April 1st will mark the one year anniversary of our move to Colorado and we still own a home in Wisconsin. A year ago, I was discussing the possibility of a land contract purchase offer. Twelve months later and that route is still a possibility.

We have a different set of potential buyers this time and the deal is being brokered by our realtor so I feel a little better about it. Nothing is certain, however, and we continue to pray and keep our fingers crossed. A land contract purchase is similar to rent-to-own, except a certain amount of the monthly payment is applied to principle each month. In essence, a land contract is a seller-financed purchase except the deed is not transferred. Let me compare the three options generally:

Rent-to-own:

Buyer moves in with the understanding that he will be given the opportunity to purchase the property at a future date. Typically, the payments do not reduce principle in this situation. Deed is not transferred until the purchase date and the buyer cannot make major changes to the property.

Seller-financed purchase:

Buyer pays down payment and makes monthly payments including interest to the previous owner. Deed is transferred and the buyer is free to maintain or improve the property as he sees fit.

Land Contract:

Buyer makes a small down payment and then monthly payments to the owner. A contract is signed that includes a promise on the part of the buyer to close on the property on a future date. If the contract is not fulfilled, the house goes back to the original owner and the down payment and previous payments are forfeited. Typically, even though the deed is not transferred, the buyer is free to make improvements on the home.

Every situation is unique, but the above are basic outlines of ways to move a house without an outright sale. So why would a buyer choose one these options? The possible reasons are numerous: the buyer does not have a down payment, the buyer cannot get financing, the buyer’s situation is going to change drastically in the near future, etc.

In our situation, the buyers have a good credit history and enough cash saved for a down payment, however they do not want to apply for credit at the moment because they are going through financing for their small business. A hard pull on their credit right now and the assumption of a mortgage line of credit might place their business financing in jeopardy. Once the business financing is in place, they plan to close on our home.

At the moment, we are working through various scenarios with the help of our realtor. We made one offer that was rejected and last week I made a counter-offer. We sure hope this land contract deal goes through.

If the home does not sell within the next two months, we may have to walk away from it . . .

picture credit

Other than to pound him.

Therefore I was a little startled recently to find myself the recipient of a speaking honorarium of almost $600 plus hotel and food expenses. The organization probably spent almost $800 to hire me to conduct a couple of workshops at a conference. Total time spent speaking was probably around 3 and a half hours. Needless to say, an hourly rate of over $170 is a nice gig for a guy like me. (Don’t tell them that I would have done it for $20 an hour . . .)

When I took the job, I knew that I would be paid for the work, but I didn’t quite know how big the check would be. As soon as I got in the car to drive home, I called Mrs. Rocket with the good news. I was still a little incredulous that someone thought I was worth that much as a speaker. But then I remembered reading that glossophobia or the fear of speaking in public routinely ranks as people’s number one fear – even ranking ahead of death in some polls.

And that is why public speaking is a topic for Rocket Finance. A person who does a job that not many people can do or are willing to do, can command a higher salary. Morticians and brain surgeons make more money than most of us, and they should. The thing about public speaking is that it requires no special skills. You don’t have to achieve a high level of schooling or possess a comfortability with cadavers. Public speaking is accessible to almost anyone who is willing to step out and take a chance. At the age of 34, I am surprised to suddenly find myself a somewhat capable public speaker. As I reflect on my life, here are some things that contributed to my development, you may pick up a tip or two that can help you to generate income in this area:

• Learn to speak properly – I remember several teachers throughout my life that emphasized proper grammar. Also, my parents made it a point to model good syntax and pronunciation.
• Look for opportunities to speak with a script. Read a verse or prayer in church, write out a toast for the next wedding you attend, look for a small part in a play, etc. Using a script removes some of the pressure and allows you learn to relax in front of people. Some of my earliest school memories included the recitation of short, memorized lines for a school program. This helped me to deal with anxiety.
• Teach a Sunday School class, speak to a Boy Scout Troop or some other group of young kids. Children are forgiving of mistakes and are much less intimidating. This will give you practice in ordering your thoughts – before you stand up before adults.
• Volunteer to MC a wedding reception. This is a great transition opportunity. You can use a script, most people are not paying attention and you can always just pick out people to embarrass if you have trouble being funny on your own.
• Progress to a presentation at work.
• Volunteer to speak for free. Not every gig is a paying opportunity, but it will give you practice and more importantly, any public speaking will showcase your abilities to a wider audience.
• Don’t be afraid to speak slowly and pause now and then. Nothing communicates nerves more than ah’s, um’s and speaking quickly. You are always speaking faster than you think you are. Don’t talk just to fill space, you will make mistakes that way. This is where I get myself into trouble.
• Don’t be afraid to mess up. If you are embarrassed – your audience will be uncomfortable. If you are confident, even after a blunder, your audience will laugh with you. Some of the greatest public speaking moments happen when the speaker makes a mistake, acknowledges it and keeps right on going. I have made hundreds of mistakes when public speaking and I have learned how to roll with the punches. I have also learned the biggest cause of mistakes: lack of preparation.
• Study. It doesn’t matter what. Pick an area that you enjoy and start to read and participate in that field – gardening, sports, sewing, cooking, fishing, golf – every field needs people who can speak in public. Start to attend local gatherings your area of interest and you will soon find opportunities to practice your new skill.
• Be passionate. Nothing helps a speaker more than being passionate about his subject matter. If you don’t care, why should your audience? Furthermore, if you care strongly about what you have to say, you will forget about your nerves.
• Keep a watch handy and stick to the time schedule. No one ever complains about a speaker who is brief. Leave your audience wanting more.
• Have a plan. Think about your words before they come out of your mouth.
• Just do it. If an opportunity presents itself, seize it! Not all of us can be Ronald Reagan, but you never know if you don’t try.

I doubt that I will ever command an honorarium much larger than the one I received in Wyoming, but the check did cause me to notice an area of my life that I have developed almost unintentionally. Maybe you can develop the ability to speak in public and can start to generate a little extra money.

Nothing ventured, nothing gained.

(If you become famous, please mention Rocket Finance when you are on T.V.)

Most of you know that my family and I recently moved several states to the west. Our move took place rather quickly and now we find ourselves as the proud owners of an empty house in Wisconsin and as the recent signees of a twelve month lease in Colorado. Our finances are stretched as tight as possible, but with the help of a small raise and a similarly sized budget surplus from 2007, the situation will be tenable for six months to a year. Housing expenses are currently consuming seventy-five percent of our monthly income. Obviously we are doing all we can to sell our home. A month ago, I mentioned that I was considering a land contract.

After researching the concept, I met with the potential buyer and we began to discuss various scenarios of a rent-to-own arrangement. Rent-to-own or also known as a land contract can be a complicated venture. The basic principle around which they are based is that the buyer assumes all of the risk in exchange for the opportunity to purchase a home without a down payment. Typically the buyer is allowed to move into the property and pay rent with the commitment to purchase the home at a certain point in the future. Many times the owner agrees to apply a portion of the monthly rent check toward the purchase price. The risk comes from the fact that there is not a lot of protection for the buyer. The owner can re-take possession of the property at any time and if the buyer cannot purchase the home outright on the agreed upon date, he loses all of the previous payments and equity.

My discussions with the potential buyer broke down in one critical area: purchase price. The buyer wanted to purchase the house outright after leasing for three years, the problem was that he wanted to purchase the home in 2011 – for the 2008 price. Here is the set-up: he would give me a monthly rent check and take possession of the house. I would apply a portion of the check toward the total price of of the house (or the principal). In April of 2011, I would agree to sell him the house for the agreed upon price minus his payments toward the principle. The problem was that he would not allow for any appreciation of the house.

Let me demonstrate using fictitious numbers – the house is worth $150,000 in 2008. He makes monthly payments of which $100 is applied to principle each month. The contract then allows him to purchase the house for $146,400 in 2011. The problem is that houses almost always appreciate, even in a down market. In fact, in our area, the average appreciation per year is 5% to 8% – even over the last two years. So I proposed that we set a price that reflected an annual appreciation of 3%. Which would make the property’s value approximately $164,000 in 2011. The monthly principle payment would be subtracted from this amount meaning that I would commit to selling the house for $160,400 in 2011.

He walked.

Was my proposal unfair? Or did this post include too many numbers for you?

Photo by artsy_t

We are feverishly tying loose ends and packing and saying goodbye’s as we anticipate our upcoming move in ten days. We are also trying to make the decision to either sell our home or rent it out. Obviously, if we sold our home tomorrow, we’d be in great shape. The problem is, our home has not been improved enough to make much of a profit. Also, there is no guarantee that we can sell it in the next 6 months . . . or year. . . or more.

The next option is to rent it out. I have already spoken to a couple of pretty responsible people who I know quite well. They would make great renters. The con is that we cannot rent it for enough to cover all of our expenses each month – mortgage, HELOC, taxes, insurance, utilities, etc. The pro is that we would at least have some income while the house was sitting in Wisconsin and we are living in Colorado.

The third option came out of the blue: land contract. I ran into a contractor who did some work on our house several years ago and I mentioned that we were moving. He is a single handy-man who would like to purchase a home. The basic idea of a land contract is that the buyer is allowed to live in the home and assumes all privileges of ownership except that no deed is transferred. The buyer makes a payment each month directly to the owner. This money is not viewed as rent, but is more similar to a mortgage payment and a portion is applied to the total price of the house. Land Contracts can last up to 30 years or the buyer can agree to purchase the house after an agree-upon length of time.

It is a winning situation for the buyer because a large down payment is not required. The situation is attractive to us as the owners because we are assured of having enough income to cover our housing expenses in the short-term and this particular buyer is able and motivated to continue working on our house because he will benefit from the equity in the future.

The biggest problem is that I am utterly ignorant when it comes to this type of financing. Any thoughts or advice from readers?

Photo by jana-n-tommy.

Home for Sale: river view, no basement, some yard

Yesterday, I presented rocket finance readers with my family’s mortgage story. We are not subprime borrowers, but our experience demonstrates how access to easy credit has caused the current foreclosure crisis in the United States. I am passionate about keeping others from making the same mistake. In the following list of articles, you can learn all you need to know about home finance, credit and home equity. If you are looking for a home, contemplating a HELOC, or looking for ways to hold down costs so that you can hang on to your home, this post is for you.

We have two posts from foreign bloggers who demonstrate that the problems are not limited to the United States. Plonkee from the UK writes the American subprime crisis: Should we care?. Mike from 4 Pillars tells us why the subprime crisis has not yet affected our friends to the north.

My Two Dollars explains why he doesn’t feel bad for those who over-extended themselves and are struggling with their mortgage. I am not always in total agreement with 2 buck’s politics, but I think he and I are in agreement on this one. My personal challenges in this area are my own fault and I don’t expect the government to bail me out. If you are facing a tough time with your mortgage, Randall from Credit Withdrawal wants to give you some steps to take in order to avoid foreclosure.

As you look toward a home purchase, Single Guy Money presents the real cost of homeownership. This is important! Pinyo from Moolanomy explains debt to income ratio. I bought my first house without ever having even heard this concept. I did not know what our ratio was and I certainly did not know when debt ration was getting too high. Jaime from I Paid for this Twice Already warns against the “Can we afford the payments?” mentality. Patrick at Cash Money Life explains ubiquitous the escrow account. My realtor used the word “escrow” while I was signing papers for my first mortgage, I just nodded, smiled and kept signing papers. She could have been speaking Japanese for all I knew.

Mrs. Micah explains why you might want to consider renting just a little bit longer. If you are still debating that question, Jim from Blueprint for Financial Prosperity analyzes the numbers extensively in his rent vs buy post.

Once you own your home, Madison at My Dollar Plan gives some good reasons to consider an Adjustable Rate Mortgage – remember, an ARM isn’t for everyone, but it is good to understand the concept and see if it applies to your situation. Ciaran at Chance Favors has put together historical piece on how we got to where we are in the US and warns against predatory lenders. I never thought that a bank would loan me more than my house was worth, but they did and they do! I believe that home equity loans are generally a bad idea, but what if you are drowning in credit card debt? Debt FREE Revolution tackles that important question in Pay off credit cards with a HELOC?. Did you know that your mortgage payment can change – even with a fixed rate loan? Make sure you pay attention to your mail so that your are not blindsided with a major change in your monthly payment.

Many people look at a house purchase as an investment – it can be and it is. Mike from Two Wise Acres gives a great deal of wise advice if you are considering a house as an investment. If you are debating whether or not to invest in a house or increase investment in the stock market, you should stop by Millionaire Money Habits. Sweat equity is a great way to increase return on your housing investment and we have made a great deal of improvements on our home, but it is not always easy or cheap. Remodeling this Life asks So you want to buy a fixer-upper?.

Once you sign the papers for that mortgage or home equity loan, do everything you can to pay down your debt and stay healthy financially. Hardworking blogger, Lynnae at Being Frugal, will help you save money with a huge list of frugal hacks for your home. You have to see this list.

Finally. . . if the unthinkable happens, Debtkid gives you some suggestions for dealing with the aftermath of a foreclosure.

If you decide to purchase your own home, congratulations! There are definitely benefits to homeownership. Just be sure that you have consulted every source of advice before you sign the papers. If you have done your homework, your home will be blessing to your family for years to come.

Picture by Jason Weaver.