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 July 16, 2008 @ 10:53 pm - Written by BawldGuy
Random thoughts allows for random pictures. Well, maybe not totally random. I was kinda hungry when I wrote this.
BawldGuy Axiom: The most difficult question for which to find an answer is the one you didn’t know to ask. Answers to those questions are often the most expensive.
Worrying about what the seller may or may not have paid for the property is wasted time. If your research shows empirically it’s worth $XX, then that’s what it’s worth. If they paid half that last Tuesday, so what? Is the seller, when you remind him what he paid, gonna reply, “You have a point, Grasshopper. I shall let you decide how much profit is fair. Please proceed.” Really?
Sellers generally follow the idea that the more they get the buyer to pay, the better off they are. This is almost a spiritual thing for them.
Said this over and over here, but it bears repeating. If yer chasin’ high cap rates that’s fine, in and of itself. Obviously, the higher the ‘cap’ the better the return. Well, maybe you shouldn’t be so quick on the trigger there, Roy. With rare exception, and I mean rare as in, a vegan ordering a #4 at Carl’s Jr.’s, really high cap rates are found in ah, shall we say, less than prime ocean front locations. Once all is factored into the real life equation, yer cap rate turns out to be a mirage. And for the record? That’s maybe why the guy was sellin’ in the first place.
Cap rates aren’t always what they seem. Never ever believe them, unless you or your guy is doing the numbers. No exceptions to this rule.
Read the rest of this entry »
Posted on July 16, 2008 @ 12:41 am - Written by BawldGuy
Today I bring you a quick principle. It’s not new, here or anywhere else. I bring it up often in fact. But this week, beginning this past weekend, I’ve heard this phrase at least a half dozen times.
“Nobody’s ever told me that before” OR “I’ve never been asked that question — I wonder why?” OR “If we hadn’t talked today, I’d of done exactly what you just told me to avoid. Wow.”
It was about variations on tax law as it relates to tax deferred exchanges. What to pay attention to when making offers on income property. Why it could matter big time what time of year you close escrow. Why one part of the country could be affected by certain strategies, while another blissfully trudges on. The potentially severe consequences of proceeding without that one little nugget of info can be staggering. That’s not hyperbole by any stretch. Hint: The IRS has no sense of humor.
Forging ahead without understanding what you simply don’t know, can, and more often than not, will make your life miserable. Hittin’ a wall you didn’t know was there ain’t cool no matter how you dress it up. We’ll discuss some examples later this week. The irony is, the consequences can be so outa whack compared to the simple actions a real estate investor can employ to avoid them.
Contrary to popular belief, ignorance is best dealt with (Read: Cured) not by emergency action, but by actual real world knowledge. Go figure. Read the rest of this entry »
Posted on July 3, 2008 @ 12:45 am - Written by BawldGuy
Warning Warning Warning — Pictures found while reading this post have absolutely nothing, nada, zilch, to do with the subject at hand. I just like inserting them. I am open to requests though. Ok, that’s it — you may continue. 
Estoppel is a silly sounding legal word sometimes used in purchase contracts when tenants are involved. Of course there are many time an attorney might use the concept of estoppel, but since it doesn’t say lawyer on my expansive forehead, I’ll stick to the purchase of real estate investment property.
I’ve taught the concept, been taught the concept, partnered with a real estate attorney for a decade and listened to him pontificate endlessly on the concept. It’s a giant pain in the patute. Yet, I’m still gonna give it a shot here. If you really insist on confusing yourself you can click the above link, but I recommend you take two aspirin first.
Here Goes
You’re lookin’ to make an offer on some income property. You’ve gone over the offer to purchase three times, and are finally satisfied yer covered. Due diligence period — check. Subject to your inspection and approval of interiors/exteriors — check. Seller’s gotta turn over income/expenses last 2-3 years — check. 23 other things — check, check, and check. Eyes begin to blur, and the thought of watching a soccer game between East Toilet Seat, Wisconsin and Rubber Chicken, Kentucky is soundin’ pretty dang good about now.
Got it covered, right? Not so fast estoppel breath. Read the rest of this entry »
Posted on June 29, 2008 @ 6:59 pm - Written by BawldGuy
When speaking to audiences in historically high appreciation areas, it’s common to hear them voice serious concern with regions I’m recommending. Their real problem? They’re lookin’ at appreciation at the cost of capital growth — theirs. They’re literally penalizing themselves to the tune of millions over the long term. In baseball terms, strikeouts are cool, but how many earned runs a pitcher allows per game is the real gold standard. No? Ask yourself if for the big game you’d want the guy who strikes out 12 batters a game but has a 5.3 ‘earned run average’ (ERA), or the guy who hardly ever strikes anyone out but only allows three runs a game?
Not a difficult decision, is it? ‘Course not. It’s obvious on it’s face. Why? ‘Cuz in baseball the winner is decided by how who has the most runs at the end of the game — not the team sporting the pitcher with the most strikeouts.
Appreciation = Strikeout Pitcher whereas Capital Growth = Very low Earned Run Average
In real estate investment terms, here’s how it shakes out in real life. Read the rest of this entry »