Put more succinctly, I was the typical 20-something know-it-all whose real life lack of experience, expertise, and knowledge was nearly immeasurable.

Then several ’storms’ converged to enlighten me.

The starry-eyed optimism and unearned confidence of my early adult life was both a help and a hindrance. It helped as I forged ahead in things only a lack of fear made possible. It hindered cuz, well, ignorance and arrogance always hinder. Duh. So what were these storms?

I embarked upon an intense and extended period of education. The teachers were, with rare exception, not ivory tower professors. They were doing what I was doing — and with excellence.

I became a father — that should be self explanatory.

The disastrous inflation/recession of the early 80’s hit HARD and taught exceedingly well.

Grandma explained what she’d been tellin’ me for years — that the fundamentals, physics if you will, of economics would not be long mocked.

I learned a priceless lesson: ‘Adapt or perish’ wasn’t just a slogan.

In my experience, the principle of adaptation has two basic levels. 1) We must adapt to market changes, often temporary in duration, or if not, they’re generally not soul-wrenching events. (Captain Obvious now rollin’ his eyes.) 2) We must adapt to huge changes, often systemic in nature, that will make previously profitable strategies and/or endeavors disappear faster than steam.

An example of #1 would be temporary but problematic interest rate increases, or minor but irritating modifications of a particular tax law. An example of #2 might be TEFRA, an act passed by congress in 1986 which threw wrenches in all sorts of real estate investment strategies. It causes much grief and chaos in the years immediately following its passage. It decimated limited partnerships, a very popular investment vehicle of the time. Many said it took away much of what ERTA gave a couple years earlier.

If you’re over 40, and especially over 50, the big picture as it relates to your retirement income is now more important than ever. Specifically, that means the real estate goddess of forgiveness, appreciation, has been banished for the foreseeable future. Without the reasonable expectation of properties consistently moving up the value escalator, the real estate investor’s expertise and knowledge will be tested. Mistakes will now be punished — solid investing will be rewarded.

The ability for you to adapt to all the changes that have rained down on us in the midst of this perfect storm will, more likely than not, make or break the quality of your retirement. Those who’ve lost so much on Wall Street are acutely aware of this principle and how it will affect their future.

Be bold, but Plan — then do things on Purpose.

This is where Self-Directed IRAs, Solo 401Ks, and Roth IRAs come into play for so many of you. Best case scenario for many is a number of years on the treadmill playing catchup — making up for all the money lost. Be strong, and take heart — then make the decision to be an adapter. It could be the difference between the retirement for which you planned, and 10 more years on the job.

We’re not in Kansas any more, Toto — it’s back to the Old Normal.

Frankly, I’m thrilled the Old Normal has made a comeback. It’s the silver lining to all these storm clouds. Those who make Purposeful Planning the foundation for their retirement will reap the benefits. The next five years will see the amateurs left by the side of the road. Appreciation, the goddess of forgiveness has left the building.

Let’s talk. Contact me at 619 889-7100. Have a good one.

It always amazes me that folks can hold on to foolish ideas in their heads despite ample logical evidence of the foolishness of those ideas. For example, I constantly see referenced a couple of articles written by some Wall Street Lackeys about the superiority of stock investing over real estate investing. When you actually go to look at these articles, they are so poorly argued that it is amazing that the magazines that printed them would consider them fit to print in a financial oriented magazine. But, they get continually recycled.

For the record, historic research into internal rate of returns for investment real estate versus stocks demonstrate a huge advantage for real estate. This is not to say that fortunes can’t be made investing in stocks [Buffett, Lynch, etc.], only that arguing it is always better to invest in stocks over real estate is just dumb. I mean when you look at the wealth of super-wealthy people, on average, there is 3 times as much in investment real estate as stocks and bonds.

I bring this obvious point up to this crowd because the same Wall Street Lackeys continue to argue against life insurance as they do against real estate. Yet, when you actually look at who is buying large amounts of life insurance it is the Who’s Who of corporations, wealthy corporate executives [some of which sit atop corporations that hire people to tell others not to buy life insurance], and investors. Yep, even though they use the advantages of life insurance to reduce their own taxes, they still have the hired help tell people it is best to invest in mutual funds.

Like lemmings they chant the anti-life insurance mantra of too much expense, poorer returns, and it’s not an investment. So I thought we would explore the reality of those expenses and returns and let you decide where to put your money.

Let’s take a 45 year old man and that same $150,000 that was used in my last post. He is in good health. Let’s assume for this illustration that he will retire at social security retirement age [67] and will continue to pull out income until death [his cohorts life expectancy is 78 but we will add 6 years for our healthy specimen]. Further, let’s assume that the performance from the stock index that is producing the interest returns is 11% less, on average, than how it has performed over the last 30 years. [Thirty year look back is 9.26%, so I used 8.26%] We do this to stay away from being accused of overly aggressive assumptions.

The initial face value of the life insurance is $643,368. It rises to $802,237 during the 5 years of premium payments, where it stays until year 13. At year 13 it is lowered to $400,000 and starts to gradually rise until age 67 where it hits $608,012. This strategy is outlined in the earlier post. He is able to gain $52,257 of tax free annual income for 18 years. He still gets a death payout on top of that.

Let’s look at the internal rate of return [return minus all expenses] at various death ages. I will add in the cumulative odds of dying at each age as well as the total payout.

At age 50 he dies in a fiery car crash. 8% of men in his cohort will die by age 50: Internal Rate Of Return [after expenses] = 46.75% [It is a life insurance policy!] Total tax free payout $802,237.

At age 60 he dies of a massive heart attack. 15.1% of men in his cohort will die by age 60: IRR = 7.8% The total expenses has cost him .46% [8.26%- 7.8%]. Total payout = $431,272

He dies at age 70 from cancer. 28.9% of men in his cohort will die by age 70: IRR= 7.19% The total expenses has cost him 1.07%. Total payout is $209,028 in income and a death benefit of $546,940 or $755,968

He dies at age 80 from a stroke: 54.1% of men in his cohort will die by age 80: IRR= 7.16% The total expenses has cost him 1.1%. Total payout is $731,598 in income + $303,855 death benefit or a total of $1,035,453

He dies a happy and satisfied man at age 90: 96.3% of men in his cohort will die by age 90: IRR = 7.35%. The total expenses has cost him .91% Total payout is $940,626 in income + $390,924 in death benefit for a total tax free payout of $1,331,550.

OK, now let’s look at the expenses. As I have mentioned the majority of the expenses occur in the first 10 years of ownership. However as seen above, because it is life insurance, you aren’t effected by this front loading of fees.

The first year the expenses are like this:

Premium charge = $1,650 Cost of Insurance Charge = $668 Policy Issuance Charge = $2,625 Administration Charge = $60

These are not inconsequential charges. During the premium paying years the charges are essentially the same but for a small, incremental increase in insurance cost.

Year 6 charges:
Cost of Insurance = $959 Policy Issuance Charge = $2,625 Administrative Charge $60

The charges remain the same until year 11, where they decrease significantly:

Cost of Insurance = $1,497 Administrative Charge $60

From here on out there is the cost of insurance charge + administrative charge only.

Let’s look at age 60 for an example. Remember we lowered the face value to decrease cost of insurance expenses.

Cost of Insurance $389 Administrative Charge $60

With an accumulation value of $331,748 the total cost as expressed in percentage this year is .14%!

You tell me, are the expenses a big deal? Is the internal rate of return acceptable to get tax free income? Remember, my numbers are conservative both in rate of return and how long our friend will be around to collect that income! You put in $150,000 and get over $52K of tax free income for 18 years, plus a little kicker for your family at death. Now you see why I and BawldGuy are such big cheerleaders for this product!

This is one of those nuts ‘n bolts things every real estate investor should know. The IRS doesn’t usually buy the whole ‘dog ate my homework’ — ‘I had no idea’ type of excuse when it comes to unintentionally recognized capital gains. So, heads up.

Here’s a way you’ll possibly experience what I’ve termed Stealth Gain.

Let’s say you bought a property some time ago. The boom generated two things — an increase in value — and your Happy Feet dance which came immediately afterward. Now though, you’ve been clotheslined by the market correction. Your property’s value zoomed — then came back down to earth with a rough landing.

When times were goin’ your way, you refinanced. For this discussion, the reason isn’t relevant. The loan amount was for quite a bit more than you paid for it. Also, your adjusted basis — basically what you paid, plus any sales costs and/or capital improvements, minus all the depreciation you took while you owned it, was far less than the loan balance at sale. And before you ask, NO, it doesn’t matter if it’s a foreclosure sale or a short sale. If you’re mortgage over basis, you’ll have a capital gains tax to pay. (And I haven’t even brought up the whole ‘debt forgiveness’ nightmare.)

Why am I tellin’ you this?

Simple, if you sell for what you think is a very small gain, or even a loss — even through foreclosure or a short sale — you still might discover you owe taxes.

I won’t go through all the ins and outs here, as it would go on forever. Suffice to say, it’s very possible to walk away from a sale with $1.98 and still owe capital gains taxes on a sizable ‘gain’. If your loan was $100,000 over your adjusted basis, regardless of any subjectively perceived profit or loss, you’ll be scramblin’ next April 15th to deal with it. See what I mean about Stealth Gains?

Here’s another way you can get bushwacked.

The same thing goes for those of you selling for what you naturally think is a very small gain, or even a loss. You may actually be bringing in your own cash to close the escrow. Yet — WARNING: Here comes another clothesline. If your adjusted basis is lower than your sales price, you’ll be recognizing a capital gain. This time though it could be couched in terms of the depreciation you may have taken during the holding period. They’ll call it ‘depreciation recapture’, though there may indeed be a cap gain too. For the record, tax rates for ‘recapture’ are higher than cap gains rates. Just so ya know.

This often happens when an investor acquired the offending property via their third (or fourth, or fifth) tax deferred exchange. This results in two consequences — neither one of which is good if you’re selling, not exchanging.

1. Each time you exchanged, your adjusted basis, which is almost always smaller than the day you acquired the property being left behind, went with you to the next property(s).

2. Over the years (and exchanges), each year of depreciation makes that basis smaller and smaller.

So when you bought it for $100 back in the day, executed a few exchanges, the last one at an acquisition price of $300, your ultimate sale will cause problems. Here how: You sold for $295, which meant after your costs of sale, the net check you received from escrow was enough to take the family to 31 Flavors for double-dip waffle cones. HOWEVER — since your adjusted basis at the time of the sale was the proverbial ‘buck-three-ninety-eight’, you can readily see what’s next.

See, your adjusted basis was WAY lower than your $295 sales price, which means you just entered The Twilight Zone — episode title, Nightmare on Cap Gains Street. And yeah, I know the sales price was less than you paid for it.

BawldGuy Takeaway: The cash you net from a sale has no connection whatsoever to the reality of how your capital gain will be computed. Before you have even a semi-serious thought about selling, PLEASE PLEASE PLEASE consult with your CPA. Don’t have one you think knows the ins and outs of this stuff? Not to worry — gimme a buzz and I’ll hook you up with someone who knows which way is north on the map.

Contact me at 619 889-7100. Have a good one.

Gonna make this short and simple so I don’t fall into the War & Peace trap.

First here’s the gist of of the plot from last time. Real leverage comes from the relationship between the cost of borrowed money and the return on the investment itself. Positive leverage results from the return exceeding the cost of the debt. Negative leverage is then, of course, the other side of the coin.

You borrow $100 from Uncle Dick, who charges you 6%, the normal nephew discount. Immediately you go out and ‘buy’ a $100 note from your buddy, Timm. The note calls for 8% interest.

Each year you receive $8 from Timm, whereupon you immediately send $6 of it to Uncle Dick. You pocket the remaining $2. What you have there, is classic positive leverage.

Note: Have you figured out what’s missing yet?

On the other hand — what if Uncle Dick lent you the $100, same rate, and you lent it to Timm at an interest rate pegged to a particular index, which would
set the rate the following day. It was a gamble, but one you thought prudent, as you were pretty sure the index was gonna rise. Of course, it didn’t. It fell like a rock — finally landing at 5%. You now have a problem, don’t ya?

Each year Timm pays ya $5, a dollar short of what you now owe Uncle Dick for the year’s interest on his loan. You find yourself diggin’ into your pocket for the extra buck needed to make the payment. You just felt the sting of negative leverage.

Notice in this example there wasn’t a ‘down payment’ of any size — you borrowed the $100 and ‘bought’ the note given to you by Timm with the same hundred dollar bill. You own the note free and clear — yet there’s still leverage involved.

And yeah, yer right, free and clear is a stretch here. I know it’s 100% financed by the money lent you by Uncle Dick, but you get the point.

I’ve enjoyed many a free drink proving the existence of leverage in a so-called ‘free ‘n clear’ transaction.

Now, apply this to your typical real estate investment. You might put 20% down plus some closing costs, totaling roughly $50,000. The new 80% loan carries with it a fixed rate of 5.5% interest. Using the same simple arithmetic used in the examples, we find our return is 12% — positive leverage. And, if the property’s return had been less than the cost of your money — 5.5% — your leverage would then have been negative.

The concept of leverage is one of the laws of the physics of economics.

Does all that make sense to ya? Call me at 619 889-7100. Have a good one.

I’d love to write about stuff important/interesting to me, but would no doubt be better advised to write on topics about which you guys wanna read & learn. It would please me greatly, and I’d be eternally grateful if you’d drop by here to let me know your preference(s).

Thanks so much for your input.

Consider the following. I wrote about this earlier this year, but in the last several weeks, there have been similar requested consults. Sadly, a couple of them came to me too late for me to really help much. Pay attention, cuz this particular story gets played out every year across the country. Gettin’ a huge tax bill as a complete and shocking surprise is no fun — I know, I experienced it as a young man. It was gut wrenching to say the least.

This particular story has a pretty happy ending — not always the case, unfortunately. Earlier this year an agent called me out of the blue. I’d never met them, but they’d been reading my stuff here and over at BloodhoundBlog.They had just one question, which led to a boatload more, as usual.

She said — “My client is selling one of their rental properties, a triplex, for a sizable loss — about $50,000 give or take. It’s in escrow and scheduled to close on or before August 5th — next Wednesday.”

Their numbers seemed to jive with the set of facts she then had given me. But hard earned experience has taught me to ask the seemingly unrelated questions, as those answers, if they raise red flags, often lead to a complete change of horses in the middle of the escrow stream.

I asked one question: “Did your client exchange into the property in question?”

She didn’t know. I told her to hang up, get the answer, and call me back with the pertinent facts if the answer was yes. You already know the answer, right? It was indeed acquired through a tax deferred (1031) exchange. In fact, from the facts they passed on to me, the gain deferred back then was well over $200,000 — not including any depreciation recapture — from then or now.

Holy Tax Bill, Batman!

BawldGuy Axiom: It’s not the answers to the questions you ask that get you. It’s the answers to the questions you never knew to ask that can end up haunting you for years. Put another way — You can’t know what you don’t know. Duh

The actual numbers were of course not precise to say the least, but I was able to give her a very rough idea of what the consequences were likely gonna be.

The so called ‘loss’ was gonna disappear in the consuming heat of the earlier deferred gain. The long and short of it is, a tax bill that will surely top $30,000 before any depreciation recapture is added to the mix, which of course it will — and at a higher rate too.

The happy ending? They’re converting the sale into an exchange, which will avoid the very nasty surprise awaiting them. It wasn’t their preference, but they’d much rather do that than write that kinda check. They eschewed the other option of canceling the sale outright, as the buyer had performed as agreed, and as the agent said, the seller told her that wasn’t an option. Good for them.

Over the years, this script, or something similar has played itself out more times than you might expect. Again — you can’t know what you don’t know — which means you can’t get critical answers to questions you simply don’t know to ask. It’s often a tragic Catch 22 for real estate investors.

The solution of course, is to find someone who not only knows the questions, but most of the answers as well. If they know all the answers, run, don’t walk to the nearest exit. Nobody knows all the answers.

Let’s talk and find out if there’s a happy ending in your near future. Call me today at 619 889-7100 and we’ll get started. Have a good one.

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.

I love what Warren Buffet said the other day on Charlie Rose’s show: “There are no great deals.”

He went on to say that if the investor isn’t thinking big picture combined with viewing time in terms of decades, their myopic approach will cost them in terms of return, capital growth, and cash flow. He used his latest acquisition as an illustration.

How would you like to be able to casually announce you’ve just bought the Burlington Northern/Sante Fe Railroad? By his demeanor you woulda thought he just asked you to pass the salt, please.

Anywho, he went on to say that in all his years of searching, painstakingly uncovering every possible investment opportunity, he’s never found that so-called great deal. He realized one day, that there really aren’t any, or at least he’s never found one. The takeaway he seemed to want us to understand was that with the proper/prudent long term view, reasonable returns kick major booty. Now before you get off that quick rejoinder about reasonable is peanuts in your opinion, be reminded he just donated a double digit number followed by three commas and nine zeros to charity.

Apparently reasonably returns compounded over decent time periods do indeed generate positive results. I’m no stranger to to Mr. Buffett’s thinkin’, as I’ve adopted as much of his approach as I can fathom. I’ve been shoutin’ from the mountain tops to anyone who’ll listen — buy right, keep yer nose clean, sell/trade when the market lets ya, retire well.

Back to Warren Buffett’s new railroad.

He analyzed the business and came to several conclusions, some of which I’ll note here.

Railroads won’t be replaced for the next 1-200 years.

The job of transporting widgets from Pittsburg to Phoenix can’t be outsourced to China. (Come on, that’s funny.)

The capital required to create competition is virtually prohibitive.

This will be a cash cow for Birkshire Hathaway into the next century.

It was a completely arm’s length transaction. It wasn’t in any way, shape, or form, a ‘great deal’. The return will be reasonable, which will, I suspect grow to a bit better than reasonable under the BH umbrella.

Several decades of acquiring reasonable returns = billions.

Apply that train of thought to your circumstances and imagine what’s possible if you stay on the right track for the long run. Kinda sorta excitin’, isn’t it?

Call me, I need a fix. 619 889-7100. Have a good one.

My decades as a real estate investment broker have led me to understand how landlords can rationalize just about anything, especially when it comes to direct dealings with their tenants. This is a good time to recommend professional management, as my stance has always been that your income property should work for you, not you for it. It’s not always feasible, and I get that, but if it’s at all possible, at least consider it seriously.

The question is often posed, “Should I always be on the cutting edge of market rents?” OR “What will happen if I raise my rents and they all move out?” There are myriad iterations.

Here’s a dirty little secret about where you should be with rents on your particular property — it’s not just about the ‘market’, it’s about your micro-market relative to the demand for what you have to offer.

Don’t be too quick to judge that statement as simple-minded. Take it while blending it into the context of what I’ve termed ‘relative demand’.

Let’s not turn this into rocket science, OK? If you own residential income property in a more or less blue collar area, the demand for your vacancies will not be as intense as a vacancy in a highly coveted location a couple miles away, whose tenant profile is more financially established than yours.

For instance, one of the neighborhoods we recommend in Texas (DFW MetroPlex) resides in a school district so well thought of, folks literally relocate so their kids can attend school there. Same as with Palo Alto (Bay Area, CA) schools, except ya don’t hafta make a 5-figure monthly salary. Landlords inside that school district are kings. Even in times like these, they not only fill vacancies, they sometimes see rent increases as an option.

Here are some guidelines to use when contemplating rent increases. Understand, most of the time, you’ve thought about it only cuz you already know about the competition down the street, right? Right.

Understand the real underlying demand for your unit.

Consider giving a 60 rather than a 30 day notice — courtesy.

Don’t get comfy with rents more than 10% below market, as it affects value.

Never raise rent on a poorly maintained unit — never ever.

If possible, preempt tenant resistance with evidence of local rents.

Understand: A long term tenant at way below market rent is a loss even if they’re ‘really, really nice’ people.

Ultimately rents determine value — keep your eye on the ball.

Do your own ‘boots on the ground’ rent survey. This ain’t an option.

This isn’t meant to be a treatise on rents. You set the tone on the topic when folks move in. When Brown and Brown had a management arm we told them our policy, which was to review rents either annually or even semi-annually depending upon current market trends. They went in knowing this would happen, so were never surprised.

Also, cuz we were very vigilant about maintenance and repairs, there was a well established positive atmosphere when it came to our side of the table. They appreciated our reliably quick response to the irritating little problems that crop up. It’s like banking goodwill.

When they check out your competition they arrive at a few conclusions.

The new, higher rent is equal to or a bit under what they found.

Even if they found a slight better deal, it very likely won’t be worth the irritation/cost of a move.

They have no idea if the new landlord will be as cool as you’ve been.

It’s about you giving them value for their money. As long as they perceive that’s the reality, the occasional rent increase shouldn’t be a big deal. Make sense?

Call me at 619 889-7100 and let’s get a Purposeful Plan up and goin’ for you. Have a good one.

Here’s the problem though, especially as it relates to the garbage in/garbage out principle in the form of an axiom.

BawldGuy Axiom: Using most of the required tools to complete a job well ain’t gonna work — and the proof will show up in the results.

Ever been workin’ out in the gym and seen one of those guys who didn’t get the memo about workin’ the body as a whole? They generally look like Ahnold from the waist up and Olive Oil from the waist down. I’ll bet you’ve seen this before. They’re applying the fundamentals of body building through resistance training — but doing it selectively. FAIL.

This goes double when you invest. Selectively adhering to what you know is fundamentally correct won’t cut it. Curious though, how when a fundamental is contrary to what we wish to believe, or worse, what we really wanna do, we can figure a way around it.

Bad idea.

Leg work in the gym is pretty much universally loathed. In fact, I don’t trust folks who love leg work, as it just isn’t natural. Then there are the comical results described above — the Ahnold/Olive Oil look IMHO will never catch on.

Getting the right property, or the right price, cap rate, region, etc. can’t be approached piecemeal. Also, especially these days when we tend to feel far too comfortable with online research, a false sense of ‘having the data we need’ is the biggest risk. I run into it almost daily.

“We’ve done some real research, even down to the neighborhood level, and we’re convinced the rents should really be such and such.” Long time readers know the value I ascribe to ‘boots on the ground’ (BOG) research. I’ve had folks tell me rents are too high, when in point of fact, those rents are a year old, and now slightly lower than the three down the street, just raised upon lease renewal.

Local boots on the ground knowledge is like gold — it’s value is never zero. When combined with decades of accumulated knowledge and expertise? A lot more than zero.

Online research? Helpful at best, horribly misleading at worst. If not gathered with the intent of BOG follow-up it has dubious value at best. Those who buy or pass on regions, properties, neighborhoods based upon research done in their living rooms are more likely than not future recipients of the law of unintended consequences.

This is why we always, no exceptions, do our own boots on the ground work. When we say a property should rent for $XX, we have the data to back it up. When we come to an opinion of value, we’ve seen the properties and the comps in person — not to mention appraisals from paranoid lenders who believe nothing. We know both personally and empirically how we came to our opinion.

The Father of all investment fundamentals?

They’re called fundamentals for a reason — without them in place, things don’t work as planned. You either miss out on a stellar opportunity, or mistakenly brand an investment as an opportunity. Either way, eschewing the use of all the tools in your toolbox is a mistake which almost never fails to deliver. consequences. The dirty little secret? Most investors simply don’t pack a fully stocked toolbox.

My ‘band’ has at its disposal many instruments available for use with specific real estate music. When ya need cowbell, ya need cowbell. There’s no callin’ out ‘Gimme more cowbell!’ when there isn’t one. Hence, the name of my new band.

Fundamentals Toobox — Backed up by Boots on the Ground.

Wanna talk? You can contact me at 619 889-7100. Have a good one.

A reader, one of my favorites, and a wise, experienced investor, sent me a link showing Phoenix residential rents have been taking a hit, and may continue their downward slide — various reasons were given. On the other hand, the prices have been lower than they have since the boom. Buyers have been paying cash for homes, resulting in lower rents due to the lack of loan payments. They’re buying, for the most part, for capital growth. Cash flow is fine, but not their primary aim.

Their thinking is long term. Buying for cash, they don’t really care much, relatively speaking, about how much rent they get, as long as they can keep tenant quality in their comfort zone. This bodes well, NOT, for those facing a mortgage payment the first of every month. They care very greatly how much rent the market will bear.

Now, the lesson I learned when this first happened to me back in the day, wasn’t what many have concluded these days. Oh, at first it was, but then one of my mentors made a brutally honest observation.

He said, “A larger down payment, or even the decision to pass on a few investments wouldn’t have changed much. Those in a much stronger financial position than you aren’t hurting as you are. Why? They did two things you didn’t before starting.

1) They correctly surmised their relative financial strength. And 2) They ensured they were backed up for the Black Swan type event not even a crystal ball could foretell. They had major cash reserves from Day 1. You? All you had was faith in the status quo never changing.”

Folks tend to wanna make this stuff as scientifically reliable as possible. Me too. Numbers provide this confidence factor for sure — but it’s so often a false confidence. Know that famous bumper sticker? S*** Happens? We all instinctively understand the sentiment, don’t we? We’ve all been there in many parts of our lives — it’s part of living for Heaven’s sake. Things don’t go as planned, which means your Plan better allow for that fact of life.

Will rents continue to fall in Phoenix? Probably, but they surely won’t be the Lone Ranger rowin’ that boat. (Come on, who mixes metaphors better?) Many regions, including San Diego are seeing rents slide. Why do ya think I’m so strong on Texas income property? They’re holding their own most places, and edging upward in others. But back to the point here.

Old School thinking is what took me to Texas.

Your Purposeful Plan must, by definition be long term in nature. It must correctly assess your financial strength. When things change, and this is maybe the most critical lesson I’ve ever learned — you must adjust. When your professional tells you to do something not found in the original Plan — do it. He’s adjusting to reality.

Flexibility is crucially important to anyone’s retirement plan. Without it, opportunities are lost, and avoidable trauma isn’t, well, avoided. Sometimes it makes sense to sacrifice one part of your Plan to better navigate rough seas.

Old School thinking. Amputate an arm to save a life.

Choosing into what markets to invest your capital is one thing. But plunging in without much more than faith in your due diligence and a good down payment just doesn’t cut it. The good old days are just that — old — and gone. Adjusting to the new reality is not an option, it’s a must. This is why I’ve been a disciple of Old School principles from the beginning.

One of those principles says investing without a Purposeful Plan is the fastest route to chaos. The Old School teaches boots on the ground research. Abundant cash reserves. It holds superior knowledge as golden. It believes reality is not perception — it just is. Perceive it differently at your own risk. Besides, how reliable can your perception be, when you don’t even know some of the questions to ask, much less the answers? Oh, that struck a nerve did it?

Old School isn’t all knowing or magical. It’s not perfect, as it’s certainly not omniscient. But I’ll take it over every other approach, hands down.

Let’s talk how Old School can be applied to your Purposeful Plan. I’m at 619 889-7100 — BawldOperator on duty. Have a good one.