Posted on August 7, 2008 @ 10:52 pm - Written by BawldGuy
Due to the nature of tonight’s topic, pictures will again be at my whim. I’m feeling quite random as it turns out. When I’m talkin’ ’bout numbers and basic analysis on-topic pictures just don’t cut it.
A post published here earlier this week generated an excellent comment by David Shafer.
The post discussed the differing results of 10% or 20% down payments.
Here’s David’s comment:
I argue with myself over which is better the 10% or 20% version. I think it is really individualized. But gotta comment that the 20% version is less costly in terms of lower mortgage rate and/or no mortgage insurance which is expensive now. And if you take that cash flow and put it into another investment, then you might just come out even with the 10% down option!
Dave — I know what you mean, as I’ve done this particular analysis hundreds of times.
These days we’re seeing little or no difference in interest rates on the two loan LTV’s. Even if there was a .25% spread, if that kills the deal, then generally speaking the investor might not be a candidate for real estate at that time. ‘Course sometimes common sense dictates a particular deal just won’t work.
Let’s look at your suggestion though, which might be a logical alternative. Read the rest of this entry »
Posted on August 5, 2008 @ 10:27 pm - Written by BawldGuy
Warning: The pictures used in this post have no connection whatsoever to the topic at hand. Any connection therefore is either accidental, or more likely, a result of your incredibly fertile imagination.
You have $100,000 to invest in income property. You aren’t bound by geography, and are currently interested in growth, not cash flow. For the next 10 years you have one goal: Capital growth. How should you approach this? What strategy will you employ? Are you comfortable with low down payments? What is a low down payment to you? Are you willing to sacrifice some growth for a perception of increased safety? The price range in the area on which you’ve settled is $200-300,000. Let’s take a look at your options. Read the rest of this entry »
Posted on August 1, 2008 @ 11:50 pm - Written by BawldGuy
This weekend take the time to write down all the info ya need to paint a picture of where you are today — financially. Not just assets and liabilities, but what yer doin’ now that maybe isn’t the right thing for you. Also, what’re ya not doin’ that ya know should be happening as a habit?
If the only two things you learn is your net worth and how much yer savin’ each month — or not — the effort will have been easily worth it. I remember one weekend in the mountains with The Boss. I was doodlin’ on a legal pad, and started writing down my known recurring monthly expenses, for both home, and office. When finished I was staggered by the number. I shouldn’t have been, but isn’t that how most of us are?
BawldGuy Axiom: Garbage in, garbage out is just the modern way of sayin’ what Grandma taught me. One of her favorite sayings was, “‘Bout the time the farmer got the old mare to work without eatin’, she died.” Read the rest of this entry »
Posted on July 30, 2008 @ 12:10 am - Written by BawldGuy
This was many moons ago. The client was on in years and wanted to execute a tax deferred exchange to younger, higher cash flowing properties. Oh, and by the way, Jeff, can you exit about $75,000 in cash for me? When asked why, and getting the usual lecture from her about it being none of my $%^# business, I explained how her answer would most likely dictate how I’d design her transaction.
She always allowed me a smile after givin’ me the expected hard way to go. It was a dance we did, at her calling. Turns out, since she was gonna keep the newly acquired property for quite awhile, she wanted the cash way ahead of when she actually needed it. Though semi-retired her income was still six figures yearly, as she owned a long established cash cow cafe. (She hated it when I called it that.) Turns out in three years she was turning over the reins to the cafe, and forgoing the income. This worked out ‘cuz by then her portfolio was already cash flowing, uh, more than adequately. (She had quite the portfolio.) This was probably gonna be her last exchange, and it was mostly due to her wanting younger property with lower long term operating expenses.
My assignment was to get her $75,000 — and time it for three years from the close of this exchange. It would be for a long trip she was gonna take, and frankly, just ‘cuz she wanted a little more spending money for when she turned over the cafe to her son and daughter-in-law.
Not a problem. Read the rest of this entry »
Posted on July 23, 2008 @ 10:44 pm - Written by BawldGuy
I’ve seen in the real estate business the rough equivalent of what my grandma saw in her lifetime with flight. Born in 1909 she saw in real time the embryonic stage of flight. The first successful flight was only six years before her birth. 60 short years later she watched, on a ‘machine’ not in existence until she’d been married and had four children (three on her front porch), American men land on the moon and come back safely.
Think of where real estate investment was 40 years ago. I’d compare it to the planes used in World War I. The MLS existed, but was in book/magazine form delivered by truck, supplemented thrice weekly on paper held together by staples. The establishment of financing exceeding 75% for Heaven’s sake, was a huge break through! Tax deferred exchanges required every property involved to close the same moment in time. Why would anyone do that on purpose? (Stories — I have stories.)
There were nowhere near the choices for real estate investors there are now — even the biggest thinkers didn’t see what came into being in the ’70’s. (at least that I can recall) My father didn’t use tax deferred exchanges, but then changed, deferring taxes, and he was thought of as a maverick by many of his peers. We’ve seen the rise of the real estate investor from the middle class which descended on us like a squadron of jets in the ’70’s. That new investor class has remained as a significant player to say the least. Read the rest of this entry »