Posted on September 25, 2008 @ 11:37 pm - Written by BawldGuy
Ever wonder why the guy at yer office goes from one success to another? Sure, the usual reasons work, but the common denominator is almost always goals, which then lead to their version of what for decades I’ve been callin’ a Purposeful Plan.
A Plan without goals is an eighth grade creative writing assignment. Goals without a plan is a daydream that turns into a whole lotta nothin’ the moment your mind is refocused. A locomotive is of little value with no train to pull — and a 20 car train is goin’ nowhere without the locomotive’s power.
I’ve always envisioned the train as my goals, and the Plan as my engine.
Take some time and listen to the Purposeful Planning podcasts. They’re located at the top of the page on the right. Just click and listen. They’re not long, about 15 minutes give or take. Then, if you’re interested, give a listen to Grandpa Economics. That one surprises most who listen. Many have told me it’s what pushed them to get going.
And you thought this weekend was gonna be boring. Silly you. Read the rest of this entry »
Posted on September 22, 2008 @ 8:13 pm - Written by BawldGuy
Behavior is the ginormous elephant in the room in any discussion of income/capital gains taxes. Still, many believe the myth that it’s axiomatic when taxes go up or down, the income to the Treasury does the same. This has been debunked since the early 1960’s.
Don’t know about you, but when the capital gains tax was say, 28% plus another 5% (or more) or so from your friends in state government, real estate investors tend to avoid selling investment property. Something about givin’ up 1/3 of their profits off the top rubs them the wrong way. So what do they do? The same as millions of others. They make the decision not to make government their partner.
Go figure.
BawldGuy Axiom: To the extent the government insists on being the taxpayer’s ‘partner’, the taxpayer will do what it takes to avoid that happening. (Original quote by: Captain Obvious)
What happens whenever relatively high income/capital gains rates are cut? The behavior of taxpayers changes. Duh. Come on people, is this a revelation? Don’t know about you, but taxpayers’ behavior changes when they’re allowed to keep more of their own money. For Heaven’s sake, is this news? Seriously?
Finally, let’s inject some street reality here. Read the rest of this entry »
Posted on September 18, 2008 @ 11:33 am - Written by BawldGuy
A couple months ago I wrote a post talking ’bout those who insist on chasing phantom cash flow properties. They hear the stories, even view the so called ‘proof’ of income and expenses showing Garden of Eden properties spinning of double digit cash on cash returns. These returns come from locations reminiscent of Wally ‘n Beaver’s neighborhood, with tenants who must surely have been friends of June Cleaver.
Yeah, and mutual funds will generate 10% annual returns for your 401(k) account, year after year. Divide that number by two, then subtract a little more, and you’ll then be rowing your leaky retirement dinghy on Lake Reality.
This week alone I’ve spoken with four real estate investors who rubbed that lamp and made their wishes while putting their hard earned investment capital into Lake Cash Flow, only to find the lake was home to the vicious cash flow eating piranha. They fell prey to the same approach that’s gotten us where we are today. What’s that you ask?
It’s the school of wishful thinking. It says even though somebody who should know better says up is down, then it must be OK. It says that you can create a real estate version of your personal ATM simply by puttin’ your money in the slot and waitin’ for the cash to come back at ya in an orderly, predictable fashion.
Pullleeease.
Here’s the post mentioned above. Read it while picturing Grandma. Real Estate Investors: Chasing Pretend Cash Flow Surest Path To Pretend Retirement coulda been written by most of our grandmas.
Posted on September 15, 2008 @ 10:34 pm - Written by BawldGuy
Did we learn anything whatsoever from the Savings and Loan fiasco of the 1990’s? Well meaning folks, true believers, as am I, in a relatively unfettered free enterprise capitalistic economic system, deregulated the S&L’s. They told them in effect, to follow the profit motive and be honest, not abusing their fiduciary responsibility.
Call me silly, but putting the fox in the henhouse while sternly telling them to guard the chickens instead of eatin’ ‘em shows a distinct lack of forethought. Just sayin’… It was well intentioned for sure. I’m not implying otherwise. It turned out to be a superb opportunity to learn from our mistakes, right?
Well, not so fast hedge fund breath.
Fast forward to today, say around 4 PM EST, when the ghost of Kate Smith showed up to personally ring the bell, while signaling the final curtain for a couple financial firms.
Let’s not get all technical here, OK? There’s no need, and besides it’s more boring than the last software manual you read. Wall Street types went into the offices of lender types, and said, “We think if you go along, there’s a lot more money on the table for both of us.” Whereupon the lenders replied, “We’re listening.”
The rest is history. Read the rest of this entry »
Posted on September 8, 2008 @ 10:29 pm - Written by BawldGuy
Early adapters will be the big winners when it comes to capital growth and investing in outa town real estate. Those who insist on keepin’ their capital here in San Diego will look back a few years from now, realizing they could’ve done much better. In just five years the difference can be far more injurious to your retirement plan than you might imagine. How so?
San Diego (California in general) takes another couple years to stop the decline. Another to stabilize. Two years at 2-5% appreciation. Before ya know it you’ve raised enough to pay for half your sales costs in five years. Let’s party.
OR
You can take yer $100-500,000 into a growth region or three and get 3-7% for the next five years. Even if it’s say 5%, if you executed a tax deferred (1031) exchange into say $1 million of property, your first year you’ve grown by $50,000. Even if your $450,000 duplex or rental home in SD went up 10% you’re still behind — and the gap only widens.
BawldGuy Axiom: Waiting for California (San Diego, Palo Alto) real estate to resume normal capital growth rate is akin to waitin’ for your cat to bark. Definitely not a good use of yer time — or your capital.
This cat wouldn’t bark no matter what drug the vet gave it. Sweet relief from broken leg suffered in three story miscalculation. The bird made a clean getaway.
You might as well be waitin’ for yer cat to bark as wait for the San Diego market to keep your capital on the growth trail. Adapt to the new reality. It’s now almost the same trading to other states as it is staying home. And in the end? Your capital doesn’t know where it is. It does have a need to flourish though. The Boss’s cat wasn’t even gonna
Texas, including Dallas and surrounding areas, Austin, Kansas City, and hopefully soon, the Carolinas and Georgia — all better performing markets than San Diego. Not even a close call.
Oh, and for the record? No matter how long you stare at yer cat, it ain’t gonna bark.
Maybe while yer starin’ at Fluffy, you can send me a quick note. We’ll talk about how a Purposeful Plan will most assuredly make the difference in turbo charging your equity’s growth rate. Have a good one — and thanks Kelley.