Posted on February 3, 2010 @ 8:46 am - Written by BawldGuy
Early last month I wrote a piece about growing capital and creating solid cash flow, much of it sheltered, while experiencing no appreciation whatsoever. The bottom line was surprising to many. Their capital nearly quintupled — while simultaneously creating reliable retirement income. Regardless of whether the capital grows by a factor of four or five, or less, the result will be far more palatable than a 40% loss a few years before your scheduled retirement, which is what’s happened to so many good people.
BawldGuy Axiom: Figuring return on disappearing capital is oxymoronic. Treating appreciation as anything but a luxury is akin to walkin’ in an unmapped minefield. Read the rest of this entry »
Posted on December 22, 2009 @ 10:51 am - Written by BawldGuy
This is a long post — it should be. Follow the progression and the numbers closely. At some point you’ll be reminded of someone in your past (present?) who followed Grandpa’s strategy and is now locked into their own life sentence.
There are many schools of thought when it comes to investing in real estate for retirement. Two of them dominate.
One says you buy property and hold it forever. When you’ve saved up enough to buy another one you do — and hold IT forever. The idea is you allow rental income to pay off debt as quickly as possible, arriving at the point of a free and clear cash flow machine. Do this more than once and you have the basis for a nice retirement income stream. Or so the story goes.
The other says cash flow comes from the yield on either capital or equity in an asset. The larger the capital amount or equity in the asset, the larger the income in terms of dollars. The ‘yield’ itself is expressed in terms of a percentage. For example, 8%. This school says that since the yield is the same, more or less, for a larger figure or a smaller figure, why not arrive at retirement with the largest amount of capital and/or equity possible?
The ‘Buy & Hold’ school (BHS) gets you there. But in what condition, and how much cash flow relative to the ‘Capital Growth First’ school (CGF)?
Buy and Hold Read the rest of this entry »
Posted on December 1, 2009 @ 5:54 pm - Written by BawldGuy
You might be wondering why anyone would even have rent increases on their menu these days. Fair enough. But there are regions in which the future will indeed include rising rents — in fact the last 12 months have seen rents head northward for the folks who’ve invested in the Texas neighborhoods I’ve recommended. It’s been roughly 2-4% in our real life/real time experience there. Just food for thought. 
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. Read the rest of this entry »
Posted on November 24, 2009 @ 6:26 pm - Written by BawldGuy
Some random thoughts about what I’ve been hearing/seeing/livin’ recently.
Interest rates have dropped this week. 30 year conforming fixed rates can be had for roughly 4.5-4.62%. So if you’re in the market to buy a home, I’d find one and lock the rate — sometime around 4:30 yesterday afternoon. Investors not ’saddled’ (How stoopid is that?) with four loans will currently pay in the low 5’s. The best fixed rates I’ve seen for investment long term in my 40 years — period. So if you’re contemplating makin’ a move, ya might wanna light a fire under yer booty, cuz it ain’t gonna last. Ya heard it here first. Read the rest of this entry »
Posted on November 4, 2009 @ 3:58 pm - Written by BawldGuy
After living through so many iterations of various markets, both home and in several other states over four decades, I’ve come to believe in my favorite lender axiom more and more.
BawldGuy Axiom: Lenders lend. When they begin to see the lender ’stamp’ on their forehead fading away, they realize it’s lend or die. They’d rather lend.
The most recent example of this has been in Texas, and not even with owner occupied properties. A institution totally new to investment property lending saw the opportunity to make a killing. They made it known they’d lend 80% LTV on small residential income props. They charged just a smidge over normal points, and a slightly higher, but acceptable interest rate.
What happened? Read the rest of this entry »
Posted on October 8, 2009 @ 9:09 pm - Written by BawldGuy
Let’s begin with a sentiment I’ve adopted since the night I first heard it uttered by Johnny Carson. “If all the world’s economists were laid end to end, it’d be a good idea.” Economics violates the 80/20 rule in the sense only about 2% of them ever seem to get things right more than they get it wrong. I’ve studied this phenomena with the assumption the principles involved work every time they’re tried.
Problem is, much of what one economist hails as ‘proven principle’ is mocked by the next guy. So much for the science of economics.
Though they all agree on something as simple as the law of supply & demand, they’ll debate ’till their heart stops beating about whether government spending or tax cuts work better. What really galls is those on either side of the debate will often cite the same set of ‘facts’ to prove their case. Read the rest of this entry »
Posted on October 6, 2009 @ 8:20 pm - Written by BawldGuy
I’ll begin with what I think might win this year’s award for most used oxymoronic phrase. If it isn’t Jobless Recovery, I’d sure like to hear your nominations. Recession recoveries without jobs are like waffle cones without ice cream — what’s the point?
Fannie Mae (and the rest of the ill-named posse), have done pretty much everything possible to make a real estate recovery more difficult. Example, you prod? Not a problem.
First they put an artificial limit on how many investment loans we can have. First to 10, then, in a truly Draconian move, down to 4. That pretty much put the blade to the investor’s jugular, so they ‘relented’ (crummy attempt at humor) by setting new and higher hurdles for investors when acquiring properties 5-10. Lord Almighty, we already needed to be bullet proof credit wise, have enough cash reserves to buy the Coronado Bay Bridge outa petty cash, and a FICO score in the nosebleed section. Read the rest of this entry »
Posted on September 24, 2009 @ 10:11 am - Written by BawldGuy
This is a question taken from the old story of buying in an upcoming but previously ‘grungy’ area compared with buying in the tried and true ‘clean’ locations. I’d ask my client, “Would you rather have a clean $10 or a dirty $20?” Most, if not 90% said they’d rather have the dirty $20 of course.
It amazes me how many times investors opt for local properties when they have empirical evidence showing they’ll do way better in a region a state or two away. It just doesn’t make sense. This is especially true when technology keeps us so informed, usually in real time. Living in Iowa and investing in another state isn’t anything like it was 30 years ago. Back then an investor had the phone and snail mail. Read the rest of this entry »