Durango, San Diego, Texas, KC — Random Thoughts On Real Estate Investing

Posted @ 12:16 am - Filed under Purposeful Planning, Retirement, San Diego Property Owners, Real Estate Markets, Cash Flow, Retirement Income, Buying Income Property, Sominex Account, Market Correction, Investment Lessons, Leverage, Capital Growth, Kansas City, Palo Alto, Tax Shelter, Texas

Have some cool shots of our trip that I’ll disperse randomly tonight, and for the next few nights. Just so ya know. This first shot was ‘posed to be of two people, our hostess Vanessa, and me. Turns out it was two people, just not me.

In Durango, Colorado as in San Diego, real estate values are way up the last decade, even after the steep decline of the last three years. If you can only afford a $400,000 home, the fact that the $600,000 place yer lookin’ at used to be $700,000 doesn’t really matter, does it? Hardly.

Same goes for income property.

When puttin’ 30-50% down is a necessity, not a choice, merely to break even — logic says to pass. Duh, you say? Yeah, me too. But you’d be surprised at how many folks resist drop dead empirical logic, when it’s right in front of them. I’ve seen it in San Diego for a few years now. Saw it first hand, up close and personally in Palo Alto and San Francisco, and now in Durango. Though, as I wrote last night, real estate investors in Durango understand the changes they’ve witnessed, and the consequences of ignoring them. They’re not letting their emotions become a roadblock to their retirement.

They’re not in denial about what it takes to engineer real capital growth through real estate investing. Reasonable leverage is required, unless of course, you have 50 years to invest. 1/3 to 1/2 down payments don’t come under anyone’s definition of real leverage. If the investment can’t take care of itself with a maximum of 20% down, you’re delaying your own retirement, and decreasing it’s potential for income. Just one of those is tough to live with, but both? Not a combination ya wanna have on your plate. Are there times when larger down payments are in order? Of course. But not when capital growth is the order of the day.

Both Durango and San Diego income properties offer very stylish anchors, designed to be worn around yer neck. Subtle enough for ya? Both regions are dead ends, or at the very least pretty dang effective governors on capital growth. Cash flow? Why does everyone hafta be a comedian.

Folks in both areas should be lookin’ to Texas, Kansas City, Missouri, and soon, (it says right here) both the Carolinas. Also, lookin’ to create a ‘hedge strategy’ region, that I’ll talk about later, probably next month.

Bottom line, the formula for creating wealth, followed by a magnificently abundant retirement isn’t rocket science. It’s also not accomplished in a year or two. It takes major planning. Purposeful Planning one might say. It requires generous cash reserves, to allow sleep on nights when Murphy’s paid you an unscheduled visit. (Yeah, like there’s any other kind.) We’ll call that a Sominex Account.

Here’s a tried and true formula.

Cash flow is nothing but a yield generated by a pile a cash. If that pile’s big enough, we call it income. If it’s really impressive, we call it retirement income. How’d'ya get that pile a cash to be relatively ginormous? Well, first of all, you concentrate on growin’ your investment capital. Your strategy until almost ready to pull the retirement trigger is to grow grow grow your capital. See? Not rocket science.

The bigger the pile a cash the bigger the yield in terms of dollars. The guy with seven figures in his pile gets the same 6-10% as the guy with six figures. There’s only one question you need to ask yourself.

What pile do you want? No hurry. Take yer time. Think about it. Then contact me ASAP so we can get started. If someone asks what yer doin’? Tell ‘em yer makin’ a big pile out of a little one. It’s the big pile that make for the best retirement.

Here’s today’s random thought. Beginning January of this year the drop in real estate values nationwide has decreased every single month to date. That’s seven months and counting. For the Chicken Little’s out there, whose whining requires more cheese than Wisconsin can possibly supply on its own, that’s what we call a trend. Empirical evidence of impending recovery? Hardly. Evidence of impending doom? Don’t be stoopid. That’s the end of today’s random thought.

Can I hear an Amen?

This entry was posted on Wednesday, August 27th, 2008 at 12:16 am and is filed under Purposeful Planning, Retirement, San Diego Property Owners, Real Estate Markets, Cash Flow, Retirement Income, Buying Income Property, Sominex Account, Market Correction, Investment Lessons, Leverage, Capital Growth, Kansas City, Palo Alto, Tax Shelter, Texas. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.