Posted on February 25, 2007 @ 3:00 pm - Written by BawldGuy
Have you noticed that the more the media pours it on about sub-prime loans beginning to go under, that rates in general keep trending slightly lower? Lenders, in the end, will do whatever they can to avoid taking back properties. It’ll be interesting to watch how they do it.
Right now there are some attempts to create neg-am hybrids. The actual rate is at least 1-2% lower than current traditional neg-ams, which of late have been transitioning from pig to hog status. It seems folks like WAMU have forgotten the age old wisdom that says pigs get fat and hogs get slaughtered. It’s my contention that their greed will come back to haunt them.
Tax deferred exchanges are being successfully avoided these days by investors who have been barred by the IRC from using depreciation to offset ordinary (job) income. Many of them are surprised to learn they have six figures worth of this unused write-off available to offset capital gain. It’s like finding a key to a new car in your Christmas stocking.
Here’s a quick and easy formula. If you’ve owned an investment property long enough so that you have a 40% equity position, it’s time to make a move. Maybe way past time. Your growth rate is pretty much stalled. If you originally put 10% down, you now need four times the appreciation to equal your first year’s growth rate. You can’t win by keeping it, if growth is your purpose. Those who insist on holding high equity properties while needing growth, will end up losing hundreds of thousands. Yet I see it all the time.
For the real estate pros out there who read me every now and then, I have a question. When was the last time you helped a new or young agent? I don’t mean by answering a question or two. I mean real help. Be honest and remember all the help you got when you could barely spell real estate. Pay it back. You never know how much your advice helps, or who will take it to heart, but it’s the right thing to do. I always get a big kick out of it. So many old vets helped me along the way, I couldn’t possibly pay it all back. But I try.
This week I’ll be talking about cost segregation. It’s a boring subject. Using that process can increase your after tax cash flow like the Golden Goose. So when you see the term in a title this week — read it. You’ll be glad you did, I promise.
If you own investment property in San Diego, ask yourself a question. To what end? Do you really think there will be a buyer for your rental units in the next 3-5 years? Really? Look at their value today and increase it a bit. Would you buy your own units for more than they’re worth today? Not likely. Get outa Dodge now. Denial isn’t helping.
Posted on October 20, 2006 @ 10:01 am - Written by BawldGuy
My son Josh didn’t even consider coming into the business until he was about to receive his degree. He decided to give it a fair shot, deciding to make it permanent after several months of seeing things from ‘behind the curtain’. (sorry)
You’ve seen various industries and specific companies provide training in what they called a mentoring program. Some have been proven successes, others not. I can’t speak to other industries, but real estate seems to drop the ball when it comes to training newcomers.
Though I’ve owned my own company for the majority of my career, there were several years when I worked for a large corporation. In a nutshell their ‘mentor’ program consisted of intense training, mainly to ensure that new agents kept the company out of court. Most of them had no real grasp of what to do or what it actually took to secure clients and do real business. My goal was not to emulate that model.
The Brown and Brown once-in-a-lifetime mentor program is set up like this:
- Every time a new potential client comes in for a first meeting Josh sits in. He also sits in on all subsequent meetings with that client, including entering escrow and any closings.
- Communication with clients is king. Better to err on the side of too much than not enough. This means calling with nothing to report. “Hey, how about those Chargers!?”
- Whenever possible, time permitting, we sit down with some coffee and go over whatever he needs to talk about. Sometimes it’s what I feel a need to revisit. In any case it’s a time Josh can receive one on one attention on a particular subject until he’s satisfied.
- He’s required to handle all matters in a sale/exchange beginning from the point of signed contract. This gives him a fundamental understanding of the nuts and bolts of the business.
- While handling the above mentioned post-contract matters, he interacts with all related services, clients, and makes sure all required forms are signed. Dealing with clients gives him an understanding from their viewpoint, and gets him used to interacting with investors in the heat of battle so to speak.
- Since I do business in other states, he often goes with me on visits, so he can see how different brokers and agents behave, meet lenders, and inspectors. This also allows him to measure himself and his progress.
I adhere to the principles taught in the book, The New Conceptual Selling, which outlines how to understand what clients really are thinking. The reason I prefer their approach is because it totally gets away from any deception, coercion, or the silly 1950’s million different closes approach. My policy is to educate my clients as much as they’d like, show them what I think is the best plan for their stated goals, answer the questions they don’t know to ask, and let them proceed or not of their own free will. I firmly believe if you show someone how to acquire what they really desire to have, they don’t have to be sold, or closed.
He’s been undergoing this process now for almost two years. I have now determined that he is ready to begin dealing with his own clients, developing plans, and executing sales and exchanges. He has an investor in mind, and has spoken to him several times.
Next: Is Josh able to convert his first prospect into his first client?
Posted on October 9, 2006 @ 8:36 am - Written by BawldGuy
My dad changed professions in 1959. He got his real estate license and hired on with Woodbury Realtors in Manhattan Beach, California. Upon arriving for his first day, the boss dropped a loose leaf binder on his desk saying, “Here’s all the listings, the world is your oyster, go get ‘em!” On October 19th, 1969 I didn’t even get that much guidance. I’d received my license in the mail the day before, on Friday. It said I’d been licensed since Tuesday the 15th. As I sat at my desk that first Saturday morning, I indeed had the MLS book on my desk. A couple of the old guys came over to welcome me, one of them learning just that day that I was the boss’s son. Trust me, there was no special treatment.
I’d been ‘trained’ by his general manager at the main office/escrow division conference room with other newly-minted virgins. Outside of how to fill out the forms properly, cold calling FSBO’s was the only thing taught. I remember because at 18 whatever he said was like it came from the lost third tablet of Moses. The training lasted three Saturday mornings. And I’ll remind you here that back then the purchase contract was one page, fill in the blanks. The listing was one page 5 X 7 and double sided. The measurements for the house were on one side and the contract, in very small print, on the other.
So back to the first morning, a Saturday, and I dutifully got the newspaper out and starting calling FSBO’s. I was very confident because of my extensive training. You see, Wally, the general manager had shown us national figures clearly indicating that if you called 21 FSBO’s you’d get three appointments, and from those you’d get a listing. Simple. So I made some appointments, and sure enough in my first six hours on the job on my first day I got a listing. Of course its value to the company was in cleaning up spilled coffee. Nevertheless, I got it.
I was part time while in college, but by the time I was 25 I still hadn’t received any mentoring of value. I had to go somewhere else to get it.
In defense of Dad, making a living out of listing FSBO’s was not only possible back then, but predictable if you were good. On any given weekend day in the paper you couldn’t call all of them from sunrise to sunset if you never left the phone. It’s all he knew. Don’t knock him though, because in the ’60’s he averaged over $400,000/yr in income. He had six offices, his own escrow company, and refused to cooperate with anybody. Yeah, his company double-ended every listing they ever sold. But that’s a story for another time.
I ended up switching from residential to investment sales as my wife said at the time that if I didn’t get out of selling houses I’d end up on the 11 o’clock news. And she was right. I also spent thousands in the late ’70’s and early ’80’s buying great mentoring from highly successful investment agents. Sadly, it wasn’t until past 30 that I finally felt like I knew what the hell I was doing.
If the agents reading this are honest, I bet most of them look back at their training and realize they learned how to keep their broker out of trouble, and that was basically it. Oh sure, they also learned about their ’sphere of influence’ and how to exploit it. How’d that work for you? How’d all those open houses you held for the real producers work? And don’t forget the incredible ads you wrote to attract the buyers who’d be so loyal to you. Really kick-started your career, didn’t they?
Fast forward to November of 2004. My son has just passed his real estate license test, and is looking to me for guidance. I was, to put it mildly, determined to be the best mentor I could possibly be.
Next - the third generation.