Posted on August 7, 2008 @ 10:52 pm - Written by BawldGuy
Due to the nature of tonight’s topic, pictures will again be at my whim. I’m feeling quite random as it turns out. When I’m talkin’ ’bout numbers and basic analysis on-topic pictures just don’t cut it.
A post published here earlier this week generated an excellent comment by David Shafer.
The post discussed the differing results of 10% or 20% down payments.
Here’s David’s comment:
I argue with myself over which is better the 10% or 20% version. I think it is really individualized. But gotta comment that the 20% version is less costly in terms of lower mortgage rate and/or no mortgage insurance which is expensive now. And if you take that cash flow and put it into another investment, then you might just come out even with the 10% down option!
Dave — I know what you mean, as I’ve done this particular analysis hundreds of times.
These days we’re seeing little or no difference in interest rates on the two loan LTV’s. Even if there was a .25% spread, if that kills the deal, then generally speaking the investor might not be a candidate for real estate at that time. ‘Course sometimes common sense dictates a particular deal just won’t work.
Let’s look at your suggestion though, which might be a logical alternative. Read the rest of this entry »
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 30, 2008 @ 11:47 pm - Written by BawldGuy
Here’s how I explain to real estate investors in other states what it’s like to trade equity from California to much lower priced growth regions.
It’s kinda like buying that killer Norstrom’s dress for yer wife. You honestly thought it was perfect for her. But after she stopped laughing, and could speak English again, you were back in the car, headin’ for a refund. Now, imagine you hafta spend the entire refund at the Dollar Store. That is what the CA real estate investor faces when he exchanges his properties’ equities to another state.
Take a Bay Area, San Jose (Palo Alto), or San Diego income property owner. We’ll use a San Mateo duplex. Let’s say it can sell for $850,000 and with a loan balance of $400,000 the net proceeds would be roughly $385,000 or so. If they paid $600,000 back in the day, their annual tax shelter runs in the neighborhood of $18,000 +/-. (Should be more, but that’s another post.) Their current cash flow is either zip zero nada zilch, or enough to treat the family to a monthly dinner at Sizzler. Oh boy! We’re goin’ to Sizzler!
Here is the ‘before & after’ picture when their 1031 tax deferred exchange has been successfully completed. Read the rest of this entry »
Posted on July 21, 2008 @ 11:02 pm - Written by BawldGuy
Leave, you say? No, still live here, just take your investment capital to places where it will actually do, well, what it’s supposed to do. Grow. Want income? Whatever yer gettin’ in California, it’s easily more likely than not, you can do better elsewhere.
This is common sense. Properties requiring upwards of 40% and more to merely break even each month, aren’t candidates for capital growth or cash flow for serious investors.
I’m in San Francisco tonight. There’s a conference tomorrow offering a rare treat. I get to listen, take notes. and get to learn. There’s gonna be a bunch of very bright hi-tech types showing guys like me how best to improve what I do without makin’ it seem like rocket science. Works for me. It’s not about real estate. It’s about helpin’ me do what I do best.
It’s funny though, talkin’ with NoCal people. Their real estate world is skewed to say the least, relatively speaking. Prices that make San Diego income property owners pay attention, are high indeed. Still, price differences aside, both regions think fundamental truths about their markets haven’t really changed. Armed with this false belief, they blithely continue down the road their various strategies have taken them.
In the last three years, they’ve cost themselves in several ways. Read the rest of this entry »
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 »