Posted on April 26, 2008 @ 12:03 am - Written by BawldGuy
It’s never a good day when I find it necessary to tell someone I can’t take them on as a client. Sometimes it’s ‘cuz they find themselves in quicksand and need help — but they’re too far gone. Most of the time though, it’s ‘cuz they’re under capitalized. They either want me to help them invest with 0-5% down, which I won’t do period, end of sentence, or they’ll have zip, zero, nada cash reserves to establish their Sominex Account.
As I’ve said dozens of times here, no Sominex Account means we can’t work with you. Though it’s designed to help the client sleep when Murphy makes his inevitable visit(s), it’s also there so I can sleep, know what I mean, Verne? I don’t like those weird dreams when I’m stressed.
Still, to those for whom I can’t help for this reason, and who obviously have more courage than is safe, I offer the following. Read the rest of this entry »
Posted on April 7, 2008 @ 9:51 pm - Written by BawldGuy
Countless times on these pages I’ve admitted my addiction to the process of taking real estate investors from ‘now to retirement’. Of course, there are nearly an infinite menu of investor flavors. There’s the experienced veteran. The investor who’s owned their first property for quite awhile, but hasn’t experienced a tax deferred exchange yet. Obviously there’s all the variations in between.
But my all time favorite real estate investor? The first timer. Get ‘first timer juice’ flowing in my veins and I’m good for quite awhile. 
Talk about a potent fix. They ask more questions, have more anxieties, are more conservative, searching for ‘lake serenity’, or real fire breathers, braver than is safe. Sometimes all at once. They also offer insight at times which makes me stop and think. They’re unfettered by experience, good, bad, or indifferent, so often bring a fresh take to the arena.
The questions almost always are the ones they should be asking. Many of their queries require a crystal ball, but they understand that — they just want a professional and experienced opinion. Fair enough.
How long will it take to get these properties rented?
Do I include insurance as an expense when analyzing properties I recommend?
How to houses in the area compare to the ’sides’ of a duplex for resale value?
Don’t I need a pre-approval letter for each property?
Can we drive a harder deal with this or that seller?
Why don’t renters buy, when the payments wouldn’t be much different?
See what I mean? All great questions. And those are only a small sampling of what I’ve been asked in just the last several days. I remind people all the time — answering questions is a huge part of my job.
Of course, the best part is when I’m able to answer a question they didn’t know to ask. Lord knows I love when that happens.
When new clients, especially those new to investing, ask us questions, we try our best to give in depth, and richly detailed answers. It’s not always possible, but we give it our best shot. When the answer depends upon our perpetually cracked crystal ball, we laugh about that fact with our client, then proceed to answer the question as best we can.
Sometimes the answers aren’t what they expect. Everything isn’t Grandma’s pancakes and bacon — know what I mean, Verne? Newbies learn quickly — we don’t sugarcoat answers that are sometimes by nature, negative, or at least unpleasant. One of our most often repeated retorts to stunned silence is, “Hey, that’s why we insist on a Sominex Account.” 2 3 4, “Oh, yeah, right.”
That’s when the light comes on — there’s a reason it’s called ‘risk capital’ Virginia. Usually by the time any particular conversation is finished, they’ve learned a new respect for the concept of cash reserves. This is a decidedly good thing. Soon, the excitement of investing for a magnificently abundant retirement is tempered by the realities of the real estate investment arena.
Again, that’s exactly why we call it Purposeful Planning — ‘cuz doing things on purpose with a plan is a whole lot mo betta than the alternative. Right?
Right.
Deciding to take the path of a real estate investor for the first time means you’re gonna take a nearly vertical ride up the learning curve elevator.
I’m always excited to ask — “What floor please?” “Penthouse? Excellent choice.”
It’s my job to answer questions, and do it as long as you have them to ask. Never, ever feel like you can’t ask ‘just one more question’. It’s how you learn, and how I stay high.
First time investors are great fixes.
Posted on February 15, 2008 @ 12:04 am - Written by BawldGuy
It’s shameful the way I used to answer questions from prospects or clients. The excuse of age is available, as I was only about 27 or so. But even youth, or having just transitioned from homes to investments doesn’t wash as an excuse for my pitiful performance back then. It’s truly a blessing there were no hidden cameras or recorders in the office back then.
Clients would ask me if the rents in the area would tend to rise during the holding period. And I’d answer yes. The problem? Most folks asking
questions want the answer, of course. But what they really want is the why or how behind the answer. Back then it irritated me no end that they wouldn’t just accept my answer as if I was quoting the 11th Commandment from the missing third tablet Moses forgot on the mountain. I knew the answer. Why couldn’t they just take my word for it? What a moron I was. I could have been more full of myself back then, but I’m not sure how.
That’s about the time I was blessed by the teachings and example of Chuck Chatham. As far as I’m concerned Mr. Chatham was absolutely the best teacher mentor and practitioner of real estate counseling. He was an artist pure and simple. As the title of his seminar promised, The Art of Real Estate Counseling, (also the title of his book) he was indeed a master. One the subjects near and dear to his heart was how we, as professionals, dealt with questions from our clients, or those pondering becoming a client. He was especially sensitive to young upstarts like me and a few others in his seminar one day.
You first have to imagine a smallish older guy with what appears to be several centuries of experience. He literally oozed authority. I remember his face as having an eagle’s beak nose, and a patrician like stare, that when focused on you, was both chilling and assuring at the same time. Figure that one out.
Anyway, he’d been talking with some of us whipper-snappers during breaks, and was not happy with either our attitude or demeanor. Don’t get me wrong, all of us had immeasurable respect for him. Heck, he was close to deity to most of us in the seminar. But he was concerned about the high opinion we held for our own skills and knowledge — which he felt was humorously over estimated. Go figure.
His remedy was to teach by example. He took one of the students who was about to start looking for his first investment property, 
and asked him to participate in an impromptu role play. Mr. Chatham would be the professional and the student the prospect. The prospect began asking questions. And that’s when I begin to feel as if I knew nada, zip, zilch about how to really answer questions in a way that actually helped the person across the desk or on the phone. (add email to that today)
It was awesome. It was like watching the Mona Lisa being painted by da Vinci himself. If on my best day, about 30 years later, I can be half as good as he was that day, I’ll die a happy man.
Here’s what I learned that day.
If possible, give the short answer at first.
Follow that up with an explanation for that answer.
Ensure that explanation is pure substance, with no guessing on your part.
Give an example if possible, illustrating your explanation.
Allow for chronological context if appropriate.
Finally, ask them if your answer was sufficient.
You’ll be surprised how many times that last one generates very solid follow-up questions. When this happens it’s often an indicator they now have more confidence in your expertise and real world knowledge and experience.
Why?
Because in the end, you can’t fake solid substantive answers to real questions. This is especially true when they’re from folks who are asking those questions in part to ascertain whether you actually know more than they do.
When people decide to take a trip down the Question Hiway, you can bet the ranch their destination is Answer City. It’s the pro’s job to honor the question with a worthy answer.
Short dismissive answers given with a false tone of authority just won’t cut it — not in the long run. You must actually know what you’re talking about.
When we as pros answer questions, we must give answers so complete, forthcoming, and informative the questioner is somewhat taken aback — positively. If you begin putting this into practice you’ll never go back to the short, dismissive, “you’re questions are a pain in the rear end” answers.
Why? The change in the way they look at you. You gave them a real answer with an impeccable explanation, and instead of getting served instant pudding, you gave them filet mignon. Talk about separating yourself from the crowd.
Of course, this requires that you actually know the answers. That’s always the challenge, isn’t it?
Posted on January 15, 2008 @ 12:18 am - Written by BawldGuy
Though it’s my policy to keep emails private, those communicating the following to me have personally given me their official Okey Dokey to pass on their thoughts anonymously. The subject was increasing traffic from people expressing an interest in buying/investing in real estate the last 2-3 months.
I’ll boil them down to bullet points.
The number of calls/emails has risen measurably since school started
The percentage of people actually doing something has also risen visibly
It doesn’t seem to be geographically bound either
Arizona, Texas, Oregon, Minnesota, even New England and Canada reported in
Most, but not all said market times have decreased a little bit
Lenders are proactively reaching out — all but one mentioned this
Brian Brady, my go to mortgage guy, said today lenders are bringing back 80% non-owner occupied stated loans. What will they think of next?
Keep in mind — Whatever Bernanke does or doesn’t do with rates is, in his thinking, secondary to money supply. Keep a watch on how much cash he’s continually dumping into the system. It’s been going on for months now, without the appearance of the inflation monster. Many of his harshest critics are now reduced to calling names, cuz he won’t play by their rules. Yet, as much as they complain he doesn’t get it, things have improved. Even his critics now grudgingly admit his mission to add liquidity is having a positive affect. The jury’s still out, but my money is still on Dr. Ben.
This Thursday Josh and I are winging our way to Kansas City. 
We’ll be speaking to a couple small groups of local investors, giving them a better understanding of their current investment options. It’s invitation only, and you must already own investment real estate to attend. Don’t tell anyone, but though I’m excited about speaking to these folks, of equal importance is getting to finally find out first hand about Kansas City BBQ. Our goal is to be able to walk on our own power and fit into the airplane seats on the flight back.
Very soon, you’ll be able to see for yourself the results of what I’ve spent the last three years molding and shaping. The ‘other’ Brown will begin publishing his own stand alone blog. There are a few who’ve met or talked with him, 
but he’s remained pretty much a mystery since replacing me in the part of ‘Son’ in the Brown and Brown movie. I was first cast in the part back in the ’70’s at about his age. We’re looking forward to launching his blog, and will announce it loudly when it’s imminent. It’s past due, but he’s carrying his weight, and has been from Day 1. Being Dad in this sequel has been eye opening. There have been times when I’ve been in conversations with Josh about one thing or another, when it suddenly dawned on me — wow! I’ve had this conversation before, except I was the son, not the ah, elder statesman. Yeah, that’s the ticket.
Meanwhile, back at the ranch — buy low, sell high, and remember to keep yer Sominex Account topped off. Man, I gotta start goin’ to bed earlier.
Posted on January 12, 2008 @ 7:48 pm - Written by BawldGuy
I’ve been putting the writing of this post off ‘until tomorrow’ for a few weeks now. Though an optimist by nature, a realist by training, and a skeptic all the time, I’ve decided it’s time.
I began my career at 16 while at the dinner table. Told Dad I wanted to be in real estate, and work at his company. (I already worked for his company as the janitor, printer/distributor of lisings, 
and all around underpaid servant.) A couple years later I was two months past my 18th birthday, spending my first day ever as an agent in a real live real estate office.
My experience as a real estate investment broker began sometime in the summer of 1976, and was set in concrete in January of 1977. When you start a company, albeit with your father, (who’d been semi-retired since ‘71) go through the trouble of becoming a broker, (as opposed to an agent) then take the bigger step of becoming the designated broker of your new company — your decision has indeed been set in concrete.
From day one the market was on a wild ride up. Double digit appreciation was the rule for around four years or so. It all came crashing down around and on top
of us in ’79’s last quarter. From then on until about the last quarter of ‘83 or so, things were not good. Not good is real estate investment code for very, very bad. How bad? I was elated when I sold a seven unit property to a client and was able to get him one of the first adjustable rate loans — which started out under 12%!
We struggled like crazy in those down years, but emerged intact and much the wiser. You think a seller carrying back a note is creative financing? Hah! The things I did and observed first hand would fill a book. Some of the most innovative thinking you can imagine made seemingly impossible transactions possible. There were several sales and exchanges in which I was either a principal or a broker, in which the lender had no clue whatsoever what was happening.
Some day I’m gonna write a book about it.
I fondly remember Grandma explaining to me how proud she was of my survival. She said it would become one of my most valuable assets. She was right. She also smiled knowingly when I told her the main factor in my survival back then had been a working wife. I’ve noted when invited to speak to groups of other pros, how the backbone of the real estate industry in bad times is often the working wife. That comment almost always elicits knowing smiles of experience.
When the market again took off in the mid-’80’s we were back in business, the hard times quickly and almost effortlessly forgotten. Then the S & L chaos struck. In many ways it was worse than the previous downturn. It lasted through ‘94, some would say ‘95. By ‘96 we were doing business in a more or less normal market. By then it wasn’t normal to me, it was nirvana.
We crossed into the 21st century. NASDAQ crumbled. The recession of ‘01 arrived. 9/11 hit. I was prepared for the worst. However, much to everyone’s surprise, by around Halloween normalcy returned. The recession had no impact on real estate or my clients’ investments whatsoever. In fact, I can still hear one client telling me that if he hadn’t been told by talking heads that a recession really was in force, he wouldn’t have known it.
It was a legitimate observation, especially in hindsight.
I’ve always believed the lessons I learned during those terrible times were invaluable. True enough. I’ve since realized an even more valuable lesson. Ironically, it never occurred to me what I’d missed learning until one of my mentors laughed himself silly at dinner one night. Ever seen something twice and still not realized what your were seeing — and shoulda been learning? He wondered aloud if this wasn’t my first rodeo. Old School charter members can be cold dudes.
Clyde and I had just closed an exchange, and were congratulating ourselves on our brilliance, as it had been more involved than usual. (It’s a guy thing.) Clyde was in his sixties and pretty experienced. He tolerated me cuz we’d worked side by side in the early ’80’s mess. Even though I was only 30 when those bad times struck, he grudgingly admitted I’d hung in there, and gutted it out. Some of my favorite war stories find Clyde in the starring role. Old School? Look it up and you’ll find his picture.
Anyway, I’d mentioned in passing how in ‘83 and again in ‘94 or ‘95 I’d noticed not only an increase in potential new investor traffic coming my way, but also in their interest level. I distinctly remember taking a bite of steak, as we were at the local real estate watering hole, when he startled me by laughing out loud without warning and for no apparent reason.
“You dumb $^&*@# kid” he said. “Do you need a flashing neon sign to tell you things are changing?” Still not getting it, he turned serious, and demanded I listen closely. (Or words to that effect.)
I’d missed the signs of transitioning markets twice. I’m certainly not ready to say the third time is here, cuz I’m not. However, since maybe the middle of October I’ve noticed a clearly defined shift in Brown and Brown ‘traffic’. Unlike the daily drive home from the office, traffic coming our way has definitely increased measurably.
My records since then show an increase of at least 25% in initial queries from all sources. This extends across the country, as we’re not geographically bound. Though we don’t talk about them much, we speak to groups of investors all over. The numbers have been increasing steadily. Also, a much higher percentage are following through with Purposeful action. More plainly put — a bigger percentage of folks are turning their talking into walking –putting the Firestones on the pavement. A good thing.
This could be an indicator of nothing, or it could be the initial stirrings of changing times. In the ’80’s the change took about a year to show itself as real. In the ’90’s it took longer, maybe a year and a half.
The good thing was how I was able that night to see, with Clyde’s help, what I’d experienced twice, without knowing it. He was right. He then went on, promising to tell me his stories as long as I agreed to pay for dinner. No problem old man — start talkin’.
His stories went back to the late ’50’s. They were no different than mine. More calls, more referrals, and an easily discernible increase in the quality of inquiries. More people without the commensurate qualitative improvement isn’t an indicator of anything.
At best this is anecdotal evidence proving — not much if anything. When you see it in San Diego, Dallas, Boise, Phoenix (yes, even there), Maryland, Austin, Sacramento, and of all places, Kansas City, it makes you stop and wonder. Is this the start of something? Or is this the group looking 
to buy when the buying is good — you know, under-the-radar good. That kinda good.
Why? Cuz it’s always, without any exception I’ve either seen or heard of, the under-the-radar folk who seem to act as scouts for the hoards who show up much later.
We’re seeing this increase almost weekly. There’s a technical real estate technical term for this — putting the Firestone’s on the pavement. More folks are now walking their talk than was the case even six months ago.
I’ll keep you posted — and please, you do the same.
Anyone seeing what we are?