Posted on April 2, 2008 @ 12:32 am - Written by BawldGuy
Please forgive the title, but sometimes I grow weary of all the nay sayers out there, rooting for a complete collapse. Surely this correction, both for the national economy as a whole, and real estate housing specifically, have demonstrated unique qualities. Subprime is now part of the culture’s lexicon. The banking system has been tested mightily, as has the leadership of the Federal Reserve and its Chairman, Ben Bernanke.
I’ve never been one of those real estate cheerleader types. You know the ones, there’s never a bad time to buy real estate, yadda yadda. When the market’s sucky that’s what I call it. You can’t go through as many bad markets as I have and do otherwise.
Those who’ve been buying real estate investment property lately are gonna feel pretty good about themselves a few years down the road. Even back in the post recession years of ‘74-75, or after the S & L Crisis resolved itself, the perfect storm we see today never materialized. The missing link? The permanent loss of historically reliable investment regions like say, the entire west coast for instance. Or how ’bout the emergence of new ‘destination’ regions in Texas, (Dallas/Fort Worth) Idaho, (Boise) and Kansas City to name a few? But the real difference is the long term fixed interest rates available for investors.
Just to be consistent and on point for my San Diego readers — Get Outa Dodge — and get out now. 
Thanks — I needed that. Now back to our regularly scheduled post.
First Sam Zell says what I’ve been saying for months. The housing market isn’t nearly in as bad a shape as mainstream media wants us all to believe. In fact he said a recovery would begin this spring. I think he’s pretty aggressively optimistic to say that, but he’s the billionaire, so I’ll let time tell us if my 3rd to 4th quarter scenario is correct or not.
This was followed shortly thereafter by the markets in Texas I like so much experiencing incredible real estate growth, even more impressive population growth, and a precipitous drop in vacancy rates. Oh, and did I mention the simultaneous increase in apartment construction there? Oh yeah — good times.
This week two giants also decided it’s time to buy. As David Stejkowski duly noted, both Shorenstein and Blackstone have raised prodigious amounts of capital for the acquisition of billions in commercial real estate.
And here’s a gift for San Diego readers who are owners of local income property. Allow a short preface. Your properties are worth significantly less today than they were three years ago. Yet, if you had the choice, you wouldn’t buy your own property for even today’s value. I’ve asked that question of a couple dozen local real estate investors, and with two exceptions, they all admitted they wouldn’t think of buying their own properties again — even at today’s discounted values. 
Read this quote from Mr. Shorenstein and think of what you should be doing with your San Diego income property. (Hint: Get Outa Dodge)
Shorenstein, son of company founder Walter Shorenstein, told the New York Times in 1995: “If somebody is willing to pay a lot more than I would pay, then we’re a seller.”
That quote was taken out of an article published two days ago in the San Francisco Chronicle, entitled — Waiting for real estate bounce. Read the article to learn how Shorenstein is thinking about this market.
Bloomberg tells us about Blackstone’s $10.9 Billion in today’s update. Blackstone Group for those reading the name for the first time, is the world’s largest leveraged buyout fund.
So, there you have it. Sam Zell — Shorenstein Co. — Blackstone Group — all saying the window of opportunity is upon us.
Put that together with what Wall Street has been saying, especially today, and one could conclude the Bulls are about to make their final move against the staggering Bears. The jury is still, of course, out. But I’ve been saying in these pages for the last 90 days or so, that this is the final skirmish between the two. It appears to me the Bulls have the Bears in the corner hoping for a last minute miracle.
Finally, without wavering, I’ve been backing Fed Chairman Bernanke since Day 1. He’s made the correct moves, all the while listening to critics who wanted him to do their bidding on their schedule. He’s done it his way. We won’t know for awhile, but it’s my contention we may look back at the first 92 days of 2008 as the period the good guys triumphed, led by Bernanke.
I’d give you a much clearer picture, but since the crystal ball hasn’t come back from the shop, this’ll have to do. But, just before I put it in the shop, I looked to see what might be next for the general lending outlook.
BawldGuy Prediction: On or before July 4th, real estate loan underwriters and their bosses will have rolled the clock back to basic sanity. Meaning? Loan programs now unavailable will reappear. Virtually impossible underwriting requirements will quietly be retired. Lenders will wake up, realize it says L-E-N-D-E-R on their foreheads. The next thought will be how little they’ve been acting like a lender. Then they will find ways to lend.
Why?
BawldGuy Axiom: Lenders lend.
Posted on March 27, 2008 @ 11:40 pm - Written by BawldGuy
Though we’ve been to Austin, Dallas/Fort Worth, Kansas City, Boise, Phoenix, Palo Alto, and the list goes on, we’ve pretty much ignored San Diego real estate investors for nearly five years. Our plan calls for reentry in April or May. And no, we’re not gonna be tellin’ folks to buy San Diego investment property. It hasn’t made sense for a few years now. In fact, we don’t think it will ever be wise to invest here again.
Why?
Here’s the short version.
Your half million dollar duplex has monthly rents these days of $1,800-2,500 or so. For easily less than half the value of your property,
you can own a duplex (and brand new, not ancient like yours) with monthly income of $2,000-2,400. Does yours offer 3 bedrooms and 2 baths? And an attached 2-Car garage? In a neighborhood you’d allow your 70-something mom live in by herself?
I’d put my mom into these properties to live alone. In Phoenix they started calling it BawldGuy’s Mom Rule. If I wouldn’t put Mom there, don’t tell me about the property. That policy cut out a whole lot of useless conversations.
If your small 1-4 unit residential income property has a net equity of $60-500,000 you’ll be able to move that equity, tax deferred no doubt, to areas in the country allowing for leverage San Diegans can only experience through time travel, or Grandpa’s stories. Your capital growth rate will soar. Oh, you’d rather have a whole bunch of cash flow? How ’bout doubling to quintupling your current cash flow?
San Diego income properties simply cannot compete with other regions. It’s not possible. And if your Plan calls for you to sell your San Diego stuff in the next 3-10 years, here’s something to think about.
If they’d be ah, ill advised to buy your property today, at it’s lowest value in quite some time, how silly is it gonna be for them to buy it in another decade? It’s ancient now, right? If it’s value goes up in the next 10 years do you believe they’ll pay even more? Really? It’s my professional opinion they won’t — even if they were all the colors of the rainbow.
The bottom line is this: We can get you Outa Dodge — significantly increase your capital growth rate and/or cash flow — plus your tax shelter — while dramatically improving your chances for a magnificently abundant retirement.
Let’s continue with an example of what’s possible.
Let’s use your duplex mentioned above, with loans totaling $250,000 — here’s what you can do.
Your net proceeds from a sale will be more than you might expect because of our new business model. Instead of having sales/closing costs of around $40,000 or so, they’ll be far less. Brown and Brown no longer takes a listing commission of 3%. Tell me that isn’t cool. More on the details later. (Or, here’s an idea — you can contact us and we’ll give you the scoop way before everyone else finds out.)
Even with the normal brokerage fees your net proceeds from a sale will be about $210,000 +/-. With that capital we can tax defer you into $1-1.5 Million of very well located property — brand new too. And that’s not all, not by a long shot. The problem is, most folks don’t know what to do, where to do it, or who can help them get it done. In what direction should they go?
You’ll increase your annual depreciation by over $40,000 — not an insignificant improvement.
The difference is we’ll take your equity from here to there for a whole bunch less — and with way better marketing. We suspect our new model will end up costing our San Diego sellers about 75-90% less on the listing side of the commission. There’s nothing we can do with the buyer’s agent’s cut.
I mentioned marketing. We think those who have been selling small income props have been getting short changed on the quality of marketing. This has resulted in most of these props not selling, or taking forever. We’re gonna change all that — or at least that’s what it says right here.
Back to saving money.
This will result in a savings of well over $10,000 per property at the half million price range.
We’re serious about this.
Are you serious about your retirement plans? Are you seriously counting on San Diego to yield the retirement income you’ll need? If you could safely double, triple, quintuple your retirement income — never mind, silly question.
What are you waiting for? Contact me — we’ll sit down and let you know what’s possible. Most San Diego property owners can make surprisingly significant improvements in their capital growth rate, cash flow, tax shelter, and retirement income.
We’ll be standing by — there’s a pretty convenient Contact BawldGuy button on the upper right side of this page. Says ‘Contact BawldGuy’ and everything.
It works too.
Posted on February 22, 2008 @ 12:05 am - Written by BawldGuy
This market, for the most part, is terrible. Plain and simple, it’s a long way from just being down a tad. Though not nearly the worst I’ve seen, it’s bad enough. Is it bad enough for you too?
What would motivate you to trigger a tax deferred (1031) exchange into another region in another state? I promise to give you more than one reason.
We’ll get back to that.
There are a couple reasons, generically speaking, motivating folks to invest or execute a tax deferred exchange. One is to end up with more money than they have now. The other is to create more cash flow (income) than they have now. Sophisticated stuff, eh?
The people reasons are infinite, and for the most part absolutely appropriate. Obviously whether for growth or income, retirement is the #1 reason people invest in real estate. The end game is always the same — the highest retirement income possible. They also want to easily pay for their kids’ education. Or be able to take care of their parents if necessary.
Let’s take a mini-detour here for a BawldGuy Axiom: More is better than less. Sooner is better than later. More, sooner, is much mo’ better.
Paradox: Sometimes selling for less, means ending up with more.
Focus on what’s happening now. Loan underwriting has been tightened. (New candidate for understatement of the year.) Selling real estate has become more difficult, or as we’ve discovered in some markets, more than difficult. Prices have gone down — more or less in different markets. The plain truth is, your property isn’t worth what it used to be. Usually though, it’s just not that big of a deal.
Let me show you why.
Investors who wish to sell in this market think denial is a valuable trait. They don’t respond well to the naked facts of today’s market reality. Sometimes they’re even unkind. That’s because maybe they haven’t thought this market all the way through.
Now it’s time to ‘get back to that’.
I’ve been through this kinda market a few times before. You know, the whole been there, done that thing. The script doesn’t change. The scenery is different, but that’s about it. This correction is worse than ‘74-’75 — but not as ugly as the early ’90’s. Many, including Warren Buffet most recently, have made the observation that the early ’80’s were worse. It’s not close, at least so far.
There are some real perks to a down market for those in the right position, and armed with a well thought out Purposeful Plan.
Let’s talk about what the right position is.
The rightest position is having a boatload of cash burning a hole in your Levi’s. Next best? An investment property(s) with sufficient equity to do some serious damage. The next in line is your home with lots of accessible and affordable equity. Affordable meaning, of course, you can make the potentially increased monthly payments that could result when taking money out.
For now, we’ll bypass 1 & 3. Both involve showing up as the Buyer With Cash, which in this market, doesn’t exactly make you a pariah. Instead, let’s talk about the investors holding income property with a good bit of equity.
Let’s not get caught in the trap in which amateurs sometimes find themselves. They’ll use a formula found in some real estate investment book, telling them to make their move once their equity reaches a particular percentage of the property’s value. For instance, 40%. That figure might work well in one region, while it’s seriously way late in another.
There are too many factors involved to handcuff yourself to impotent one size fits all templates. Numbers may or may not work the same in different regions. Kingman, Arizona ain’t Mansfield, Texas. Southern California isn’t Boise, and Kansas City is just not comparable to Phoenix.
This is where the pro comes in. I’m in San Diego. Let’s say you’re in, ah, Kansas City. A duplex in San Diego goes these days for $450-700,000 give or take. In Kansas City you could probably go to Duplexes R Us and get 2-3 duplexes for that much. So if you have a SD duplex worth $600,000 with only $200,000 gross equity, the average owner would probably role their eyes at the thought of exchanging their equity elsewhere — especially in this market.
Looking more closely, we see the net equity of the SD duplex is a little over $150,000. If that were a brand new KC duplex, with a value of $235,000 and the same percentage equity to value — the net would be far less, around $60,000.
Let’s also agree the prices for both properties are easily less than they’d have received a couple years ago. Hence, the anxiety. “Why should I exchange, losing money in the process?” Of course, that’s a false statement based upon a false premise. (Again, more on that one later.) Because your value has fallen from its high point, doesn’t mean you’ve lost money. It simply means your crystal ball failed you — again — not telling you the exact day the damn thing was worth the most.
What’s the most relevant question at this point?
Easy.
Will a tax deferred (1031) exchange result in your position being significantly improved? Yes? or No? If it’s not a no-brainer — don’t do it.
In many of today’s growth regions an exchanger can better their position — sometimes more than significantly. The SD investor? (Or, just for giggles, how ’bout the Palo Alto investor? Their prices make San Diego look like the Dollar Store.) He could easily go from selling a single, 40 year old duplex to owning nearly $1.5 Million in new or nearly new properties. The KC guy? His net wasn’t nearly as much, but given the same opportunity, they could just as easily acquire triple (or almost) the value of what they left — really. No kiddin’.
Still, I hear the whispering.
That is pretty cool, but don’t you understand, we’re taking a ‘loss’ here. Why do that?
I’ll let the ‘loss’ propaganda pass. You don’t think anyone’s actually feeling sorry for you, do you?
In today’s markets, we’re negotiating deals for our clients, some as buyers, some as exchangers, saving them literally thousands of dollars. In some cases, this is not only in property value discounts, 
but upfront money too. Money in various costs and immediately require capital expenditures. Even when the deal is fine without a discount, our clients are miles ahead of where they started.
Huh? What’d he just say?
Either no closing costs, or 60-80% reduced closing costs.
Other credits based upon the property and lender.
In the most recent transactions — most recent meaning they haven’t even closed escrow yet — the average upfront savings (credits/upgrades) per client turns out to be over $15,000! Add to that the properties were bought as duplexes but will be sold as two separate units, and what have you discovered?
Again — easy.
All that money you ‘lost’? You made it all back and more simply by closing escrow on your exchange.
We won’t even talk about the next 10 years, except to make one observation. 
The difference in capital growth and additional cash flow over that period of time, will be easily measured in hundreds of thousands, if not in excess of a million dollars. It’s my intention you take that statement literally. Your choices could be crying in your beer about ‘what could have been’, or breakin’ out the champagne to celebrate your great judgment.
In the case of the SD investor, who thought they’d lost over $50,000? They gained $60,000 by their ability to buy with almost no closing costs, loan points, or paying for various upgrades. I’ll grant you it sounds pretty mundane, so I’ll make you a deal. If you don’t want the savings, pass ‘em on to me.
So far, I’ve already had a client who was able to purchase an extra ‘bonus’ property as a direct result of all the savings on his earlier purchases. That extra property will result in at least an additional half a million bucks over the next 15-20 years. Again — please take that statement literally.
Seriously, most of the properties available today, can be acquired with prudent leverage — as were the properties mentioned above. In fact, each of those properties, very conservatively speaking, were put into escrow for our clients with low downs, and fixed rate loans. They all break even or better.
Now, I double-dog dare you to tell me again about how much you’ll lose by selling your properties?
If you come here regularly, you know I like to have fun while passing on my experience and expertise.
Today was no different, but there’s a serious lesson to learn here.
Even without gaining any of the advantages shown so far, you can still sell for far less than you think your property’s worth and come out way ahead.
Think about what happens when you triple the value of what your equity controls. In SD you’re going up what, 0% a year lately? It’s far more likely decreased in value, and you’re acutely aware of that fact. Imagine our guy with the SD duplex, selling for $600,000 — ending up with nearly $1.5 Million in property. At only 3.5% appreciation the first year of ownership, he’ll have made more than $52,000 in increased value. Surveys show that beats 0% on $600,000 11 times outa 10.
Furthermore, they’re now in a much more flexible position, as instead of one property, they now have six. They’re all new. Their tax shelter has nearly quadrupled. Their capital growth rate has almost shot off the chart. And please folks, remember that capital growth, NOT appreciation is the name of the game.
Oh, and by the way — their yearly after tax cash flow has gone from about $5,000 to $15,000.
Not exchanging out of areas like California (Which includes you, Palo Alto.), Arizona, the northwest, and almost the entire midwest, makes no sense.
This is the kinda market where selling for a so called loss is actually the most profitable thing you could do. Really. 
Moving your equity, when it’s (And therefore, you too.) essentially mired in quicksand, puts your Purposeful Plan back into the game. Until you, as a real estate investor, realize this, your Plan will remain on hold. (stuck?) Meanwhile, your life isn’t on hold, and more importantly, well — tick tock. Another year, another birthday.
Time stops for nobody.
Don’t be captive to the whims of the market. Instead, turn this market into your personal capital growth machine. Learn how to win by selling for what everyone else thinks is a loss.
In this market you can truly lose your way into a far superior position.
Try it, you’ll like it. Be dumb like a fox.
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 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?