The answers followed a predictable path. You know, analysis, research, knowing pertinent tax law — you could probably fill out the rest of the list. They’d start gettin’ itchy as I kept shakin’ my head no. Then, for my own personal entertainment I’d tell ‘em they weren’t even warm — keep tryin’.

Availability, 24/7 etc. Returning phone calls, or now, emails, texting and the like. Nope. Still not close.

Over the years I’ve attended many conferences, seminars, and now a couple ‘barcamps’ — and spoke at a bunch of ‘em, or participated in various panels. The same poppycock is often being passed off for wisdom. These days it’s all about social media, the new scourge of mankind. I’m reminded of what an Arizona agent, a wickedly smart guy, and a friend, once said about what home buyers are lookin’ for. He runs one of the most, if not the most successful house brokerage teams in Phoenix.

He said, “Buyers aren’t lookin’ for agents, they’re lookin’ for homes, silly.” He gets it.

The same goes for real estate investors, but with an enormously more intense sense of urgency. See, investors, whether they be buyers, sellers, or exchangers, all want the same thing. It’s what separates those who try, and those who simply do.

Real estate investors want results.

This is especially true in the current environment of barely controlled chaos in various markets. San Diego income property owners, at least the ones who now realize their plight, want answers first, and ultimately results. Not kinda sorta, close-enough-for-horseshoe results — but real, ‘This is what I wanted to happen’ results.

You might be wondering why I bring this up today. It’s not complicated. Though you can ask the folks with whom I work about how quickly I return calls and emails, or how well my various outa state teams take care of clients, it’s not the so-called ’service’ that matters to them.

No, it’s the results.

It’s always the results. The alternative, for most real estate investors isn’t a pretty thought. There, I feel so much mo betta.

I need a fix! Gimme a call at 619 889-7100 and we’ll talk about the results you’re wantin’. Have a good one.

My decades as a real estate investment broker have led me to understand how landlords can rationalize just about anything, especially when it comes to direct dealings with their tenants. This is a good time to recommend professional management, as my stance has always been that your income property should work for you, not you for it. It’s not always feasible, and I get that, but if it’s at all possible, at least consider it seriously.

The question is often posed, “Should I always be on the cutting edge of market rents?” OR “What will happen if I raise my rents and they all move out?” There are myriad iterations.

Here’s a dirty little secret about where you should be with rents on your particular property — it’s not just about the ‘market’, it’s about your micro-market relative to the demand for what you have to offer.

Don’t be too quick to judge that statement as simple-minded. Take it while blending it into the context of what I’ve termed ‘relative demand’.

Let’s not turn this into rocket science, OK? If you own residential income property in a more or less blue collar area, the demand for your vacancies will not be as intense as a vacancy in a highly coveted location a couple miles away, whose tenant profile is more financially established than yours.

For instance, one of the neighborhoods we recommend in Texas (DFW MetroPlex) resides in a school district so well thought of, folks literally relocate so their kids can attend school there. Same as with Palo Alto (Bay Area, CA) schools, except ya don’t hafta make a 5-figure monthly salary. Landlords inside that school district are kings. Even in times like these, they not only fill vacancies, they sometimes see rent increases as an option.

Here are some guidelines to use when contemplating rent increases. Understand, most of the time, you’ve thought about it only cuz you already know about the competition down the street, right? Right.

Understand the real underlying demand for your unit.

Consider giving a 60 rather than a 30 day notice — courtesy.

Don’t get comfy with rents more than 10% below market, as it affects value.

Never raise rent on a poorly maintained unit — never ever.

If possible, preempt tenant resistance with evidence of local rents.

Understand: A long term tenant at way below market rent is a loss even if they’re ‘really, really nice’ people.

Ultimately rents determine value — keep your eye on the ball.

Do your own ‘boots on the ground’ rent survey. This ain’t an option.

This isn’t meant to be a treatise on rents. You set the tone on the topic when folks move in. When Brown and Brown had a management arm we told them our policy, which was to review rents either annually or even semi-annually depending upon current market trends. They went in knowing this would happen, so were never surprised.

Also, cuz we were very vigilant about maintenance and repairs, there was a well established positive atmosphere when it came to our side of the table. They appreciated our reliably quick response to the irritating little problems that crop up. It’s like banking goodwill.

When they check out your competition they arrive at a few conclusions.

The new, higher rent is equal to or a bit under what they found.

Even if they found a slight better deal, it very likely won’t be worth the irritation/cost of a move.

They have no idea if the new landlord will be as cool as you’ve been.

It’s about you giving them value for their money. As long as they perceive that’s the reality, the occasional rent increase shouldn’t be a big deal. Make sense?

Call me at 619 889-7100 and let’s get a Purposeful Plan up and goin’ for you. Have a good one.

Here’s the problem though, especially as it relates to the garbage in/garbage out principle in the form of an axiom.

BawldGuy Axiom: Using most of the required tools to complete a job well ain’t gonna work — and the proof will show up in the results.

Ever been workin’ out in the gym and seen one of those guys who didn’t get the memo about workin’ the body as a whole? They generally look like Ahnold from the waist up and Olive Oil from the waist down. I’ll bet you’ve seen this before. They’re applying the fundamentals of body building through resistance training — but doing it selectively. FAIL.

This goes double when you invest. Selectively adhering to what you know is fundamentally correct won’t cut it. Curious though, how when a fundamental is contrary to what we wish to believe, or worse, what we really wanna do, we can figure a way around it.

Bad idea.

Leg work in the gym is pretty much universally loathed. In fact, I don’t trust folks who love leg work, as it just isn’t natural. Then there are the comical results described above — the Ahnold/Olive Oil look IMHO will never catch on.

Getting the right property, or the right price, cap rate, region, etc. can’t be approached piecemeal. Also, especially these days when we tend to feel far too comfortable with online research, a false sense of ‘having the data we need’ is the biggest risk. I run into it almost daily.

“We’ve done some real research, even down to the neighborhood level, and we’re convinced the rents should really be such and such.” Long time readers know the value I ascribe to ‘boots on the ground’ (BOG) research. I’ve had folks tell me rents are too high, when in point of fact, those rents are a year old, and now slightly lower than the three down the street, just raised upon lease renewal.

Local boots on the ground knowledge is like gold — it’s value is never zero. When combined with decades of accumulated knowledge and expertise? A lot more than zero.

Online research? Helpful at best, horribly misleading at worst. If not gathered with the intent of BOG follow-up it has dubious value at best. Those who buy or pass on regions, properties, neighborhoods based upon research done in their living rooms are more likely than not future recipients of the law of unintended consequences.

This is why we always, no exceptions, do our own boots on the ground work. When we say a property should rent for $XX, we have the data to back it up. When we come to an opinion of value, we’ve seen the properties and the comps in person — not to mention appraisals from paranoid lenders who believe nothing. We know both personally and empirically how we came to our opinion.

The Father of all investment fundamentals?

They’re called fundamentals for a reason — without them in place, things don’t work as planned. You either miss out on a stellar opportunity, or mistakenly brand an investment as an opportunity. Either way, eschewing the use of all the tools in your toolbox is a mistake which almost never fails to deliver. consequences. The dirty little secret? Most investors simply don’t pack a fully stocked toolbox.

My ‘band’ has at its disposal many instruments available for use with specific real estate music. When ya need cowbell, ya need cowbell. There’s no callin’ out ‘Gimme more cowbell!’ when there isn’t one. Hence, the name of my new band.

Fundamentals Toobox — Backed up by Boots on the Ground.

Wanna talk? You can contact me at 619 889-7100. Have a good one.

And there’s the rub.

Lip service is given to the intimate relationship between risk and return, but often not much else. What’s worse, both risk and return are just as often misjudged by the investor as a result of their analysis of a given property. Though I used to believe risk was more routinely misunderstood, I’ve come to believe it’s probably the return side of the equation.

Risk seem more a victim of denial than anything else, though that’s purely an experiential observation on my part.

It’s that pesky relationship risk and return have had goin’ hot ‘n heavy for centuries that can and will chew you up and spit you out if you ignore it. None of us are immune to the very simple reality which says the higher the risk, the higher the return. That truism goes hand in hand with the golden triumvirate of Mr. More is better than less, Mr. Sooner is better than later, and Mr. More, Sooner, is much mo betta.

There’s a thought process that seems to convince many real estate investors the extraordinarily high return their analysis shows them as reality, is somehow attached to a risk normally found runnin’ with a much lower return. We all wanna believe we’ve discovered the formula for finding high return properties without the ever congruent risk attached thereto.

It doesn’t happen people.

BawldGuy Axiom: Grandma wouldn’t lie. The higher the return, the more risk you’re gettin’ yourself into. High return? Low risk? Recheck your return. Something ain’t right, and it’s probably you.

I’ve done the same thing more than once. It finally hit me — either I was foolin’ myself, my numbers weren’t real, or my assessment of risk was, to be kind, wanting. It was the latter, by a landslide. Since that epiphany so many many years ago, I’ve done my best to understate return, and overestimate risk. I try not to go overboard, but it’s been a practice with which I’ve become very comfy.

Look, boiled down to its essence, the idea is to become as wealthy as possible — but slowly, not by next Thursday.

BawldGuy Axiom: The shorter time span demanded by investors to attain their growth goals, the higher the risk factor must be to achieve those goals. And the congregation says, “Duh!”

Risk and return go hand in hand whether it’s high or low — it’s like gravity — you won’t defeat that investment principle regardless of what you think you may have found. Much like gravity, it doesn’t care what you think — it just is. Go figure.

BawldGuy Takeaway: Your analysis of a given property should always have as its foundation, the laws of Investment Physics. When the conclusion is high return with low risk, you’ve discovered an inherent flaw in either your assumptions, your numbers, your conclusions — or all three. Analysis must forever and always be brutally honest, letting the chips fall how they will.

When investing in real estate for your retirement, may I suggest you keep some principles in mind.

1. Your #1 job is to do everything within your power to protect the original capital you’ve invested. Return is secondary. Nothing trumps this principle once your capital is invested — ever.

2. The assessment of risk, should be relatively reliable. It’s the numbers you use for income, vacancies, and operating expenses now — what you predict for future years — that have the ability to make or break you. Don’t be artificially draconian, but be real.

3. When you’ve arrived at your estimate of the property’s inherent risk and projected return, and it seems too good to be true, remember what Grandma told you, OK? Cuz she wouldn’t lie to you — if it seems too good to be true, it probably isn’t true. Find the flaw.

But, you ask, “What’s too good to be true, BG?”

Let’s say you’ve found a property and decided the risk is very acceptable, in the high level of the ‘low range’ so to speak. You conclude the after tax internal rate of return (IRR) for a projected holding period of 5 years, ending with a sale, will be 17% annually.

Ya screwed up somewhere, cuz that ain’t gonna happen. High return properties carry commensurate risk — let that be your mantra.

BawldGuyCaveat: Though high return does indeed mean the risk is also high, please don’t make the common mistake of reversing that principle, cuz it simply doesn’t work that way. High risk MIGHT mean high return — OR low return — OR, God forbid a complete boondoggle loss of everything you invested. A reasonable return with comfortable risk, over the long haul, is what works.

Finally, ponder what Grandpa told me the first time I visited him after switching to the investment side of real estate: “Remember, it’s not called ‘risk capital’ for nothin’” ‘Nuff said.

Let’s take a look at your portfolio, or get one started. Call me and we’ll laugh and scratch awhile. 619 889-7100 — Have a good one.

By far the most difficult part of what I do involves both sides of the same coin. One side is advise given, which for one reason or another is not taken. I never take it personally. They asked, I offered my professional opinion along with a Purposeful course of action, then left it up to them. The other side of that coin is when they’ve chosen either to ignore my advice and/or picked an entirely different path to travel altogether. The only time that bothers me is when it backfires on them.

It’s like when we challenge gravity — paid for with a trip to the emergency room, some stitches, and a bill — and that’s when we’re relatively lucky.

Whether it’s clients who’ve decided they can go it on their own, or those who never really bought into the principle of generously funded cash reserves, unintended negative consequences still hurt. I take it personally when those who don’t follow prudent principles lose hard earned money.

Clients have been financially injured by insisting the use of their best friend as their investment property lender isn’t the horrible idea I suggested. Losing over $25,000 due to fraudulent lending sadly proved me a seer. That particular one happened a couple years ago, yet I still become furious when it’s brought up. The topper to that one? It really was one of their best friends — or used to be. So besides the huge financial loss, they lost a long time and pretty close friend.

That’s what we call a bad day.

The last few years have brought in more than the usual number of real estate investors from around the country, asking if I’d listen to their stories a few minutes. That’s like asking a five year old if they’d like some ice cream. Most of these conversations end with me telling them to stop investing — at least pause. Sometimes doing absolutely nothing for awhile is the best course of action. (inaction?) If I can’t help, at least I can avoid making things worse.

As I’ve written so often, doing very well investing in real estate almost always relies on following foundational principles which have been proven effective for centuries. Your properties can be mundane. Your locations average or better, but not excitingly cool. But the perfect property sitting in an A+ location, will turn to dust when these principles are violated with a cavalier attitude. See, it doesn’t matter if you jump off the roof in ripped up Levi’s or a designer tuxedo — yer still gonna be hurtin’ when the fall concludes.

The physics of investing don’t care who you are, how much you’re worth (or not), or if you believe in them. They just work every time they’re tried. Apply them prudently for a very long time, and your retirement income will demonstrate in an empirically financial way how wise you’ve been. Still, fate can intervene with a gigantic curve ball — we’re living it in real time now. A plane falls from the air — there was no intention to challenge gravity in that manner. It happens, unfortunately.

BawldGuy Axiom: Intentionally defying the laws of investment physics will have the same sad ending as those who’ve challenged gravity once too often. The consequences are inevitable — sometimes fatal.

It’d make my year if what you take away from today’s missive is how investment physics are crucial to your retirement income in both quantity and quality. I call them investment physics ‘cuz they work like the physics we learned in school. The respect and yes, sometimes fear of gravity is what keeps us from hurting ourselves. That respect will often help us avoid the fall headed our way. There are times when that simply means holding on ’till help arrives — or simply being injured less severely.

Every time you invest, think of gravity, and ask yourself how many times in your life it’s failed your expectations? Then remember investment physics will be just as reliable — in fact, inevitable.

Let’s find out what’s possible and talk about your future, OK? Moving folks to a superior retirement is what keeps me high, and I need my daily fix — sometimes more than one. Call me at 619 889-7100 or click the Contact BawldGuy button up top. Have a good one.

One client called me up laughing. Seems he came upon his high school sweetheart living a couple streets down. Ya never know what you’ll find and/or learn, but you’ll do both if you’re focused.

Here are some suggestions you may wanna incorporate.

1. Understand exactly what info you’re trying to unearth. I’d say rental amounts plus the physical makeup of rentals compared to yours is enough for this outing.

2. If there’s a manager, or someone who at least looks like they may be in charge, talk with them first. If you’re honestly straightforward with your purpose, they’ll almost always go outa their way to oblige. That’s been my experience since forever.

3. Make copious and highly detailed notes. Don’t rely even a little on your memory. After awhile they tend to blend together. Make sure to have each tenant’s address above all your notes on that unit. If you’re able to get in, even better. Tip: Get in ‘n out quickly, and thank the tenant profusely. Down the road it may be helpful if they remember you.

4. If a unit offers more or less what yours does, but rents for a lot more, be sensitive to why. Is it a half bath extra? More modern kitchen? 125 more square feet? A private garage? Pay attention.

Don’t mistake this as a highly detailed ‘how to’ on rent surveys — it’s far from it. That’s another post altogether, and almost always more effective conducted by a pro. Still, that part of the business isn’t rocket science no matter how ya slice it. It’s boots on the ground grunt work that often yields 24 carat nuggets. I’ve made incredible deals and dodged some ugly bullets as a result of a well timed, and thorough visit to the neighborhood in question.

BawldGuy Takeaway: Without exception — literally — nothing has been brought to the table technologically that has even come close to replacing human boots on the ground with a mission and an attitude. Nothin’. This is one area where eyes ‘n ears and some thoughtful questions will give you more insight and useable intel than you’ve had since you bought your units.

I’d love to hear what you found. Send me a note to let me know what surprised you, or better yet, what you learned was different than what you ‘knew’ before.
If you have more questions, give me a buzz, as I’d love to hear about your experience out in the world. 619 889-7100 will find me. Have a good one.

More simply put, they produced higher quality results, most of the time more quickly than I did. As I put more years behind me, I began to understand what Dad and many of his silver haired agents told me. They said after enough time I’d ‘get it’. Who knows when that really happened, but after about five years, my confidence level seemed to be much higher.

I compare it to umpiring at the Division I level of college baseball. You clearly don’t get to that point without having proven yourself. Watch umpires at any level of baseball and observe their body language. You can tell the grizzled vets, right? They’re always where they’re supposed to be at the right time. I used to help train youth umpires while working for the NCAA, and the rookies were an easy spot. Tentative was their middle name. They were never really sure of where to be, the rules, or sometimes even whose call it was.

It gets worse.

As a direct result of their shaky grasp of the job at hand, when their calls came into, um, question, they tended to either morph into DarthBlue, immediately reverse themselves, or ask for help from their partners who were often literally 70-100 feet away with poor to impossible angles. Not good no matter how ya slice it.

BawldGuy Takeaway: There are too many answers to too many questions house agents simply will not know to ask. As we’ve discussed her often, it’s the answers to those questions that will run your train off the tracks every time.

I remember one Little League All-Star tournament back in the ’90’s. A couple fellow NCAA umps and I had donated our time to their second round. I drew the plate for the first game of the day. The first pitch was taken for a called strike. They’d never seen nor heard anything but the usual Little League volunteers before that game. After I finished barkin’ out ‘HUH!’ for that first strike, the catcher, as he was throwin’ the ball back to his pitcher said, “That was so cool.” We had the usual close calls, but the coaches behaved very differently than we’d be told to expect.

Know why? They knew they were dealin’ with seasoned pros, not volunteers. Disputes were handled almost under the radar. Afterward we were inundated with requests to stay and do the night game. Two of those petitioning us were part of the crew assigned to that game. They knew the kids were in better hands, and wanted them to experience what it was like to play under those conditions. We acquiesced.

Our reward? They brought us Double-Doubles from In ‘N Out instead of makin’ us eat out of the snack bar. Perks is perks — we gladly accepted.

Think of how important your investment Plan is and how doing the Right things at the Right time in the Right way makes all the difference in the world to your results. Oh, and it’s not a game either. It’s real life, and when you find out what you shouldn’t have done, what you did wrong, or that you should’ve just stood pat awhile longer, there’re no do-overs.

Point made.

Hire your house agent to sell your personal residence, and a real estate investment expert for the rest. The real estate investment ‘rule book’ is nearly orders of magnitude more complex than those governing the sales of primary residences.

Call me — let’s talk. 619 889-7100 will put us together. Have a good one.

In a nutshell it (102) says the heirs take the property(s) tax free. Good enough — as far as it goes. But, you ask, what if I wanna sell it? What happens then? On what does the heir then calculate their capital gain? Is it a capital gain? Will the heir have any tax liability?

Section 1014 of the IRC, in a nutshell says no. It’s called ’stepped up basis’. The property is valued at Fair Market Value at the time of death. This acts to effectively raise the basis from whatever it may have been to current market value, more or less. Because of Section 1014 any rise in value of the property in question which occurred during the decedent’s lifetime may never be taxed. I know, sounds to good to be true, but I’ve dealt with dozens of heirs over the years, and except for the amount of sales price exceeding the value at death — their was no tax liability incurred by the heirs.

The Old School of real estate investment brokers used to say without deviation — “Defer ’till ya die.” If I heard it once, I heard it a thousand times. Since those early days they’ve learned how to leverage other parts of the code, often avoiding the necessity for a tax deferral strategy, but you get the gist. The code, simply put, provides strong incentive for taxpayers to defer capital gains from Day 1 to the grave.

Ah, but there’s about to be a huge Gotcha!

Beginning right after ya finish kissing your sweetheart at midnight of New Year’s Eve 2009, 1014 will be terminated, ended, sliced and diced if you will. In 2001 the Economic Growth and Tax Reconciliation Act (EGTRRA), had this ’sunset provision’ in it from the outset. Now, the heirs will take the property with a revised ‘carryover basis’ rule. The property will then receive a basis equal to the adjusted basis of the property in the hands of the decedent OR the fair market value — whichever is less.

Know how I’m always pounding the theme of folks gettin’ into trouble as a direct result of the answers to questions they didn’t know to ask? This particular answer, this newest ‘gotcha’ from our favorite folks on Capitol HIl begs several questions 90% of investors don’t know to ask — and is a prime example of why I bring up all those pesky questions never asked by most investors.

BawldGuy Takeaway: If you’d prefer leaving your estate without it being molested by Uncle Sam, there are strategies available to you. But they need to be part of your Purposeful Plan a whole lot sooner than just before ya say your final goodbyes. It is called a Plan, right?

BawldGuy Axiom: The Golden Rule says, “Those with the gold make the rules.” Those who can print whatever money they need, AND control the tax code, also make the rules. They can change ‘em any time they want, too.

Tax deferred exchanges have their place for sure. Lord knows I’ve done more than my share, as I stopped counting at around 200 or so. But it’s just another tool to be used when appropriate and nothing more. The continued worship of the 1031 exchange is about to have some lethal unintended consequences for folks who didn’t know the right questions to ask — or when to ask ‘em. Be careful out there. Enough said.

Let’s talk. 619 889-7100 or email me. I’m pretty good at promptly responding. Have a good one.

Try three rental houses in San Diego — two of which were, regretfully, not performing as planned. Not only that, but the timing of their acquisition was not the best. They’re both upside down now. Between them $8-10,000 a year in negative cash flow is generated.

The third house spit out positive cash flow, and had appreciated nicely, even accounting for the recent backslide in prices. At first glance we guesstimated this property’s net equity at somewhere between $150,000 and $200,000.

I was contacted by the owner, who asked me my opinion of his situation, and whether he should use the cash he had on hand to separately acquire any additional income property.

Here’s a summary of Bill’s status quo at the time, which was around the end of last year.

Enough cash on hand to acquire a couple more income properties.

An existing Sominex Account easily big enough for my scaredy-cat tastes.

1 property in need of selling — about 4 years ago.

2 properties in need of flushing, one way or another.

A little over $200,000 in unused depreciation, accumulated over the last 8 years.

First thing outa the box we had Bill double check with his accountant on the amount of unused depreciation available to him. Turns out he was more or less in the ballpark. Then we looked at all three San Diego properties to figure out what best to do. It was decided that although the two losers were a giant pain in the butt for sure, they were now so upside down, Bill decided to bite the bullet and tough it out a few years.

This left the high equity rental, which we had Bill prepare for market, following our in-house interior designer’s instructions. It sold in about a day or so, and closed this month. His net proceeds landed in the range predicted, which will allow him to do the following.

He’ll acquire three brand spankin’ new duplexes in different parts of one of our favorite growth regions in Texas. He’s holding back $20-25,000 to replenish his Sominex Account (cash reserves, for the uninitiated), spent on upgrading the rental just sold. We love that attitude on his part, as regular readers will attest. Never make your Sominex Account a 2nd class citizen of your Purposeful Plan.

The three duplexes will be bought using 20% down payments. All title policies and an additional 2% of his closing costs will be credited to Bill in escrow. Total capital required to close all three will be roughly $155,000 — or close enough for horseshoes. Cash flow from the three will land somewhere around $10,000 annually, probably a tad more. What a pleasant co-inky-dink. That just happens to offset the negative cash flow from the lemons back in San Diego. And no, it’s not really a coincidence.

The capital gain Bill incurred via the sale of the San Diego rental will be more than offset by all his unused depreciation. This is cool on more than one level. Besides avoiding either a handsome (ugly?) capital gains tax bill or a tax deferred (1031) exchange, he becomes what I call, (and please excuse the phrase) a reconstituted virgin as it relates to his cost basis. No exchange means no artificially low adjusted basis. This in turn means that not only will the capital gain on his new properties be significantly reduced in the future, but that his future annual depreciation will also rise big time.

His new annual depreciation will be roughly quadruple what he left in San Diego. He’ll be increasing his leverage while simultaneously going from a break even cash flow to a five figure annual cash flow. Let’s summarize all this.

Sold much appreciated property without paying capital gain.

Immediately goes from no cash flow to 5-figure cash flow — after tax.

Immediately quadruples his tax shelter when new duplexes close escrow.

Offsets negative cash flow in San Diego with positive flow in Texas.

Avoidance of 1031 reduces future capital gains monumentally.

One of the bonus perks, at least as far as Bill’s concerned, is he now has one less property sucking up his time managing. Don’t know about you, but managing property is without a doubt my least favorite thing to do in real estate — and there is no runner-up.

Also, he’ll be rackin’ up huge amounts of unused depreciation for the next round of moves — always a good thing. Oh, lest we forget, this move’s most profitable result will be the epic increase in his capital growth rate. We’ll not know how much the increase will be ’till we have a year or two behind us, but it’ll be impressive. Not only did he increase his leverage just short of a factor of three, but by controlling more property — located in a region far more likely to increase in value, his chances for appreciation are now far more likely. (And sooner, rather than later.)

BawldGuy Axiom: Expertise, knowledge, and experience can often turn what seems a difficult set of circumstances into something very workable. But don’t expect something as cool as turning lemons into mojitos. That’s a bit much, don’t ya think?

This is an ongoing saga, for which the ending is still to be played out. We’re just now putting the duplexes under contract. I’ll let you know when it all finally shakes out. You get the idea though, right?

You own property in San Diego? Maybe some place much like it? Give me a call so we can explore the possible together. Try 619 889-7100. Have a good one.

This example recently took place in a smallish northern California city.

First of all let’s face something that may be our currently reality — it’s entirely possible real estate in general is beginning its painful U-Turn as we speak. It’s also entirely possible it ain’t. From my vantage point, which allows me to see more than a few markets up close and personal, there’re too many signs for me not to think something might be afoot. But I digress, and besides, we’ll not know for sure until our rearview mirror tells us, right?

Buyers in markets so heavily tilted in their favor tend to behave accordingly — Duh. They make sometimes insultingly low-ball offers. Insist sellers pay a large part if not all their closing costs. Want price adjustments at every turn, mostly from the leverage they perceive available to them during the inspection period. They do it until they sense the seller is about bleed out, then smile, back off, and wait for the escrow to close.

So the million dollar question is, just how does a seller successfully shift the balance of power? Can it even be done? You bet your bloodsucking vampire-buyer it can. It’s so simple, yet so many sellers are afraid to implement the approach. I’ve never understood why.

A recent example comes from our own files. Our seller, as we warned him from Day 1, had to swallow pretty much everything the buyer wanted. Still, the final price was a record high in that neighborhood since about August of last year. Not bad. The buyer had made his offer literally hours after it had hit the market. He wanted it. And why not? The property itself was nearly perfection personified — a factor which shouldn’t be lost on you.

Every time we yielded to the buyer’s agent (on one point after another) it was quietly mentioned by us how this was a buyers’ market and we really had little choice. Once we arrived at the bottom line, which was, according to our seller, written in his own blood, we made one itty bitty request of the buyer’s agent.

We’d like the deposit, which was nearly $10,000 on a sales price under $500,000 — to become permanently/irrevocably non-refundable on the last day of the inspection period — passed by escrow through to the seller at the end of business that day. We’d been so reasonable throughout, he felt he couldn’t/shouldn’t refuse this one small request.

Then the appraisal came in low. The agent said that was ‘unexpected’ but the seller would need to ‘adjust’. We politely demurred, instead saying the buyer would need to be paying for more of his own closing costs than previously agreed. “He doesn’t have it” replied the agent. “Then I guess we have a problem, ‘cuz the seller just ain’t in the mood” said the ‘other’ Brown. Continuing politely, he said, “You’ll need to figure a way to make it far more palatable for the seller. He’ll adjust to this farce of an appraisal, but your client will hafta come up with a lot more than he has so far. This is a two way street.”

One wonders what the conversations must’ve been like between the buyer and his agent at this point. There was simply no way, no how the buyer was gonna walk away from his nearly $10,000 deposit — and everyone knew it. The best part? That deposit was like the 10 ton elephant in the room nobody (needed, wanted to) talk about — especially the buyer’s agent.

We may hear from various buyers and/or agents saying they’d surely not ever allow a deposit to ‘go hard’ as it’s called. Fair enough. But I’ve been able to make it happen over half the time in every buyers’ market in which I’ve participated, with the exception of ‘74-75. Why not then? Gimme a break, as I was 23 at the time and hadn’t yet had the full advantage of all the mentoring I’d eventually receive.

If you’re a seller in a buyers’ market, please put this strategy into play. Buyers and their agents tend to become more than a tad cocky, and will often let their guard down. I call it IBS — Invincible Buyer Syndrome. It’s often exacerbated by a much worse malady — IBAS — Invincible Buyer’s Agent Syndrome. The really pivotal players more times than not in this approach are the buyers’ agents themselves.

Anywho, give it a try. In this example it generated about a 7% increase in our seller’s ultimate net proceeds — not a bad result, all things considered.

Wanna talk? Call me at 619 889-7100 or email me through the Contact BawldGuy widget up top. Have a good one.