This week, we interviewed Saurabh Shah from InstaLend.
Without further ado…
Who are you and what do you do?
My name is Saurabh Shah – I am the co-founder of InstaLend, which is a nationwide lender for fix and flip and rental loans. I have spent the last few years growing the business and scaling it across loan product types. Typically when a borrower wants to enquire about a loan, they speak to me to get the loan origination process initiated.
What problem does your product/service solve?
InstaLend is transforming neighborhoods by allowing anyone to become a real estate developer. We do this through our flexible loan programs which are available to first-time property investors, as well as experienced folks.
What are you most excited about right now?
I believe that once the moratorium on foreclosures and evictions are lifted, we could see a lot more distressed properties come to the market, which could increase buying opportunities for property investors. This in turn should help lenders like InstaLend scale their operations and grow further.
What’s next for you?
Expanding to commercial real estate.
What’s a cause you’re passionate about and why?
I’m passionate about consciousness around our carbon footprint. With the Biden Administration, we’ve seen platforms like EnerYields being created that are helping property owners tap into low-cost incentives to make their buildings go green.
Thanks to Saurabh for sharing his story. If you’d like to connect, find him on LinkedIn here.
We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop us a line (Community @ geekestate dot com).
In the days before Los Angeles’ “mansion tax” took effect, the luxury market moved at hyperspeed.
Prices were slashed, escrows were rushed and million-dollar deals were closed as panicked sellers offered exotic cars and lucrative bonuses to anyone willing to buy their properties by the end of March. It was a manic, desperate attempt at avoiding Measure ULA, a new transfer tax that levies a 4% charge on all residential and commercial real estate sales in the cityabove $5 million and a 5.5% charge on sales above $10 million.
On April 1, everything froze.
Sellers, now faced with paying the tax if they sold, yanked their properties off the market. Discounted prices, which were valid only if the deal was done by March, shot back up. The luxury goodies were off the table. Bye bye, Bentley.
A market slowdown was expected, but the night-and-day difference between March and April sales was unprecedented.
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In March, when the luxury market reached the peak of its frenzy, there were 126 home and condo sales above $5 million in the city of L.A., according to the Multiple Listing Service.
This Brentwood mansion sold days before Measure ULA took effect, avoiding a tax bill of $891,000 that would’ve gone toward housing and homelessness efforts.
(Noel Kleinman)
In April, once Measure ULA took effect, there were two.
One sold in Brentwood for $5.7 million, and the other traded hands in Venice for $7.5 million. Together, they raised $528,000 for the city to use for affordable housing and homelessness prevention programs. So far, that’s it.
The slowdown makes sense. Sellers were economically incentivized to close deals before they would have to pay the tax, so most of the sales that were going to close already closed. L.A.’s luxury market won’t remain frozen forever, and deals will eventually pick back up, especially once the courts rule on two lawsuits arguing that the tax is unconstitutional. Many sellers are holding off listing while they wait for a clear ruling one way or the other.
But for a city grappling with a housing crisis, funding is needed as quickly as possible, and early signs indicate that the once-lofty projections for how much Measure ULA would raise might be much, much lower — especially for the first few months.
When Measure ULA was on the ballot in November, proponents estimated it would generate roughly $900 million a year, based on real estate sales data from 2021 to 2022.
In March, a report from the City Administrative Office lowered that number significantly, projecting $672 million in revenue from July 2023 to June 2024. The projection was a response to a real estate market that slowed dramatically because of rising interest rates.
Then in April, Mayor Karen Bass unveiled her first budget proposal, a $13.1-billion plan that included $1.3 billion to address homelessness. However, the budget projected only $150 million in revenue from Measure ULA.
The city is walking a tightrope. It needs to spend as much as possible to address housing and homelessness, but if the courts decide the measure is unconstitutional, the city will have to pay back all the money it generated from the tax. An L.A. County judge recently consolidated the two lawsuits challenging the measure into a single case, but the timeline for a ruling is unclear.
In this legal limbo, the city had to choose a budget number big enough to make an impact but small enough to pay back if necessary. The planners landed on $150 million because they felt confident that the city could make that back through federal reimbursements from organizations.
“The $150-million number takes into account the risk of losing litigation, but it’s also reflective of the urgency of the housing and homelessness situation,” said Greg Good, a senior advisor on policy and external affairs for the Los Angeles Housing Department. “This is an amount we feel comfortable that we could refund, if necessary.”
The ULA money can be spent only as it comes in, meaning that the city won’t be able to use the $150 million until the tax generates $150 million, Good said.
If luxury sales stay at the pace they are right now, that may take awhile.
“We anticipated the market slowing down. It’s logical economic behavior,” Good said. “But it’s still real estate in L.A. Eventually, transactions will get back to normal.”
Sellers are sitting on the sidelines in hopes that the tax will be overturned. The Howard Jarvis Taxpayers Assn., one of the groups filing a lawsuit against the tax, published a page on its website with instructions on how to file for a refund if the suit is successful.
“Sellers are taking their properties off the market, and there are some developers who won’t buy anything in the city,” said Compass agent Sally Forster Jones. “There’s hope that it gets overturned.”
Jones handled one of the final sales before Measure ULA took effect, helping a client sell a 1930s mansion in Brentwood for $16.2 million. Because it sold before the deadline, the seller saved $891,000.
The commercial market has cooled as well, said Oron Maher of Maher Commercial Realty. He said that most sellers listing properties post-ULA will be the ones that have no choice.
“These are mom-and-pop owners of real estate. People going through death, divorce, partnership dissolutions or retirement who are forced to sell as soon as possible,” Maher said. “If you don’t need to sell in ULA, you won’t. This will be a tax on people already experiencing difficult situations.”
In the last days of March, Maher closed the sale of a 16,000-square-foot apartment building on behalf of an elderly client who chose taking a lesser price over paying the tax. At $11 million, the sale price was $1.5 million less than the asking price, but it avoided a tax bill of $605,000.
This 16,000-square-foot apartment building sold for $11 million on March 31.
(Mano Handian / Lights Camera Location)
Maher said that over the last month negotiations have become a game of hot potato, with sellers and buyers both asking the other to cover the tax.
“Buyers are saying it’s a seller’s tax, but sellers are saying they can’t sell unless the buyer can raise the price,” he said. “It’s all leading to less transactions.”
Even if the measure is upheld in court, there’s a chance sellers will find ways to skirt the tax. Shortly after the measure passed, The Times reported that wealthy sellers were already eyeing ways to avoid paying, such as breaking properties into pieces and selling them separately.
Legal resource outlet JD Supra recently published an article headlined “Nine Ideas to Avoid the Effect of Measure ULA.” Its suggestions include selling stakes in the entity that owns a property rather than the property itself, selling a house and the land it occupies separately, or taking the broker’s fee out of the sale price to get it under the tax thresholds.
City officials, meanwhile, are beefing up staff to help manage and administer the tax. The Los Angeles Housing Department is requesting six new hires to help launch ULA spending effectively, and the City Council confirmed 15 people to sit on the Citizens Oversight Committee, a volunteer group that will supervise spending and make program recommendations.
Among those named to the committee were Steve Diaz, deputy director of the L.A. Community Action Network; Deepika Sharma, a professor at USC‘s Gould School of Law; and Alan Greenlee, executive director of the Southern California Assn. of Nonprofit Housing, who worked on the United to House L.A. coalition that drafted the measure.
The group will convene for the first time in early May.
“I’m excited about the prospect of ULA,” Greenlee said. “It creates considerable and ongoing resources that the city can use not only to protect low-income residents so they can stay in their homes, but also creates certainty that there will be resources available for developers to build affordable housing.”
Good said both groups will play a crucial role — should the measure survive litigation.
“We’re in an extraordinary dual crisis with housing security and homelessness, and this measure was passed by nearly 60% of voters,” Good said. “This is a genuine opportunity to move the needle, and we’re hopeful and committed to seeing it through.”
Is fear holding you back from taking the massive action required to make meaningful changes in your life? On today’s podcast with Brian Luebben, we discuss how to overcome fear in order to achieve incredible things. Brian also shares how real estate helped him find financial freedom, why now is the best time to work toward goals, and where he found meaningful support in his journey. Don’t miss it!
Listen to today’s show and learn:
About the Action Academy Podcast [2:43]
Brian Luebben’s brief background [6:36]
Creating a path out of corporate America [8:37]
The “tomorrow isn’t promised” philosophy [14:13]
The power of a vivid vision [15:29]
Brian’s inspiration for something better [18:11]
The 2023 Real Estate Rockstars Mastermind [24:35]
Advice on taking massive action [26:07]
Brian’s take and tip on Mastermind meetups [30:55]
Advice for agents on taking action [34:15]
Aaron’s door-knocking strategy for foreclosure properties [36:10]
Brian’s final thoughts: force change before it’s forced on you [38:50]
Where to find and follow Brian Luebben [40:00]
Brian Luebben
Brian Luebben is an Entrepreneur, Podcaster, and Real Estate Investor out of Atlanta, GA. While in college he built his first company (GreekBeats DJ/Entertainment). Shortly after graduating – he made it to the top of a Fortune 500 Company in their Sales Organization, only to realize quickly that living the “corporate America life” for the next 40 years was simply no longer an option.
He now runs a successful podcast “The Action Academy” where he talks to seven, eight, and nine figure entrepreneurs on how to earn freedom in life and business. Through his podcast, cash-flowing real estate, and his Media Company (Sexton Media) he now has generated enough revenue via remote income sources to earn him Financial Freedom to do what he wants, when he wants, with who he wants.
This lead to him leaving his corporate job in March 2022, hopping on a one way flight, and traveling the world for 6 months straight.
His new mission is to help 1,000,000 other people do the same through The Action Academy.
Related Links and Resources:
Thank You Rockstars!
It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.
A once common feature of buying a term life policy was being able to offer what’s called a spousal rider.
A rider is something that you are able to add on to your life insurance policy that can provide additional benefits or coverage depending on what the rider covers. With a spouse rider, you and your spouse will both have coverage under the same policy. These riders basically cover both of you instead of having to purchase two different policies.
For example, there are accidental death riders that will pay out a larger portion than the face amount.
There are child riders that will pay out if something were to happen to your child to help cover funeral costs, but children riders are a little different because they don’t require as much life insurance coverage.
Spousal riders are similar to child riders in that the insured, say for example the husband, would receive some type of economic benefit if his spouse were to die before him.
Spousal riders are more commonly added on to help out with burial costs. The average funeral can cost around $10,000, which can be difficult for a grieving spouse to pay for due to the loss of income.
Do Spousal Riders On Insurance Polices Still Exist?
As time has gone on, spousal riders have become less and less prominent as insurance companies have pushed more for the spouse to take out their own policy. Recently, I had a 59-year-old male who is looking to lock in a $100,000 15-year policy. His previous policy was expiring and it had a $10,000 spousal rider that he was hoping to replace.
Upon doing further research, I found that there are some life insurance companies that do offer the spousal rider. I was then surprised to learn that there were only a few options available.
The few companies that I found that offer a spousal rider were United of Omaha, Nationwide and Lincoln Benefit Life. The important thing for the client’s case is that none of them offered the coverage he was seeking. For example:
United of Omaha offers a spousal rider, but the minimum coverage for the spouse is $100,000.
Nationwide requires a minimum face amount of $125,000 for the insured and then the minimal spousal coverage of $25,000 for the spouse.
Lincoln Benefit Life is similar to United of Omaha but it only required $50,000 of spousal coverage.
Upon running a few more quotes, I found out for this gentleman’s case the Lincoln Benefit Life was the cheapest option at $140.88 per month.
Spousal Rider Vs. Individual Life Policy
Thinking that the spousal rider option was too expensive, I then ran some quotes for an individual policy for the husband and a final expense policy for his wife. The cost of a 15-year, $100,000 basic term policy of $48.56 per month plus a $10,000 final expense policy for his wife, which was $57.27 per month, a total premium for both is only $106.03, about $34 difference than doing the life insurance policy with the spousal rider.
Purchasing the term policy with a spousal rider didn’t make much sense here compared to buying the two separate policies.
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Are Spousal Riders Worth It?
If you are looking to have a spousal rider, as long as your spouse is in good health, I would consider doing the separate term policy. Do keep in mind that your spouse’s risk class and age will also have an impact on how much your premium policy will end up costing. Just like buying another life insurance policy, the company is going to require your spouse to take a medical exam, which can drastically impact how much you pay for the rider.
The biggest disadvantage to a spousal rider is losing coverage. If the primary insured party dies, the rider will no longer be effective. At this point, the spouse would have to find more coverage, and more than likely it’s going to cost them more than it would if they would have originally bought a term policy. Similarly, if the marriage is ended through divorce, the rider won’t cover the spouse and they will be back to square one.
Buying a separate policy will give both spouses coverage regardless if one dies, and because the policy is under each spouse’s name, if there ever were a divorce, both would keep their life insurance coverage. There could be some situations that spousal riders are worth the money instead of buying a separate term policy for your spouse, but these situations are few and far between. In most cases, the rider won’t save you much (if any) money on monthly premiums. Most applicants are surprised to see just how affordable a life insurance policy can be for their spouse.
Because these riders are becoming less common, you’ll have a lot less options, while you would have hundreds of different options for a term life insurance policy. The more options that you have available, the higher chance that you have of finding coverage for a better price.
In just about every case, buying a separate policy is more effective than adding a rider to your policy. Sure, only having one policy with one bill to pay is easier, but it might not be giving you the coverage you want at the best rates. Regardless of which option you take, we would be happy to find the best coverage at affordable rates for you and your spouse.
How much coverage you and your spouse need?
Regardless if you choose to purchase a rider or a separate policy, it’s important that you have enough coverage for you and your family. If you’re looking at purchasing an additional policy or rider, or it’s been a long time since you’ve looked at your insurance policy, it’s time to recalculate your needs to make sure you’re covered if tragedy ever strikes.
Both you and your spouse should sit down and discuss all of the debts that both of you would leave behind if either were to pass away. Add up your mortgage, car payments, credit card bills, student loans, etc. and the total of your debt is a great starting point to make sure you have enough life insurance.
The other factor that you both should consider is how many people rely on your incomes and how much income would be lost if one of you were to pass away. Do both of you work? Would one spouse be able to live off of just a single income? Do you have children that need your income? All of these factors are going to impact the amount of life insurance you need.
Every year there are spouses suffering through the grief of losing their spouse, and they find themselves dealing with massive bills that they don’t have the money to pay the bills. Don’t let your spouse become one of these stories. Life insurance gives them the funds they need to get through the difficult time without adding financial struggles.
If you want to get the lowest life insurance rates for the best coverage, you could spend hours on the phone or researching different companies looking for the perfect policy. We can save you hours of frustration on the phone answering the same questions. Fill out the quote form on the side and the lowest rates from the highest-rated companies will come to you.
“Mortgage credit availability decreased for the third consecutive month, as the industry continued to see more consolidation and reduced capacity as a result of the tougher market,” said Joel Kan, MBA’s deputy chief economist. “With this decline in availability, the MCAI is now at its lowest level since January 2013.” The Conventional MCAI dropped 2.3%, … [Read more…]
Both Wells Fargo and Bank of America, the top two residential mortgage lenders in the nation, have raised minimum credit score requirements on FHA loans, according to Bloomberg.
The pair raised the minimum Fico score to 640 from 620 on FHA-insured loans they buy from other mortgage lenders.
Per Fico, there are roughly 6.3 million Americans that have credit scores between 620 and 640, or about 3.7 percent of the population.
As a result, correspondent lenders like Quicken, which is a top ten mortgage lender, have stopped making many of their FHA loans.
And FHA commissioner David Stevens told Bloomberg the move would exclude as many as 15 percent of FHA borrowers, who often have no other place to turn for home loan financing.
However, Wells Fargo will continue to offer FHA loans with Fico scores as low as 600 via its own loan officers.
And Bank of America still offers FHA loans to its direct customers with Fico scores as low as 620 for purchase money mortgages, though they now require 640 for refinance applications.
Chase, the third largest lender in the nation, had already raised its credit score requirements on FHA loans a while back.
Credit Quality Improves on FHA Loans
But credit quality has improved immensely at the FHA, largely because more creditworthy borrowers have turned to the agency for financing.
And the FHA recently imposed a minimum credit score of 500, while also requiring that borrowers have at least a 580 credit score to qualify for the flagship 3.5 percent down payment program.
At the end of the third quarter, just 3.8 percent of FHA loans had scores below 620 or no credit score, compared to 50.4 percent as of the end of 2008.
Nearly 40 percent of home purchase mortgages and nine percent of refinances were insured by the FHA during the nine-month period ending June 30.
Update: A reader informed me that Wells Fargo will still buy FHA loans with Fico scores as low as 620 if they come from correspondents and mortgage bankers.
Today, we’ll take a closer took at the “FHA PowerSaver” loan program, which aims to make it easier for homeowners to make energy-saving improvements to their properties.
In short, the FHA PowerSaver loan is essentially an alternative to taking out a home equity loan or HELOC, both of which have become more difficult to come by ever since the mortgage crisis.
After all, mortgage lenders have lowered maximum combined loan-to-value ratios (CLTVs) considerably, and with home prices not what they once were, it doesn’t leave a lot of room to borrow by tapping equity.
How FHA PowerSaver works:
The FHA PowerSaver program allows homeowners to borrow up to $25,000 for terms as long as 20 years to make certain energy improvements, including insulation, duct sealing, energy-efficient doors/windows, HVAC systems, water heaters, solar panels, and geothermal systems.
The FHA encourages homeowners to get an energy audit to determine which improvements will be most cost-effective and worth their while.
It’s essentially a green improvement loan intended to make your home more environmentally friendly, while also saving you money via lower energy costs.
What about FHA PowerSaver rates?
The mortgage rate for a PowerSaver loan is expected to be between five and seven percent, but comparable or lower than other options available to homeowners.
As mentioned, second mortgages are harder to come by and the interest rates aren’t cheap in most cases, especially when the CLTV is super high.
PowerSaver loans are backed by the FHA, with federal mortgage insurance covering 90 percent of the loan, and private mortgage lenders retaining the remaining risk.
The loans will be subordinated behind existing first mortgages, and borrowers must have existing home equity, as the max combined loan-to-value ratio is 100 percent.
Eighteen national, regional, and local mortgage lenders are taking part in the two-year pilot program.
It is expected to help roughly 30,000 homeowners finance energy-efficient upgrades, while creating 3,000 jobs.
FHA PowerSaver Requirements
Property type: one-unit, owner-occupied properties Loan term: Up to 20 years Minimum credit score: 660 Max loan amount: $25,000 Max debt-to-income ratio: 45% Max combined loan-to-value ratio: 100%
FHA PowerSaver Approved Lenders
1. Admirals Bank 2. AFC First Financial Corporation 3. Bank of Colorado 4. City of Boise, Idaho 5. Energy Finance Solutions 6. Enterprise Cascadia 7. HomeStreet Bank 8. Neighbor’s Financial Corporation 9. Paramount Equity Mortgage, Inc. 10. Quicken Loans 11. SOFCU Community Credit Union 12. Stonegate Mortgage Corporation 13. Sun West Mortgage Company, Inc. 14. The Bank at Broadmoor 15. University of Virginia Community Credit Union, Inc. 16. Viewtech Financial Services, Inc. 17. Wintrust Mortgage 18. W. J. Bradley Mortgage Capital Corporation
If you’re like most small business owners, you’re always looking for ways to keep your finances in order. That especially means protecting your hard-earned business revenue.
So are business checking accounts FDIC insured? The answer is both yes and no, depending on the type of account you have and how your bank operates.
The Federal Deposit Insurance Corporation is a government agency that protects consumer deposits in the event of a bank failure. All FDIC-insured banks are required to display the official FDIC logo at their branch locations.
Let’s unpack this a little bit further, though, because there are nuances you should be aware of.
What’s Ahead:
What are business checking accounts?
A business checking account is not a personal checking account. That much is clear. But what else is a business checking account? And, more importantly, what isn’t a business checking account?
A business checking account is a tool for managing your company’s finances. It’s a place to keep track of your income and expenses, and to make sure that your money is being used appropriately.
A personal checking account, on the other hand, is a place for you to manage your own finances. You can use it to pay your bills, save for retirement, or just keep track of your spending.
A business checking account can be a great asset for any company, but it’s important to understand what it is and what it isn’t before you open one.
What are their benefits?
Running a business is hard enough without having to worry about keeping track of expenses. A business checking account can help you stay organized and on top of your finances.
With a business checking account, you can easily see where your money is going and keep track of business expenses. This can help you save money and make better financial decisions for your business.
In addition, a business checking account can help you build credit for your business. This can be helpful if you ever need to take out a loan or line of credit.
So, if you’re running a business, consider opening a business checking account. It could save you time and money in the long run!
How do you know if your business checking account is FDIC insured?
When you open a business checking account, the first thing you should do is make sure it is FDIC insured. The FDIC is a government agency that protects your money in case of bank failure.
To find out if your account is FDIC insured, look for the FDIC logo on your bank’s website or on your account statements. You can also call your bank and ask a customer service representative.
If your account is not FDIC insured, you may want to consider opening an account at a different bank.
Keep in mind that not all banks are FDIC insured, so make sure to do your research before choosing a bank for your business.
What are the steps to opening a business checking account?
So, you’re ready to take the plunge and open a business checking account. Congratulations! This is a big step for any small business owner. But where do you start? Don’t worry, we’re here to help. Here are the steps you’ll need to take to open a business checking account:
Choose the right bank for your business. This is an important decision, so take your time and do your research. Consider your business’s needs and choose a bank that offers the services and support you need.
Gather the required documents. When you know which bank you’d like to use, they will have a list of the documents they require to open an account. Make sure you have everything on the list before you go to open your account.
Open your account and deposit money. This is the easy part! Once you have all of your documents in order, simply go to the bank (either physically or online) and open your account. You’ll need to make an initial deposit, so make sure you have enough cash on hand or in your source account.
Start using your account! Now that your account is open, it’s time to start using it for your business transactions. Be sure to keep track of your spending and deposits, and to stay within your budget.
What documents are needed to open a business checking account?
When you’re ready to open a business checking account, you’ll need to bring a few things with you to the bank.
First, you’ll need to bring your business license or incorporation documents. These will show the bank that you’re authorized to do business in your state.
Next, you’ll need to bring your Employer Identification Number (EIN). This is a nine-digit number assigned by the IRS that identifies your business for tax purposes.
Finally, you’ll need to bring a voided check from your personal account. This will give the bank the information it needs to set up direct deposit for your business account.
Once you have all of these documents, you’ll be ready to open a business checking account and get started on your way to financial success.
How to use a business checking account to manage your finances
A business checking account is a great tool for managing your finances. You can use it to keep track of your income and expenses and to make sure that you’re paying your bills on time.
The best way to use a business checking account is to set up a budget and stick to it. By knowing what you have to spend each month, you can stay on top of your finances and avoid overspending.
Additionally, you can use your checking account to save money by setting aside funds for future expenses. By planning ahead, you can make sure that you have the money you need when you need it. F
inally, a business checking account can help you build a good credit history. By making on-time payments and keeping your account in good standing, you can improve your credit score, which will make it easier to get loans in the future.
So don’t be afraid to use a business checking account to manage your finances – it’s a great way to stay organized and avoid financial problems down the road.
The importance of reconciling your business checking account
As a small business owner, you wear a lot of hats. You’re the CEO, CFO, and janitor all rolled into one. And while you might be tempted to put off reconciling your business checking account, it’s actually an important part of running a successful business.
Reconciling your account helps you spot errors and prevent fraud, and it also gives you a clear picture of your financial health. Plus, it’s a great way to catch up on the latest gossip from your bank teller. So don’t delay—reconcile your account today!
What are some of the benefits of reconciling a business checking account?
When it comes to reconciling a business checking account, there are a few key benefits that can’t be ignored. For starters, it can help to ensure that all of your transactions are accurate and up-to-date.
This is important for both record-keeping purposes and for making sure that your finances are in good order. Additionally, reconciling your account can help you to identify any discrepancies or errors that may have occurred.
And finally, this process can give you a better understanding of your overall financial picture, which can be helpful in making future business decisions.
Overall, reconciling your checking account is a wise move for any business owner. It may take some time and effort, but the benefits are well worth it.
How does one go about reconciling a business checking account?
If you’re like most people, the thought of reconciling your business checking account probably sounds about as much fun as getting a root canal. But it doesn’t have to be that way! Just follow these simple steps and you’ll be done in no time.
First, get your hands on a copy of your bank statement. Then, grab a copy of your checkbook register.
Next, match up all of the checks and deposits from your register with the corresponding items on your bank statement. If there are any discrepancies, investigate and make corrections as necessary.
Finally, total everything up, and voila! You’re finished.
So there you have it – reconciling your business checking account doesn’t have to be painful. Just follow these simple steps and you’ll be done before you know it.
Can I rant about mortgage rates for a minute? I just can’t help myself. First things first, current mortgage rates are actually lower today than they were a year ago. Let’s make that clear.
This is true despite the headlines warning you to “BUY NOW” and to do so before it’s too late, before interest rates rocket to the moon.
If you don’t act now, you might be stuck with a mortgage rate in the double-digits…well, that’s what all that fear mongering makes it feel like.
The 30-Year Fixed Averaged 4.15% This Week
It’s early 2018 and mortgage rates are still lower than they were last year
While the 30-year fixed has climbed to 4.15% per Freddie Mac
It’s still below the 4.19% being offered this time last year
Which means there’s no need to panic just yet
Let’s start with the facts. The 30-year fixed averaged 4.15% this week, per Freddie Mac, which collects mortgage rate data from lenders from Monday through Wednesday.
This gives them a good idea as to what’s being offered, despite the survey being inherently flawed if you take it at face value, which you shouldn’t.
While 4.15% is indeed up a sizable 11 basis points from 4.04% last week, it’s still down from 4.19% a year ago. So to get in a tizzy over the recent increase in mortgage rates would be silly, at best.
Additionally, 30-year mortgage rates anywhere close to 4% is a reason to celebrate without question, both historically and recently.
Here Comes the Panic
Whenever rates rise for a sustained period
Everyone assumes they’ll never come down again
Or that they’ll never stop increasing week in and week out
But sometimes that’s precisely when they reverse course
When mortgage rates rise for a few successive weeks, or climb rapidly, which they kind of maybe did in the past few weeks, a lot of irresponsible reporting and exaggerating nonsense surfaces.
To put it in perspective, a rate of 4.25% versus 4% on a $300,000 loan amount equates to a difference of $44 per month. Yes, it’s real money, but it’s not a reason to panic and make crazy decisions, or pull your hair out.
It’s not like you were thinking about buying a home this year, saw that rates went up a quarter of a percent, and then rushed out the door to place an offer immediately (I hope).
If you did do that, take a second to check yourself. Buying a home shouldn’t be an impulsive decision driven by numbers alone, unless you’re a bona fide real estate investor.
Sure, it might make you stop procrastinating, but it shouldn’t drive your decision to buy vs. rent a home entirely.
Mortgage Rates Might Drop Again
Think of the stock market for a second
When it dumps for a few days
Everyone panics and sells or simply doesn’t buy
But often you see a reversal and then traders kick themselves
Ultimately, mortgage rates are experiencing a bad month, but that doesn’t mean they will continue to rise indefinitely.
They go up and down all the time, and sometimes sideways, just like the stock market and other securities. It just so happens that they’re on an upward trajectory at the moment.
Last year, the 30-year fixed averaged close to 4% throughout the entire year. At times, it went as high as 4.30%. At its best, it may have dipped to around 3.75%.
Interestingly, rates were highest during the first quarter of 2017 and increased to that yearly-high of 4.30% in March.
Today, we’re getting closer to 4.25%, which is basically the same range we saw in 2017, month after month.
Yes, I’d rather have a rate of 4% too, but it’s not the end of the world. And we could well see rates drift back to 4% or lower this year. I wouldn’t be the least bit surprised. So relax!
A covered call ETF is an exchange-traded fund that provides investors with additional income by writing options on the securities the ETF holds. These actively-managed ETFs offer investors the benefits of writing call options on stocks, without them having to participate in the options market directly.
The upside is that investors take on less risk and potentially earn income in the form of options contract premiums on top of dividends. The downside is that potential upside profits will be capped because the call options will have to be exercised once the underlying security reaches a certain strike price (one of many options trading terms to know), at which point the shares will be called away from the shareholder.
Basics of the Covered Call Strategy
Covered calls involve buying shares of a stock and then writing call options contracts on some of those shares. A covered call could also be referred to as “call writing” or “writing a call option” on a security.
Other investors can then purchase the call option contract. They pay a small fee to the call writer, known as a premium, for doing so. The contract gives a buyer of the option the right, but not the obligation, to buy shares at a specific price on or before a specified date.
In the case of call options, when the share price of the underlying security rises above the strike price, an option holder can choose to exercise the option, at which point the stock will be called away from the person who wrote the call option.
The option holder then receives shares at a cost lower than current market value. Their profits will equal the difference between the option strike price and where the stock is currently trading minus the premium paid. The higher the stock price rises before the expiry date, the greater the profit for the person holding the call option.
Because the call option writer receives income on the deal in the form of a premium, they want the stock price to either stay flat, fall, or rise only slightly. If the stock rises beyond the strike price of the option, then they’ll receive the premium, but their shares will be called away. The option writer will have a gain or loss depending on the difference of the exercise price and the purchase price of the stock and the premium received.
On the other hand, if the stock doesn’t reach the strike price of the option, then the writer keeps both the premium and the shares. They’re then free to repeat the process as many times as they wish.
What Is a Covered Call ETF?
A covered call ETF is an actively-managed exchange-traded fund (ETF) that buys a set of stocks and writes call options on them — engaging in the call-writing process as much as possible in order to maximize returns for investors.
By investing in a covered call ETF, investors have the opportunity to benefit from covered calls without directly participating in the options market on their own. The fund takes care of the covered calls for them.
The ETF covered call strategy usually involves writing short-term (under two-month expiry) calls that are out-of-the-money (OTM), meaning the security’s price is below a call option’s strike price. Using shorter-term options allows investors to take advantage of rapid time decay.
Options like these also serve to create a balance between earning high amounts of premium payments while increasing the odds that the contracts will expire OTM (which, for covered call writers, is a positive outcome).
Writing options OTM serves to make sure that investors can benefit from some amount of the upward price potential of the underlying securities.
When to Buy a Covered Call ETF
It may be a good time to buy a covered call ETF when most of the securities held by the ETF are expected to trade sideways or go down slightly for some time. Beyond that, any time is a good time for investors who find the strategy appealing, want to take the chance of gaining extra income for their portfolios, and don’t mind missing out on outsized gains if the market rips higher.
Covered call ETFs might also be attractive to people nearing retirement, people who are generally more risk-averse, or anyone looking to add some additional income to their portfolio without having to learn how to write and trade options.
If an investor were considering ETFs vs. index funds, they might choose an ETF for the reason that the fund might employ creative strategies like covered calls, whereas index funds merely try to track an index.
When Not to Buy a Covered Call ETF
The one time when it may be advisable not to buy a covered call ETF might be when stocks are generally rising and making new record highs on a regular basis. This is a scenario where covered call ETFs would underperform the rest of the market.
If the underlying securities rise only slightly, and do not exceed the strike prices set for the covered calls, then these ETFs should also perform well. It’s only when stocks rise to the point that the shares get called away from the fund that the fund will almost certainly underperform compared to holding shares directly.
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Pros and Cons of a Covered Call ETF
The main benefits that come from taking advantage of an ETF covered call strategy are reduced risk and increased income.
Pros of a Covered Call ETF
Overall, a covered call ETF has largely the same risk profile as holding the underlying securities would. But some investors see these ETFs as less risky than holding individual stocks because the ETF should, in theory, do as well or slightly better than the market in most situations. (The one exception would be during extended, strong bull markets.)
But while covered call ETFs reduce the risk associated with owning a lot of shares while also providing additional income, hedging against downside risk would best be accomplished by using put options.
Cons of a Covered Call ETF
Covered call ETFs are actively managed, which means they tend to have higher expense ratios than passively managed ETFs that track an index. But the extra income may potentially offset that cost.
The Takeaway
A covered call ETF is an actively managed exchange-traded fund that offers investors the benefits of writing call options on stocks, without them having to participate directly in the options market. For investors looking for a simpler approach, this may be beneficial. Covered call ETFs also have two primary benefits in reduced risk and increased income.
That’s not to say that they don’t have downsides, too. Notably, they tend to be actively-managed, which generally means they have higher associated fees. Again, all of this should be taken into consideration before folding any type of security into an investment strategy.
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