Principles Of Flight & Real Estate Investment — Gettin’ Off The Ground

Posted @ 10:44 pm - Filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Investment Physics, BawldGuy Axiom

I’ve seen in the real estate business the rough equivalent of what my grandma saw in her lifetime with flight. Born in 1909 she saw in real time the embryonic stage of flight. The first successful flight was only six years before her birth. 60 short years later she watched, on a ‘machine’ not in existence until she’d been married and had four children (three on her front porch), American men land on the moon and come back safely.

Think of where real estate investment was 40 years ago. I’d compare it to the planes used in World War I. The MLS existed, but was in book/magazine form delivered by truck, supplemented thrice weekly on paper held together by staples. The establishment of financing exceeding 75% for Heaven’s sake, was a huge break through! Tax deferred exchanges required every property involved to close the same moment in time. Why would anyone do that on purpose? (Stories — I have stories.)

There were nowhere near the choices for real estate investors there are now — even the biggest thinkers didn’t see what came into being in the ’70’s. (at least that I can recall) My father didn’t use tax deferred exchanges, but then changed, deferring taxes, and he was thought of as a maverick by many of his peers. We’ve seen the rise of the real estate investor from the middle class which descended on us like a squadron of jets in the ’70’s. That new investor class has remained as a significant player to say the least.

The first time I found out one of my mentors closed an investment property using only 10% down, I thought surely it was a joke he was playin’ on me. It was the beginning of the new approach being taken by both lenders and real estate investors. Not everywhere, but in well established growth areas, both were willing to take advantage of the relatively stable, and predictable growth environment. In other words, San Diego was prime for this shift in thinking.

Fast forward to today

What’s happened is, the fundamentals of real estate investment have been largely ignored by a large segment of investors. They see a DVD, read a book, watch an infomercial, and believe whatever sounds good. 100% financing with reduced risk may be the oxymoronic phrase of our time. And yes, I know that’s funny, but it’s far more sad, isn’t it?

What worked for real estate investors 100 years ago, works today. Do we do things differently? Of course we do. Have we become more sophisticated? Yep. But the fundamentals haven’t changed. Erring on the side of prudence is still the way to go. Putting 10% down instead of more? Than your Sominex Account better dang well be generous. The research better be hands on. The evidence relied upon better be more empirical than not. The projections must be biased towards conservatism, not pie in the sky. Nobody ever lost sleep ‘cuz the appreciation or rent increases were more than projected. It’s akin to signs we all see from time to time. Ya just wanna scream, Duh!

Flight went from the Wright brothers to the Apollo Program in six short decades. Everything changed except for the principles that made flight possible in the first place. Lift overcoming weight and thrust defeating drag are what makes flight possible. Sound familiar? Oddly, you don’t find sub-prime like problems in the airline/space industry, do ya?

Apply this to the here and now

Know what aeronautical engineers do without fail? They construct Purposeful Plans. They discover and apply principles and make their business not to fight those fundamental principles, which govern their discipline. What’s the upside in creating new jets whose design ignores lift, thrust, etc.? They don’t have the luxury of flaunting know principles. When a real estate investor flaunts fundamentals they usually don’t fall out of the sky from a mile or two up to certain death. Now you see what I mean by no sub-prime problem in the aerospace/airline industries?

They innovate, but within the outline of what works. Brilliant engineers took us from props to jet engines, but they still kept lift, thrust, and drag in the equation. This is why they’ve figured a way to build fling fortresses so big some need 1-2 miles to land. They worked within the fundamentals, and didn’t violate the laws of physics which defined their parameters.

Are you a real estate investor? Yer not, but wanna be? If yer plane weighs more than your thrust and lift can handle, you ain’t gettin’ off the ground. Do aeronautical engineers fail? You betcha. But when they fail, it’s almost always without loss of life. They don’t mess with physics when designing new aircraft. This is woefully unlike the real estate investor, who launches willy nilly into an investment, without the slightest regard for the physics of investing. Those physics are no more forgiving than the physics we learned in high school and/or college.

BawldGuy Axiom: Gravity works every time it’s tried. Really, they’ve done tests and everything.

A Plan surely matters, but it won’t make a hill of beans difference for those who haven’t figured out what makes the damn plane fly. Don’t crash and burn while violating the laws of the physics of investing. Let me show you how to generate enough lift and thrust to overcome the weight and drag of our current circumstances.

Let’s get you started. We’ll begin by respecting the fundamentals of the physics of investing. Contact me and we’ll figure out what sorta lift you need to get your Plan airborne. Please put trays back, and bring your seats back into the upright position. We’ll be landing at Abundant Retirement before ya know it.

This entry was posted on Wednesday, July 23rd, 2008 at 10:44 pm and is filed under 1031 Exchanges, Real Estate Investing, Purposeful Planning, Investment Physics, BawldGuy Axiom. 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.