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.
Posted on December 13, 2007 @ 12:33 am - Written by BawldGuy
Leaving Thursday for Austin, then Dallas on Sunday. I’m conducting a seminar Saturday in Austin.
Friday I’ll be taking a long and in depth look at a project or two. The numbers are lining up. We don’t like to recommend investments which haven’t had our own boot prints stamped on their dirt. The fourth dimension in real estate investing is what experience adds after all the before and after tax cash flow numbers have been analyzed. Numbers aren’t the whole story by a long shot. Quality of construction is merely a chapter, as is location.
It’s the gut feeling that comes after the romance of the first impression passes. There’s nothing that replaces boots on the ground. Having been there and seen that is invaluable.
I can’t wait to meet the folks attending the seminar. Excitement is having the Firestones hit the pavement in person. After the first cup of coffee of course.
Texas offers real estate investors many choices, as do most regions. I like the trends. One which seems to have legs is the migration from states to the north and east ending in Texas. There are more options than I have time over there. So far I’ve been able to sufficiently research both Austin and Dallas/Fort Worth. (Known there as the Metroplex.)
They’re two totally different worlds. Austin is San Diego with nowhere to surf, but a cool river. Dallas is, well, Dallas. It’s a big, big place — in population and size. It’s what they have in common that attracts me though. Locations harboring pockets of opportunity rich in potential.
It’s not hard to find property combining solid location with demand. When have you seen one without the other for very long? Add relatively high rents and we’re still not surprised, right?
In San Diego a 40 year old duplex offering a couple 2 bedroom 1 bath units with garages, will rent for $1,000-1,200 a side. They sell for $400,000-700,000. Our favorite Metroplex location offers duplexes too. There are some differences though. Real estate investors typically notice these differences.
The Texas duplexes offer 3 bedroom 2 bath units and garages. They’re brand new. They rent for $1,100-1,225 a side. The tenants are very solid. When you drive by on Wednesday afternoon, shortly after lunch, hardly anyone is home.
They’re all at work.
One more thing. The Texas duplexes are generally half the price of their San Diego cousins. Often less than half. The $500,000 SD duplex requires at least $160,000 to buy, including down payment and closing costs — that is if you want it to break even every month.
$160,000
That much capital in Texas will get you the following:
6 brand new well located duplexes
$50-60,000 in annual depreciation
Properties that pay for themselves
Great leverage and loans with principal pay down
Steady capital growth made even better by leverage
The potential future ability to offset over $100,000 in capital gain
Selling each side as a separate dwelling — at a premium price per side
Imagine, if you live in a market like San Diego, how a tax deferred exchange into these properties would turbo charge your capital growth rate over the next 3-7 years. More likely than not it would put you years ahead of where you would be retaining he status quo.
Decisions this easy are what we look for in real estate investments.
The technical term is No-Brainer. 
We’ll take a look at some examples in Austin in a day or two.
Posted on December 3, 2007 @ 8:48 am - Written by BawldGuy
I love San Diego. Been here since June 15th, 1967. Wouldn’t make my home anywhere else — period.
Dad used to joke with visitors from other states about living here. He said it only posed one big problem. Where the heck do you go on vacation?
I went to school here. Married and started a family here. My kids lived in two places until they went to college. Both my son and daughter have best friends with whom they went to 2nd grade.
I’m a San Diegan through and through.
I sold my first set of ‘units’ in the ’70’s — a fourplex for well under a hundred grand. Even allowing for the latest price drops, that same fourplex would go today for about $800,000 or so.
Real estate investment means different things to different investors. One thing on which they’ll all agree? When they sell an investment, they’d prefer to net more than they invested in the first place. They’d also like to have some reasonable demand when they sell.
BawldGuy Axiom: If you wouldn’t buy your own San Diego real estate income property at 80% of today’s reduced prices — nobody with three digits in their IQ (before crashing into the first decimal point) will buy it for more in the future. At least nobody who is literate, and values their capital.
We both know, the very thought of paying anywhere near what the market says they’re worth today is insanity. Furthermore, you wouldn’t buy them at today’s prices. Admit it.
Why? He asks, baiting the BawldGuy brazenly.
Your duplex is worth say, $480,000 or so. It’s annual income is about $32,000.
Your net income after everything, is roughly $21,000. Don’t start crying about how you’re netting a lot more than that. The dang thing was built 50 years after Moses first wife died for Heaven’s sake. Sure, you’ve kept things in good shape, but really, you and I know how old your stuff really is. OK, if you stop sniffling, we’ll use $23,000 for your net income. Happy now?
A fixed rate loan will come in at 6.5%, maybe 7%. Let’s use the lower of the two, which gives us a fixed monthly payment of $1,896.20 or rounded, $22,755 a year. Oh, did I forget to mention the loan amount? Your less than impressive $23,000 net income will support a whopping $300,000 in debt. Way to go Big Guy — your buyer only needs $180,000 down to break even on an ancient, but incredibly cool San Diego duplex. That’s 37.5% down.
I ask you again, San Diego income property owner — would you buy your own income units today?
Of course not, cuz you realize yer stuck here.
Grandma always admonished me about pointing out a problem without bringing along a solution. Here’s what I suggest you consider. A pause here for disclosure.
BalwdGuy Disclosure: I wouldn’t advise any of my own clients to even consider driving by San Diego investment property, unless it was for comic relief. We sell them though. We just let other local brokers put their clients in the dang things. There is one exception to this. If our client plans to live in the units to save money, or get started, we give them comparisons to analyze.
For instance, if they’ve saved enough to put 10% down on a San Diego duplex, plus closing costs, it means they have around $50,000 saved. 
Their options include renting in a San Diego neighborhood superior to one they can afford to own. Meanwhile, their $50,000 could be in Dallas, Austin, Kansas City, or (fill in the blank) — owning two, even three new or near new properties, which, Holy Cow! pay for themselves with slightly less than 37.5% down. Usually 10-15% does it.
Back to your duplex. Let’s say you sell it, and net around $175,000.
Here’s what’s absolutely possible. You can own more than $1.5 Million in income property. They’ll pay for themselves — with professional property management. They’re well located and work well with traditional fixed rate loans.
Let’s say for the next five years, the average appreciation, meaning some years lower and some higher, is 5%. Let’s say it’s only 4%. You gonna get that in San Diego? Dream on. Let’s say you do get 5% in San Diego for the next five years — a pipe dream if ever there was one, at least from where I sit. There’s a better chance of elephants flying.
Staying in San Diego gets you just under $133,000 in appreciation at 5% over five years.
Moving that equity to superior real estate markets, at only 4%, gets you almost 2½ times that amount — a few bucks under $325,000 in those same five years. How ’bout the additional $40-50,000 a year of depreciation as a bonus? For those following at home, that’s an annual tax savings of around $12-16,000 every year for five years. Wait just a darn minute! That means besides the almost $200,000 more in capital gain, you’ll be keeping around $50-65,000 of tax savings in your Levi’s to boot.
Let’s add up what you’re losing by staying in San Diego.
Almost $200,000 + at least $50,000 in extra tax savings. (Some of those tax savings will come in yearly on your tax returns, some at sale.)
How’d you like a minimum of A QUARTER MILLION BUCKS EXTRA over the next five years?
Look, wherever the numbers end up, your pouring a huge portion of your potential retirement income
down the drain by keeping your equity here. Over the next 10-20 years, depending upon your age, you’ll be $500,000 to over $1 Million ahead by trading your equity from San Diego to a region making much more sense.
It’s worth repeating: This is serious stuff — by keeping your real estate investment capital in San Diego, you’re literally pouring much of your retirement income down the drain.
A million bucks extra at retirement will be an additional $5,000 to $6,500 a month in retirement income. No bull. No smoke, no mirrors. This is 8th grade math, and you know it.
Living in an oxymoronic investment world is a sure way to reducing the quality of your retirement.
Your retirement — That is why you began investing in the first place, right?
Thought so.
Stop procrastinating and call us. It’s not as easy as falling off a log. It’s a heckuva lot easier than living 30 years of retirement with $5-10,000 a month less than you could’ve had. We’ll sit down with you, over a superb cup of coffee, and figure out your personal investment situation. Even if you never pull the trigger, it’ll be worth knowing what’s possible, right?
Call us — you know it’s the smart thing to do. We’re easy, and we’re fun. Just ask for the BawldGuy.
Posted on November 16, 2007 @ 9:54 am - Written by BawldGuy
How many times have we all said that? I’ll confess to probably more than my share.
Back in 2003 I’d begun telling clients, and whoever else who’d listen, to forgo the cartoonish San Diego appreciation and head to more stable ground. Once blue collar 40 year old duplexes are selling for over half a million? 
Seriously, did the Lord tap me on the shoulder and whisper into my ear? Did He give me the scoop?
“Thou shalt leave San Diego and wander yonder, until the promised investment lands are found.”
“Investment lands? Plural?”
“Verily I say unto you — get outa Dodge! Folks listen to you — at least sometimes. Many of them will make the correct decision — most will hang in San Diego, wandering for who knows how long. The last guy I tried to lead to some great real estate took 40 years and…never mind it’s a long story. Besides, I already wrote a book about it.”
There’s no Promised Land out there — at least I’ve not found it. Been lookin’ for it so long, flying so often, a Southwest flight attendant recently asked me how Mom was doing.
There are some places out there offering solid locations, very reasonable prices, old school financing, and pretty attractive rent/price ratios. Translation: relatively higher rents & lower prices. It’s one of those ‘best of both worlds’ kinda things.
It’s my contention the next 10 years could be the most boring decade in recent memory. However, like vanilla ice cream, possibly the most boring dessert ever created, it can be significantly improved upon.
For instance, a little chocolate sauce, even warmed up a tad, makes vanilla ice cream nearly edible. Now Jamocha Almond Fudge…
Back to the next 10 years.
The South and West are benefitting from consistent population shifts aimed at those two compass points. That trend will only continue, as folks will always follow jobs and a better lifestyle.
Places like Phoenix, Boise, Salt Lake City, Austin, Kansas City, Denver, Atlanta, parts of both Carolinas, and several more, are going to experience long term, steady, boring — growth. Some them, Boise and Austin to name two, will change dramatically in the next 10-15 years. Austin’s already well on its way, and Boise? That one will be fun to watch. The stars are aligned in favor of that city. Weather, recreation, very family friendly, median prices still comparable to San Diego — in 1995.
Nobody knows what the next decade will bring. Anyone who takes themselves seriously can only make a guess, based on incomplete data, and conclude what they will. Extrapolating 10 years from now will only make us blush later on.
Make a pact with yourself. Regardless of how the next 10 years turn out — don’t be in the position of lamenting — Shoulda Woulda Coulda.
Where you invest wisely, with a Purposeful Plan, and a vision — that’s your Promised Land.
Endless wandering will get you nowhere fast.