Posted on July 21, 2008 @ 11:02 pm - Written by BawldGuy
Leave, you say? No, still live here, just take your investment capital to places where it will actually do, well, what it’s supposed to do. Grow. Want income? Whatever yer gettin’ in California, it’s easily more likely than not, you can do better elsewhere.
This is common sense. Properties requiring upwards of 40% and more to merely break even each month, aren’t candidates for capital growth or cash flow for serious investors.
I’m in San Francisco tonight. There’s a conference tomorrow offering a rare treat. I get to listen, take notes. and get to learn. There’s gonna be a bunch of very bright hi-tech types showing guys like me how best to improve what I do without makin’ it seem like rocket science. Works for me. It’s not about real estate. It’s about helpin’ me do what I do best.
It’s funny though, talkin’ with NoCal people. Their real estate world is skewed to say the least, relatively speaking. Prices that make San Diego income property owners pay attention, are high indeed. Still, price differences aside, both regions think fundamental truths about their markets haven’t really changed. Armed with this false belief, they blithely continue down the road their various strategies have taken them.
In the last three years, they’ve cost themselves in several ways. Read the rest of this entry »
Posted on June 29, 2008 @ 6:59 pm - Written by BawldGuy
When speaking to audiences in historically high appreciation areas, it’s common to hear them voice serious concern with regions I’m recommending. Their real problem? They’re lookin’ at appreciation at the cost of capital growth — theirs. They’re literally penalizing themselves to the tune of millions over the long term. In baseball terms, strikeouts are cool, but how many earned runs a pitcher allows per game is the real gold standard. No? Ask yourself if for the big game you’d want the guy who strikes out 12 batters a game but has a 5.3 ‘earned run average’ (ERA), or the guy who hardly ever strikes anyone out but only allows three runs a game?
Not a difficult decision, is it? ‘Course not. It’s obvious on it’s face. Why? ‘Cuz in baseball the winner is decided by how who has the most runs at the end of the game — not the team sporting the pitcher with the most strikeouts.
Appreciation = Strikeout Pitcher whereas Capital Growth = Very low Earned Run Average
In real estate investment terms, here’s how it shakes out in real life. Read the rest of this entry »
Posted on May 30, 2008 @ 12:06 am - Written by BawldGuy
San Diego and (California in general) has been the best girlfriend ever. Loyal, always thinking of just us, enriching our lives almost without fail, and bringing additional commas to our bank accounts. Talk about having it all, we sure did.
She always played our song. Happy days? The status quo. Even when she was down, we knew from experience she’d bounce back — and even more lovable than before. Well, as happens in real life sometimes, that perfect mate has tired of us and left us high and dry. She’s walking away, and she ain’t comin’ back.
People, that’s exactly what’s happened in California. Investment property has taken a different path. The days of buying, holding for a few years, then selling or executing a tax deferred exchange yielding splashy results are gone. I think they’re gone forever. Why?
Glad you asked.
Your property is now worth, after this market correction, 150-300% of competing markets in out of state growth regions. In San Diego for example, a 35 year old duplex in a decent area sells now for $425-525,000 (often more) give or take. Also, in order to break even every month the investor must put down at least 30% and usually 35-45%. In NoCal 40% is considered wicked good leverage — no kiddin’. The Kool-Aid they drink in Palo Alto and the Bay Area in general is phenomenally effective. They’ll realize too late their lovingly loyal maiden has decided they’re not the Knight in shining armor any more.
Surveys show — capital growth rates fall when leverage is severely depressed. (anonymous smart aleck) Read the rest of this entry »
Posted on April 19, 2008 @ 9:27 pm - Written by BawldGuy
The other day I was having a great conversation with one of my clients who happens to share my passion for baseball. They’d not known about my ‘baseball life’ as a former umpire. I’d worked my way up as far as one could go, umpiring every level of NCAA (college) ball, up to Division I.
Anywho, we got to tradin’ baseball stories, as her brother had played college ball in the midwest. Can’t remember the college for which he played, but it turns out they played in San Diego all three years he was there. It’s possible I umpired him. Go figure.
The present real estate market in San Diego, (Palo Alto too) and those who own income properties here, remind me of what a very experienced head coach once told me. We’d been going over a complicated, and controversial call the week before. He was sure my line of sight had been blocked, getting it wrong, while I knew for a fact my line of sight was unimpeded and I gotten it right. That’s baseball in a nutshell.
I miss it like breathing, but too many conflicts with my business schedule finally forced an early retirement. Also, I got tired of being afraid of my own assistants, who would look at me the morning after weekday afternoon games with death stares you never wanna experience.
During our discussion the coach made a comment I’ve always remembered. Read the rest of this entry »
Posted on April 12, 2008 @ 1:29 pm - Written by BawldGuy
I hesitated more than a little before publishing this post, as it’s never my intention to make folks feel badly, even if unintentionally. The thoughts in this post come from a good place in my heart. The San Diego (or Palo Alto?) real estate investors owning income property have seen the changes happening in real time. I’ll confess my slowness in seeing the writing on the wall here. Let’s face it — we’ve been spoiled since, well, forever.
What’s been more resilient than California real estate? There are some regions sporting a similar track record, but when the roll is called, it sure doesn’t take very long. We, me included, have been lulled into a false sense of security by decade after decade of solid if not spectacular returns on our investments here.
Still, it’s not that the page has turned, but the book, and therefore the story and its ending has been changed.
This is the weekend, so I’m having some fun at San Diego’s expense, and mine too, to be sure. 20/20 hindsight tells me Read the rest of this entry »