Posted on February 7, 2008 @ 7:07 pm - Written by BawldGuy
As Josh and I go from region to region we’re able to meet current and beginning investors. Depending upon the city and the host, we speak to 2-4 seminar groups averaging 10-15 ‘entities’. (Single, married, or partnership investors.) An ‘A’ list of questions has emerged as a common thread, no matter where we speak.
Why is (fill in region) better than ours?
If their taxes are so much higher than ours, why is the price the same?
Should we fly to (fill in region) to see the properties & the management?
Why is (Dallas, Boise, Denver, Austin, Kansas City) better than our city?
Generally speaking it may not be. If you’re from Detroit, (and with apologies and sympathy) pretty much everywhere is a better destination for your investment capital. Every region is different and will have its own set of pros and cons.
Let’s review some of the pros & cons first.
Wanna go to one of the great investment spots in Texas? Be prepared for abject terror when you see what they charge for real estate taxes. It’s just silly. Don’t bias yourself against a local market by overlaying a statewide factor. It’s only one factor — use it but don’t endow with power it may not have. You’ll miss some great opportunities.
Wanna go to Boise?
CON — Due to the current market correction, things change there in real time faster than you can recognize the change. I’m convinced there were more wannabe investors per capita in Boise than even Las Vegas or Phoenix. They’ve learned to walk on their hands by watching all the upside down investors move around town.
I’ve already seen vacancy rates go from over 10% to under 4% to “Why isn’t my dang unit rented yet?” And all that took place in far less than 12 months. Rent/price ratios don’t allow levels of leverage available in other solid markets.
PRO — Nobody doesn’t like Boise! Four seasons, none of which are extreme. Demographics studies all showing a doubling of their population by around 2021. A culture more reminiscent of Mayberry than a typical half million population area. Virtually unlimited outdoor recreation — 20 minutes to 2 hours drive away. Family oriented lifestyle — see Mayberry reference. Job producer. Growing job market. It’s also the state capital, almost always a positive.
Like Austin do ya?
CON — Been there a few times now, and it so reminds me of San Diego sans beaches. I love Austin because it has such a young and educated population. This bodes well for the future. Duh. Still, though rents are rising as we watch, surely a good thing, downtown is about to drown in new condos.
Apparently they didn’t watch the movie — Downtown San Diego Condos Slump. It was in all the theatres.
PRO — Austin rocks! Every possible type neighborhood is there. GenX, Y, Boomer, hi-tech, and it’s all green. They’re maniacal about preserving open space. The prices start below the affordable line. No matter what you want there, it’s probably lower priced than almost anywhere else you’ll look — as long as the area is actually comparable. Remember, I’ve likened Austin to San Diego, so the standard is high. Their rents are on an upward swing, which should be a trend. The job market is fabulous and you can’t swing a dead cat without running into a college or university. It’s the state capital which never hurts. They’re possibly the youngest city of their size in the country — a plus.
You a Rocky Mountain fan?
CON — The problem? It takes more down payment to make things work ‘cuz the rents aren’t as high as other areas. For those wanting better leverage this means adjustable rate loans, which these days are wicked on the margin — 
as opposed to the good ol’ days. Where I once used neg-am loans, I now avoid them with rare exception. They’ve morphed from a tool in our financing quiver to a bad apple.
PRO — Denver is awesome. Did you realize much of the California brain drain ended up there? Yep, a whole bunch. It’s already showing. They’ve already voted in a new rapid transit light rail system, which will be ready in 4-5 years. There are current and planned projects all along the route. Every pro with whom I’ve spoken says the same thing — Denver is gonna blow up in a very positive way.
Yer a good ol’ boy who’s always liked Dallas?
CON — Understand though the metroplex is huge, it’s a double edged sword of sorts. Mostly it’s a good thing, but for those who are allergic to the whole metropolis thing, you may want to go elsewhere. Of course, we’re staying on the edges, avoiding the noise. 
Still, at 6.5 million people and counting,
it’s already more than the combined population of San Diego and Phoenix. (county populations) (Picture is Mansfield, TX)
PRO — I can’t get enough of the Dallas area myself. Again, we’re goin’ to the growth paths, planning to cross our capital with the inevitable economic growth. What we’ve seen many times there is a hospital rising 2-4 stories with an adjoining medical clinic. Hospitals are for-profit operations, but they’re very risk averse. If they’re planting roots in a new area, we pay attention. They know something very cool about the area, and it ain’t how good the BBQ is.
Is the land of BBQ, Kansas City your preference?
CON — For the same money per unit their annual rents are lower than some areas mentioned here. Also, the city is bipolar for Heaven’s sake. Pick a state, wouldya? As others with predictably cold snowy winters, their rental markets kinda sorta blow chunks when potential renters are shivering. 
Duh. Since we know winter will come every year, we simply plan. Another duh.
PRO — KC is much like Boise in that their culture is heavily tilted towards the family. They also are known for living below their means. This is seen in their high national ranking for disposable income. High disposable income is great for almost every part of a local economy. They’re not wasting money on a new Lexus, but have plenty for all the local businesses. Tenants are of higher quality. There’s more money available for down payments. And on and on. Jobs? KC is one of the places to be. Expansion is happening everywhere. We couldn’t be on a freeway for half a mile before a new project was pointed out. Business loves KC.
Love San Diego?
CON — Me too — just not in any way shape or form as an investment destination. You want an example? Always ready to serve.
Duplexes in a very cool area of La Mesa have been put on the market for as low as $430,000 recently. That’s more than $100,000 below ‘05 closed sales prices in the same exact neighborhood. Still, using 40% down will only net you a $160 positive annual cash flow. Yeah, that’s what I want. The same capital would get you about $1.5 Million worth of brand new duplexes in Texas. Geez, I dunno, a 50 year old So Cal duplex OR 6 brand new Texas duplexes. Go ahead, no rush, take yer time. We’ll wait.
What’s the tipping point?
Do you have enough for one property, or several? I’m no fan of diversification, but diversifying your real estate investments via geography is a luxury you should include in your Plan if possible. IBM having a bad year in Austin doesn’t necessarily hurt KC, or even Dallas for that matter. A problem in Boise with major local employers wouldn’t be a problem for Denver or anywhere else.
Also, if you’re into capital growth and investing a couple hundred grand or more, I’m a big fan of ‘down payment diversification’. I’ll be writing more on that soon, but it allows for a growing Sominex Account, plus acting as a separate kinda buffer during market corrections.
A tipping point shouldn’t be whether a potential investment candidate is local or not. Unless you’re a pro at this, it’s just not a factor. Don’t kid yourself about this. Keep in mind your capital doesn’t know and doesn’t care where it’s invested. You do — especially how that investment ends up on the return side. There’s nothing magical about your city — get over your control issues.
A Purposeful Plan is more important in these times than ever before. Look on the top right hand portion of this blog site for PODCASTS. Make time to listen to them, or do what many of my clients do and put them onto CD’s for use while driving. They have solid useable info.
The best tipping point?
The realization your retirement is getting closer each passing year. You’ll need more income by far than you’ll have sticking with the status quo. You’ll likely live longer than you might have thought. Acting to increase your retirement income now is the best thing you can do for your future.
Of course, living down the hall from one of your kids could be an option. Sound good to you?
Posted on February 5, 2008 @ 6:39 pm - Written by BawldGuy
If I guesstimated at least half a dozen failed escrows before this one closed the number might prove low. I didn’t list or sell the units as Matt always seem to have some local agent with a ’sure fire’ investor for his units. Needless to say, his luck would have been nonexistent if it hadn’t been all bad. Deal after deal after deal went awry for every reason in the book, and some new ones. About 3 years after we met, he’s ready to go.
That’s all water under the bridge now ‘cuz his cash is already at the accommodator waitin’ for travel orders. The plans are Mansfield, plus Burleson and/or Austin. He really likes Austin, so we’re gonna try to make that work. Our guy there is the best, so I’m countin’ on success.
His Purposeful Plan is now hittin’ on all 12 cylinders.
We’ll go over his increased tax shelter, capital growth rate, and flexibility in a later post. I just wanted to update you on Matt’s progress, as this has been more than an ordeal for the poor guy. Remember, he’s no beginner. He’s a professional investor
already a veteran in three states. He’s also a recovering attorney, but we’ve already forgiven him that.
This should be done and tied into a pretty blue bow no later than the end of February.
We’ll be deciding upon degree of leverage, length of loans, how many properties to acquire, and whether or not the mix will include more or less duplexes vs town homes or single families.
We’ll keep you updated as the plot thickens. Any questions I can answer without violating anyone’s privacy are welcome.
Posted on January 12, 2008 @ 7:48 pm - Written by BawldGuy
I’ve been putting the writing of this post off ‘until tomorrow’ for a few weeks now. Though an optimist by nature, a realist by training, and a skeptic all the time, I’ve decided it’s time.
I began my career at 16 while at the dinner table. Told Dad I wanted to be in real estate, and work at his company. (I already worked for his company as the janitor, printer/distributor of lisings, 
and all around underpaid servant.) A couple years later I was two months past my 18th birthday, spending my first day ever as an agent in a real live real estate office.
My experience as a real estate investment broker began sometime in the summer of 1976, and was set in concrete in January of 1977. When you start a company, albeit with your father, (who’d been semi-retired since ‘71) go through the trouble of becoming a broker, (as opposed to an agent) then take the bigger step of becoming the designated broker of your new company — your decision has indeed been set in concrete.
From day one the market was on a wild ride up. Double digit appreciation was the rule for around four years or so. It all came crashing down around and on top
of us in ’79’s last quarter. From then on until about the last quarter of ‘83 or so, things were not good. Not good is real estate investment code for very, very bad. How bad? I was elated when I sold a seven unit property to a client and was able to get him one of the first adjustable rate loans — which started out under 12%!
We struggled like crazy in those down years, but emerged intact and much the wiser. You think a seller carrying back a note is creative financing? Hah! The things I did and observed first hand would fill a book. Some of the most innovative thinking you can imagine made seemingly impossible transactions possible. There were several sales and exchanges in which I was either a principal or a broker, in which the lender had no clue whatsoever what was happening.
Some day I’m gonna write a book about it.
I fondly remember Grandma explaining to me how proud she was of my survival. She said it would become one of my most valuable assets. She was right. She also smiled knowingly when I told her the main factor in my survival back then had been a working wife. I’ve noted when invited to speak to groups of other pros, how the backbone of the real estate industry in bad times is often the working wife. That comment almost always elicits knowing smiles of experience.
When the market again took off in the mid-’80’s we were back in business, the hard times quickly and almost effortlessly forgotten. Then the S & L chaos struck. In many ways it was worse than the previous downturn. It lasted through ‘94, some would say ‘95. By ‘96 we were doing business in a more or less normal market. By then it wasn’t normal to me, it was nirvana.
We crossed into the 21st century. NASDAQ crumbled. The recession of ‘01 arrived. 9/11 hit. I was prepared for the worst. However, much to everyone’s surprise, by around Halloween normalcy returned. The recession had no impact on real estate or my clients’ investments whatsoever. In fact, I can still hear one client telling me that if he hadn’t been told by talking heads that a recession really was in force, he wouldn’t have known it.
It was a legitimate observation, especially in hindsight.
I’ve always believed the lessons I learned during those terrible times were invaluable. True enough. I’ve since realized an even more valuable lesson. Ironically, it never occurred to me what I’d missed learning until one of my mentors laughed himself silly at dinner one night. Ever seen something twice and still not realized what your were seeing — and shoulda been learning? He wondered aloud if this wasn’t my first rodeo. Old School charter members can be cold dudes.
Clyde and I had just closed an exchange, and were congratulating ourselves on our brilliance, as it had been more involved than usual. (It’s a guy thing.) Clyde was in his sixties and pretty experienced. He tolerated me cuz we’d worked side by side in the early ’80’s mess. Even though I was only 30 when those bad times struck, he grudgingly admitted I’d hung in there, and gutted it out. Some of my favorite war stories find Clyde in the starring role. Old School? Look it up and you’ll find his picture.
Anyway, I’d mentioned in passing how in ‘83 and again in ‘94 or ‘95 I’d noticed not only an increase in potential new investor traffic coming my way, but also in their interest level. I distinctly remember taking a bite of steak, as we were at the local real estate watering hole, when he startled me by laughing out loud without warning and for no apparent reason.
“You dumb $^&*@# kid” he said. “Do you need a flashing neon sign to tell you things are changing?” Still not getting it, he turned serious, and demanded I listen closely. (Or words to that effect.)
I’d missed the signs of transitioning markets twice. I’m certainly not ready to say the third time is here, cuz I’m not. However, since maybe the middle of October I’ve noticed a clearly defined shift in Brown and Brown ‘traffic’. Unlike the daily drive home from the office, traffic coming our way has definitely increased measurably.
My records since then show an increase of at least 25% in initial queries from all sources. This extends across the country, as we’re not geographically bound. Though we don’t talk about them much, we speak to groups of investors all over. The numbers have been increasing steadily. Also, a much higher percentage are following through with Purposeful action. More plainly put — a bigger percentage of folks are turning their talking into walking –putting the Firestones on the pavement. A good thing.
This could be an indicator of nothing, or it could be the initial stirrings of changing times. In the ’80’s the change took about a year to show itself as real. In the ’90’s it took longer, maybe a year and a half.
The good thing was how I was able that night to see, with Clyde’s help, what I’d experienced twice, without knowing it. He was right. He then went on, promising to tell me his stories as long as I agreed to pay for dinner. No problem old man — start talkin’.
His stories went back to the late ’50’s. They were no different than mine. More calls, more referrals, and an easily discernible increase in the quality of inquiries. More people without the commensurate qualitative improvement isn’t an indicator of anything.
At best this is anecdotal evidence proving — not much if anything. When you see it in San Diego, Dallas, Boise, Phoenix (yes, even there), Maryland, Austin, Sacramento, and of all places, Kansas City, it makes you stop and wonder. Is this the start of something? Or is this the group looking 
to buy when the buying is good — you know, under-the-radar good. That kinda good.
Why? Cuz it’s always, without any exception I’ve either seen or heard of, the under-the-radar folk who seem to act as scouts for the hoards who show up much later.
We’re seeing this increase almost weekly. There’s a technical real estate technical term for this — putting the Firestone’s on the pavement. More folks are now walking their talk than was the case even six months ago.
I’ll keep you posted — and please, you do the same.
Anyone seeing what we are?
Posted on December 16, 2007 @ 6:12 am - Written by BawldGuy
Late yesterday morning we held a seminar here in Austin. Those in attendance were friends of our hosts, Benn Rosales and his wife Lani. Our practice is to invite those who wish to join us for lunch after the seminar. Normally about 2-4 people will show up. Today, every single seminar attendee joined us for lunch. That’s a first. It’s simply never happened. Our best was several months ago in one of our Boise seminars when about half of those in attendance ate lunch with us.
Benn made an astute observation last night concerning the responses of those attending the seminar. As he was watching them, gauging their responses to the different concept explanations, he began to notice a common thread in their response pattern.
Every time I referred to either Purposeful Planning or doing something on purpose, they visibly perked up, many adding to their notebooks. I was of course pleased, but not surprised. Purposeful Planning has always had this affect on investors.
At lunch, a pretty formal affair, held at Fudrucker’s, the atmosphere is relaxed and more one on one. We talked a lot of real estate investment, but the latest in the baseball steroids to-do was brought up, along with all the normal topics.
Everything went as smooth as silk — a direct result of the organizers, Benn and Lani. My job was to show up with my shirt tucked in. Pastry, a couple kinds of burritos, and other cool stuff awaited people as they arrived. Everything those two do is first class then a little bit more. The three of us worked hard this weekend. Our days have started relatively early and ended relatively late. Our brains have slowly morphed into likenesses of the mashed potatoes and gravy we had for dinner with our chicken fried steaks.
Yeah, honey, the healthy diet I’ve been eating went to hell in a hand basket while I’ve been in Texas.
The best thing coming out of this working weekend has been the successful creation of a new language — BawldBennese. Slowly but surely, like mice making fewer and fewer wrong turns in a maze, Benn and I can just about communicate using the new language.
Lani is, how do I put it? Different? She’s different alright — in all the best ways. Smart, gracious, discerning, and possibly the best all around wife/assistant I’ve ever seen in action on the planet. Josh and I need a Lani, but we’d have to pay her six figures. Remember the movies back in the good ol’ days when the powerful exec had an assistant who seemed to make whatever was necessary happen like magic?
That’s Lani. It’s a good thing she’s Benn’s wife, cuz otherwise, he couldn’t afford her. Professionally they’re a well oiled machine and impressive as all get-out.
If it’s Sunday morning, I must be on my way to Dallas. The agenda there is twofold — conclude negotiations with a stellar builder and a good man on a couple dozen duplexes give or take — and hopefully meet Benn’s brother Michael to check out some pretty cool homes nearby. The ambiguity is intentional as we’ve gotta stay under the radar, remember?
A heartfelt thanks to Benn and Lani for a seamlessly executed weekend. Your gracious hospitality, attention to detail, and competence was appreciated — and the coffee cups are very cool. Can’t wait for our visit next month.
Posted on December 14, 2007 @ 11:56 pm - Written by BawldGuy
By being there in person, and forcing the issue today, we were able to walk away from what appeared to be a solid investment opportunity. It still could be if only we’d hear the same story twice in a row from the developer’s mouthpiece. That’s how it is sometimes. Some think they can fool us, but we pay attention.
It’s not that we couldn’t find the pea — we just won’t play. Hide the pea isn’t on our menu.
It was my local guy though who saw through what appears to be some, ah, misinformation put out by the developer’s rep. Details have to be withheld, but suffice to say we were collectively chagrined to learn we’d essentially wasted the last 7-10 days. i say we, which is kinda sorta misleading. Mr. Single Pointe (Benn Rosales — he of agentgenious.com fame.) had documented, hard copy, everything put out by said developer’s spokeswoman. 2 + 2 consistently kept consistently coming up 5.46.
It’s really too bad. There was some pretty solid potential for all concerned, most importantly my clients. This is the way of searching for the next deal. 9 outa 10 fizzle before you hear the fat lady sing. Stellar transactions don’t grow on trees, contrary to what many may believe.
Bottom line — unless we get credible info and a fresh start, we’re walking away.
This is a good thing, though not as cool as successfully concluding our negotiations with them would have been. Our reaction to this turn of events? We retired for the day and ate BBQ at The County Line. We already know where my clients will land. Also, we now know what project is pinging our radar in Texas. No, can’t say where, as remaining under that radar is and remains our best strategy.
Saturday morning finds me giving an investor seminar to a group gathered by Benn and Lani, and Benn’s brother, Michael. Can’t wait. The best part is always, without exception, the question and answer session after I take a breath and stop talking.
Sunday I’m off for Dallas and the conclusion of an agreement to take the remaining inventory of a local builder. His product is high quality, and he, like I am, is old school through and through. What often takes several meetings, conference calls, and two or three false starts, will take this builder and I about 20-30 minutes to get done.
That’s what happens when you’re not playing hide the pea. Old School is where things get done.