Posted on October 2, 2008 @ 12:03 am - Written by BawldGuy
If you wanna catch up, please read the post preceding this one, as it sets the table for tonight’s post. The pics for this post are for us to share as completely unrelated enjoyment.
OK, let’s get this road on the show. 
I”m going to give a snapshot of what I plan to tell Jon and Jill.
At 42, they’ve given themselves a head start over most by having already invested in real estate. Also, they have cash savings of around $50,000. This will act as their Sominex Account. (Cash Reserves) You know, sleep at night? They also own the family home free and clear. (Grandpa cheering in background.)
Their stated goal is to retire sooner, rather than later. Jon is not lookin’ at 65 as retirement time. If he could retire around 4:30 yesterday afternoon he would. Our end game is tax sheltered cash flow for retirement. Duh. First however, we must grow their capital. All retirement income is, is a yield on capital. The yield is, give or take, the same for $3 million as it is for $300,000. The idea is to be the guy with $3 million. The yield’s the same, but the dollars? Not the same.
The net equity in their rental house is around $200,000 — give or take. It will go on the market immediately. Since they paid $250,000 for it, they’ll sustain a long term capital loss. A tax deferred exchange will not be necessary here. Read the rest of this entry »
Posted on September 25, 2008 @ 12:16 am - Written by BawldGuy
I was thinkin’ today about the national economy, and how the third reel of this sequel to the “We’re All Gonna Die” franchise is indeed followin’ the script. The tension finally reached a crescendo, and all the major characters suddenly showed up as if instructed by an invisible director. Friends and foes alike are now on TV singin’ from the same songbook and same song, if not always the same verse. The posturing by politicians of both sides is the Achilles Heel of this movie, as even first time movie goers, new to this franchise, can sense the false notes being sounded by many of the actors.
Behind the scenes you can imagine the panic as so many of them shed their brave fronts while lookin’ to the calm, experienced leaders with the real power to take charge. The real power is now tellin’ the faux power how it’s all gonna shake out. It’s been like this since one man had power over another. But I digress.
No matter where twisters show up, weak or strong, they’re local in nature. There are no exceptions, nor have there ever been. Real estate behaves similarly. Grand Rapids, Michigan can be depressed, while Mesquite, Texas is thriving. This dichotomy can exist in times both boom and bust. It’s quite a paradox at times, to say the least. Read the rest of this entry »
Posted on September 8, 2008 @ 10:29 pm - Written by BawldGuy
Early adapters will be the big winners when it comes to capital growth and investing in outa town real estate. Those who insist on keepin’ their capital here in San Diego will look back a few years from now, realizing they could’ve done much better. In just five years the difference can be far more injurious to your retirement plan than you might imagine. How so?
San Diego (California in general) takes another couple years to stop the decline. Another to stabilize. Two years at 2-5% appreciation. Before ya know it you’ve raised enough to pay for half your sales costs in five years. Let’s party.
OR
You can take yer $100-500,000 into a growth region or three and get 3-7% for the next five years. Even if it’s say 5%, if you executed a tax deferred (1031) exchange into say $1 million of property, your first year you’ve grown by $50,000. Even if your $450,000 duplex or rental home in SD went up 10% you’re still behind — and the gap only widens.
BawldGuy Axiom: Waiting for California (San Diego, Palo Alto) real estate to resume normal capital growth rate is akin to waitin’ for your cat to bark. Definitely not a good use of yer time — or your capital.
This cat wouldn’t bark no matter what drug the vet gave it. Sweet relief from broken leg suffered in three story miscalculation. The bird made a clean getaway.
You might as well be waitin’ for yer cat to bark as wait for the San Diego market to keep your capital on the growth trail. Adapt to the new reality. It’s now almost the same trading to other states as it is staying home. And in the end? Your capital doesn’t know where it is. It does have a need to flourish though. The Boss’s cat wasn’t even gonna
Texas, including Dallas and surrounding areas, Austin, Kansas City, and hopefully soon, the Carolinas and Georgia — all better performing markets than San Diego. Not even a close call.
Oh, and for the record? No matter how long you stare at yer cat, it ain’t gonna bark.
Maybe while yer starin’ at Fluffy, you can send me a quick note. We’ll talk about how a Purposeful Plan will most assuredly make the difference in turbo charging your equity’s growth rate. Have a good one — and thanks Kelley.
Posted on September 4, 2008 @ 12:31 am - Written by BawldGuy
It’s so easy to talk about moving real estate equities from here to there like your rearranging furniture in the living room. In practice it takes real experience, knowledge, and expertise to pull off. Though I’ve ‘captained’ hundreds of tax deferred exchanges (stopped counting), each one has to be executed to near perfection ‘cuz that’s the only thing the IRS understands. It’s not rocket science, which is what so many real estate folk want you to believe. Still, do it with a cocky attitude and you’ll find out in real time what a bad day’s all about.
For the record, Brown & Brown has never, not once, failed to successfully finish a 1031 exchange. How do you know that’s true? ‘Cuz I’m alive, dude! What would you do if an agent messed up your exchange, costing you six figures in capital gains taxes? Exactly.
Let’s talk nuts and bolts first. How do you sell a property in a place like San Diego these days? That’s no walk in the park, as you may have guessed. It’s not like yer able to head over to the parts store like Grandpa used to, when the family jalopy needed work.
Gonna be brief tonight.
When selling property in a buyer’s market, which is also known for it’s relatively high prices, you must be serious. I’ll only talk tonight about the first step, which is simple as pie. Read the rest of this entry »
Posted on August 28, 2008 @ 10:53 pm - Written by BawldGuy
I often make economists the butt of jokes. I remember one time a line by Johnny Carson. “If all the economists were laid on the ground head to toe, it’d be an excellent idea.” He didn’t think much of them that night. They want us to drink their own special recipes of Kool Aid, but don’t like it when folks notice they’ve predicted 13 of the last 4 recessions. That, uh, includes the recession of 2008 — yet another in a long line of recessions that never were. Yet since the last quarter of 2007, ya couldn’t swing a dead cat (pun intended — ya gotta read the linked post) in ‘Cable TV World’ without seeing a talkin’ head warning us of the recession around the corner. There were a couple who even had the cajones to say out loud and in public that we were already in one.
Makes ya wonder just how stooped some of them think we all are, doesn’t it?
The current and persistent real estate market correction has been the topic of debate since its birth some three years ago. I’ve seen this movie a few times before. I know the ending. Each time another sequel comes to theaters, the debates are similar. Most center around how harsh the correction will be, and when it might run outa steam. To that end, I ask you today,if you would do me the favor of reading a post published here almost exactly eight months ago.
It talked about real estate investing in 2008, and also included my thoughts on the possible life span of this correction.
I reread that post today. My thinking hasn’t changed. In fact, I’m more convinced than I was in January about what the last reel of this sequel holds for us. Plainly put, it’s my contention this time next year we may look back to the late summer, early fall months of August/September/October of 2008 as the time when the market began in earnest to execute it’s painstakingly slow U-Turn. Recoveries are like like emerging from recessions in that it’s only in hindsight that we pinpoint their beginnings.
I won’t go into detail tonight about on what hook(s) I’m hangin’ my ‘end of correction’ hat. Suffice to say the well known disclosure applies. My opinion, along with my heavily armed Starbucks card will get us coffee and cookies most days.
That said, what I thought was gonna happen has been playing out, more or less, since January. There are several trends which, when isolated may not mean much, but when seemingly choreographed with each other, can become powerful forces. Again, I’ve seen this movie, lived it actually a few times already. It’s my opinion the last reel is already playing on the screen.
We’ll see. Again, thanks for reading the January post. I’d love to hear your thoughts.
As I said back then, be nice, be respectful, and let it fly. Have a good one.