Posted on February 3, 2010 @ 8:46 am - Written by BawldGuy
Early last month I wrote a piece about growing capital and creating solid cash flow, much of it sheltered, while experiencing no appreciation whatsoever. The bottom line was surprising to many. Their capital nearly quintupled — while simultaneously creating reliable retirement income. Regardless of whether the capital grows by a factor of four or five, or less, the result will be far more palatable than a 40% loss a few years before your scheduled retirement, which is what’s happened to so many good people.
BawldGuy Axiom: Figuring return on disappearing capital is oxymoronic. Treating appreciation as anything but a luxury is akin to walkin’ in an unmapped minefield. Read the rest of this entry »
Posted on January 16, 2010 @ 10:14 am - Written by BawldGuy
Had the best conversation of the young year yesterday. Spoke with the CPA who’ll be comin’ on board as a regular, though time limited contributor. (Tax season = weekly posts…NOT) Anywho, among other subjects, we spent a half hour cussin’ and discussin’ the acquisition of real estate through the various available self-directed retirement plans (IRA/401 ’solo’/Sep/Roth) and the various strategies I’d planned on discussing at great length.
We agreed there’s much misinformation and plain bad info out there. For example, some think real estate inside an IRA etc., will be taxed — not true. Even some ‘expert’ websites word their blurbs on the topic in ways ripe for either incorrect inferences by readers, or maddening ambiguity designed to protect the authors, only serving to confuse. Read the rest of this entry »
Posted on January 6, 2010 @ 8:01 pm - Written by BawldGuy
Short and sweet tonight. Been recovering from the whole revenge of the sinuses thing.
If you have a 401k from a previous employer, it’s probably convertible to what’s known as a Self-Directed IRA. This would not entail taxes or penalties, and can be done relatively simply and quickly, especially with the help to which I can point you.
Why would you wanna do this? Simple — you’d be in virtually total control of your funds, which would allow you to acquire, if you were so inclined, well located cash flowing real estate. I can turn you on to a lender specializing in such loans.
Speaking of said loans, that’s even more good news. They’re what’s known as non-recourse — which means the lender can’t go after your plan or you if things go to hell in a hand basket. Furthermore, they’re barred by federal law from requiring a personal guarantee. It’s the best of all worlds.
You can use the strategy I wrote about yesterday. Or, much mo betta, you can use your Roth IRA if you have one, which will be just about golden when using last night’s strategy.
OK, that’s it — short and sweet. To talk with me, call 619 889-7100. Have a good one.
Posted on December 22, 2009 @ 10:51 am - Written by BawldGuy
This is a long post — it should be. Follow the progression and the numbers closely. At some point you’ll be reminded of someone in your past (present?) who followed Grandpa’s strategy and is now locked into their own life sentence.
There are many schools of thought when it comes to investing in real estate for retirement. Two of them dominate.
One says you buy property and hold it forever. When you’ve saved up enough to buy another one you do — and hold IT forever. The idea is you allow rental income to pay off debt as quickly as possible, arriving at the point of a free and clear cash flow machine. Do this more than once and you have the basis for a nice retirement income stream. Or so the story goes.
The other says cash flow comes from the yield on either capital or equity in an asset. The larger the capital amount or equity in the asset, the larger the income in terms of dollars. The ‘yield’ itself is expressed in terms of a percentage. For example, 8%. This school says that since the yield is the same, more or less, for a larger figure or a smaller figure, why not arrive at retirement with the largest amount of capital and/or equity possible?
The ‘Buy & Hold’ school (BHS) gets you there. But in what condition, and how much cash flow relative to the ‘Capital Growth First’ school (CGF)?
Buy and Hold Read the rest of this entry »
Posted on December 16, 2009 @ 11:12 am - Written by BawldGuy
Two great phone calls yesterday. One about the ever present tug of war between capital growth and cash flow, the other about financing, and holding properties forever. Today I’m talkin’ about paying too much attention to obtaining high cash flow properties when the primary agenda is for capital growth. I’ll talk about the second conversation in a separate post.
What’s a cap rate?
Simple — Captialization rate is what you get when you divide the price paid for an investment (income) property into its Net Operating Income (NOI). If you paid cash it’d also be your before tax ‘cash on cash’ return rate. Example: Paid $100,000 with NOI of $8,000 = Cap Rate of 8%.
Having a 50 million dollar bill would change everything, wouldn’t it?. You’d probably buy all the super located NNN leased properties with high cap rates you could get. You’d also acquire a few 5-star mobile home parks, and/or some well located mini-warehouse storage operations. Then you’d make sure all the checks were wired to the correct bank account — which would be your management time each month. 
Furthermore, you’d acquire an EIUL, using about 10% of your $50Mil. Note: I’ll be posting on EIUL’s soon, with cool examples. Bottom line on ‘em, is that they’re a superb source of tax free income which upon death offers a payoff to your heirs not subject to inheritance taxes. Like I said, cool. Read the rest of this entry »
Posted on December 2, 2009 @ 6:13 pm - Written by BawldGuy
As I chatted with so many people at the National Association of Realtors (NAR) convention, held in the GasLamp section of downtown San Diego a few weeks ago, it became evident there were two kinds of brokers/agents. I didn’t attend the convention myself, though I did go to the ‘Real Estate BarCamp’ held all day Thursday, and written about here earlier. I also spent much time with many of them after hours both Thursday and Saturday, gettin’ the feel of future expectations from a pretty wide variety of fellow pros, all but one of which were in the home selling part of the industry, or vendors servicing home selling agents.
A few of these conversations were not only enlightening, but very revealing. The two kinds of brokers/agents? Using a broad brush, they generally fell into either the ‘now‘ group or the ‘long term/big picture’ group.
Their responses got me to thinkin’ more and more about how the real estate investor usually falls into the same couple categories. They’re either focused on the now, and possibly the following year or so, or they’re keenly interested in what strategies would be best applied over the next 10, 20, even 30 years. In my experience, which spans 40 years now, I’ve noticed a distinct difference between the two camps. Read the rest of this entry »
Posted on November 17, 2009 @ 6:57 pm - Written by BawldGuy
This might turn out to be a short series, so if it seems there should be more info, your instincts are right on. There’s so much for the new investor to know. Let’s begin by invoking one of my all time favorite axioms.
BawldGuy Axiom: It’s hardly ever the answers to your questions that end up producing dire consequences. It’s usually (80/20 rule?) the answers to the questions you never knew to ask that end up ruining your day.
I’ll assume you either A) Have the necessary capital to acquire your first property(s) or B) The equity/assets to provide it. Most folks without the hard cash, tap into their home’s equity — if it’s prudent under their unique circumstances.
First, let’s get some myths out in the open. Read the rest of this entry »
Posted on November 16, 2009 @ 9:36 am - Written by Max Whitmore
One of the comments I received on last week’s column was “But, it is too late when something has happened!” This was in response to my comment in the column: “The stock market is not about what might happen. The stock market, if you are an investor, is all about what ACTUALLY has happened. The one and only thing that is important to your portfolio is what has actually happened! Once you know this, then you can take steps to protect your portfolio values.”
The implication from the commenter is that it was “too late” when the “ACTUAL” has already happened. Let me elaborate a bit on my comment to put to rest the concern implied by the question.
Charts go a long way in predicting the future. How? A chart traces out all sorts of repetitive formations. These formations are not just chronicling what is going on, they also forecast what may be about to happen. Read the rest of this entry »