Posted on June 20, 2008 @ 10:36 pm - Written by BawldGuy
Man, the hucksters are out in force. Been gettin’ emails and phone calls from folks wantin’ me to help them retire in the next 2-4 years through ‘fantastic’ cash flow opportunities in such and such a region. What? Huh? First, let’s ask ourselves a few quick questions.
If we at Brown and Brown could get clients to retirement that quickly, don’t ya think we’d of been braggin’ about it before now? Ya think? Do these magic cash flow properties exist? Well, on paper they do. After that? A whole lotta ‘what the heck is goin’ on here’ is what’s after that.
Seriously, didn’t Grandma tell you about the whole ‘If it sounds too good to be true, it’s probably not’ thing? I’ve literally had over half a dozen conversations this month in which I’ve been questioned about why I won’t fess up about these properties with ATM-like qualities. Wow. What new seminar, Invest In Our Magic Property And Retire Next Tuesday did I miss?
BawldGuy Axiom: Listen to Grandma — she’s been there, lived that. Read the rest of this entry »
Posted on June 6, 2008 @ 12:45 am - Written by BawldGuy
I hate infomercials hard. Then there are the cattle call seminars promising their spellbound audience great riches and early retirement through investing in real estate for cash flow. It’s not that the idea isn’t way cool, it is. But seriously people, the stuff they’re puttin’ out will make your lawn grow faster, but not your capital. And cash flow? Give me a break.
It’s the old ‘on paper’ vs real life thing. On paper, a house bought at the Dollar Store with stoopid high rent, makes real estate mogul type cash flow. Let’s look at this video frame by lyin’ frame, OK?
First Frame
Pulling the common sense card from the deck right off the bat, one’s gotta wonder — if they’re such great properties, why are the so dime-a-dozen cheap? Duh. ‘Cuz nobody wants ‘em, that’s why. Was the first clue a Glock is required to get in and out of the neighborhood? Real estate is a slave to the law of supply & demand. There’s nothing special exempting income property from that law.
I have clients who’d buy them literally by the dozen — for cash — if they were really what they say they are. I’d own a hundred of them by now. No, two hundred. Why not? They’re that cheap, right? And the rents are as high as properties selling elsewhere for five times the price. Pullleeeze. You know the guys on TV are actors. Real folks couldn’t keep a straight face.
Second Frame Read the rest of this entry »
Posted on May 30, 2008 @ 12:06 am - Written by BawldGuy
San Diego and (California in general) has been the best girlfriend ever. Loyal, always thinking of just us, enriching our lives almost without fail, and bringing additional commas to our bank accounts. Talk about having it all, we sure did.
She always played our song. Happy days? The status quo. Even when she was down, we knew from experience she’d bounce back — and even more lovable than before. Well, as happens in real life sometimes, that perfect mate has tired of us and left us high and dry. She’s walking away, and she ain’t comin’ back.
People, that’s exactly what’s happened in California. Investment property has taken a different path. The days of buying, holding for a few years, then selling or executing a tax deferred exchange yielding splashy results are gone. I think they’re gone forever. Why?
Glad you asked.
Your property is now worth, after this market correction, 150-300% of competing markets in out of state growth regions. In San Diego for example, a 35 year old duplex in a decent area sells now for $425-525,000 (often more) give or take. Also, in order to break even every month the investor must put down at least 30% and usually 35-45%. In NoCal 40% is considered wicked good leverage — no kiddin’. The Kool-Aid they drink in Palo Alto and the Bay Area in general is phenomenally effective. They’ll realize too late their lovingly loyal maiden has decided they’re not the Knight in shining armor any more.
Surveys show — capital growth rates fall when leverage is severely depressed. (anonymous smart aleck) Read the rest of this entry »
Posted on May 7, 2008 @ 9:27 pm - Written by BawldGuy
Caveat: There’s an old saying that says you shouldn’t buy real estate solely for the tax shelter. I’ve seen some exceptions to that rule. But just a handful, and they tended to prove the rule, not otherwise. Yer gonna get some tax shelter whether you want it or not. Of course, if you don’t want yours, we can talk. 
Let’s all get on the same page first. What is tax shelter in real estate terms? Simply put, depreciation is the loss of value of your building. Land isn’t depreciated because it doesn’t wear out. Even better, depreciation shows up on your tax return as a loss — one you didn’t feel, ‘cuz it’s also known as a ‘phantom loss’. Make sense? You didn’t really lose any money — it’s a paper loss only. Yet you get to claim you lost money.
How cool is that? You mean you never got the memo?
This loss saves you money through income taxes you now don’t have to pay. Those are real dollars, and the taxes you aren’t paying are real return. Said another way — these are dollars that but for the depreciation would be leaving your Levi’s and heading towards the IRS. A quick example would be an investor with a $90,000 income from their day job. Read the rest of this entry »
Posted on April 30, 2008 @ 9:25 pm - Written by BawldGuy
Ever had to make up your mind? Pick up on one and leave the other behind? Those words mean nothing to most of those under 40, but those in their 40’s and 50’s are already hummin’ the tune. Sometimes we don’t get to have our cake and eat it too. The decision whether to invest in real estate carries with it just one of those choices.
Should you go for cash flow or capital growth?
Are you inches away from retirement with all your ducks in a row? Cash flow is probably (probably!?) the easy pick. You’ve got quite some time ’till you see yourself quittin’ yer day job? Capital growth is the way to go. Save the purchase of your retirement money tree for uh, retirement.
So where’s the rub you might ask? Come on, really? Human nature insists on at least asking why we can’t have both. I hereby invoke the BawldGuy ‘Cuz Rule. Why can’t you have both? ‘Cuz.
Here’s the reason. Read the rest of this entry »