Posted on May 9, 2008 @ 11:52 pm - Written by BawldGuy
The funny thing about counting on the past as a future predictor is how some will attribute circumstances to history that simply belong in a piece of fiction. Here’s a challenge. Tell me how the last eight years is repeating any part of our San Diego or California real estate history. Take yer time.
Give yourself a break and don’t waste precious weekend time on what amounts to a bar bet. We on the west coast have relied on one common thread, regardless of whatever slowdown was our current reality.
Here’s a speed of light review of the last 30+ years of San Diego real estate history. Read the rest of this entry »
Posted on February 2, 2008 @ 9:52 pm - Written by BawldGuy
As I’ve mentioned a few times before, I also write for BloodhoundBlog, surely one of the most respected real estate blogs in the country. They offer many, many contributors from various sectors of the real estate universe. They write about every real estate subject you might imagine, and some you wouldn’t in a million years. They surprise me regularly. They are also very informed.
Though putting Bloodhound on your daily to-read list is something I wholeheartedly recommend, it’s not the purpose of this post.
No, the purpose of this post is to pimp something I wrote over there. 
I came across a video which in a few short minutes, using plain English, explains the Laffer Curve brilliantly. I also offer a few opinions, and say a few things I might not here. This blog is for real estate investors or those that wish to become one.
In any case, I invite you to wander over there and take a look at the post, Understanding the Laffer Curve… as I think it’s a topic in tune with our economic times — not to mention what’s looming for us this coming November.
Arthur Laffer will be shown to have been one of the most brilliant economists of his generation. His theory has proven in application to be one of what I’ve come to call The Physics of Economics.
While you’re there, and after you’ve read the above linked post and watched the brilliant video, take some time to browse around. Read three posts at random and I bet you’ll be hooked.
Posted on December 11, 2007 @ 12:39 am - Written by BawldGuy
Real estate investment works more smoothly with a Purposeful Plan — especially when that Plan has as one of its pillars — flexibility. This is what really hurt Grandpa — when the switch was made from companies providing pensions, to their employees being made responsible for their own retirement income — he had no flexibilty.
If Grandpa’s son, back in the ’80’s, when that switch took place, had paid attention and modified his retirement Plan, he wouldn’t be scuffling the way he is now. For those ‘Dads’ who did change their Plans with the changing financial/economic facts and circumstances, they’re probably not reading this, cuz laptops don’t do well at the beach. 
Please allow me a baseball analogy.
A major league pitcher learns early on how smart major league hitters are. They talk to each other in the dugout, so that after a couple innings, they’ve collectively figured out what the pitcher tends to throw at certain times in the count. For instance, if, when the count has been 2 balls and 2 strikes, and 4 outa 5 times he’s thrown a breaking pitch (curve ball or slider) low and outside — hitters make that adjustment in their thinking. In other words, some of the guesswork has been taken out of the hitting equation — a good thing — for the hitters, who’re being flexible.
The smart pitcher knows this of course. So by the second time he’s plowing through the batting order, and the count hits 2 balls and 2 strikes, what does he do? He shows flexibility in his thinking, and modifies his approach. See, the last game he pitched? The hitters teed off on his 2-2 pitches, cuz they figured out his thinking. So this time, he applies what he learned, and instead of a curve ball, he throws a 93 MPH fast ball at the knees on the inside corner.
The batter either looks at strike three, or hits the ball weakly to an infielder — either of which makes the pitcher the winner in that skirmish. I witnessed this hundreds of times from the best seat in the house — inches behind the catcher. (I was an NCAA umpire until I just couldn’t rationalize the time any longer. Miss it like a kid misses Mommy on the first day of school.)
Flexibility — one of the most overlooked attributes an investor can have.
Real estate markets don’t give a damn about you and me. Let that sink in for a few moments. There is, what I’ve for years called, the physics of economics. Here’s one — supply and demand. Works every time. Well, maybe not every time. Huh?
We so easily assume demand comes off the rack with the ability of buyers to go through with the transactions.
For example, we know there’s always gonna be a demand for water. If the price of water is somehow artificially controlled, resulting in much a much higher price, sales of water will go down. The market will buy only as much water as it needs to get by.
For the real estate investor, this kind of scenario is almost a way of life. Sure, supply/demand is a huge factor, but what about the ability to pay? Oops — almost forgot the credit market didn’t we? We’re going through credit market changes now.
The demand was high, and further increased artificially by bringing in additional buyers. These buyers, based on tried and true loan underwriting principles, couldn’t have financed a slightly used Snickers Bar, but they were being given real estate loans right and left. This drove real estate ‘values’ up.
Want another example?
Inflate the value of tax write-offs. In the early ’80’s when real estate markets were terrible, congress actually did something smart, at least in my opinion. They looked at depreciation schedules, and decided 30-40 years was way too long. So as part of dozens of other tax law changes, they said, in essence, 15 years would be the new schedule. That’s an oversimplification, but it’s pretty accurate. What did that change mean to an investor?
It means if he bought real estate investment property, his tax write-off each year pretty much doubled. Cool — cuz it means his after tax cash flow doubled too, sometimes more than doubled. More you say? Yep. If the investor/taxpayer happened to luck into the next marginal tax bracket down, his actual tax rate was decreased as a bonus, resulting in even more tax savings. Very cool.
This allowed the flexible investors of that time to do things not advisable in today’s atmosphere. For instance, one of my clients was paying over $30,000 annually in state and federal income taxes. His income exceeded $300,000, which in ‘83 was a ton.
Making a long story much shorter, here’s what he was able to accomplish — cuz he was flexible.
He invested in three properties using 10% down, which caused a total of around $20,000 in before tax negative cash flow. His tax shelter via the new depreciation schedule, saved him more than $30,000 in taxes. In other words, his after tax cash flow was in excess of $10,000 a year. He could easily afford the negative cash flow before taxes because of his huge job income.
His taxes dropped to under $3,000 the first full calendar tax year he owned the properties.
Flexibility — it’s a good thing.
As you might suspect, many investors also figured out this newly available approach. It resulted in demand for investment property rising — which resulted in, surprise, higher prices.
All because outside forces changed the rules. In physical science, we pretty much have to live by the rules, or face some fairly dire consequences if we don’t. Congress hasn’t figured out yet how to repeal gravity, so we’re safe for now.
Those who were flexible enough to adapt to the new rules, prospered far more than if they hadn’t. My client not only eliminated nearly 90% of his income taxes, he bought a year before the mid-late ’80’s boom began. Bingo! The best of all worlds.
Flexibility.
Applied today, here’s what it can mean for you.
Understand the new realities:
The average investor can invest in far away lands — without an act of congress to make it happen.
There are opportunities out there you don’t know about. Others do. We do.
Folks just like you, who are flexible, and have adjusted to the new realities of the last few years, have positively impacted their retirement.
You can too.
Relax a bit, and flex with the new circumstances. Those who do will prosper. Those who don’t, are probably the ones who couldn’t flexibly adjust to new circumstances the last time out either.