Renewable Energy: 2 Types of Solar Power Generation

In a approximately two decades the world will need to produce between 25% and 35% more energy. This increase is due to the growing global population, and the addition of more middle class citizens (especially in the non-OECD countries). Hopefully this increase in demand can be satisfied by renewable energy sources.  Australian engineers have recently made headlines with a world record for electricity conversion efficiency by solar cells of 34.5%. The previous record was set by a US company called Alta Devices, and they achieved 24% efficiency.

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The Two Ways to Generate Solar Energy

1) Photovoltaic solar technology: This system directly converts sunlight into electricity by using solar panels made of semiconductor cells. You mainly see these kinds of solar panels on the roof tops of homes, and they are  often used to power electrical devices.

solar panels for the home

2) Solar thermal technology: Captures the sun’s heat, and is used directly or converted into mechanical energy. Solar thermal technology uses a heliostat, a large circle of mirrors that are all focused to reflect the suns heat to the top of a tower. The top of the tower is filled with a transfer fluid, which is heated by the reflected and concentrated solar energy.  The transfer fluid powers a turbine, and converts the heat into mechanical energy. The mechanical energy can be turned into electricity, and this process is often called concentrated solar power – CSP. Photovoltaic or concentrated solar power plants often  cover hundreds of acres, and are used to produce electricity on a large scale. These energy plants are connected to and feed the power grid.

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European Countries Leading the Way

According to an article published by Greentech-news.com, Scotland is on track to supply 100% of its electricity via renewable energy sources by 2020. Ireland has recently gathered an assembly to debate how the country can establish itself as a world leader in the fight against climate change, and will implement policy changes to scale up its renewable energy supply.

Greentech-news published another article stating that on October 28, wind power sources from 28 countries in the European Union have set a new record. Wind power was able to provide 24.6% of the total electricity used, which was enough power to sustain 197 million European households.

Utility capacity additions

The US needs to increase the renewable energy supply, because the demand for energy is increasing with no signs of abating. The current presidential administration has deregulated much of the oil and energy sector, making it easier for companies to obtain fracking permits and increase off shore drilling. The paradigm shift towards sustainability and renewable technology has already hit a tipping point, and the population is demanding more clean energy. Do you believe that the free market economy will ultimately name “renewable energy” as the dominate market player through consumer demand, or should regulatory bodies step in and boost the growth of renewable energy like it has in Scotland? Share your thoughts below!

 

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Photo credit contributions to growth of energy

Investing Strategies: Contrarian Versus The Crowd Consensus

Crowd consensus is the broader sentiment of the current market. In more simple terms, crowd consensus is how the general population feels about the economy. Does the overall population feel that there is a positive outlook for the future (bullish market), or that the economy is headed towards a recession/correction (bearish market).

There are many styles of investing, and you need to look within to see which style fits you best. Investing in the market when the sentiment is positive, is a style called momentum investing. Investing when the overall market sentiment is negative, is called contrarian investing. There are several measures that can help an investor understand where the current market consensus stands. One can look to the volatility index (VIX), the fear and greed index, watch the most recent Fed board meetings (posted on youtube), gauge the national unemployment rate, and keep an eye on other financial market benchmarks or leading indexes.

fear and greed index

(Fear and Greed Index dated 4/27/18)

 

Investor Business Daily (IBD) often writes about the CAN SLIM method of stock analysis. CAN SLIM is a growth stock investing strategy formulated from a study of stock market winners dating back to 1953.

CAN SLIM

C – Current quarterly earnings per share. An investor should check that the most recent quarterly earnings have increased sharply from the prior year’s quarter earnings (of the same month or year over year analysis).

A – Annual earnings have dramatic increases over the past five years. All companies that are traded on the stock market are required to file quarterly and annual reports. Familiarize yourself with these earnings statements, and watch a stock over time to understand the company’s business practices.

N – New products, management, and other new events. The market and investors are subject to their emotions and sudden events can cause short-term excitement (propelling a surge of optimism within the market) causing prices to have an uptick. On the other hand, negative news (like a scandal, product defect, or recall) surrounding a company can cause investors to lose confidence in the firm’s future which can cause a decline in the stock price.

S – Scarce supply, coupled with a strong demand for the company’s stock. The equilibrium of any commodity, product, or stock rests at the intersection of their supply and demand curves. Investors should pay attention to companies buying back their stock, and be on the lookout for low debt-to-equity ratios.

L – Leading over laggard stocks within the same industry. Use the relative strength index (RSI) as a guide to study up on how companies within in the same industries compare. The RSI ranges from zero to 100. An RSI indication above 30 suggests a buying opportunity (bullish), while above 70 signifies a chance to sell (bearish).

I – Institutional sponsorship. Look to see where the big money players are placing their bets. If a stock catches your eye, check to see if large mutual funds hold that stock as one of the top 10 holdings within their fund. Be cautious of stocks that are overly owned by institutions, because if a large institution sells its shares in the stock, it can have a negative impact on the stock’s price due to the increase in shares (high volume) that hit the market all at once.

M – Market direction. Review daily market averages by using Yahoo Finance. You can compare several stocks against one another, and against indexes or other market benchmarks. Another good indicator is to apply the 50 and 200 moving day average lines to the graph. A few common market benchmarks are the Dow Jones Industrial Average (a price-weighted average of 30 blue chip stocks listed on the NYSE), S&P500, and Russell 2000. These benchmarks measure the overall health of the U.S. economy and are also a good indicator of investor sentiment.

Warren Buffett is one example of a contrarian investor who is a value buyer. He famously said, “Be fearful when others are greedy, and be greedy when others are fearful.” Ray Dalio, the CEO and founder of Bridgewater, says that uses algorithms to betting against the majority and hopes that he gets it right.

If you are interested in a particular stock, add the ticker symbol to your watch list and subscribe to receive their company news. There are many ways to make money in the market. I want to know how you feel about the different pros and cons of these two styles of investing. Which do you prefer and why? Comment below!

 

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A Sweeping Change in the Energy Industry: Big Oil is Out of Fashion

On January 8th the New York City Mayor, Bill de Blasio, announced the city would divest $189 billion of its pension funds from fossil fuel companies and $5 billion of fossil fuel industry funding was to be retracted. After five years of community pressure,  a lawsuit against 5 major oil companies was filed for climate related damages. The city is sending a clear message that “the fossil fuel industry is to blame for our warming climate“.

NYC twitter post

A wide sentiment is spreading, and lawmaker’s constituents are using their voice to overpower “Big Oil’s” lobbyists. Voters are demanding a change in the energy industry, asking for the reduction of our dependency on fossil fuels, while supporting more sustainable methods of producing energy. Businesses are joining in on the efforts to reduce oil dependency by finding ways to increase the efficiency of their current manufacturing and logistical processes, while investing in and purchasing “greener” equipment to replace outdated ones. One challenge that we face is our ability to modify the current infrastructure to be compatible with renewable energy technology. One way lawmakers can help is by providing tax credits or deductions for companies making the switch to more renewable technologies.

 

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Companies Making an Impact

There are many examples of companies making changes towards implementing a more energy efficient supply chain and product. Hapag-Lloyd, a shipping firm, is aiming for a 20% carbon emissions reduction by 2020. The company plans to participate in the reduction of the global shipping industry emissions figures, as well as pledging to purchase more efficient ships. The way to solve the current sustainability issue is by increasing the efficiency of the products that are currently in use through modification, and overtime replacing old technology with products that are able to run on renewable energy resources. Another example of a company making headlines is Siemens Gamesa, which announced that it had successfully connected 5,000 MW to the Indian electric grid since first entering the company’s wind market in 2009.

First Solar has announced that it plans to open a new solar module manufacturing plant in Perrysburg, Ohio. The 1.2 gigawatt factory will produce the company’s Series 6 thin film PV modules, which are exempt from the solar tariffs that are plaguing their competitors who manufacture products overseas. In December, Tesla confirmed that they will begin producing solar tiles at their Buffalo Gigafactory. Tesla’s solar Gigafactory is expected to produce 1 gigawatt of annual capacity by the end of 2019, and 2 gigawatts at some point in future. Lockheed Martin is aiming to create a flow battery system that will allow renewable energy to be stored and used.  The challenge with existing flow batteries is that they are made of toxic materials like vanadium and zinc bromide, which are also extremely difficult to recycle.  Lockheed Martin’s flow batteries are made of water-soluble electrolytes (or equivalents) making them much more earth and recycle friendly.

The renewable energy industry has been growing over the past decade, and in 2015 it reached nearly 10% of the global energy consumption. However, to achieve a truly sustainable energy system,  global energy consumption needs to more than double to 21% by 2030. Although wind and solar deployment has accelerated, this goal is still out of reach under current policies.

Power generation by technology sourced

What Can Be Done to Support the Switch to Renewable Energy?

Financial institutions can increase funding and provide more credit to companies that are in the  renewable energy industry. They can also create CSR (corporate socially responsible companies) and Renewable technology ETFs to make it easier for individuals to support companies. Do you have any ideas of how we can boost the transition? If so, comment below!

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Photo credit New York City Mayor, Bill de Blasio

Corporate Social Responsibility: A Company That Puts the Community and the Planet First

A CRS (Corporate Social Responsible) company is one that considers all of its stakeholders (the community, environment, employees, customers, investors, and suppliers) when making a decision. Companies can have a large impact within their communities, and should take the responsibility of making  meaningful changes with their actions. After all, companies are communities of individuals who come together to make a difference. CRS companies seek to increase the overall engagement, and create a sense of connection within and among individuals in society. There are many paths a company can take to approach and engage in CSR. There is no one-size fits all standard.

Socially responsible companies are regular companies who go above and beyond to accomplish the impossible. These companies are businesses first, and need to focus on profits as well as their community. The good thing is that according to Business Ethics Magazine, 74% of respondents to a survey say that corporate citizenship can help increase profits at their company. In 2004, a study of the meta-analysis on CSR and its link to profits won the famed Moskowitz Prize (for responsible investing). The study, “Corporate Social and Financial Performance: A Meta-Analysis,” was authored by Marc Orlitzky, Frank L. Schmidt and Sara L. Rynes. The study found that  there is encouraging data suggesting a positive link between CSR and an increase in profits.

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Being socially responsible increases a firm’s reputation, and the overall good will of a company.  According to a survey, 55% of consumers are ready to pay more for products when they come from a socially responsible company. Think about the emotional response of a consumer when they consider purchasing a product from a local artisan boutique versus purchasing an item from Wal-Mart. This study also found that a whopping 65% of the fortune 500 companies offer gift matching programs, and donated a total of $17.8 billion to charities in 2016.

There are many ways in which a company can get involved with the community and become socially responsible. A business could find alternative uses for used goods (to keep them out of landfills), create green technology jobs, or require higher humanitarian standards from their suppliers. The main point is for a company to be more purpose-driven, involved in the community, or to implement sustainable practices. We are starting to see large companies use their power (as customers) to drive improvements in the area of responsible business practices through their global supply chains. By setting increased expectations around transparency, they hold suppliers accountable for their environmental impact and on human rights issues.

Do you have any unique ideas that a company could implement to help them become a better CRS company? If so, comment below.

 

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Make an Impact: Changing Your Habits to Become a More Environmentally Sustainable Earth Inhabitant

The Very Scary Current Situation:

The first major ocean “garbage patch” was discovered in the 1990s, and approximately 8 million metric tons of plastic find its way into our oceans each year according to Jenna Jambeck, who is an environmental engineering professor at the University of Georgia. Another recent study concludes that the oceans now contain more than 5 trillion pieces of plastic. In a 2013 study, researchers warn that the Earth’s garbage patches will be around for at least 1,000 years, even if all plastic pollution stops immediately.

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We must stop ignoring this issue, and take responsibility for own own actions. You CAN make an impact! As Michael Jackson’s wisdom conveys to us in his song “Man in the Mirror”, it is up to us to make the change that we want to see in the world.

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What Steps can I Take to Live a More Sustainable Lifestyle?

  • Increase you knowledge about sustainability through education
  • Sign a petition/communicate with politicians
  • Use your voice on social media platforms to spread awareness
  • Make a donation to a non-profit organization
  • Support CSR (corporate socially responsible) companies by purchasing their products or using their services
  • Research products and companies before you make a purchase
  • Create awareness by volunteering

Use Your Purchasing Power to Create a Change

Conscious consumerism is when consumers “vote” for earth-friendly products and practices by  purchasing from companies who put its people and the planet first. The idea is that if there is a high demand for products that protect the environment, companies will be incentivized to expand their earth friendly product lines. On the other hand, environmentally damaging companies will be economically motivated to change their practices or face going out of business.

The Reality of Plastic

Stop Using Plastic! Plastic is an oil derivative made from natural gas.  It is a byproduct from the refining process of crude oil.  According to the Center for Microbial Oceanography: Research and Education (C-MORE), it takes 100 years for a plastic bottle and 10-20 years for a plastic bag to decompose.

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How Can I Reduce my Plastic Intake?

  • Use reusable produce bags.
  • Say no to straws!
  • Give up gum: gum is no longer made from rubber tree sap, you are chewing on plastic. Additionally, you may be chewing on toxic plastic (polyvinyl acetate is manufactured using vinyl acetate, which is a chemical shown to cause tumors in lab rats)!
  • Buy boxes instead of bottles: the process to recycle cardboard is much more environmentally friendly than plastic, and can be made into a greater variety of products. Cardboard decomposes in a much shorter time frame (2 months) then plastic, should it accidentally find its way into our oceans and forests.
  • Buy from bulk bins: many stores sell bulk food like rice, pasta, nuts, and cereal. Buying your groceries in this method will also save you money!
  • Reuse glass and plastic containers: according to Food & Water Watch, bottled water produces 1.5 million tons of plastic waste per year. These bottles require 47 million gallons of oil. Avoid disposable goods at all costs!
  • Don’t use plastic utensils and bring your own containers: it has become common in Boulder Colorado for restaurant goers to bring their own Tupperware for leftovers.
  • Clean your home and office spaces with green products.
  • Shop and eat locally: shopping locally benefits the local economy as well as the environment. Locally sourced products require less transportation fuel, and is likely to be more fresh and taste better.
  • Choose natural over synthetic materials: choosing an organic cotton shirt over a polyester one.

By following these tips you can make a significant impact, and help make the sustainable lifestyle trendy. Soon your friends and children will follow suit, and your actions will make ripples throughout the community!

It is said that it takes 2 to 18 months to form a habit, depending on the amount of change that the habit is requiring. Becoming an environmentally conscious “Earth citizen” is like changing your eating or workout habits, it is a lifestyle change. I am sure you have or know someone who has been on a “diet”, but shortly after attaining their desired weight they quickly gain back all of the weight they worked so hard to lose. This is because the behavior change has not become part of who they are at their core being.

To successfully implement a behavior change, you need to be constantly vigilant about your thoughts and actions. Behaviors are typically triggered by an action or thought. For example: next time you write a grocery list, write P at the top of your list to remind you to check for plastic versus cardboard packaging while you are shopping. Change your systems: I always keep reusable grocery bags in my car, so no matter where I am or what I am buying they are there when I need them!

Do you have any system or short cuts that you use to help you live a more sustainable life?  Please share them with our community by commenting below!

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Personal Finance and Environmental Sustainability: Fixing the Gap in our School’s Curriculum

I find it interesting how some of the most important topics like personal finance and environmental sustainability are not taught as part of the standard curriculum within our school systems. We live in a time where the fiat monetary system touches every individual’s life, yet we don’t teach our young adults how to manage or navigate their personal finances. Once an individual turns 18, we automatically expect that they know how FICO scores, credit cards, saving for retirement, and managing a budget works. Human beings have certain base level needs that are the same across the world. We all need to eat, obtain clean water, feel safe, and have some sort of shelter. What is left out of Maslow’s hierarchy of needs, is the fact that at least half of these things are obtained with money!

We are told at a young age that it is impolite to talk about money, politics, and religion. Why is money such a taboo subject, when it is something that impacts everyone’s life? Every person on this planet has a financial report card, so why is it not taught in high school?

Environmental sustainability is another subject that is also not being talked about. There are nearly 7.3 billion people on this planet, and the human race is growing exponentially. Every individual has an impact, and can make an impact on how we use our resources. In economics, we are taught that we live in a world of resource scarcity. My goal with this blog is to shed more light on these topics, and provide an avenue for individuals to become more knowledgeable about their personal finances and to live in greater harmony with Mother Earth.

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If we think on a grander scale, our planet is but one rock in the billions and trillions of planets in the universe. The earth doesn’t NEED to have human life on it, but WE do need Mother Earth. If we look at the natural ecosystems that exist on our planet (the water system, weather patterns, and how the rain forests operates), we can see that it all functions in harmony. I would argue that the way in which we use our resources has fallen into disharmony. In 2016, I created a nonprofit organization (which currently has its 501 C3 recognition from the IRS, and is registered in the state of Nevada) called Earth Mantra. The goal of this organization is to help educate the world’s citizens on how to live in harmony with our planet, and become knowledgeable about how to navigate their own personal finances.

Becoming financially solvent, allows individuals to be able to care about higher order issues (Maslow’s hierarchy of needs). They would make more informed decisions on what kinds of products they purchase (consider a company’s overall impact) and companies they invest in. For example: a financially knowledgeable individual, who cares about sustainability, would decide to invest in a B-Corp, a CSR (corporate socially responsible company), or a renewable energy company. An environmentally aware individual would understand that they can make a choice to support companies (through the power of their investments) that put its people and the planet first. They would use their purchasing power to increase the demand for the products of eco-friendly companies, instead of supporting big oil or other antiquated finite resource consuming companies. We all live on this planet, and we only get one of them. Although we have plans to put humans on Mars, the reality of inhabiting that dreary and dusty red planet is a concept so distant in the future that we may not make it off of this planet for that reality to come to fruition (if we keep ruining Mother Earth). Some of the greatest minds, like Stephen Hawking and Elon Musk, believe that someday we will need to find another planet due to our poor resource management skills. This is such a tragedy, because if we look at all of the beautiful places that Mother Earth has to offer, and then compare the landscape of Mars… Well, there is no comparison!

Concepts like sustainability and saving for retirement can be seen as issues that will impact us sometime in the far future. Many people choose to ignore these issues, because there are other more pressing issues at hand. I see so many individuals problem-solving for today, but creating larger and more hairy problems for tomorrow. My wish is to help people problem solve out into the future, so that when the future comes to today the problem has already been resolved.

Through out my blog series, I talk a lot about goal-setting. In the book, “Built to Last: Successful Habits of Visionary Companies” the authors James Collins and Jerry Porras talk about the importance of establishing a Big Hairy Audacious Goal.

What is my Big Hairy Audacious Goal?

I want to create a website for Earth Mantra which will allow me to work full-time on helping individuals change their habits to live a more sustainable life with respect to the environment and their personal finances.

In a past blog, I discussed how to use mental modeling to set goals and how to achieve them. One important point to note is that during times of radical change, we need to humble ourselves and seek the help of others. By reading and sharing this website YOU can help me achieve my big hairy audacious goal, and in turn I can help others learn more about personal finances and how to live in harmony with our planet.

What is your big hairy audacious goal? Comment below!

 

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Moving to a New State? Things to Consider

There a number of reasons why one would consider moving to a new state.  Before moving, here are a few items to consider.

The Average Price of a Home:

You can use websites such as Zillow.com, Realtor.com, and Trulia.com (average price of a home interactive map) to see what kinds of homes are available. Consider how much you earn, relative to the average price of a home in the area. One way to know how much you can afford is to make an appointment with a mortgage lending officer (an MLO) to get pre-qualified for a loan. They will most likely ask you for your three most recent bank statement and pay stubs. A good rule of thumb, is that you can afford a mortgage payment that is roughly one third of the amount that you earn. Getting pre-qualified will allow you to get a realistic idea of how much you can afford, provide you with a house hunting budget, and will signal to Realtors that you are a serious home buyer.

Compare the Cost of Living:

The cost of living varies by location, and by using this cost of living calculator  it will show you how far your salary will go in a specific region. Consider the amount you earn relative to the average cost of living. If you are moving because of a new job, make sure that any increase in the living cost (interactive map) is factored into your salary.

Employment Opportunities:

In many trendy states, where there is a net gain of individuals emigrating, it may be difficult to nail down a job due to an influx in the labor supply. It would be in your best interest to start the job search process prior to moving. Use websites like Monster.com, Indeed.com, and ziprecruiter.com to see which companies are hiring in your industry. If you decide to apply to a position, I would recommend using a local address (use a friend’s address who lives in the area that you plan on moving to) or leaving your address off of your resume. In your cover letter, explain that your are moving to that area and give a firm date.

The Daily Commute:

Some cities have great public transportation, but most will require that you own a car. You should research the cost difference of registering a car, and the average cost of gas (gasbuddy.com-interactive map) in the area. Another thing to consider, is the average cost of parking. In some areas, such as New York City, parking can add up and become a significant monthly expense. I grew up in Santa Monica (California), where many streets are restricted and allow permit parking only. Each house was allotted a certain number of parking permits, which you paid $35 per year with a maximum of 3 permits per household (at least that is what it was when I lived there, the number may have changed since then). Additionally, the city performs street cleaning every Tuesday and Thursday. If you accidentally forget to move your car, you will find a $65 ticket on your windshield. When I lived in LA, I received at least 4 tickets per year. I would also have to pay for metered and car lot parking. Even though parking tickets are not considered a standard cost to park your car, everyone I knew received at least 4 parking tickets per year, so I would argue that you should figure this fact into your car parking budget. When I moved to Las Vegas and then later the Reno/Tahoe area, I would find that almost all parking was completely free of charge! I would recommend visiting the city that you are interested in moving to and asking locals about what they think the pros and cons of the city are. Ask how long it takes to cross the entire city in normal traffic conditions versus during peak traffic hours. You can also use Google maps to see the red traffic areas at 5pm to get a sense of the flow of traffic.

Calculate State Taxes:

Taxes vary widely from state to state, and can have a significant impact on your paycheck. You should compare the different amounts each state charges in income taxes, property taxes, and sales tax. Taxes will greatly affect your net income, and it may surprise you which states are most tax friendly. I recommend creating a file where you can compile all of this information so that at the end of your research you can compare the net effect on your bottom line.

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States with no State Income taxes:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

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Create a Plan:

Make a list of all of the pros and cons of the place where you are currently living, and the place that you are considering moving to. Perform research on how much it will cost you to move, and create a budge. Obtain bids from at least three moving resource websites. There are a number of ways to phonically move your belongings and at various prices. I will list three methods in order of cheapest to most expensive.

1) You can rent a truck, pack it yourself, and drive.  Example: U-Haul and Budget.

2) Have a company drop off a large moving container, you fill the container with the contents of your house, and then lock the container with your own lock (no one but you can open the container). Schedule the moving company to pick up the container and transports the container to your new home. Example: Pods

3) Have professional movers pack your belongings, drive to your new home, and move the boxes into their designated rooms. (check Google for local movers in your area)

The cheapest option is clearly going to be the option where you are going to have to perform the most work, and the more expensive option is going to require less work on your end. When you call to get a bid from the professional moving company, make sure to ask about whether they have insurance (should any of your belongings get damaged in the move). You should clearly label each box  with its contents, and the room that it belongs to (kitchen, master bathroom, bedroom, etc.). This will help you greatly with the unpacking process.

Decision Time:

Now that you have created a moving budget and a full analysis of where you live versus the place that you are considering moving to, take a moment to sit back and take it all in. In a prior blog, I talked about mental modeling. You should try to imagine what your life will be like in the new city. I am a big believer in using both your heart and brain when it comes to the decision making process. The budget and plan was the “logical” brain part of the decision making process. Now it is time to ask what your heart wants. Once you have let your heart weigh in on the situation, analyze all of the information together as a whole. The best way to make a decision is after you have gathered all of the pertinent information. Are you thinking about moving? If so, where to and why? Comment below.

 

 

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Renewable Energy is a Growing Industry: But is it Growing Fast Enough?

As a society, we must begin to live more cohesively with the earth and the environment. If the human race does not take notice and make changes rapidly, our natural resources will dissipate through attrition and lead to resource depletion. Whether one believes in global warming or not, one thing is sure, the earth can only provide a finite amount of resources and we are using those resources in an unsustainable manner. According to The International Energy Agency (IEA), in 2015 the world consumed 575 quadrillion British thermal units (Btu). By 2040, the IEA estimates that the world’s demand for energy will increase 28% to 736 quadrillion Btu.  Fossil fuels have long been the dominating energy resource of the past century, but times are changing. Due to the environmental hazards of oil combustion, a paradigm shift is occurring and investment dollars are shifting toward supporting renewable energy substitutes.solar

According to the United Nations Environment Program, (UNEP), in 2017 the  world added more solar power capacity than any other type of energy. The sector attracted $160.8 billion in investments, and renewable energy (including wind, hydro, and solar)  accounted for 12% of the world’s energy use. Over the past year, global investment in renewable energy exceeded $200 billion. By 2040, the IEA estimates that renewable energy will comprise 40% of the energy usage, which means that the majority of energy (60%) will still be coming from unsustainable fossil fuels.

Investment in renewable energy is increasing, because as a collective we are realizing that fossil fuels are a limited and a  quickly diminishing resource. The continued harvesting of fossil fuels is becoming increasingly more difficult and costly. Since most of the more easily obtainable sources of fossil fuels have already been excavated, companies are having to invest in increasingly expensive technologies to extract oil from more difficult locations (such as oil sands and underground fracking). Widely publicized photos, of environmental damages from fossil fuel extraction, are causing the public to recoil and support other methods of energy generation.

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There are two main solutions to solve the ever growing need for energy 1) switching to renewable energy and 2) creating technologies that use energy more efficiently. Renewable energy is made up of many sub-sectors, such as wind, hydro, bio fuels, and solar. Each renewable technology has it pros and cons. Wind has proven to be the most efficient method of producing renewable energy, but the sporadic nature of wind makes the constant harvesting of energy very difficult. Like wind, most renewable energy technologies face similar sporadic energy harvesting issues. Solar energy facilities are limited to collecting energy during the day. To overcome this, we must implement a variety of renewable energy technologies, so that they complement each other during the duration’s of non-production.

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Additional Resources: 

 

The renewable technology sector is growing rapidly, and investment is following suite. Although we are making progress toward consuming more of our energy from renewable resources, IEA projects that fossil fuels will still account for 60% of the energy used in 2040. Do you have any ideas of how we can curtail the use of fossil fuels? The goal of this blog is to get people thinking about renewable energy, and to help create momentum around switching away from the use of fossil fuels.  Comment below and share your thoughts!

 

 

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How to Finance the Purchase and Remodel of a Home: FHA 203k Loan

What is an FHA 203k loan?

An FHA 203k loan, is also known as a Rehab Loan or FHA Construction loan. This kind of loan allows you to finance repairs to the property, and lets the buyer add personalized touches to their new home! As with all FHA or HUD products, the borrower must plan on living in the home as their personal residence. Through the process the lender tracks and verifies that the repairs are being completed, and is able to lend on  homes that usually don’t qualify for a loan (typically lenders don’t approve loans for homes in need of major repair). The FHA 203k loan allows a buyer to purchase and fix a property within one transaction.

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A standard FHA 203k loan is only offered by select lenders, and the process is much more rigorous than an FHA 203k Streamline loan. I would recommend going with a streamline loan because it allows for up to $35,000 in repairs. If you are a first time home buyer I would not suggest looking at properties that need more than $35,000 in repairs, because the construction process can become lengthy and tiresome.

 

The FHA 203k Streamline Loan:

This loan allows a borrower to finance up to $35,000 in repairs. The FHA 203k loan requires a 15 percent “buffer” (called a contingency fund) on the total amount of the combined bids (in case there are any overruns or minor unforeseen costs). If a portion of the contingency fund is not used, then it is credited back to the borrower. Therefore the “real” maximum amount, that the total cost to repair the property, cannot exceed $31,000. Keep in mind, this loan is only for non-structural and non-luxury repairs (no tennis courts). Although, you may upgrade to granite counter tops and gut the bathrooms.

What Can the Construction Loan be Used For?

  • Kitchens
  • Bathrooms
  • Appliances
  • Flooring
  • Roof repair or replacement
  • Painting
  • Repairing safety and health issues
  • Energy-efficient improvements

 

The Process:  

  1.  Apply for a loan with an FHA 203k streamline lender (ask your lender if they have completed this kind of loan within the last year. Hopefully the answer is yes!).
  2.  Get approved.
  3.  Find a contractor.
  4.  Get bids for the work (I recommend getting up to 3 bids, and make sure that the contractors are giving you quotes for “apples-to-apples” repairs. i.e. using the same materials).
  5. Finish all of the paperwork and close the loan.
  6. Have the contractors complete the repairs.
  7. Move in to your new home!!!

 

Hack: HUD has a search page that will allow you to see if your lender successfully completed at least one 203(k) rehab loan in the last 12 months (type your lender’s name into the search bar located at the top of the page and then check the box for 203(k) rehabilitation mortgage insurance program).

 

Eligibility: 

  • Credit score: FHA requires a minimum credit score of 580, but many lenders may require a score of 620-640 to qualify. Check with your lender for their specific requirements.
  • Down Payment: FHA loans require a 3.5 percent down payment (based on the purchase price + total cost of repairs). If you are short on the down payment, you may receive a gift from your family to help you purchase a property.
  • Debt-to-Income Ratio:  You should speak with your lender about their particular requirements.
  • Loan amount: You can finance up to 110 percent of the property’s future repaired market value (home price + repair costs). Since the FHA 203k is a type of FHA loan, they are subject to your region’s FHA loan limits.
  • Occupancy: This loan is for owner occupants only (no investors).

Additional resources:

 

In conclusion, the FHA 203k streamline loan is a great way to purchase a home and add a few personal touches to the property prior to moving in. Are you interested in the FHA 203k streamline loan? Do you have any particular questions about who to talk to regarding a certain question? Comment below.

 

 

Photo credit 

The Future of Residential Real Estate: Zillow and RedFin

Zillow (Z) and Redfin (RDFN) are publicly traded companies, and I believe that they offer an interesting investment opportunity, both in the purchase of property and through owning their stock. They have only been trading on the market for the past 2-3 years, and have a ton of room to grow. Zillow and RedFin have just rolled out new programs that are revolutionizing the real estate industry.

Zillow-Logo

How Residential Real Estate Has Evolved:

Way back in the day, a Realtor would obtain a listing from a seller (documentation stating that the realtor had exclusive right to represent the seller). The Realtor would drive down to the Real Estate Division, and post it on a cork board alongside all of the other homes for sale in the area. The Realtor would look at all of the homes for sale, think of each buyer she represented, and see if any of the properties fit their needs. Now, let’s fast forward. The MLS (Multiple Listing Service) was born! Real Estate Agents, usually coalesced by area, formed groups to share listing information over an intranet. For example, the Las Vegas the local Realtors association is called GLVAR. Only paying members had access to the MLS, which safeguarded all of the access information to the homes currently on the market. The MLS provided a great source of historical information, from which realtors could pull comps also known as a CMA (comparable market analysis). A CMA is the estimated current market value of a property (see a prior blog on real estate valuations).

The Current Situation:

With the proliferation of the internet, even the government is finally getting on board! One can find tax assessment values, home characteristics (sqft, bedrooms/bathrooms, etc), and search home addresses to find who the owner is and how to contact them. Disclaimer: some states are non-disclosure states, and finding information on properties in these areas is next to impossible (even real estate agents need to estimate square footage). Example: certain areas of New York, Pennsylvania, and Maryland (mostly the Northeast).

Zillow, RedFin, and Trulia saw this niche in the market, and have aggregated the public data into a user friendly free website. Of course, nothing in this world is truly free. When an internet user finds a particular property of interest, they willingly give their contact information to Zillow, who then turns around, and sells the “lead” to a Realtor. Zillow and RedFin have revolutionized the real estate industry by providing current and historical data to the public. I would relate this to the scale of how the printing press revolutionized the transmission of knowledge.

Zillow’s Instant Offers:

Zillow is now attempting to replace the MLS system (multiple listing service), by connecting homeowners with sellers directly. Zillow’s Instant Offers provides homeowners with offers from investors alongside a comparative market analysis (from a local real estate agent). To use Instant Offers, the homeowner provides Zillow with some basic information (bed/bath count, square footage, remodel information, views, etc.), and photos of the home. Once an offer is made, there is no obligation for the seller to accept any offers.

RedFin Now:

redfin-logo-square-red-1200

RedFin is another company that is disrupting the traditional residential real estate industry process. RedFin is a vertically integrated technology company that is also now a brokerage firm. “RedFin Now” allows Redfin to buy and resell homes directly with its customers. RedFin is now essentially double-ending transactions (earning commission for being the listing and buyer’s agent). One benefit, from the seller’s perspective, is that they will not have to worry if the buyer’s funding will fall through.

The Future:

With these new programs, it is possible that many residential real estate agents will be squeezed out of the market. I could see a future where a company like “Rocket Lawyer” could provide all of the paperwork to buyers and sellers for them to complete in front of a notary. I believe that the landscape of the real estate industry is evolving rapidly due to Zillow and Redfin’s new programs. There are so many possibilities that Zillow and RedFin could engage in, for example  RedFin could create a subsidiary company and flip the homes to increase their return on investment.

Throughout history there are many industries that have evolved and positions that have become obsolete. A few examples are the whaling and automotive industries (most car factories are now automated). There are many areas within the real estate industry that cannot yet be outsourced. This transition will cause a shift of residential real estate agents into other areas of real estate (commercial, flipping, mortgage/portfolio analysis). What do you think? Comment below.

Photo credit Zillow

Photo credit RedFin