Property as a first investment?

Discussions about how to join the property market, happen fairly frequently in my life. A lot of my peers have got their eyes fixated on buying property as a first investment. They dream about getting onto the “housing ladder” by taking out a big mortgage. I usually take the sparsely populated angle that housing is probably the  worst first investment one can ever make (unless you’ve got a few hundred thousands quid/bucks/euros sitting around in your bank account).
Amongst the pro arguments I’ve heard, the following make frequent appearances: “renting is like throwing away money” (the actual vocab is somewhat more vulgar) or “the longer I wait, the more expensive it will get”. Everyone in the UK (where I currently live) is obsessed with owning their own home and wanting to switch their monthly rent checks with monthly interest payments.
But seriously, is it really a good idea to have your first investment be a house?
Obviously the answer to this is different for each individual, and I’m not by any means trying to dish out advice. Everyone should do their own research and figure out for themselves whether they want to buy a place. The answer will depend on your own financial situation, whether you are single/have a partner to share with and what your immediate and longer term career ambitions are etc etc.

Since the financial state is the easiest to compare and analyse, let’s see what your financial situation is. Have you got enough money to afford a deposit on a house? If so what percentage of the total house price can you put down?

Now before I kick off, I’d like to highlight that probably 90% of the people I talk to consider themselves quite knowledgeable about the housing market (myself included!): everyone has at one point lived in a house, everyone knows the advantages and disadvantages of local areas, and the old saying that property can only ever go up sounds better the more you say it (try it!). After all, rich foreigners are buying London up. I find the last one quite hilarious because it is repeated so often that it can only be right! I mean, who cares about the time when the Scandinavian housing market blew up in the early 1990s. Or the more recent 2007/08 subprime crisis in the US pulling all property valuations lower. Also who cares that interest rates and housing markets are inversely correlated (when interest rates go up, housing goes down). And that interest rates at the moment are at record lows and have been here for the past 6 years.  Doesn’t really matter riiiiight?

Let’s ignore the market for now and look at individual scenarios:
Scenario #1:

Joe has 20,000 in his bank account that he’s willing to put as a deposit for a house. The 2 bedroom house he’s looking at costs 200,000 and he’s very keen on buying it. The bank he talks to offers to stake him out with the remaining 180,000 (at 4% interest) he needs in order to buy the house (ie a 90% mortgage). He buys his dream house and makes his monthly payment of roughly 860 over the next 30years.

At this point it is worth taking a closer look at his mortgage. His monthly payments stack up to 10,320 each year, making a total of 309,600 over the next 30years. As you will have noted, this far exceeds the 180,000 principal of his mortgage. The difference (129,600) is the interest that Joe pays over the 30year tenor. At the start of his mortgage agreement, Joe will be paying 600 in interest with an additional 260 that will pay off his principal. Each month the interest figure will decline whilst the principal payment will increase marginally. In the last few instalments Joe will be paying less and less in interest and will be paying more and more towards getting his principal lower. But this is only if the mortgage rate stay at 4%.
The chart will look something like this.
http://thismatter.com/money/real-estate/images/mortgage-payments-interest-principal-portions.gif
Source: http://thismatter.com/money/real-estate/images/mortgage-payments-interest-principal-portions.gif

So let’s assume that over the course of 30years, the mortgage rate goes up by 1% 5 years in. Joe’s position will look somewhat different:
5 years from today, Joe has paid off 34,350 in interest and 17,200 in principal and has an outstanding interest bill of 95,000 as well as 163,000 in outstanding principal. He has also nearly paid 10% of his principal but his outstanding interest bill is still over half of the principal. If he hasn’t got much disposable income (i.e. spending money), he will be in trouble meeting his increased monthly mortgage payments.

As a comparison, Emma is looking to buy a house too in Scenario #2.
She has saved up 100,000. Emma finds a decent house which costs 200,000 and she also has a willing lender who will put up the 100,000 to cover the shortfall. Her monthly payments total roughly 480 and compose of 335 worth of interest payments compared to 145 worth of principal repayments at the start of her mortgage. Over the course of the 30year mortgage that adds up to 172,800 in payments which is 72,800 over the principal amount, thereby constituting the balance of interest payments.

5 years from today, Emma has paid 29,100 in interest and 9550 in principal. And has 52,800 in interest payments outstanding and owes 90,450 in principal. Since mortgage rates have gone up to 5% from 4%, her new monthly payment will be somewhat higher given the higher interest payments she has to make on the outstanding principal. But she has already paid off 10% of her principal and she can easily swallow the increased cost of the monthly payments because the overall burden is much lower.

I’ll try and dig up some mortgage to income ratios. In the London area this ratio is at insane levels, meaning that any moderate interest rate rise will cause a lot of borrowers to be in trouble. But don’t believe it til I post veritable facts here.

In the above scenarios I want to highlight one thing:

-The huge cost that the interest payments make up… in some cases more than to the principal itself. Joe’s interest payments are 72% of his principal amount! In essence you’re buying the house at more than 65% of it’s current value. Emma’s is much ‘better’ at only 36.4% higher than the market value of the house.

Essentially taking out a mortgage is a bet on the housing market to advance, as it only really makes sense if the house you purchase surpasses the breakeven point of the initial value of your house + the interest paid from the mortgage.
Moreover, one is also betting that interest rates will stay steady or go down. The lesson I’m trying to draw is that the larger the loan, the more you need things to go your way, whether it is the housing market going up or interest rates staying low.

We haven’t even touched the upfront costs (lawyer fees, surveyors fees, stamp duty, mortgage broker fees, real estate broker fees). In the UK, stamp duty alone can cost 5% of the purchase price (if the property is valued at between £250,000-925,000, that is £12,500- 46,250 for the aforementioned range). So when you come to sell your home, don’t forget all the money you spent on it before you setting even one foot in it.

Finally, I’d just like to touch on the dreaded alternative to buying…. renting!
Have a look at the above costs for buying a place, adding in the interest you will be paying over the course of your mortgage(d) lifetime and try and calculate when at your current rent, you would surpass that breakeven point. Often you’ll be financially better off renting and waiting for your deposit money to grow than investing in a property with a huge mortgage.
A paper published by a duo working for the Federal Reserve as well as University Of Warwick examined whether high levels of home ownership impede a flexible labour market. Though they could only speculate on why this would the case, they found a clear correlation between high levels of home ownership and higher unemployment, listing various potential reasons. For example they saw home owners take on longer commutes due to them being unwilling or unable to move/sell their houses resulting in higher costs for employee and employer and decreased productivity.
Their study was based on the US but they used countries such as Switzerland (30% of population are owners, 3% unemployment) and Spain (80% of population are owners, 20% unemployment).  Nothing conclusive and more study is needed, but interesting comparisons nonetheless. You could be doing your career a favour if you don’t get on the property ladder just yet. Who knows how many excellent job offers you’ll have to turn down because of your purchase.
Renting can be a great alternative to stomping up huge costs and taking out a mortgage that’s too big for you to shoulder if things turn to the worse. The cash you save, can be invested elsewhere in the meantime and in assets that can actually give you a tangible and liquid return such as public and private companies or bonds.

Anyhow, this post is already long enough. Hope you liked my ramble and saw the benefits in keeping the mortgage small or renting and investing elsewhere before you invest in a house.

Happy Monday!

Storytelling Techniques

Well that was quite a long interlude. Apologies for the delay in posting I was away for a little bit in the South East Asian world (and loved it) and did not really have the time or resources to post from that side of the world. However, I am now back again!

Instead of continuing to expand the education around building one’s own website, I have decided to go down a different route for this post. I will be dipping my foot into methods of storytelling, be it in written or visual form (mainly motion picture type). In person storytelling is something rather different and I have yet to think about that one properly, so I’m going to leave out in this post. The reason I want tp write about this is because I needed a break from analysing and dissecting websites have been fascinated by how stories are told. And I have been meaning to research this a bit more in order to be able to write great stories myself! Here is what I have discovered thus far:

There are only handful of techniques used in written and visual story telling. And they seem to be incredibly simple. Sometimes they are used in a singular form, other times they are combined and blended. It really depends on what type of story is being told and how many perspectives there are (e.g. there may be one main character and two or three side characters whose perspective the author uses to develop the plot).

The simplest form of storytelling is chronological. The vast majority of stories are told in chronological order as they are easy for the reader to follow. One popular example is the Harry Potter story (with exceptions of a few sections in the later books where some chapters go back in time). The story in a nutshell consists of Harry growing up and moving from 1st year to 2nd year to 3rd year etc in Hogwarts. Nothing overly complex and the story is easy to follow.

Then there is what I like to call the peel technique (leaning on the imagery of peeling a banana or an onion). The bulk of the story happens in chronological order, but occasionally the author reveals some key aspects about the main character. The manner in which this may happen obviously depends on how the story is narrated (1st person, 3rd person?). The key thing about this technique and why I enjoy it, is that often the chapters or sections, where some details about the characters past or certain key parts of the story are revealed, contain very juicy details. So in the case of Harry Potter, I very much enjoyed the sections where the perspective was shifted to Voldemort and the reader got glimpses of who his mysterious aids were as well as the revelation of his favourite choc chip cookie recipe.

A variant of the peel storytelling technique is the flashback method. This one is very similar though I’d prefer to differentiate from the peel because often the main characters in these stories have something to hide. They could have had a trauma and/or have suppressed memories. Or they could be a dark dark person with dark dark deeds done in the past that are gradually uncovered throughout the story. Examples in this category include Batman Begins who’s still terribly mad about having fallen down that manhole.

The above three methods are the most common methods that I see employed. Obviously there are tons and tons of variants as stories are often told from the perspectives of many different characters. The possibilities truly are limitless!
I also wanted to add one little thing that annoys me most about books I read and/or films I watch:  I really find it annoying when the author devotes a large section of the story to a character’s dreams. Maybe it’s just me, but I get truly bored reading about some character’s dreams. The reader is already in a day dream of sorts when reading. They imagine the story unfold, then on top they have to force themselves to imagine a dream of a dream? That’s all a bit too much for me and I often find that it detracts from the actual story. I prefer just reading about the plot unfolding rather than about the character’s dreams, even if it is some sort of foreshadowing of events to come.

Anyhow, I just wanted to share some of the thoughts I had about storytelling/writing. Do you agree with this? Is there another very obvious technique of storytelling I have left out? Happy to hear all thoughts!

Happy Monday!

Setting up WordPress

So now that wordpress has been installed, we can have a look at setting up wordpress and running some of the most important features included in this software package. You will have allready had to pick a URL for the admin page when installing the software. I probably should have said this in a previous post, but I’d recommend not setting the Admin page as your main page, because you can mess the site up big time. This is what happened to me.  I didn’t realise what I was doing and set up my admin page under chriswinterhoff.com. It backfired massively as you can imagine, visitors would see the administrator log in screen  as opposed to the wonderful content I was about to post. And the best thing was … I couldn’t figure it out after an hour of hunting in the wordpress settings, consulting google and searching the C-panel. In the end I had to remove WordPress and reinstall it again. This time I was wiser though: If you set it up as [your domain].com/wp-admin/ you’ll have a nice and clean entry point to write your future blog posts. In fact I even think it is the default setting when installing the software… oh I wish I would learn not to fiddle with default settings.

Anyhow, the first thing to note is that when you sign up and log in, you’ll get to the “dashboard”. This is the menu of the whole wordpress software and allows you to navigate between different plugins, widgest, settings and most importantly, manage the content of your site.

When  you signed up you will have also noticed that WordPress asked you to pick a username, which if you were thinking like me, you would assume it wouldn’t be visible on the actual blog. Think again! I made the mistake of signing up with a username I invented when I must have been 11. When I did finally post my first blog post I was horrified to find that it had been written by ollo123. Now you might thank, that’s a bit more interesting than just using the name Chris, but if you’re trying to build something semi serious, Ollo123 doesn’t quite cut it. I changed it by hitting the top right button where it says Howdy, [username].
Once you open that window, you can scroll down and change some of your username settings. However, the actual username you signed up with cannot ever be changed. Ohhh noo, you shall forever be known as littleprincess86 or spookmastaaa  (hehe, hello Patrick!) or Ollo123! Joookes, of course you can change what your name appears as under the “nickname” section. Having your real name will naturally give you some social validity with your audience though you may want to build a different kind of rapport… really depends what kind of site you are building!

Under the settings tab you can also set up an email address for anything admin related. I would recommend using something dead simple such as admin@chriswinterhoff.com. It doesn’t really matter what you put down, because you can always autoforward any email to your normal email address. However, it just keeps everything neat for you and I like to be able to have everything organised like that  🙂

The last important thing to mention is the appearance of the blog. The theme of my blog is currently very bland and boring, yet incredibly simple and that’s why I like it. I will change it at some point in the next few weks and will show you how you can purchase or install a difference theme that does not come with worpress automatically.  But for now this will do.
Wordpress does come with a few free themes that you can install very easily.  On the left hand side, selecting the Appearance tab followed by the Themes button will reveal a few themes you can select for your blogpost. Having an aesthetically pleasing blog will help you rank much higher in search engines, so it’s not something to snuff at. Google uses site design and feel in order to filter out the serious from the non-serious blogs/websites. So it basically translates into this: if you look after your site, it is moree likely that you also post good content. But at the start of your blogging adventure, this is fairly irrelevant as you should be focussing on getting to know all the blogging features.

That’s it, those are the most important features to get you going and enable you to post away. Hopefully I haven’t missed anything, but please shout if I have!

Happy Monday!

 

Navigating the C-Panel

As promised, today I’m going to reveal a bit about the very useful but somewhat intimidating C-panel. The name derives from either Command or Control maybe both? Sometimes it feels like I need a Conquest-panel to control the Command-Panel. The C-panel is a piece of hosting software that enables you to manage most aspects on your website from a macro perspective. As far as I know the hosting software is the largest of the lot and allows relatively easy management of your site (if you know which aspects to use).

The first thing to realise is that a lot of the buttons and menus can be ignored. The C-panel is packed with so many weird and wonderful things, but at the start only a few are essential.  The panel can usually be reached via typing in your domain followed by /cpanel (e.g. chriswinterhoff.com/cpanel). Your domain name registrar will have sent you an email with the login details to sign on.

Once you have logged in there are three sections that you need to pay attention to:

Firstly, you will have to install the blog software to your website. After locating the “software/services” tab, you will note a button called “softaculous”. Softaculous is an auto-installer which helps you install apps onto your website. With its help, it is much easier to install apps such as wordpress (imagine programming a blog into your website… urgh!). After clicking on this, follow the steps to install wordpress.

Secondly, and perhaps the most important area once set up is the “backup” area. Since your website is live on the web, it is also vulnerable to systems failures, errors and computer virus attacks. The hosting provider will do its best to thwart many of these failures and attacks, but it is unlikely to resist them all. That’s why it is very important to back up your site regularly. This area will help you do that. And depending on how often you post content, I would schedule a weekly or monthly backup routine, saving the backups to your cloud or hard drive.

Thirdly, the stats page will be one of your regular sections to check out once you have a few posts on your site.  Here you’ll be able to check out historical stats regarding page views for the website as a whole, each separate post, times of the website views, country’s of your viewers locations amongst a few other things. If you experiment a bit, you can judge which topics get the most views and how long people take to read through your content (if they do read through it, that  is). Of course, a lot of this depends on how big your subscriber base is or how easily your website is found via a search engine (more info on Search Engine Optimisation in future posts).

These are broadly the three most important areas you need to pay attention to at this point in time.I will go into more detail about the wordpress settings and initial set up next week.

Happy Monday!

Free blogging services: Pros and Cons

Last week I posted a guide that described how to go about  hosting one’s own blog. After the initial registration, one then needs to set up the software, using a preconfigured software package that can be downloaded for free (such as wordpress.org (which this site uses)). This is fairly easily done and I will write about that and the useful but complex looking “C-panel” next week.

Instead of jumping through all these hoops, there is of course, as I alluded to last week, a much simpler way of setting up a blog. One can accomplish this by signing up to a site such as wordpress.com (not to be confused with wordpress.org), blogger, blog.com, tumblr, blogspot and many more.

What these sites all have in common, is that a new blog will take a mere five minutes or so to set up and will automatically have set up many of the advanced  services and features that I will go through in a few more posts. However, there are some significant drawbacks that one needs to consider as well. One of these drawbacks is that your domain will be a subdomain of the blogging service you sign up to. For example, if chriswinterhoff.com was a blogging service, someone might sign up to this site using the subdomain “mini”, thereby having an address linked to my website. Something along the lines of “mini.chriswinterhoff.com”. Depending on the goal you are trying to reach, this can be a significant or insignificant drawback.

Instead of going through a detailed article of all the Pros and Cons of setting up a self hosted website vs signing up to a free blogging service, I have listed the advantages and disadvantages of using free blogging services in this awesome list:

Advantages
– As the name suggests, free blogging services are free to use
– You won’t need to set up extra widgets such as anti spam commenting filters or email subscription widgets: These are all already included. The service is essentially “plug and blog”

Disadvantages
– Can only be registered as a subdomain (see example of “mini.chriswinterhoff” above) and comes with a longer URL
– If you’re looking to use a blog for commercial purposes, it will not look nearly as professional if you have a subdomain (e.g. luxurious-car-sales.blogspot.com)
– On some free blogging services advertisements pop up on your blog, and you don’t even get the revenue for displaying those ads.
– You don’t get a private email address when you reserve the subdomain, this is only possible when hosting  your own purchased domain
– We’ll go into this in a later post, but you won’t have control with regards to SEO (Search Engine Optimisation  – which essentially describes certain practices of trying to place your website high up on certain internet search machines to attract readers)

Essentially, the free blogging services are great for beginners and casual bloggers. But if you want to have even the slightest control over your blog, you may want to think about self hosting. You’ll have a lot more freedom, and it’s not that much more expensive. The good news is if you start your blog on a free service, you can always migrate your blog and all exisiting content to a self hosting site.

Happy Monday!

Registering a domain

One of the first things one must do when starting a blog is to register a domain. Broadly speaking there are two types of registrations one can choose from. This week I’ll write about one option and next week will be about the other.

The first option is to register a custom domain. An example is chriswinterhoff.com, where I paid a fee to reserve the address, meaning that no one else can use it so long as I own it. There are plenty of services out there that one can choose from to register the domains.  Below are some examples:

Namecheap.com
Godaddy.com
Names.co.uk

Just by typing “domain registration” into google will reveal plenty of other competing services looking for your business.

Once you’ve decided which domain you want to pick, you need to choose a domain name out of hundreds of possibilities. They start from country specific domain names such as “.de” or “.co.uk” to universal domain names such as “.com” or “.net”. Country specific domain names will naturally limit you to a certain country as for example visitors from the US or Canada rarely visit websites with a “.de” ending, whereas visitors from Germany will (since it is a German domain name, as it stands for Deutschland). So this is important when considering who your target audience will be and where they come from. There are notable exceptions such as “.tv” which is the domain name for the island nation of Tuvalu and is nowadays often linked to media outlets around the world for obvious reasons.
Registering a custom domain will come with a cost for the actual name and for the required hosting service (more about that later). Below is a screenshot of namecheap.com, illustrating the different costs for various domain names.

NameCheap screenshot

 

It often pays to shop around a bit once you have decided on your custom domain. In this case, the “.net” domain name is £1.15 cheaper on godaddy than on namecheap.

GoDaddy screenshot

The second step when registering a domain is choosing a hosting service. Competition is big in this space too, so a simple google search will reveal plenty of web hosting providers offering various price plans with a multitude of hosting bandwidths and added services. Often the domain registration websites (such as namecheap) will offer hosting on the back of your registration, and I think this is probably the best way to get started because you circumvent possible complications with linking up your hosting service to your domain. At the start it is very unlikely that you’ll receive hundreds of thousands of visitors, so going for the cheapest price plan will be sufficient whilst you build your content and readership base.

There is also an additional service that is called WhoIs Guard. Often the domain registrar will throw this service in for free for the first year, but it will never cost more than $3 a year. WhoIs Guard protects your personal information (which you need to use when you register your domain) from being viewed online (ie your home address, email and telephone number). To me this is key when operating online, as you will avoid receiving many unsolicited mail and emails and more importantly protect yourself against identity theft.

So all in the costs for my own custom domain ($9.66), hosting service ($9.88) and WhoIs guard ($0.00) came to $19.54 for 1 year. The web hosting service came with hosting from the US, but given recent negative NSA publicity I decided I preferred UK data centers which cost me an additional $12.00 on top of that. I guess in hindsight the UK government institutions will be  sharing the data with the NSA anyway, but one can always hope right?

Please post any questions or comments you might have below. Next week I’ll talk about the free blogging services.

Happy Monday!

First post

So this is the start of what is by now my third attempt to get a blog going in the last two years. Back in 2013, I started a blog reviewing games on mobile phones. I planned for it to be the go to space for anything mobile gaming related and that hundreds of thousands of enthusiastic gamers would scour the web to find the site with the best review and ultimately land on my page. Unfortunately, I didn’t realise that one of the prerequisites of focusing on such a narrow topic is that you should have a keen interest in that topic in order to keep up the enthusiasm. Well, I play a few games here and there on my phone, but at the end of the day, I have many other things higher on my priority list of things that I enjoy. In the end the site had a total of two posts and the registration for the domain lapsed back to the domain registrar. However, it was a great learning experience nonetheless as I can now highlight two aspects that I struggled with in particular:

(a) finding enough content to write about (never mind being enthused by it) and
(b) sticking to a regular posting schedule.

If only I had stuck with it,  I would now have hundreds of posts on the page and essentially be an expert in anything mobile gaming related as well as blogging software. Not to forget, I would probably be able to write a blog post in a speed rivalling the very best Olympic Blogging Athletes (a quick google tells me that there are no contenders for the Gold medal…. this may be my chance…). Alas, the old blog has long been abandoned and I have to start a site from scratch again.

What you can expect from me in this latest iteration is that I will tackle this project with unstblogppable enthusiasm!
After a few hiccups in setting this site up (more about that in one of the later posts) I have now, after a week of tinkering and think(er)ing, come up with a topic that this blog will target. What better way to start blogging than to write about how to set up a blog from scratch?

So, the first topic of this blog is going to be everything and anything to do with how to set up a blog, make it look nice whilst flowing nicely and smoothly, and down the line I will focus on how one can get the most out of blogging (attracting web traffic and exposing your blog to a larger audience). The theme I’ve currently selected is bland and boring and illustrates perfectly what I know about blogging: absolutely zilch.
Down the line, I’ll try to adapt a somewhat more professional layout for this blog and by then this site should boast plenty of excellent and useful posts for you all. The aim is that I become more familiar with all the intricacies that come with setting up one’s very own propaganda machine blog. As a result, you, my dear reader, will partake in this journey and become more knowledgeable as well 🙂

Topics to be thoroughly dissected include (but are not limited to) the following:

– Registering a domain
– Going through some of the added software packages available at registration- Setting up a hosting service
– Setting up a blogging page (incl. the themes that can be purchased alongside it)
– Marketing and SEO (Search Engine Optimisation)
– And much much more

Join me on a journey of magical adventures to the land of wordpress and blogspot!

Happy Monday!