Posted on June 26, 2008 @ 10:10 pm - Written by BawldGuy
Guy I’ve been helpin’ on the side with investment advice lives in Iowa. Pretty smart guy, and frankly, if my opinion was asked, I’d say he had more ah, testosterone than is safe. But that’s another post altogether. Anywho, he’s not only smart, but a doer with a capital D. Tell him what to do and how to do it, and Boom! he’s emailin’ me with a question about what to tackle next.
BawldGuy Axiom: Those who set out to try are doomed to learn from those who set out to do. Doing is what results are all about. Trying is how we begin explanations for failure.
The latest bump in the road for ‘Jim’ is figuring out how to reliably value properties in which he has some interest. Though I’m still not positive about what he was looking at during his research, I can say it did bring up a common misconception.
Going to the local tax assessor and viewing property tax appraisals in order to value is maybe one of the fastest ways to find yourself in the black abyss of ‘What happened?’
In California for example, the only kinda sorta reliable assessor valuation is found the day after a new sale is recorded — if that sale was recorded at full value. Back in ‘78 we amended the state constitution as it relates to real estate taxes. (Proposition 13) Very much oversimplified, it limits taxes to 1% of the purchase price, which of course has been perverted somewhat over time to include various exceptions. In San Diego homes and small investment props generally land in the range of 1.25-1.6%. Also, and this is best part, annual tax raises cannot exceed 2%. Pretty cool, eh? Read the rest of this entry »
Posted on June 26, 2008 @ 1:05 am - Written by BawldGuy
We’ve found the right property(s) for you. You’ve successfully entered into escrow, and have navigated all the hurdles and potholes encountered on the way. It’s time to transfer ownership to you. Let’s look at what happens now.
Note: For those who haven’t read the series from the start, and would like to do so, here on some links for you. Here’s Part I, Part II, and Part III
I’m gonna simplify this as much as I can. It’s not my job to make things as difficult and/or complex as possible, right? Right.
How do we know when we’ve arrived at our off ramp? There are as many answers as there are brokers and investors. For me it’s when lender says to get ready for loan docs. Don’t get me wrong, Murphy still has arrows left in his quiver. They’re just harder for him to reach now. At least that’s my story, and I’m stickin’ to it.
BawldGuy Axiom: The escrow ain’t closed ’till someone tells you it’s closed and even then not ’till you’ve confirmed with the title company. You can be fairly sure when you’ve received the payment info from the lender. Probably. Read the rest of this entry »
Posted on June 19, 2008 @ 10:26 pm - Written by BawldGuy
Had to write on this subject, as it’s been consistently coming up lately. And if clients bring it up, it needs to be addressed here. Asset protection, in my humble opinion, has become a racket — a huge cash cow racket — but a racket nonetheless. I’ll make use of the BawldGuy Disclosure:
The following opinion plus my Starbucks card will get us both some strong coffee and some really cool cookies. At least my opinion has been vetted by some pretty impressive attorneys.
(That last part is me saying, ‘Neener neener neener’ to doubters.) ‘Course I don’t actually say those words, I just refer to the bazillion dollar an hour attorneys I consulted. Gets the job done though, doesn’t it? Works for me. 
Been sayin’ this for years — at least since the mid-90’s. After nearly 15 years of Asset Protection seminars, infomercials, and Fred yer next door neighbor tellin’ you how everything you own is in danger, you should smarten up and spend thousands on LLC’s and new fangled limited partnership agreements, and they should all tie into the…Stop! My ears are bleeding.
Has anyone told you the cost of residing in California with a few LLC’s? Try about $800 a year just to file the LLC tax return. Unless you’re unfortunate enough to have established one of those Blue Light Special LLC’s for ‘Just $99 Today!’ a real live LLC drafted by a real live real estate attorney with more than five minutes experience, will cost you $2,500-4000 for the first one. He’s creating it for you, not the last dozen clients. That cost real money. From then on the price crashes to $250-500 depending upon the attorney, and/or their mood. Gonna buy half a dozen properties? You’ll be advised to initiate more than one LLC. Let’s say the first one costs $3,000, and the next couple are $250 apiece. That’s $3,500 right off the bat.
You hold the properties for five years. That’s $12,000 of filing fees. Geez. I’ve already posted before about the tax deferred exchange problems. They’re not nearly as bad as they used to be, but they still can present problems. Lenders are usually the catalysts. I’ll skip that part of the story, but suffice to say holding investment property in a way which might possibly weaken or, perish the thought, cause a 1031 exchange to be disallowed, ain’t the way to a consistent sleep pattern, know what I mean, Verne?
Look, liability is what yer trying to protect yourself from when all the smoke clears, right? Right. This ain’t rocket science people. I’m not the Lone Ranger when it comes to this school of thought. I’ve finally heard the LLC word one too many times. So here’s my thinking, and that of the three real estate attorneys queried on the subject. Read the rest of this entry »
Posted on June 18, 2008 @ 11:08 pm - Written by BawldGuy
Those of you who’re regular readers know I like using pictures to help illustrate points, while breaking up the text monotony. Some posts, (this series for sure) make it difficult to maintain photo/prose continuity. (Great phrase, eh?) Anywho, I mention all this so I can now warn you — today’s pics are more random than a soccer game in a league for five year olds.
Yesterday we got part way through the process a new investor experiences with Brown and Brown. What wasn’t discussed was the behind the curtain kinda stuff that goes on just before, after, and between steps. Info dumps one client calls ‘em. I like it.
First Info Dump
This comes more in verbal form. The newbie hears about the differences between the investment lending process vs buying the family home. They hear terms like declining market, rapid acquisition, and ‘Hey, no problem, we just need one more thing.’ (They mean well, but that last one is almost always a lie.)
They hear why this loan is better for them and their particular properties than that loan. Also, the nuts and bolts of real life investing are at this point beginning to become a part of the vision they have for their retirement. That’s an important moment, as it brings excitement to what is often a tedious process. Read the rest of this entry »
Posted on June 17, 2008 @ 10:06 pm - Written by BawldGuy
Let’s take a peek at what a shiny new real estate investor faces when entering this market. We’ll use a composite Brown and Brown client made up of several clients who’ve come on board this year. They’re early 40’s with two kids. (She’s 39, sorry.) They make $150,000/year between them. They own a home with a loan at around 70% loan to value. The investment capital available to them is $125,000 not including their cash reserves. They credit is very good, with both scores in the mid-700’s.
First we need to hear them say they wanna be our clients. We don’t make a big deal about it, we just need to hear the words. Once spoken we shift into gear and our V-12 power plant begins its throaty hum. Ever heard a V-12 idling? It’s been described by some as a small airplane. Very cool.
Here’s the chronology
1. A frank discussion is had between the us and the client. How old are they? Salary? Savings? Other assets? Credit? Retirement goals? The list goes on for awhile. The agenda is to establish a Purposeful Plan based upon the answers to these questions. This Plan is the foundation for our first moves on our client’s behalf. It’s importance can’t be under valued. Read the rest of this entry »