Posted on August 22, 2008 @ 7:27 am - Written by BawldGuy
Looked at the weather report for Durango. 88˚ sunny today, the same tomorrow and and Sunday, but with possible thunder storms. For a San Diegan that’s gonna be fun. We’re there to speak to a couple groups of local investors. They’ve had the same experience real estate investors all over the country have had. Their real estate folks got them decent investments for the most part, but don’t really have an answer for their questions now.
‘Course the most important answer is to the question — What should we be doing now? Anything? Nothing? What?
We’re gonna answer those questions and a whole bunch more is these seminars are anything like every other city we’ve visited. I’m sure Purposeful Planning will come up in the conversation. 
The questions usually center around their retirement, but then begin to narrow down to how to generate enough income for their retirement.
Gotta cut it short today. I’ll be back once we’ve landed, and there’s some time. Have a good one.
Posted on August 20, 2008 @ 11:43 pm - Written by BawldGuy
Everyone and their Uncle Bobby wants a tried and true formula so they know when to make their next move. Often, one of the choices to be made is whether to keep the property(s) or not. If the decision is made to move forward in an effort to enhance their investment agenda, the next topic for discussion will, or should be how and through what structure are they gonna move forward? Surely the so-called formula doesn’t include a miracle. The miracle to which I allude, would be a formless voice arising from your analysis sheet.
Are there formulas designed for real estate investors to figure out whether to exchange or not? Yep. Do they do the job? Eh. Here’s the problem. I stopped counting the exchanges I’ve done when I hit a couple hundred, and the analysis for each one was indeed designed to assist in that single decision. No matter what though, there are choices to make almost every time. I’d say the 80/20 rule probably applies. 20% of the time the analysis pretty much screams which decision makes the most sense. Even then, sometimes there are subjective factors for which the analysis is simply not equipped to handle.
It’s called life. You’ve seen the bumper stickers, right? It happens.
I’ve structured transactions which included tax free cash to my client; installment sale treatment; boot was received; (cash or other property received by taxpayer, debt relief, etc. in an exchange which is taxable) and threw in a hypothecated note just for giggles. How often will a real estate investor incorporate all those techniques in one transaction? I dunno. I’ve only done it twice. But both times it was the right thing, (things?) to do. The decision to incorporate more than one technique flowed naturally from the client’s Purposeful Plan.
It’s an entirely different post, but pretty soon I’ll write about what generated the transaction’s structure. Read the rest of this entry »
Posted on August 19, 2008 @ 10:27 pm - Written by BawldGuy
Just how does a real estate investor grow their capital in a stagnant market? Let’s first look at what it takes, lookin’ at the big picture. The first assumption is your market isn’t goin’ up in value. Also, you’re convinced it’s not likely to go up much at all over the next several years. What constitutes a stagnant market changes depending upon whom you’re asking. San Diego real estate investors would, ’till recently, turn their collective nose up at only 5-8% annual appreciation.
In many markets, most in fact, property values are simply not movin’ up. In fact, if they’re holding their value, owners are learnin’ to claim that as a moral victory. Tonight is for the stubborn cusses who won’t leave town with their capital ‘cuz any property not managed by their hands on, ‘control issue’ selves will die a gory death.
Here’s what the competition looks like. Prudently leveraged buys in growth regions. Even with what I call Grandpa’s Leverage, the capital growth rate at just 5% yearly will hit around 8% give or take for a five year hold. That’s sans before and after tax cash flows — only value increase + the loan’s principal reduction was used. (Hey, I said simple.) That means your capital growth rate upon executing a tax deferred exchange at the end of year five would probably exceed 10% annually. That would be after tax, or to be really picky, after ‘deferred’ tax.
Tonight let’s touch on controlling property through long term lease/options. Read the rest of this entry »
Posted on August 18, 2008 @ 10:59 pm - Written by BawldGuy
You know the kinda place I’m talkin’ about. I joke about it all the time. Around here it’s known as East Toilet Seat, Wisconsin. Buy an income property there, and five years later it’s either worth the same, or gone up just enough to pay the costs of selling, and break even. Like I said, slloooow. This is why we do so well with investors in those type areas, ‘cuz folks often have capital but no place for it to grow. We make it easy for them to export their hard earned investment capital safely. Makes plenty of sense, but not everybody wants to travel that road. They’d rather stay local. For most that’s a huge long term mistake in those kinda markets. Why? ‘Cuz you’re forced to grow your capital almost exclusively through expertise, technique, and courage.
Therefore, in those markets, any strategy relying upon appreciation in general should be discarded out of hand. It’s a failure just achin’ for a sucker to grab hold.
If it can be reasonably assumed an area won’t exceed 1-2% annual appreciation, here’s what the real estate investor’s lookin’ at.
Buy at $200,000 and hold for about five years at 2% annual appreciation. In those five long years you made a whole $21,000 — and I rounded up. After sales costs you can take the family for a week’s vacation to lovely Lemon Grove, California — just a $4 cab ride away from the famous Lips. Read the rest of this entry »
Posted on August 17, 2008 @ 11:10 pm - Written by BawldGuy
Of course I have no empirical evidence of this contention. However, dealin’ with real estate investors for over three decades, I’ve been able to observe certain personality traits repeat themselves. One of these is the so called ‘maverick’ gene. You know, when I was in high school, you either loved the Beatles or the Stones. The ones who didn’t care what others thought, went for the second tier, so called ‘cuz they weren’t the Beatles or the Stones.
I liked the Beatles, but could take or leave most of their stuff. Same with the Stones. ‘Course, they both recorded songs that I still love today. Still, high school buds never tired of laughing at my musical taste — which they said was mostly in my mouth. Not so. I just had what Grandma always said was an eclectic taste in music.
Fast forward to the present, more or less. Unlike the Kingsmen who were almost the poster band for one hit wonders (Louie Louie), These guys have been around for years. Anyway, I like these guys. They do what they think is best and right, and let the chips fall, regardless of what others think. Read the rest of this entry »