Posted on June 10, 2008 @ 10:28 pm - Written by BawldGuy
Had a great conversation with an active client today. The discussion wandered over to stocks vs real estate. He’s been in that game — as a player for both sides. This is when I asked him his stocks’ return compared to his real estate. A minor pause ensued, as we both knew the answer. So why would you keep putting hard earned cash into something performing at a fraction of the return as the alternative does in a mediocre year?
Simple — you wouldn’t. He’s moving the lion’s share from stocks, to cash, to real estate. Smart move.
Look, I’m not interested, nor am I gonna spend much time arguing with the Wall Streeters on this subject, ‘cuz it’s not fair to them, and it’s frankly a waste of my time. Am I saying you shouldn’t invest in stocks or mutual funds? Nope — it’s your money and you should do what you think best, and fits your personal comfort zone. Getting out the portfolio folder and checking your stocks’ historical performance might be an idea to consider.
If your stocks return 10% yearly, how would your real estate have to perform to beat that return?
If the real estate appreciated at 3% annual rate, and you put 20% down, your return, sans tax benefits and cash flow, is 15%. Do we really need to take this any further? Really? Read the rest of this entry »
Posted on June 2, 2008 @ 11:56 pm - Written by BawldGuy
I was asked an excellent question over the weekend. It forced me to pause awhile before answering. It wasn’t that the answer wasn’t coming to me, it was how to frame it. The questioner was gonna hear an answer they didn’t necessarily bargain for, and how it was presented was important to me. I didn’t wish to offend or cause hurt feelings. The question?
“In your opinion, what is the most common hindrance to the real estate investor’s chance for long term success?”
Seems innocent enough, doesn’t it? Not by a long shot. Understanding the answer is critical to discerning why one investor seems to do better than another. It’s too late, at least much of the time, once the rubber has hit the road. Understanding the answer to this question is one of the keys to attaining the retirement for which you’ve worked so hard.
The real estate investors with whom I speak daily, answer this question themselves. In their own words they remark on something I said, maybe even as a throwaway thought.
The Answer Read the rest of this entry »
Posted on May 13, 2008 @ 11:00 pm - Written by BawldGuy
Part of my job as a real estate investment broker is to recommend investors do — nothing. Whether that’s the case or not, the common denominator found in all my advice to clients, or those merely seeking a little quick guidance, is to ferret out what fits the factual circumstances and the investor. It’s not always cut and dry, but there’s almost always a path combining common sense with the comfort zone of the investor. Hint: It’s not the path clearly blocked.
By far the most difficult part of what I do involves both sides of the same coin. One side is advise given, which for one reason or another is not taken. I never take it personally. They asked, I offered my professional opinion along with a Purposeful course of action, then left it up to them. The other side of that coin is when they’ve chosen either to ignore my advice and/or picked an entirely different path to travel altogether. Read the rest of this entry »
Posted on May 8, 2008 @ 11:13 pm - Written by BawldGuy
Lately some have asked how many of these axioms there are. I don’t know. There’s a bunch though, and many have been taken from Dad and other mentors, some of whom were literally industry giants. I can claim originality on none of them, as they’re time tested over literally centuries — at least most of them. Come to think of it, I’ve been told my paraphrasing on many of them is original.
Here are a few.
BawldGuy Axiom: About the time the farmer trained the ol’ mare to work without eating — she died.
We can fool ourselves all we want when it comes to where, when, how, what, and why we invest in real estate. We can even appear to defy gravity for periods of time. Sooner or later though, Investment Physics win out. The core, or maybe better said, foundational principles of real estate investment are defined as such for a reason. As has gravity. Being a contrarian as I am much of the time, is one thing. But you’ll notice you’ve never seen me jump off a roof expecting to fall sideways. So sure, we can get a starving horse to work for us — until she dies. Then where are we?
BawldGuy Axiom: The words ‘Free & Clear’ have no magical powers. In fact they’re often the central figures in Grandpa Economics’ unintended consequences: Not a retirement supporting the Golden Years, but rather a mind numbingly financial life sentence. (See Grandpa Economics podcast.)
Grandpa retired with a retirement income quadruple his salary when he was 35 and a free and clear home. Read the rest of this entry »
Posted on May 6, 2008 @ 11:00 pm - Written by BawldGuy
For those not in California, try to imagine the following. You’ve been investing in real estate since early adulthood, and have done exceptionally well. Regardless of the cyclical downturns, it’s like your touch literally shames Midas. Your mere presence in a real estate investment turns it to guaranteed future platinum. Face it, you’re a stud.
That is until the end of ‘05 when your model was turned inside out, upside down, and smashed into a thousand pieces. There’s even a problem with that historical flashback. See, California investors, through no fault of their own, have contracted Super Investor Syndrome. I’m living proof it’s curable, but it’s a potentially devastating experience. The first symptom is the appearance of a large red S on your chest whenever you enter the real estate investment arena. Though yer unaware of this, yer the only one who actually sees it.
It’s insidious the way it slowly, sometimes over decades, infects its victims. No matter what they’ve done the last four decades, they’ve done spectacularly well. Their net worths have skyrocketed through good times and bad. Nothing ever had the power to derail their investment prowess — or so they thought. After the first several years they slowly but surely began to believe how smart they were. Again, I’m speaking from experience here. Sometimes my red S actually glowed in the dark. 
The difference is I learned my lesson in the early ’80’s. Read the rest of this entry »