Posted on December 22, 2009 @ 10:51 am - Written by BawldGuy
This is a long post — it should be. Follow the progression and the numbers closely. At some point you’ll be reminded of someone in your past (present?) who followed Grandpa’s strategy and is now locked into their own life sentence.
There are many schools of thought when it comes to investing in real estate for retirement. Two of them dominate.
One says you buy property and hold it forever. When you’ve saved up enough to buy another one you do — and hold IT forever. The idea is you allow rental income to pay off debt as quickly as possible, arriving at the point of a free and clear cash flow machine. Do this more than once and you have the basis for a nice retirement income stream. Or so the story goes.
The other says cash flow comes from the yield on either capital or equity in an asset. The larger the capital amount or equity in the asset, the larger the income in terms of dollars. The ‘yield’ itself is expressed in terms of a percentage. For example, 8%. This school says that since the yield is the same, more or less, for a larger figure or a smaller figure, why not arrive at retirement with the largest amount of capital and/or equity possible?
The ‘Buy & Hold’ school (BHS) gets you there. But in what condition, and how much cash flow relative to the ‘Capital Growth First’ school (CGF)?
Buy and Hold Read the rest of this entry »
Posted on September 24, 2009 @ 10:11 am - Written by BawldGuy
This is a question taken from the old story of buying in an upcoming but previously ‘grungy’ area compared with buying in the tried and true ‘clean’ locations. I’d ask my client, “Would you rather have a clean $10 or a dirty $20?” Most, if not 90% said they’d rather have the dirty $20 of course.
It amazes me how many times investors opt for local properties when they have empirical evidence showing they’ll do way better in a region a state or two away. It just doesn’t make sense. This is especially true when technology keeps us so informed, usually in real time. Living in Iowa and investing in another state isn’t anything like it was 30 years ago. Back then an investor had the phone and snail mail. Read the rest of this entry »
Posted on September 21, 2009 @ 11:55 am - Written by BawldGuy
This isn’t about keeping something out of your backyard, it’s about whether or not it makes sense for you to invest your hard earned capital into your own area’s real estate. If you live in San Diego as I do, you know what the history of real estate has been. In a nutshell, if you invested and let it be, depending upon the cycle, sooner or later (never real long) your capital grew — big time. That was the case from the 1970’s ’till late 2005 or so.
For the record, San Diego is not, by any stretch of the imagination, the Lone Ranger in this. It’s true for California in general. Look at where you live. Is the median price of a home affordable for the typical family? No? See, it’s a matter of degree. San Diego is ecstatic cuz their median home price is now under $400,000! What’s your region’s median price? If it’s much over $200,000 the regular folk are beginning to be crowded out. If that’s the case, your 1-4 unit residential income properties are already becoming less attractive.
Enter what appears to be a paradigm shift — in fact two . Read the rest of this entry »
Posted on September 2, 2009 @ 3:28 pm - Written by BawldGuy
Last week you got that raise. At 40 you’re making what you thought you would be at 50. Way to go! Once the raise kicks in you’ll be banking more Benjamins than ever. And that three unit property you bought back in ‘99? It’s cash flowing like an ATM thank you very much. You’re in the money — and things are really looking up. As a matter of fact, those units have gone up over $100K since you bought them — even after the current market correction.
How could things be any better? The answer? Easy.
Let’s do this by employing just a little Socratic questioning. Read the rest of this entry »
Posted on January 23, 2009 @ 12:06 am - Written by BawldGuy
As regular readers are aware, the pictures published here are for my entertainment. It’s my hope you’ll find ‘em fun too. In the spirit of full disclosure, they have nothin’ nada zilch to do with the content. Just so ya know. If ever you make a connection between pictures and content? Please, keep it to yourself. 
Tonight’s post is meant to be a reminder. It’s nothing earth shaking, and I’ll probably wonder a bit. It needs to be said during buyers’ markets. Understand the underlying truth to the message though. There’s nothing worse than buying a stud horse, then learning too late you really have a pig in a poke.
In markets like we’re currently enmeshed (love that word), the siren call of what the investor might perceive as monster discounts are often more like a strong riptide. The warm inviting water, the rollin’ waves, and pretty soon yer 300 yards from shore with no earthly idea how you got there or why — or how to get back to shore. When you head into an area offering those kinda discounts it’s crucial to take a step back to access what you’re really lookin’ at and where it is — and what the fundamentals are screamin’ in a loud and clear voice.
In most regions we’ve seen, there are pockets, often several more or less contiguous neighborhoods seemingly immune to this market correction. That’s true in San Diego. One example is where my aunt ‘n uncle live, in La Costa. The correction has made only a courtesy dent in their home’s value. Not so in most other areas in the county. Read the rest of this entry »
Posted on December 31, 2008 @ 10:46 pm - Written by BawldGuy
First off let’s agree 2008, spun in Grandma-speak, will forever be a ‘learning’ year. You’ll probably not argue when I posit the the belief 2008 might turn out to be as historically relevant as 1929. Probably not ‘cuz it will have turned out that badly, ‘cuz it hasn’t and won’t come close. But ‘cuz it was such a rare perfect storm, much as was documented in ‘29.
The two most egregious mistakes made by the Federal Reserve back then was A) Raising interest rates B) Decreasing the money supply. Together they had the same effect on the economy as would treating a hemophiliac with leaches and razor blades. The resulting decade plus of massive human suffering was predictable — and a direct result of incredibly poor logic.
Surely, credible cases can and have been made against Fed Chairman Bernanke, but he obviously learned from the experience of 80 years ago — Don’t constrict the money supply while raising rates when deflation is upon you. Duh. While this has caused widespread wringing of hands and gnashing of teeth, it’s also kept us from catastrophic deflation, which is just another way of saying Great Depression II. The Fed can only do so much, and frankly I’m not ecstatic about some of the timing lately. But much of the crappola goin’ on in D.C. this year has been clearly out of Bernanke’s control.
Those afraid of hyper-inflation (and afraid they should be) say the massive employment of our printing presses presage that very same inevitable economic infection. Maybe, maybe not. What most people gloss over is that inflation is indeed the over production of money, but it’s a relative concept. It doesn’t exist in a vacuum. Read the rest of this entry »
Posted on December 9, 2008 @ 10:39 pm - Written by BawldGuy
In the 39+ years I’ve been in the business, the percentage of Americans owning their homes has stayed more or less at the same level — around 64% or so. It’s fluctuated at times of course, but 64% has been the benchmark for quite awhile. The last decade it’s zoomed to 69% or so. ‘Cuz it was largely based upon pretend loans made to pretend borrowers it’s now in the messy process of reverting to the norm — which ain’t pretend.
Though it’s arithmetical to say 5% when 69% is reduced to 64%, it’s really a 7.25% reduction in those who own their home. No matter how you say it, that’s a lotta people. It’s my contention the vast majority will forever be renters. Add to that the dearth of residential income property around much of the country, especially some growth regions — and you have the formula for falling vacancy rates marching in lockstep with rising rents.
Works for me.
When this happens in many regions of Texas, Kansas City, the Carolinas etc., it has the affect of turbo charging an already positive real estate investment atmosphere. This year alone we’ve already experienced escalating rents in parts of Texas. In fact, this year alone rents have risen in a specific project by just under 3.5%. Not bad, eh? Read the rest of this entry »
Posted on December 4, 2008 @ 11:18 pm - Written by BawldGuy
This post was inspired by Benn Rosales over at Agent Genius. He was talkin’ about agents, but I was moved to write about what I perceive the difference is between perceptions of regular folk.
No, this isn’t about the glass being full or empty, half or otherwise. It’s about dealing with what is, and making decisions based upon what is, not emotion.
Here’s a totally unrelated example of emotion based pessimism vs the ability to see reality, while effectively probing for avenues of potential success. What? Huh?
There was once a 13 year old playin’ centerfield in an all-star baseball tournament years ago. His team found itself in the position of no outs and bases loaded — in the top of the 1st inning. He was waved in by the manager to get them out of the dilemma. (A pitcher when not an outfielder.) What to do? Since he’d paid attention to the base runners while in the outfield, he’d noticed the runners on 1st and 2nd were both pretty cocky.
To make a long story short, in the next three ‘pitches’ he picked off the runner on 2nd, then the one on 1st. The next batter, lookin’ to make up for this in one swing, feebly popped up. Four pitches, three outs, no runs. The same exact scenario played out the next day. The results were the same, except for one run on a seeing eye 17 hopper through the infield. Six runners, no outs, one run scored. Read the rest of this entry »