer--I switched and have been happy with SunRocket.

I bring all of this up because I read that via:talk is running a buy 1 year get 1 year free special for $199 with no equipment fee. From what I've heard, via:talk seems to have a good quality product, and telephone service for $8.29 per month is pretty hard to beat.

Midnight temptations

NO--not those kind of temptations! I wanted to follow up on my post 1 year ago today where I discussed Woot and a few other reasons I'm up after midnight. In the last year, much has changed.

Two of the 5 sites I previously mentioned, 1deal1day and SnapGone are no longer operating. Though both sites lead you to believe they'll be back soon, their landing pages haven't changed in 6+ months.

Fortunately Woot, MidnightBox, and steepANDcheap are very much alive & well, and in the last year there have been two new additions: StrongIdea and Tanga.

If you're looking to save your way to the poor house, these sites offer some swinging deals. Woot has gotten the lionshare of my $, though I've also made purchases from MidnightBox and StrongIdea. My sweet deals last year were a chest belt heart rate monitor and watch for $30, a Toshiba DVD player with HD upconversion and HDMI output for $40, and a pair of binoculars with built-in digital camera for $25.

If you're looking for an evening distraction and living in the Eastern Time zone, check out Tanga starting at 10:00pm followed by MidnightBox at midnight, and then Woot posts their new item at 1:00am. steepANDcheap lists a new item as soon as their previous one sells out, and sorry--I have no idea when StrongIdea lists new items.

2007: The year to de-clutter

My wife and I have decided that 2007 is the year to de-clutter and de-crappify our lives, and that starts in our basement & drive-under garage. Since picking up our first rental house in the fall of 2001, we haven't been able to park a car in the garage.

We have a lot more tools than we ever did before, so I'm content with only having one of the garage bays open, but the days of keeping stuff "just in case we'll need it someday" are gone.

I've already thrown away two large rolling trash bins of stuff, and I'm only half finished. In addition to better organizing the things I want to keep, I've also made three piles of things for: 1) Goodwill, 2) eBay/Craigslist, and 3) yardsale. The largest things I have to get out of the garage are a dining room table (going on Craigslist) and several large upright arcade games (eBay).

I've been buying & selling things on eBay for several years, and I'm often amazed at the value people place on things. I understand that I sold at the perfect time, but just before Christmas I unloaded a vibrating football game from my youth for $143 + shipping!

Here are my 10 eBay tips for those looking to de-clutter or just unload those Christmas presents which didn't come with gift receipts:

1. List items Thursday night and pay the extra 40 cents for a 10-day auction, giving you two full weekends of eyeballs.
2. Start with a low minimum and avoid setting a reserve amount.
3. To speed up the transaction time, only accept PayPal as a form of payment and require payment within 24 hours of auction close.
   
4. If you have a lot of small things to sell, invest in a postal scale to avoid trips to the post office.
   
5. Use PayPal for creating shipping labels with postage, again avoiding trips to the post office.
6. ALWAYS use delivery confirmation when shipping.
7. Use LOTS of pictures to avoid any questions, and host the pictures free through Auctiva, Flickr, or anywhere other than eBay, which charges you after the first picture.
8. Consider offering free shipping to encourage people to bid.
9. As a seller, only leave feedback for the buyer once you know they are happy and have left positive feedback for you.
10. If an item doesn't sell, don't relist it--donate it and take the tax deduction.

Is there anything I'm missing?