About two years ago I decided that I wanted to buy a house, and specifically a rental property. I was still in college at the time, but I didn’t want that to stop me from reaching a goal that I had set for myself. To make a long story short, my now wife and I ended up purchasing a small house relatively close to where we both went to school. I knew that we would be moving in the coming months for me to take a job in the Midwest after graduation, so I began actively marketing the house for rent so that the payments would be covered when we moved. It took some doing, but we eventually got a rental contract in place. And there we had it, our first rental property.

So now it’s about two years later and we’ve decided to sell this little house. We put it on the market for a couple of reasons, one being because I’m going back to school in the fall and won’t be working. The other reason is because of the increase in value and what we could make off the sale. So yesterday we finally received an offer on the house that we’re going to take, and the net of the sale should be a little over 20 percent of what we paid for it. It’s interesting to note that even in these troubled financial times, it’s possible to make money.

What I’ve Learned From All This

1. The first thing isn’t so much something I’ve learned, but rather something that’ been reaffirmed to me. We’re constantly hearing of declining real estate prices and how bad the market is, but these are all national numbers and averages. Real estate however, is very local, and you can’t draw conclusions about your local market from the overall national averages and trends. This is very evident in our most recent experience.

2. It’s also important not to let yourself get overextended. When analyzing a deal or purchase, I always consider what could be the worst-case scenario so that I’m prepared for it if it were to happen. In this case, the house we purchased was well within our means to afford while we were living in it. I also structured our current finances so that if we were to lose our renter and have a vacancy we would be able to carry the mortgage ourselves. The amount we save each month is at least equal to the amount we would owe in the worst case scenario. I have never worried that we wouldn’t be able to make the payments on the house.

3. The third lesson follows closely from the second. When maintaining an active investment such as a rental property it pays to have substantial liquid funds on hand in case of an emergency. Emergency funds are frequently advocated by many, but how much is widely debated. If you base the amount on a set time period of expenses to maintain, such as enough for 6 months or a year, then this will need to increase when you have an investment you need to look out for each month as well.

4. The last point I want to make is to think and plan ahead. When we bought this house, I knew that I wanted to turn it into a rental property. Going in with this perspective helps to keep the emotions from inflating the price you’re willing to pay, and it makes sure that you’re more aware of all the associated details and expenses. It’s much easier to figure out how you’d handle certain situations before getting yourself into them, rather than scrambling to find a way to handle things.

Blog Contest Giveaway Reminder

If you haven’t already, make sure you enter to win your copy of the The Millionaire Next Door. All you have to do is post a comment to the contest post and you’re entered. It really couldn’t be simpler. Contest ends at midnight on Friday.

I am giving away two copies of the bestselling book The Millionaire Next Door written by Thomas J. Stanley and William D. Danko. As the cover of the book states in its subtitle, it uncovers the surprising secrets of America’s wealthy. Some of the questions this book answers are:

• Who are the rich in this country?
• What do they do?
• What do they drive?
• How do they invest?
• How did they get rich? and,
• Can You ever become one of them?

It isn’t one of those overly simplistic personal finance books. It’s full of data and statistics, and is basically a case study of Millionaires here in America. It’s definitely a book that’s worth the read.

So How Do I Win My Very Own Copy?

I don’t want to make this contest difficult for anyone, and have therefore made the entry requirement very simple. The first book will be given away to one of the first ten people to leave a comment to this post (by random selection of course). That’s a one in ten chance for those of you that get in on this early.

To win the second book, you still only have to leave a comment to this post. I’ll choose one reader at random from the entire comments section. It really couldn’t be any easier to win a copy of The Millionaire Next Door.

The contest will end at midnight (CST) on Friday the 28th of March. The winners will then be announced shortly thereafter. So what are you waiting for? Enter to win by submitting your comment now.

About a year ago I talked about my Mobile Universityand how it allows me to learn a lot more than I otherwise would be able to. Basically what I mean by this is that I listen to various audiobooks while I’m driving around. Instead of listening to the radio and hearing about the latest celebrity gossip, I’m able to learn about all sorts of things such as investing, entrepreneurship, business, leadership, and on and on.

Listening to these audiobooks has really been a great experience, and I feel much more productive throughout the day. Recently however, I haven’t had very many audiobooks and so it’s been hit or miss. I’m hoping to get back into it again since I really enjoyed doing it, and I’ve run across some audiobooks that I haven’t heard in a while as we were cleaning and organizing different parts of the house. So not only am I excited to go back to school and get my MBA, I’m also excited to start up my Mobile University on the way to and from work.

It seems that over in London an ATM machine started paying out twice as much money as was asked for. Apparently it was doing this for a couple of hours until the machine finally ran out of cash. Hundreds of people were drawn to cash in on the mistake and people were calling up their friends telling them to come take advantage. They were requesting the daily maximum of 300 pounds and being given 600 pounds while their receipt only showed the asked for 300.

After reading this, I asked myself what I would have done if I were in the same situation. I’m sure for a lot of people something like this would be pretty tempting; however, I decided a long time ago that being honest in all things was more important than a quick buck. 300 pounds is a decent chunk of change, but is it really worth selling your integrity for? I would hope not.

1. PF Advice has an interesting article up comparing our everyday financial decisions to the hit game show Deal or No Deal. The question is, what kind of “deals” are we taking that are costing us our financial security?

2. I found a good article about how to score over 700 on the GMAT and figured that a few people might be interested in it. After scoring a 750 myself, I’ve thought about writing some tips and things. But since I haven’t yet, this post has some good things to consider.

3. One very important aspect of personal finances is managing your credit. Here are 6 steps for checking and fixing a credit report. It’s pretty detailed and has a lot of information for people that aren’t that familiar with credit reports.

For all of the business owners and entrepreneurs out there, there’s an interesting way to acquire the Business Funds necessary in order start and grow your business. Through a program offered by Merit Capital Advance, you can get the funds you need in exchange for a portion of your future Visa and MasterCard receipts. There are no fixed payment terms and it’s not even considered a loan.

With this program you are able to get the cash that you fairly quickly and you won’t have to worry about being cash strapped when you need to pay it back. Because a percentage will be deducted from your daily credit card receipts you only be paying back the money as you get paid by your customers until the the balance owed is collected. It’s an interesting spin on acquiring capital for your business and something that you may want to consider.

Yesterday was the start of the NCAA tournament, otherwise known as March Madness. Unfortunately my alma mater, Brigham Young University, performed like they always seem to and choked at the end of the game. Throughout most of the entire game, the score remained pretty close, but BYU just seemed to give up in the last few minutes. So now that I’ve lamented the loss of my team, what does it have to do with our financial lives?

All too often as we’re struggling to reach our goals, we choke shortly before we achieve them. We start out with great resolve, passion, and the desire to succeed, but at some point we give up and fall short. Here are just a few examples of what I’m talking about:

1. You’ve decided to start an emergency fund and you’ve been adding to it now for about 8 months. Watching the balance grow has been pretty exciting, and it’s now larger than you’ve ever had it before. After a while you start to think of all the things that you could do or buy with that money, even though you know that’s not what it’s for. Eventually you succumb to the temptation to raid the fund and use it to take a nice vacation or purchase that new TV you’ve been looking at. So what happened to the goal of having an emergency fund? Why did you choke?

2. You’ve managed to find some extra money each month that you’ve started investing. You’ve decided to purchase relatively simple investments at regular intervals. Things have been going rather well for you for the last while and again the balance has been growing. Then the time comes where the market starts to head south and your investments begin losing value. Eventually the pressure is too much for you to handle and you sell out of the investment so that you don’t lose any more. What happened to the long term investing strategy that you began with? Why did you later choke?

So you get the idea. Why do we so often give up on something that we started with the best of intentions? To eventually realize the goals you’ve set for yourself, you can’t choke along the way. Things will get difficult along the way, but you’ve got to give a hundred percent for the duration. So next time you’re thinking of giving up, remember that you decided not to choke.