The Merits of Buying Your Own Home

With interest rates currently at a forty-year low, many people that rent their homes are now contemplating the feasibility of purchasing their own house.  As the real estate industry slumped considerably over the past 2 years, it may now be cheaper to own rather than to rent. 

For households with limited income, like single moms such as myself, I went into a frenzy looking for a low mortgage.  Getting affordable mortgage hinges on several things.  First you may have to consider is your credit rating.  If you kept a healthy a credit, it would not be difficult to get a mortgage loan for your first home.  This means not only paying your credit cards but also utilizing it regularly.  Some may have the misconception that not having any debts would be good for your credit.  As a matter of fact, it isn’t. 

Financial institutions need a measurement system to gauge your credit value.  Not having any debts, even credit cards, means there is nothing for the financiers to evaluate. Zero debt doesn’t necessarily mean you are a good debtor.  So, if you shun credit cards, this may be a good time to get some and build your credit rating. 

In order to evaluate the cost-benefit of owning a home, calculate how much you would be paying for mortgage based on the estimated value of the home you wish to purchase.  There are several mortgage calculators in the web that will help you compare your monthly lease against your possible mortgage. 

However, the merits of owning a house should not be evaluated merely on costs alone.  The security of being a homeowner cannot be valued against being lessee.  The pride and self-esteem it can bring to you and your children is considered priceless.  Especially for a single mother like me, it validates your capability to take care of your children on your own.  It gives your children a sense of comfort knowing that they do not need a father to have security – Mom is strong enough to take care of everything. 

Nevertheless, review your budget well before making a decision.  Is your job stable at the moment amidst the staggering rise in unemployment?  Can your salary afford the mortgage without compromising your essential needs?  When evaluating your budget, make sure you take the conservative approach.  Don’t miss out on contingency expenses to ensure that you have enough buffer after paying your mortgage.  Remember that it is not merely unemployment that rose inversely with the decline in the economy.  So did mortgage foreclosures.  It would be unwise to take a mortgage on a new house when the risk of losing it in the future is high.  If your pay cannot take it, find out if there is a way to make adjustments.  You may opt for a cheaper or smaller house or find unnecessary expenses that can be foregone.  You may even consider getting a second job if your time can manage it. 

Although this may be the opportune moment to purchase your home, it wouldn’t end well if you tweak your expenses by deceiving yourself that it is feasible.  When making your decision, be level-headed and objective.  As much as we single parents want the best for our family, we have to be practical and avoid making our financial status difficult.  If your budget cannot afford it now, don’t stop believing that someday you will be able to buy our dream house.  It is not a matter of if, but a matter of when.

All the best and much success!

Becoming an Entrepreneur – Toolkit for Your Start-Up Home Business

This Toolkit for your Start-up Home Business outlines all the basic guidelines you will need to get your home business up and running. The goal is to ensure that you have all the relevant information and a structured approach in getting your business off the ground as soon as possible.

Step #1 – Determine what type of business you want to get into.

Business ideas and suggestions may come from many sources. You may have some ideas of your own based on your passion or you may recognize that there is a need based of discussions you have with others. A case in point, I recall when my children were younger we needed transport to pick them up from school (there was no school bus service). After discussing with a friend, he assisted us with picking up the children, and soon realized that there was a demand for such a service. There and then his new business was born.

Step #2 – Research the business idea

In the school transportation service example given above, my friend conducted an informal survey by speaking with other parents, he was quickly able to determine the demand for such a service and the potential revenue to be generated. Depending on your business idea you may be required to do a combination of both informal and formal research, but the goal is to gather as much information as possible that will help you to make an informed decision on the business idea.

You may have several business ideas in your head and would have to make a choice on which one to implement. In making your choices consider the following:

  • The size of the market – in terms of customers, revenue and growth potential
  • Competitiveness of the market -how many businesses are already operating in that space?
  • Who is your target audience? If a market is very competitive, as a new entrant, you may want to probably look to see if there is a particular niche that has needs that are not being met by the existing suppliers and get into it.
  • What are customers looking for? (demand)
  • Where are the customers located?
  • How do you plan to reach them and serve them? (Your marketing strategy). More on this will be discussed in a subsequent article.
  • If you are not producing your own product or service, who will be you supplier? I will suggest that you identify at least three suppliers to give yourself more room to negotiate and get the best deals.
  • If you plan to import or export then you would have to enquire about licences with the relevant authorities within your jurisdiction.

Tip – Focus on the business idea that you are most passionate about. Because when things get challenging, it is your passionate that will give you the strength to stay in the business.

Step #3 – Decide on your Business Structure

Since the focus of this article is on home based businesses, the assumption is that your business structure will be one of either a sole proprietorship or a partnership. Notwithstanding that, I will still provide a brief description of the three typical business structures for setting up and registering a business.

  • Sole proprietor– this a business where there is a single owner. It is sometimes referred as a “one-man” business. You are the business and the business is you. As the owner of this type of business you have the responsibility for making all decisions. You receive all the profits and accept all losses.
  • Partnership – this is an association between two or more persons who joint themselves together to form a business. You can partner with relatives or friends or whoever. You and your partners contribute to the business equally and share equally in the profits and losses. A limited partnership may have some different arrangements in terms of contributions and profits and losses.
  • Corporation – a business structure, where the business has a legal identity that is separate and distinct from its owners. The owners of a corporation are referred to as shareholders. In some countries a corporation can be started by a single person. A key distinction between a corporation and the other types of business structures is that the owners (shareholders) have limited liability, in that they are not personally liable for the debts of the corporation. They share in the profit of the company through the receipt of dividends and stock appreciation.

Step #4 – Register your Business

Having decided on your business structure you will need to register your business name with the relevant authorities in your country. If you are a sole proprietor and you are using your name as the business name you do not have to register yourself, since you and the business are one. However, apart from that all business names must be registered.

When you have a name in mind, you will be required to do a search of the data base of registered companies to ascertain that the name is not being used by anyone or company. Once your chosen name is available then you can go ahead and register it with the relevant government authority.

Step #5 – Calculate your start-up cost

The guidelines used here are focused on a home based business that may not have some of the typical expenses of a business operated outside the home. Calculating your start-up cost will certainly assist you in deciding how you will finance your business.

  1. Start-up expenses- examples- business cards, flyers, promotional expenses etc.
  2. Assets to be purchased- examples could include- desk, chair, filing cabinet, computer, software licences, printer, inventory etc.
  3. Ongoing monthly expenses- example website hosting fees, other online fees and charges, subscription services fees, business telephone, advertising expenses, distribution cost etc.

Tip – multiply the monthly expenses by six (6 months), since it may take approximately six months to breakeven or realize a profit.

  1. Add the figures in 1+2+3 to get your total start-up cost

Step #6 – Forecast your Revenue

To calculate your breakeven revenue – divide your ongoing monthly expenses by the number of business days to get your daily revenue. Anything in access of that is your profit.

Step #7 – Prepare your Business Plan

It is good to prepare your business plan before seeking financing, even if you are self-financing. Your business plan is your road map showing your business vision and how you will get there. The key elements you want to cover in your business plan are as follows:

  • Business Concept– Description, vision and mission, goals and objectives
  • Operations and Management– Owner background, location, staffing, inventory, suppliers, delivery and distribution etc.
  • Marketing – products and services, customers, competition, pricing, promotion and advertising etc.
  • Financing– assumptions, operating expenses, asset requirements, operating expenses, sales and revenue forecast etc.

Step #8 – Get Financing for your Business

Just to re-state the focus here is on the sole proprietorship and partnership business structures. Depending on your business structure and the size of your business, there are many ways that you can secure financing:

  • Personal Savings– you may have adequate personal savings set aside to start your business. In a partnership, partners would contribute to the financing of the business based on the partnership agreement.

  • Line of Credit– you may have a decent line of credit from you bank which you can use to finance your business.
  • Credit Card– depending on your credit limit, your credit card could be a good source of short term financing. The interest rate on this could be very high.
  • Borrowing from friends– to supplement your personal savings you may borrow from relatives or friends
  • Institutional Borrowing- you may approach a financial institution (bank or credit union) for business financing, and this is where your business plan will come in handy. Your financial institution would only lend you money based on a solid business plan.

The above are the basic tools required to get your home business started. Have fun utilizing you toolkit and best of luck with your business venture.

Additional note for those who are getting into Import and Export

Get familiar with these shipping terminologies

  • Free on Board (FOB) – The quote reflects the cost of the goods plus the cost of loading them on the ship or plane. The supplier handles all customs export formalities at the loading port. No insurance or freight is included.
  • Free Along Ship (FAS) – The seller is responsible for delivering the goods alongside the vessel at the agreed port of shipment. It is the buyer’s obligation to clear the goods for export and must also absorb all costs and risks of loss or damage from that point on.
  • Cost and Freight (C&F or CFR) – The price quoted include the cost of the goods and the cost of the ocean freight to transport the goods to the agreed port.
  • Carriage Paid To (CPT) – Seller absorbs cost of freight for the carriage of the goods to the destination. The seller clears the goods for export.
  • Cost Insurance and Freight (CIF) – The seller pays for the insurance coverage of the goods up to the time they reach the designated port of entry.
  • Delivered Duty Unpaid (DDU) – The seller is obligated to deliver goods to the named place in the country of import. The seller absorbs costs involved with bringing the goods to that point (excluding duties, taxes and other charges)
  • Delivered Duty Paid (DDP) – The sell absorbs all the DDU costs in addition to the duties, taxes and other charges of delivering the goods to the destination.

Mortgage Help – How to Use a Mortgage Calculator With Ease

With homes at an all time low more Americans than ever are thinking about being first time home buyers. Finding the right home loan can be confusing. An online mortgage calculator can be a great tool for future home buyers to estimate the cost of their monthly mortgage payments. With a mortgage calculator the future home owner can estimate the costs and rates of interest for the different mortgage deals on the market. In this article I will give you some tips on how a home calculator works.

With homes at an all time low more Americans than ever are thinking about being first time home buyers. Finding the right home loan can be confusing. An online calculators can be a great tool for future home buyers to estimate the cost of their monthly mortgage payments. With a mortgage calculator the future home owner can estimate the costs and rates of interest for the different mortgage deals on the market. In this article I will give you some tips on how a home calculator works.

First, a calculator will ask how much money you need to borrow, how much time you will need to pay it back, and what interest rate you will pay. After those three functions it will ask you to click on the calculate button.Many calculators will give you rates for 30, 40, years and some even give you the rates for accelerated payments.

Secondly, a number of financial calculators have a calculator function. Many of the office software programs such as Microsoft Excel also have mortgage calculators. There are also numerous mortgage calculators to be found on the web sites of potential lenders.

Third, calculators have been a terrific development in the home loan market. It is something that has made purchasing a home much easier for the buyer. Before these calculators perspective home buyers had to be armed and informed with all kinds of mathematical skills enabling them to figure out how much their potential monthly mortgage payment would be. With these loan calculators almost anyone can quickly and accurately figure out how much they will be spending on their mortgage monthly.