As some background for you, we bought our home in DC for about $400,000 back in 2004. We had a combination of a 5/1 interest-only loan (80%) and 15 year balloon (20%), which meant a lower payment, but 100% financing and a big risk to the bank and us if either of us lost our job. We also had over $115,000 in debt outside of the home back then too.

As of today, we’ve paid off all our debt (the last one being my student loan in Nov 2009), have a good 5 figures in cash savings, 6 figures in retirement (but nowhere near what we’ll really need), and our 2nd mortgage paid off and a small chunk of our primary mortgage paid down. Overall, we’re closing in fast on a half-million dollar net worth, counting home equity (but that’s always a hedgy calculation). Life has been good for us financially.

But it’s decision time. We thought this house would be good for 5 years; basically a starter home. We’ve been in it for over 7. We’ve gotten to be good friends with our neighbors, we like the local area and are learning to love it more. But we have to ask…

- Should we stay or
- Should we go?

(yes, that was from a song)

There’s a lot that we have to consider and I won’t list everything here, but lets consider the financials:

- We might break even on the sale of the house, minus realtor fees
- We need to consider WHY we would move (bigger, newer, smaller, etc. house…new jobs…change of life?).
- Should we refinance? Should we go short-term (another variable mortgage like a 5/5) or longer-term (15, 20 or 30 years)?

That last question has a lot of impact because it implies how long we stay here, when can I close some credit cards (cause it’ll hit our credit scores) and, maybe if the wife lets me and I can find the right one, when I can replace my truck (another hit on credit scores and our piggy bank).

Refinancing

Ok, so let’s assume we stay. We have to decide on:

• Stay with our current mortgage: We have a variable rate (5/1), interest-only mortgage (for only 3 more years) that has saved us tons of money since the rate went to variable in 2009 (it’s under 3% right now). BUT, the 6-month LIBOR rate, which is our prime rate, has been going up recently. It went from .40 to .80, but now it’s at .70, so I don’t know what to think. We have a couple more months until the next reset though…
• Another variable rate mortgage: We’ve been lucky with our current mortgage, but Pentagon Federal Credit Union is advertising a 5/5 loan (not interest-only) in the low 3% range AND they pay your closing costs. That’s the biggest reason I’m looking at that loan option. You can spend thousands in closing costs, not counting the escrow that you get back.
• 30 year mortgage:Ok, here’s where we decide on staying in our home for a while. If we’re paying closing costs and committing to a higher mortgage payment, then we need to stick around for a few years for that payback period on the costs.
• 15 year mortgage:  Same as the 30-year (gotta stay in the house, etc.), but with a lower rate and higher payment (because it’s shorter-term).

Ok, so what do we do? I know you all can’t help with our decision of whether to stay in the home or not, but what have your experiences been on refinancing, including something like the PenFed 5/5 loan with no closing costs? Keep in mind we have A-rating credit scores (I’ve checked).

Why would I say that? Well, there’s some particulars to our home, but in general there’s a lifetime to certain appliances, etc. such as:

• Water Heaters: 10-11 years. We have 2 water heaters. One (gas) is about 15 years old and the electric one is about 13. Both are well past their lifespan.
• Dishwashers: 9-10 years. Ours is about 9 years old now.
• Carpet: 10 years. We have 3 rooms where we haven’t replaced yet and all are at least 14 years old and have had pets and most likely smokers on them. Two rooms have original hardwood underneath, but we don’t know the quality and I’d rather just replace with the same Pergo floor as the rest of the house.
• Fridge: about 13 years. Ours is about 9 years, but I’ve already replaced a lot of parts on it myself so I’m not sure how long it will last ultimately. I know it was an expensive fridge when they bought it based on the receipt, but that doesn’t mean it’s reliable.
• Clothes washer: 10 years. Ours is probably 14 years or older. The knob broke off years ago, but we’ve been resourceful and use pliers to start it up.
• Clothes dryer: 13 years. We’re actually on our 3rd dryer. The first came with the house and the next two (counting our current one) came for free from our friend.
• Furnace and Air Conditioner: 15-20 years. Ours is about 16 years old, but it’s a high-efficiency unit. We’ve spent about $1000 over the years on repairs, but it just takes one crack in the heat exchange unit to jack up the cost of repair to the point of replacement.
• Roof: It varies, but our shingles are 20 year warrantied. I was just up on our roof recently and the roof looks good, but there’s a bit of buckling in one spot (I noticed it a few years ago) and it appears they just put the new layer of shingles over the original on the old part of the house. That could cause problems.
• Pool Plaster Lining: Ours is supposed to last 15-20 years, but we’re noticing it thinning and lots more “blue stuff” in the cleaner than 8 years ago. We spent $7000 just 2 years ago on brick and tile-work, and I expect to spend another $7000 on replastering the pool in the next 3-4 years (it’s quartz plaster, not the regular stuff that would cost $4-5k).

Tick Tick…

So what kind of bomb are we sitting on? A big financial bomb!

All of our appliances are at the end of their lifespan right about now and we’re just waiting for stuff to fail. I added up over $30,000 if everything hits at once (maybe even over $40k). We have a nice savings account set up for the home and emergencies, but not THAT much. The good thing: it won’t all hit at once and we can start planning repairs and replacements now.

But the question is how much longer do we want to stay in this home? Do we want to stay in this house till we die, upgrade, rent something smaller or move away entirely? There’s more to this question than just dying appliances such as our mortgage rate increasing (it’s variable) and needing to refinance. We have been questioning our careers, traffic, cost of living, proximity to family (or lack of) and much more.

The question is do we stick it out, spend the money on maintenance (that won’t significantly increase house value) and live through the payback period or dump it now and cut any losses? Granted, since we have a pool, we wouldn’t sell during the winter, but we need to do some heavy thinking very soon.

What would you do?

You may also recall that we each have “our own” bathrooms. The gas-heated one is mine and the electric one is hers.

When my wife started to seriously complain that her showers weren’t staying hot, then I started to listen. I knew the heater was going on 13 years old, but I didn’t know how long water heaters lasted. Well I do now.

Luckily, we have an expert handyman in our family (her father), and he told me what to check on the heater to see if something what broken.

Some basics about your electric water heater

I’m not going to try to come across as any expert, but here’s what I was instructed about our water heater plus some things I learned later:

• It has 2 heating elements: one on top and one on the bottom
• If you want to check whether the heating element is broken, you need an Ohm reader (Multimeter) to test the current. Multimeters are also good to test electrical sockets, such as voltage, whether they’re alive or not, etc.
• Water heaters generally come with warranties of 6, 9 or 12 years. Based on that, even if the last owners bought the best one, we’re past the warranty, but I’m guessing they have a 6 year. Why? Because I can’t find 30 gallon electric tanks with more than 6 year warranties.
• 12 year warrantied heaters seem to have steel heating elements rather than copper (or vice versa). 9 year have one of each.

How to test whether the heating element is still working:

1. Turn off the breaker to the water heater
2. Open up the plate to access the element. There may be plastic and insulation covering it. It’s the thing with the large hexagonal nut behind it (if there’s another unit, it’s probably the thermostat).
3. Use your multimeter to test whether there is voltage going to the red and black wires. If so, you didn’t turn off the power properly.
4. Once power is confirmed off, remove the red and black wires from the element.
5. Switch your multimeter to read Ohms and touch the red point to the red terminal (screw) and the black to the black.
6. If the reading is very low or nothing, then the element is not working. It means it’s rotted and the U-shaped element is no longer U-shaped and thus not sending a current properly. If you get a reading, then the element is good.
7. Test the other element in the same way, but don’t forget to hook the red and black wires back up properly and replace the insulation and cover on the other element.

If it’s not the heating elements, well then I can’t help any more.

The quick way I found out our heater was dying:

The first element I went to test was the bottom one since that’s where all the sediment ends up and corrodes the element faster. When I took off the outer cover and removed the fiberglass insulation, I found it was damp on the inside and soaked on the bottom inch. I thought “UH OH!”. I put my finger down in the pan under the heater and felt water. Just a little bit, but enough to tell me it’s time to get a new water heater.

The final nail in the coffin? The severe amount of corrosion around the element showed we didn’t even have the option to replace the element. If it wasn’t corroded, we could have drained the tank and replaced it for $20-30. But not now. We’re lucky my wife noticed a difference, her dad was experienced enough to figure it out and that the tank didn’t rupture (yet).

I did end up buying a new 9 year, 40 gallon water heater which we’ll install very soon. Unfortunately, our state has a new code that requires an expansion tank be installed, so that was an extra cost. Plus, you need to have a building permit to install the tank, at least in our county in Maryland. Overall, the tank I chose and the expansion tank cost about $425, but if I wanted to be sneaky and cheap, I could have done it for half the price myself. I don’t recommend going cheap or against the law.

We live in an older community, where our home is 70 years old and those south are mostly 50-60 years old. Back in those days, they didn’t have the concept of McMansions, and most of the home are about 1000-1500 square feet.

So, I generally classify our community (including the largest collection of homes, not just the few streets around us) as either “starter homes”, “downsize homes” or “rental homes”. But on one of our walks recently, we passed a home we’ve passed many times, but something new struck me. You see, this home is average size for the neighborhood, has a garage, but also has a very large driveway. In that driveway is parked one of those “bus motorhomes” (i.e. they’re the same size as a bus). Plus it has a trailer hitched in the back. Kudos to the owner for being able to park the thing, but my focus here is on the following:

Why would someone own a mobile home as big as their house?

But then another thought came to mind (no, not talking about the jealousy one): For all these people with small homes, why not buy a motor home or trailer for the extra room?

I’m no expert on the hookups needed for electricity or water, or even zoning laws for your city, etc., so I’m mostly ignoring those technicalities here, but think about it. Instead of spending $40-100k or more on an addition just so you can get another bed for someone to sleep in once a year, buy a small camper. On the hot or cold days, it’s prepared in some way, whether running from its engine, a generator or hooked into your outdoor outlet to heat or cool the interior. Your guests would basically have their own living space and wouldn’t need to “invade” your home!

And in the economy of the past few years, mobile homes (trailers and campers, not the single-wide type) have taken a pounding and dealers are begging buyers to take them off their hands. Even better, you can get a used one for even less. I have a truck and would just need a hitch and not only would I have that special addition already furnished that we’ve been wanting, but also our own vacation lodging when we want it!

I know I can’t be the first person to think of this. Let me know if you’ve done something similar (e.g. put up your in-laws in your camper for the week), or have an informed opinion on the matter. Remember, rules and laws change by neighborhood and municipality so what goes in rural Arkansas might not be allowed in downtown D.C.

_{Photo courtesy of Philandthehounds}

First, let’s talk about the yard sale.

Is it worth the time to hold a yard sale?

We had 4 houses on our street participate in this yard sale, and we were all pretty gung-ho about it. We spent months talking about it, then weeks actually planning it. We paid $50 for an ad in the local paper, posted a few times on Craigslist for free, then in the final week, we planned the signs (all of which I hung/hanged..whatever, about 2 days in advance).

Then it came time for yard sale day. We had a pretty diverse group of neighbors. One is a single woman that doesn’t have much clutter, so she had her friend bring stuff over too. Another is a younger, newly married couple, although they seem to have much more stuff than we do somehow (more room to store it). The third house is a married couple with 2 young kids, and we thought they would bank the most money on sale day. And then there’s us, married almost 8 years with random assortments of stuff.

One thing we did differently than everyone else…we didn’t price a single thing.

The yard sale started at 8am, and I screwed up my alarm so I didn’t get up till 7:15. Luckily it rained overnight and stayed dry the rest of the day, so I just had to set up some sawhorses and folding tables and carry all our crap out to the driveway. We had unopened small appliances and other items from our wedding (2 toasters and a toaster oven), a box of mugs, a Garmin GPS I got free from Freecycle, and about 500 other random things, especially old clothes and books. I don’t have a clue what the total amount we paid for all our stuff was because a bunch was gifts or free, while the rest was bought so long ago it didn’t matter to us anymore.

I WANTED THE JUNK GONE!!!

At the end of the day (2pm), we had sold well over half our stuff for a nice profit of about $240. However, take from that $5 I spent on a blender from our neighbor (it even has a smoothie-making cup!), and about $10 we spent at the parent house on kid stuff. And then knock off the cost of the newspaper ad, lunch (which I don’t really count) and a folding table we bought for this ($40, but we will reuse it many times) and we’re looking at a tiny profit for so many hours of prep and work!

However, we had fun. We got to know neighbors on our street and in our community more, we got rid of a bunch of useless crap and gained needed space in our home.

Surprising things we found from the yard sale

First, what didn’t surprise me was that even though every sign said 8am-2pm, and my Craigslist ad said NO EARLIER THAN 8AM, we had a lot of people coming by as we were setting up. We knew this would happen, but it ticked me off because one of us always had to be outside to keep an eye on things rather than both bringing out the goods.

The first things to go tended to be kitchen items (the toasters, an entire knife set) and surprisingly the box of mismatched ceramic mugs.  Because we didn’t price anything, it was all up to the moment and haggling. We settled on prices for certain things as people asked about them, and sold things in bundles. Oh you want these 5 random items? Sure, we’ll give you a discount price for taking them all.

To us, it was about decluttering, not making money. And we succeeded for the most part.

But sadly, books didn’t really sell, and that was an entire table. Instead, at the end of the day, I posted them on Craigslist as “bundles” depending on their genre (health, spiritual, sci-fi, etc.). It worked before very well, as long as you’re not mentally attached to the original price you paid for the item.

Another surprise was that by the end of the day, we made the most money (not counting expenses), even more than the couple with kids. However, once word spread that they had stuff for sale, over the past 2 weeks they’ve tallied a nice amount from other neighbors stopping by and buying things like strollers, etc.

The last surprise was how many Latina women came by and bought bunches of clothes (we sold things for $1-2 per item) to send back to their home country.

I’ll repeat that if you’re looking to make money, a yard sale just doesn’t do it. Buyers are out for BIG bargains. Also, don’t spend too much time on it. We did our sale day on a Sunday (we weren’t all available for Saturday), and I can’t imagine having sat out for 2 days, 5 hours each hawking our crap. All the “good stuff” was gone in the first hour anyway. In the end, we donated the remaining clothes to Goodwill and other charities, and are all doing our best to sell the rest via Craigslist or word of mouth.

So, Onto Craigslist!

The yard sale was the push I needed to start going through our stuff to see what we could sell. I decided that things above a certain price point were better to be sold on Craigslist than at the yard sale, due to the bargain hunters. I posted and sold the following:

• My two “free” Sony Vaio laptops for $150 total
• Two old pool pumps (both have the motor bearings going bad) for $100 total. Some guy wants to get into doing his own pool work and bought them for some project he’s trying. The pool store didn’t think I could sell them at all, but I proved them wrong! Actually, I was just promoting the motors for someone’s “mad scientist”-type project, but along came a guy with a pool who actually wanted them.
• An old 35mm slide scanner, bought for about $200 in 2005 or so PLUS another scanner I got for free (much more recently) for $175 total.
• Two window air conditioners (one was a 14000 BTU, 110v unit while the other an 18000 BTU 230v unit). Those were “hot” items with a lot of inquiries, but in the end, I sold the 14000 unit for $100, but was worried no one would buy the bigger unit because it required a different outlet. Sure enough, though, a guy about 50 miles away wanted one for his shop and I sold it for $125.

Next, I’m still trying to sell the books (I got more to post), my acoustic/electric guitar (remember my musical instrument phase?), and 2 desks, which would REALLY free up a ton of space to make a proper guest room. I found I no longer need a full-time desk as I’ve been working off a laptop wherever it’s convenient for years now. I did buy a 22″ monitor this year to have 2 screens, but we can always set that up as a small TV or I could get a very small, high corner desk if I really wanted.

I’ve found that Craigslist does incite many inquiries, but few real buyers. I would get an email from someone, reply with “yes, it’s still available”, and then they have to ask me what I was responding about because they’re just doing a carpet bomb of posting inquiries. You also have to price just right to leave room for haggling, but know your bottom line.

For example, I’m selling a piece of furniture for $125, and I offered delivery for a negotiable price, depending on their distance from me. Some guy came with his wife to check it out, said his wife wanted it in black (not my problem), so they would “compromise” at $80, or $90 with delivery. I said absolutely not, and said my bottom line was $125 with curb-side delivery. I’ve been watching Pawn Stars on the History Channel enough to know the game, and I’m not in a rush to sell for so cheap AND have to deliver it!

And as a last note, yes, I’m aware of the tax implications of making money from yard sales, etc., so Uncle Sam needs his cut at the end of the year. A little more of my heart just broke.

How about you? What are your yard sale or craigslist stories, good and bad, both as a buyer and seller?

Well, to me, spring fever means I want to shop for a new car! While I haven’t bought a car for myself in the last 5 years, I have bought cars for my wife. For some reason, when the weather gets warmer, I just get the urge to buy a new car.

In my current situation, I’ve still very happy with my 2006 Honda Ridgeline truck. It does exactly what I want, and has even taken us 4000 miles roundtrip to TX and 2000 to FL in the last year with no complaints. But I’m not looking to replace the truck; rather, I’m looking for something either:

1. more luxurious (like a Town Car, Lexus LS, Merc S-Class or some other large highway cruiser)
2. sportier (like a Nissan 370Z, Porsche Cayman)
3. more commuter-friendly (like a Ford Fusion Hybrid or even a Chevy Volt…when the cost comes down $15k!)

But my current temptation is somewhat a mixture of all of the above…

A 2005 Mercedes SL500.

A specialty dealer near us actually has 2 SL500′s in stock (a 2003 and a 2005), but the 05 is much sweeter. Convertible hardtop with photochromatic roof (like transition lenses), heated/cool/MASSAGING SEATS, and a host of other luxuries. I don’t need rear seats because I have the truck, and the trunk has enough for a weekend trip. And it’s priced at least 60% less than new (they run over $100k new).

So what keeps stopping me?

I actually have a few reasons I’m resisting buying this car. The lesser reasons are:

1. We don’t have a garage. You don’t keep a car like this out in the weather.
2. It’s black and you know how hard it is to keep a black car clean?
3. Having a nice car just means that much more to have to worry about such as dings, scratches, etc. You want it to stay nice, but you also want to get your money’s worth out of it and drive it. Lose-Lose.
4. Yet another vehicle to insure and maintain. Mo cars, Mo $$.

But the biggest reason I’m resisting buying ANY new car (unless something really cheap comes up…that’s a different story) is because it’s not in our future plans.

Granted, we have a problem that we don’t really know what our future plans are!

What our future holds…maybe

Since I like lists in this article, here’s a list of things we may or may not want to do in the near and long-term future:

• Probably not have kids, but you never know. Kids aren’t in the cards right now as we pretty focused on our jobs and travel, as well as our nieces and nephew.
• Maybe move somewhere totally different. I can’t imagine moving to a different home in the D.C. area because we like our house, our neighborhood and our city, and it’s easy to commute to many jobs we find. However, my wife is getting tired of the grind of her job and is thinking of something totally different (she doesn’t have a clue what yet), while I’m working on saving up money just in case.
  • When I say moving somewhere totally different, it could be out west like AZ or CA, or somewhere south like NC or SC, or even overseas (although that’s a major, major decision we’re not ready for)
• Maybe make some major changes to our home. If we decide to stay where we are, we have plans for some nice renovations to make it more livable (like redoing our upstairs or adding a sunroom/Florida room).
• Definitely travel much more. I don’t want to give much away on timelines, but we’re definitely going to Germany within the next year, and we’d like to visit friends in Kenya and maybe go back to Ireland again.

Therefore, throwing, 20,30, or $40,000 at a car just isn’t in the cards, as much as I would love a new ride. Until we figure out what we want to do with our lives, we need to play it safe. And neither of us want to make a decision just to have some permanency. In other words, we don’t want to just have kids to get the decision over with and get that “monkey” off our backs.

For now, we’ll enjoy the extra income coming in from the lack of debt (except our ever-decreasing mortgage) and the assurance that we’ll be covered with whatever decision we choose down the road.

Just to recap our debt/mortgage/etc. situation for you all if you haven’t followed this site for the last 4.5 years, we’ve done the following:

1. Paid off all our credit card debt
2. Paid off all our car loans. This included any negative equity rolled in from prior car loans. Right now we’re at 2 vehicles: a 2006 Honda Ridgeline and a 2007 MINI Cooper S (oh, I didn’t mention we upgraded from our 2005 MINI Cooper, but it was paid off quickly)
3. Paid off our student loans, which made us free of consumer debt
4. Paid off our second mortgage as of this month!

When we bought our house in the D.C. area back in 2004, we had much less income, mediocre credit scores and history and a ton of consumer and student loan debt (over $100,000). But the bank approved us for about $400,000 across 2 loans:

1. The primary mortgage was 80% of the total home purchase price, is interest-only for 10 years and a fixed interest rate for 5 years. We’re past the 5 year mark, so it’s now variable, based on the 6-month LIBOR, which has brought our rate down from 5.25% to 2.75%, with little chance of jumping up a huge amount in the next 6-12 months based on the rate trending.
2. The secondary mortgage was the other 20% and was a fixed rate of almost 8%! It was a 15 year balloon payment, due in late 2019, but we paid it off almost 9 years early.

So after learning that we needed to send a certified check to pay off the loan rather than just a regular check like we’ve been doing for 6 years, I called in for a payoff amount, went to the bank to get the check (and rounded up to ensure coverage of any interest in case the mortgage company was slow to process the payment) and then mailed out the payment to the appropriate address (not the normal mortgage payment address).

Last night, I logged in to the mortgage company site to check on the loan and here is what I saw:

So what’s next?

Ok, we have just one piece of debt left, so that means we’re going to pound away at our mortgage until it’s paid off decades early, right? Well, it’s not that simple. The issue is that the loan is only 2.75%, so we’re going to focus more on fully funding our 401k’s and Roth IRAs, filling up our savings accounts for various savings goals such as home repairs, new car (way down the road), and a general emergency fund.

We’ll keep an eye on the trending of interest rates, but right now we’re saving hundreds on interest with the variable rate, but we know it can’t last forever, but we can’t justify the costs associated with refinancing and when the new loan would most definitely be 2-3% higher than our current rate. The more cautious reader would say take advantage of rates now as they will only go up, but in our case, we aren’t positive we’re going to stay in this home forever, so yet another reason to hold off on locking in on a long-term loan with a higher rate.

Anyone else in this boat? How are you handling the risk vs benefits conundrum?

Sending in extra payments

We’re on a monthly payment plan, not one of those “pay twice a month” deals. Our payment is due the first of every month.

Now, I use online billpay with my bank to just send a check directly to the bank without the paper slip from the bill. But what I learned a few years ago when I tried to make a SECOND payment in the same month as one I already paid for was that the mortgage company applied the payment to the next month’s interest first, thus resulting in much less principal reduction. I was expecting the entire amount would go towards principal rather than the next payment, so I called the mortgage company.

You know what their rule is about sending “extra payments”?

You need to send the extra payment to a different mailing address.

Whahuh? If I’m sending in an extra amount well before the next due date, and the amount is not even close to the regular payment amount, then I would expect their “system” to recognize the intent is an accelerated loan payoff. But no, they want to strip out all the interest first and apply it to the next month no matter what.

I’m sure it makes sense in some financial world somewhere, but to me it’s idiocy. Therefore, I plan around it by just sending the extra payment in with the regular mortgage payment (same check) and avoid this special second address.

Can anyone explain the reasoning the mortgage company might have for this type of action? I should also add that including the memo “apply full amount to principal” or anything similar doesn’t work. You HAVE to send it to the other address.

Well, it’s 6 years later, and we have excellent news. We’ve paid off about $1500 of our first mortgage! No wait, that’s not the good news. The good news is that we’ve been fortunate enough to have, and keep getting, good, well-paying jobs as well as get a decent amount of side-income from some websites such as this one.

With that income, as well as tightening our belts and cutting expenses, we’ve been able to pay off over $110,000 in consumer debt and student loans. As of November 2009, we’ve been debt-free except for our mortgages…but that’s going to change soon, sort of. In addition to paying off all that debt, we’ve been focusing on paying off our second mortgage, which was almost $80,000 (we live in D.C.), which is a high-interest loan and stood between us and 20% equity in our home.

Well, we were supposed to have paid off the second mortgage right about now. I sent in the final payment of about $5k well in advance of month-end, and then kept checking the lender’s website to see the magic $0. But day after day came and it kept showing the same amount. Then I noticed that the first mortgage payment got credited, so I called the lender.

Know how to pay off your mortgage properly!

What I found out, although I don’t know how I was supposed to know this as I thought every payment was handled the same, was that the mortgage company requires a certified check and a payoff letter for the final payment. They bounced back my check, and I had to quickly send a check for the regular payment just to make a payment within the grace period. So now I have to wait for their payoff paperwork to come, go to the bank to get a certified check and then mail them in.

My biggest disappointment was that I got my wife so pumped up that we only had one loan left (which will probably never get paid off), and then have to let her down that I screwed up and didn’t follow the rules. Well, shame on me for assuming this was like any other payment. What happens if I sent just enough to have 1 cent left on the loan? Would they require a certified check then?

So, while I was hoping to surprise you all with the news that we paid off another $80,000 in debt in just 6 years (along with the other $110,000), I have to wait another month or so. But at least I was able to inform you enough to call your own mortgage company to find out their rules on loan payoffs.

You’ve been watching some of those reality TV shows about flipping houses and you’re pretty sure you could do just as well as (if not better than) some of the goofs on the tube. What you may not know is that most of those guys have worked long and hard to secure real estate licenses (not required, but useful when buying and selling multiple homes), become contractors (if you aren’t one, you’d better hire a professional for your crew), and learn the ins and outs of the business (from property assessment to money management to securing loans and following local building codes).

So before you jump head-first into flipping, consider some of the pluses and minuses associated with the business.

Let’s start with money

Cash is always the first thought when it comes to starting a career. How much will it cost and how much do you stand to make? The answer to both of these questions is the same: it varies.

If you want to become licensed in real estate, you could enroll in a program that lasts just a few months to prepare for the exam, or you could make a smart career move and get a degree. You may also want to apprentice as a contractor for awhile as a way to start from the ground up. There are several options when it comes to schooling, but you absolutely cannot learn too much. And don’t forget about the initial investment to buy and fix up the homes you’ll be selling. Not to mention, you’ll also need to pay employees and consider the cost of insurance (for both health and property).

As for the money you’ll make…well, that number is virtually limitless. It all depends on how hard you work, how careful you are with spending, and how lucrative the market is.

You will be your own boss

One nice thing about flipping houses is that you have the freedom to manage your time. You will be your own boss. You can work as much or as little as you want (with flexible hours), rush projects or take your time, and schedule in vacations at your leisure. But there are two sides to every coin.

It is also your responsibility to ensure that work is getting done in a timely manner so you don’t have to continue throwing away money on costly monthly mortgage payments (most professional flippers aim to renovate and sell a home before they make a single payment – yes, that means under one month for turnaround).

You may also want to wait until you’re established (or take on partners) before taking time off so you know there is someone you can trust at the helm of your enterprise. And be aware that problems will arise, so plan your schedule accordingly. There’s nothing worse than getting a frantic phone call when you’re thousands of miles away, but that’s all part of being self-employed.

Stress?

Only you can decide if the possible financial gains are worth the stresses of the job. You may make a huge success of your undertaking or fail miserably, and unfortunately, some factors are out of your hands (like the state of the housing market). On the other hand, with proper education, deep and continuing knowledge of the many facets involved in property renovation, solid financial backing, and a sound business plan in place to get the ball rolling (and keep things moving), you stand to earn a good living and enjoy an exciting and fulfilling career in real estate if you choose the life of a flip houses.

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Kathleen Macky owns a real estate website where you can browse Wesley Chapel homes for sale.