Your thoughts? (Hat tip to Tom Royce for the heads up on this.)
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Author: Jeff Brown (page 5 of 15)
Real Estate Investments Broker
I love talkin’ with people. My heroin if you will, is the first couple conversations I have with a prospect or new client. It’s a fix I need often, and greedily seek. Political discussions also interest me. I love the rational give and take of a spirited political debate. What I can’t stand though, is the emotional claptrap, the avoidance of facing tough questions head-on, and the favorite technique of empty headed smart-asses, answering a question with a question.
Obviously, liberals and conservatives are both guilty. My experience however is with libs, who sometimes seem literally incapable of addressing simple questions asked in plain, one to two syllable words. I’m to the right of Atilla the Hun, and make no bones about it. The only reason I twice voted for Reagan was cuz Goldwater didn’t run. And HE wasn’t conservative enough. 🙂
Back to political debate.
I’ve developed some hard and fast rules. If ya wanna play with me, you abide by them, or we don’t talk politics. It tends to get libs’ panties in a bind, but it works well. Those who agree to them, usually end up admitting it made for a much calmer, more honest, and certainly friendlier give and take.
The Rules
1. If I ask you a question, you must answer THAT question — nothing more. Take as long as you need, but you must limit your response to the specific question. It works both ways.
2. Without exception — NO answering a question with a question. It’s almost always the way out when you have nothing to say. Either give the other guy the point, or make your case.
3. No personal attacks. The discussion ends there, without warning. You’ve obviously shown your gun is loaded with blanks. You’ve embarrassed yourself. Quit while you’re behind.
4. Don’t dress up your opinion as fact. You look foolish, and it’s an insult to my intelligence. It’s either fact or not. The intensity of your belief doesn’t make it so.
Here’s a recent example of a talk I had with a lib in Starbucks the other day. It was a great Read more
Don’t know about you, but I’m sick to death of all the propaganda about Free being the future of ideas. Really? Let’s take that to the extreme. Ideas should be free for the asking? Not in my world. But if you listen to all the utopian crack smokers pontificating while enjoying their afternoon expressos at the local Ivory Tower Starbucks, they’ll tell ya — and I swear I’m not making’ this up — you’ve seen it everywhere — ‘information wants to be free’. Information doesn’t want anything. Duh. Folks who don’t/won’t/can’t come up with new ideas/information — they want information to be free.
Allow me a major, albeit, related detour. I promise it’ll swerve back to the whole concept of Free. I’m reading one of the best books I’ve come across in quite some time. Outliers, written by Malcolm Gladwell. In it, among other things, he gives some astounding examples of what he empirically proves are totally erroneous conclusions based upon false assumptions. These false conclusions are then ‘proven’ by future results. In other words, horrible analysis produced WAY wrong conclusions, which were then proven ‘correct’ years later. Confusing? Here’s an example I lived in real time.
Gladwell talked about this in his book, though he chose youth hockey as an example. Their system mirrors Little League exactly. We all know how Little League works. The kids are kept within their own ages more or less, so as to keep things on as even a keel as possible. When it comes time to pick All-Star teams, performance, merit if you will, is the criteria. It’s been the same since before I was born. It’s also been universally accepted as the best system. Why? They simply point to the kids they chose as ‘the elite’. As they grew older, a percentage became stars in high school. From there, some went to college and thrived at that level. Some eventually became Major League players. How much proof do we need, right? Those not chosen didn’t amount to a hill of beans for the most part.
Wrong, analyst breath. The entire theory is built Read more
I’m the expired listing king of the hill — NOT. The only reason I’ve ever initiated a conversation with the owner of a property on the expired list, was if I had a specific buyer/exchanger who might fit. I began this policy due to the consistent and predictable dual attitude — mistrust of brokers/agents, and massive denial as to why their property didn’t set the brokerage world on fire.
Don’t get me wrong, as we all know agents who make much if not most of their living from marketing to expireds. Part of my reasoning, maybe the driving force if I’m gonna be honest with myself, is that my direct mail marketing was so reliably successful, dealing with expireds was like lookin’ for ways to get painful splinters.
When it comes to the 1-4 unit market, their are two generic classes of owners. Those who occupy, and those who don’t. I look back now and marvel at how myopic my thinking was back then. I specialized in investment property for Heaven’s sake, why wouldn’t I choose to leverage my knowledge advantage with investors who were recently unsuccessful in selling? Double Duh.
If you feel comfortable with your current basic investment knowledge, including pertinent Internal Revenue Code Sections, or are confident you can get yourself there quickly, here’s how you might garner some new listings. To save space I’m not gonna spend time on specific strategies implied here. You either know them or not. I’m easy though, and will freely share if you call.
First, let’s understand exactly the advantage you have with an investor vs a homeowner. Before we continue, I don’t bother with bank owned listings or short sales — merely a personal preference.
The reasons for selling/exchanging are mostly objective, not emotional. There are all kinds of solid reasons for an investor to make a move. Chances are, since they own just one or two local rentals, they’ve really never spoken to someone who knew which way was north on the investment map. You’ll stand out as a very positive exception. The best thing that could happen though, is Read more
My stompin’ ground is San Diego. When the bubble burst here, the median price for a single family residence was within shoutin’ distance of $600,000. To give you some perspective on that number, my first ever listing was a 4 bedroom home in a blue collar area in October of 1969 — $18,100. It didn’t sell during the 90 day listing period, as it was um, a tad overpriced. Gimme a break, it was my first day on the job, and I was just 67 days past my 18th birthday.
Let’s say you and I are partners in a bank making real estate loans in San Diego. In January of 2005 we approved a couple’s application to refinance their well located 2,500 foot home with a view. Our own appraiser came in with a value of $675,000. The borrowers wanted 80% which was $540,000 — very doable considering their 770+ FICOs and impressive credit history. The interest rate was 6% fixed for 30 years — a payment of $3,237.57 monthly. Add taxes and insurance — just under $4,000!
Their home is now worth $450,000 — more than $100,000 above the current median price for the county. She’s had to resume full time work due to her husband’s job loss. He’s now workin’ two jobs at drastically reduced pay. They’re goin’ through their savings like a mower spits out grass on Saturday morning.
What do we, as the lender wanna do?
Our Board of Directors thinks either the government or the market will eventually save us. But then the White House floats a plan calling for principal reduction. Crap on a cracker.
Even if we reduce the loan balance by $90,000 (Almost 17%), the payment will only be reduced by $540 — hardly a real life solution when we consider the couple’s severely reduced income.
If we offered them a significant reduction in interest rate, say 4.5% with interest only payments for two years, then 5% the next three years, then 5% fixed for 30 years fully amortized — it would make the difference in going through foreclosure or not.
Their payment the Read more
Books on marketing and service — gotta love ’em. Most, at least in my view are best utilized after shredding — they’re so fulla crap they make stellar fertilizer. ‘Course I say that fully cognizant of the reality I’m pretty much BawldClueless when it comes to effective marketing, so I guess that review should be taken with a boatload of salt. I could spend a year studying it and still not know what real marketers have forgotten. Truth be told, most folks using the moniker, marketing specialist would be Von’s checkers if it wasn’t for the greater sucker theory working so well.
Do I sound bitter? 🙂 I was for a few days, but I’m over it.
I’ll confess to more than my share of marketing blunders, and openly acknowledge I’ve wasted more money on marketing over the last few years than even I can fathom. A few days ago I was lamenting this sorry fact with a friend, who made the oh so witty observation that if that cash had been kept under the mattress I’d now be able to buy several free and clear homes in the Phoenix area. A recent accounting shows just over $250K down the drain — and only in the last five years!
When first seeing that number, I began staring in the mirror while chanting “Learning curve…learning curve…learning curve…”
Do I still hire folks to, gulp, market for me? Yep. I’m not a DIY guy, nor do I kid myself that by reading books, posts, and watchin’ videos that somehow the marketing light will suddenly show me the way. Many can make that work, I’m not one of ’em.
I’m not blessed with the love of what I do for a living. Don’t get me wrong, I love much about it, just not the whole. I love the process of talkin’ with new prospects — diggin’ into their particular circumstances, mining for problems, then creating solutions. It’s like heroin to me. I need regular fixes or I tend to get cranky. I love seeing and hearing folks as they first begin to see the light at Read more
Live long enough and you’ll pretty much see and hear everything. I’ve seen a pitcher strike out five — count ’em — five batters in one inning, standing right behind the catcher. I’ve seen a so-called conservative president actually increase the requested spending of a bill authored by Ted Kennedy. Hell, I’ve even seen, be still my heart, the Chargers in the Super Bowl and the Padres in two World Series.
I wonder what odds Las Vegas would lay on me agreeing with the Huffington Post that today is New Year’s Eve? Let’s just say she and I could save each other a buncha time on election days by not voting, since we cancel each other’s vote every time out on virtually every issue/office.
But then it happened. Huffington coauthored a post with Rob Johnson on the topic of what we, as regular folk, can do about the abusive conduct of most of the To Big To Fail banks. It’s both simple and brilliant. They even provide a pithy video and a link to a list of local banks in your community.
The idea? Let’s all take our money outa those thug-like banks and move it to local institutions. The money will still be equally insured. Imagine the message it’ll send to not only the TBTF’s but to Pennsylvania Avenue and Capitol HIll who, so far, have been the poster folks for clueless in D.C.
Anywho, thought it was worth sharing.
Happy New Year!!
Over the weekend I was reminded of an illustration of what true commitment is. The story was about breakfast, specifically ham and eggs. You’ve probably heard it. Grandma first told the story to me when I was in high school.
It goes like this. The chicken is involved in the breakfast. She laid the eggs, and went about her business. The pig however is committed to that breakfast. A huge difference.
Think about any part of your life and ask yourself whether you’re the pig or the chicken. How about your business? Are you ‘involved’ like the chicken, or ‘committed’ like the pig?
I’ll only speak for myself here. When I take on a client, time is not an issue. Most of my clients will require many years to achieve their goals. Geography isn’t an issue. We’re already in several states, headed for more. Furthermore, I require the same piggish behavior from my clients. I simply will not work with a client who cares less than I do about their outcome. No exceptions.
You can, as I have, look at areas in your life and your level of commitment to them. How about your kids, your marriage, or your core beliefs. Put them to the test: Are you the pig or the chicken?
Maybe most importantly, why are you one or the other?
Here’s an example, using real properties recently purchased by real clients. I’m gonna modify some of the numbers, but the modifications will not in any way make the bottom line better by an inch. (Worse in fact.)
What if you paid $245,000 apiece for four properties, each with an annual gross scheduled income of $28,800. The renters sign year long leases, and tend to stay a little longer than two years. We’ll set the operating expenses and vacancies at just under 40% — $10,950 a year. This results, when using currently available loans, in a negligible cash flow of less than $250 monthly — essentially a break even.
The down payment used will be 20%, though I’ll use 22% for any return figures. In these transactions you’ll be credited up to 2% of the sales price for your closing costs. The first year’s cash flow will be just under $3,000 or so for each property. We’ll assume any increases in expenses will serve to cancel out any rent increases. The loans are fixed rate, amortizing over 30 years, with a 6.5% interest rate.
If in five years the value is still $245,000 — what will you have gained? Of course, you didn’t invest to find yourself in a non-appreciating asset. Since your crystal ball is in the shop, we’ll just consider it your time in Murphy’s barrel. 🙂
So, what will you have gained in this scenario?
Income tax savings of around $7,500 a year, or $37,600 over 5 years After tax cash flow of almost $12,000 annually, or $59,800 over 5 years Principal reduction of just over $50,000 over 5 year holding period
It took about $54,000 +/- to close each of the four purchases, meaning you’ve invested a total of $216,000. In 5 years without values increasing, here’s what happened.
Add up your 5 year total for tax savings — $37,600. Your after tax cash flow for the same period is a couple hundred less than $60,000. What that means to you is simple. Your Levi’s garnered just under $20,000 ($19,520) annually in spendable cash. That’s an after tax cash on cash return of roughly Read more
Ever umped a baseball game at any level? It’s a rush. You haven’t lived ’till some stud has winged a 95 mph fastball your way. It literally takes a couple of ’em before your brain adjusts to the velocity. First one I saw? Told the hitter and catcher it sounded good to me as my right arm went up signaling a strike. True story. Most umpires never get past youth ball, even fewer to high school, and only a trickle get the experience NCAA baseball offers.
There’s a cliché in baseball that says when the game’s over and you really didn’t notice much about the umpires, they did an excellent job. As is true with most clichés that’s a pretty accurate statement. In fact, the only reason folks should notice umps is if they’re able to do their job with a little flare, a little passion — but it’s not required or even necessary. Just deliver the goods.
Same goes for real estate agents. Just as the excitement is in the ball game itself, the excitement for your clients is moving into their new home — possibly after movin’ outa their old one. Our job is making sure the excitement happens the way it’s supposed to.
One of my favorite memories on the diamond was a day I was to ump the plate in a junior college game in a pretty highly talented league. JC’s don’t get four umps, just two. As you might imagine, with only two men, hustle and seamless, preordained teamwork is a must, not a luxury. There’s simply no room for anything short of that when you’re part of a two man team umpiring at the college level — even junior college. Anywho, in the second inning, my partner became ill, and had to leave.
Me ‘n You, Lord.
As luck would have it, things remain more or less quiet. I’m runnin’ around like crazy, but it’s doable. Before we resume the game, I call both head coaches to the plate for a quick powwow. I tell them in no uncertain terms I’ll be in no mood for Read more
There surely are more than just a couple schools of thought when it comes to using real estate as a vehicle to get them to an abundant retirement. The two that almost always garner most of the attention are Buy & Hold for cash flow from Day 1, and Capital Growth First THEN a transition to cash flow upon anticipation of imminent retirement.
Will either one get you there? Yep.
The real question is — do you want your Social Security check to be used for groceries, or spending money? And yeah, I know, what SS check? 🙂
Proponents of the Buy & Hold school are from the Old Old School. Don’t try to talk them outa their strategy. Show their results side by side with the Capital Growthers though, and they really get loud.
I urge you to check out a comparison I’ve done over at my place. Caveat: It’s over 1,600 words of reading. It goes into clear detail. So far, folks who’ve read it, have been pleasantly surprised at how much solid info they understood and can now apply.
If you’re a real estate investor, or wanna be one, this ‘case study’ is for you.
Merry Christmas!
Ever looked over at the agent down the hall and wondered how they get from home to the office without hands-on help? They usually didn’t get past the front door back in the 1960’s, at least in our offices. I remember vividly that you were tough or you found another place to work. Cream puffs generally didn’t get too far into Dad’s job interview before they knew they weren’t in Kansas anymore. There was no such thing as laser beams back then, unless he was starin’ right through ya.
Dad used to conduct what I’ll call no nonsense weekly meetings back in the mid-20th century. Attending my first one three days after my virgin day at the office was, um, eye opening. It was Tuesday, October 21, 1969. Dad was his usual toned down Zig Ziggler self, with undertones of Darth Vader nursin’ a toothache. It was the first time I’d ever seen how others perceived him as a boss.
They soaked in every word as if he was readin’ off the third tablet Moses lost while coming back down the mountain. Though I could believe it cuz he was hugely successful (1,000 sides/yr), and arguably charismatic, I wasn’t sure about ‘why’ he was viewed this way until much later. One thing for sure, you worked for him or you took up space elsewhere. Even though the firm did so many sides a year, he never had more than 28 full timers, complimented by a dozen or so part timers. To this day I’m convinced the profile of his typical agent was ‘assassin’.
This is all prelude to explaining how a one act pony like Dad (his words, but painfully accurate), went from zero to over a 1,000 sides yearly in just over a year. Ryan Hartman’s excellent post about dominating the market struck a deep chord with me. Not just because it reminded me of the ‘good ol’ days’, but because I think he may have found the key to the mint.
That aside, the plan, whatever it may be, is secondary to the combination of unflappable belief and consistent, Read more
Just because you’ve found yourself in a position to quit your day job, and sail into the sunset, should you?
If we assume you’re financially set and your Purposeful Plan has found the cool end of the rainbow, what will you do? So many of us use artificial rest stops in our lives as an excuse to do one thing or another.
My dad sat down one weekend and set a business goal for himself with a 10 year time period for its accomplishment. Big problem. He was one of those guys born with only one gear — overdrive. For nearly five straight years he worked with less than a total (not counting a few sick days here and there) of 30 days off.
He was definitely a thinker, but once he believed he’d figured something out, either lead the way, follow, or get mowed down, ‘cuz he was gonna get to Point B. His motto was given to him by his sixth grade teacher when he pointed his finger at 11 year old Dad and said, “Don’t make excuses Brown, make good!” And he did. I’ve given this a lot of thought, and at least for Dad the problem was simple.
He never seemed to ask himself about life after achieving a goal. Like so many investors who read books and buy videos to learn how to buy investment property, he never asked a crucial question, much less come up with the answer.
Then what?
Just like buying real estate investments — anyone can buy something. Is it the right something? If so, and it rises in value — then what? Uh oh. Planning for retirement begs the ‘then what?’ question like a puppy happily wagging his tail who won’t go away. Figure out what your ‘then what?’ is and you’ll be way ahead of the game.
There was the story he told me about having some drinks after work one evening with some friends. They got to talking about business, as they all owned their own real estate firms. Before he knew what was happening, the conversation had veered sharply into Read more