Posted on April 26, 2008 @ 12:03 am - Written by BawldGuy
It’s never a good day when I find it necessary to tell someone I can’t take them on as a client. Sometimes it’s ‘cuz they find themselves in quicksand and need help — but they’re too far gone. Most of the time though, it’s ‘cuz they’re under capitalized. They either want me to help them invest with 0-5% down, which I won’t do period, end of sentence, or they’ll have zip, zero, nada cash reserves to establish their Sominex Account.
As I’ve said dozens of times here, no Sominex Account means we can’t work with you. Though it’s designed to help the client sleep when Murphy makes his inevitable visit(s), it’s also there so I can sleep, know what I mean, Verne? I don’t like those weird dreams when I’m stressed.
Still, to those for whom I can’t help for this reason, and who obviously have more courage than is safe, I offer the following. Read the rest of this entry »
Posted on April 24, 2008 @ 10:44 pm - Written by BawldGuy
The following are some well known and not so well known real estate words and phrases. I’ve found they’re so many times thrown around with bastardized, and/or implied by incorrect meanings. Misunderstanding basic definitions in real estate investments can lead to some unintended consequences. In this business the old saying, ‘Words mean things’ should be taken literally — ‘cuz they do. 
The pictures aren’t connected, but then when it comes to definitions, they almost never are, right? It’s just cool to have ‘em.
Ground Lease — one that rents the land only. You often find this when land is so expensive it’s the only way to make the whole property, including the land, affordable. Lenders and the IRS have much to say about the length of a ground lease. Most lenders have a problem making a loan on property with a ground lease with less than 30 years to go. The IRS goes as far as Read the rest of this entry »
Posted on April 23, 2008 @ 11:22 pm - Written by BawldGuy
Here’s a real time example of what a San Diego income property owner can do — if they’re willing to Get Outa Dodge.
Example — investors met with us today. We’ll be keeping them anonymous of course. They own a handful of San Diego homes, which they bought as investments. I recommended they execute tax deferred exchanges on two of them. The others simply weren’t ready yet. Between the two, there is roughly $300,000 tradable equity.
They also have, give or take, $130-140,000 in cash to sweeten the pot.
Here’s a picture of how cool their retirement could be, after taking advantage of this opportunity. What does your retirement look like to you?
In the next few months they’ll be easily able to acquire around $3-3.25 Million in solid growth region ‘path of growth’ income property. Their tax shelter alone will increase by around $80-100,000 a year.
That’s a crucial number, ‘cuz in say, 5 years from now when they pull the trigger on another exchange they’ll have Read the rest of this entry »
Posted on April 22, 2008 @ 11:33 pm - Written by BawldGuy
Was talking with a client today, when she brought up a common misnomer. “Shouldn’t we be buying 10-20% below market value? Isn’t it a buyer’s market?” Great question. (Thanks Brandi) The answer may surprise some. It falls under, ‘Ya can’t have it both ways’.
Though in the last year or so we’ve been able to secure clients some impressive discounts, most of the circumstances making those discounts possible have changed.
Let’s think this through. Demand for well located real estate is increasing in the regions in which we do business. This is a good thing. Take Austin — a place we no longer do business. Don’t get me wrong, we love the place, but the demand has increased to the point prices have made it relatively unattractive to investors. The rent/price ratio has degenerated to the point where investors must now put enlarged down payments in order to break even.
See? On one hand you have the good news showing the Austin area roaring back from the market correction. On the other hand you have the consequences of that same good news. A double edged sword just waiting for the inexperienced investor. Higher prices driven by significantly increased demand, outpacing rents, (Increased rents will very soon follow, but not fast enough in Austin.) results in investors looking elsewhere. Why spend your hard earned capital in Austin for $X worth of property, when you can go to friendlier areas and acquire $2X worth of property? If capital growth is numero uno on your agenda, investing in half the property you could prudently afford makes zero sense.
Now let’s consider the project begging folks to buy their stuff at deep discounts. Read the rest of this entry »
Posted on April 22, 2008 @ 12:04 am - Written by BawldGuy
This month I’ve spoken with more investors owning property in more or less moribund markets than the entire first quarter. I say moribund ‘cuz a common thread found in the descriptions made me think of the phrase, ‘at death’s door’. I know some of these regions, and the description fits some to a ‘T’. Some of these areas are pretty down, but have cause to at least have rationally founded hope.
These investors ask the question — How do we regain the momentum we had for so long? It’s not like we ever experienced double digit appreciation, but at least it was a steady march up in value. What can we do?
The answer for most of them is to take a step back and look at their specific circumstances as objectively as possible. They usually chuckle when I pass that nugget of wisdom to them. After all, they’ve obviously already done that, and concluded, at least temporarily that they’ve put themselves on an unmarked road to nowhere. That’s called being a little too close to the situation. It’s universal, and we all fall prey to it at one time or another. It’s called human nature.
These conversations sometimes take place with real estate agents asking advice for their clients. They’re home agents, but have done such good jobs for their clients over the years, they’re often asked for investment counseling — advice for which they’re admittedly ill equipped. One such conversation led to the agent encouraging his clients to call me.
They subsequently did just that, and the conversation took place this afternoon. Read the rest of this entry »