Category: Investment (page 18 of 20)

by Jeff Brown

Real Estate Investments Broker

Author website

If you’re in the state/fed combined tax bracket of 33.3% and your home mortgage is interest only at 6%, your after tax rate is 4%. But you knew that, right? And if your loan is say, $200K, then your annual interest deduction is $12k. At your 1/3 tax bracket your actual interest paid is only $8K. This means you are not paying $4k in income taxes just because you own your home. Big deal you say, everyone knows that. True enough. But is there a way to take further advantage of that tax break?

What if you’re married and you’ve been putting $4k annually in your 401k. Why do people do this? They do it because they’ve been pounded since they can remember — “you’re saving taxes on every buck you put into your 401k. Don’t be an foolish, keep doing it.” What if you took the $4k in tax savings from your home interest deduction and put it into something that might grow tax free? Why would you insist on taking an additional $4k and locking it inside a retirement plan that’s telling you up front it’s going to tax everything that comes out in retirement income? And that tax rate will probably be the same or more than what you’re paying now. And we’ll tax your heirs when both of you are gone.

“But my retirement tax bracket will be significantly lower than it is now” you reply confidently. Not so fast. Aren’t you and your wife doing your best to end up with a free and clear castle by the time you pick up your gold watch? If you guys put the same $4k in the retirement plan (401k/IRA) every year for 35 years and it grows at an average rate of 8%, you’ll have around $690K. At that same 8% you’ll have an annual income to add to your Social Security check (laughing in backround) of roughly $51,750 — pretty nice, eh? Not so fast. You’re earning too much possibly. What? Social Security may become taxable with your increased income. In any case, your retirement income is about what Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

O, the ignominy! Danville, IL is in the news again…

This time, my frowsy little fly-blown hometown amends its past notoriety as the cheapest-of-the-cheap housing markets by refusing to release its abysmal sales data at all:

[T]he Danville Board of Realtors in Illinois has decided to withhold sales data from the National Association of Realtors trade group after the Danville metro area ranked as the lowest-price market in the nation during the second quarter of 2006.

“We looked into it – all avenues of what we should do,” stated Debbie Borgwald, executive officer of the Danville board, in the article. “We want to let people know Danville is a great place to live.” She also told the newspaper that the low prices for the metro area had generated negative publicity.

I personally am only interested in rental homes that will appreciate in value. It’s nice to be cash-flow neutral or even mildly positive, but all the money from residential real estate investing comes from leveraged appreciation. An “alligator” in a growth market is the world’s most lovable pet.

However… If you’re the kind of investor who likes to buy cheap dumps for the positive cash-flow that can accrue from providing affordable rental housing to motorcycle enthusiasts and tenants even less savory, by all means go to Danville. You can pick up single-family homes for $20,000 or less. The rent might only be $300 or $350, but the houses will throw off positive cash-flow no matter how you finance them. Plenty to choose from, too…

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Almost three years ago, The Goldwater Institute, a free-market think tank in Phoenix, published a devastating accounting of the light rail system now being built in Metropolitan Phoenix:

[The Maricopa Association of Governments]’s public transit plans deserve close scrutiny. Use of urban public transportation systems has been in decline since the end of World War II, when public transit provided 50 percent of urban travel. Last year, only three percent of urban travel in America was provided by public transit. This decline has occurred despite prodigious government efforts to prevent it. Governments now spend 30 to 40 times as much on public transit as for roadways. But evidence suggests that transit is not the most effective use of public transportation dollars.

Of all the options in the public transit mix, light rail deserves the most scrutiny. Because it requires its own special track, it lacks the flexibility of buses, which use existing city streets. And because tracks would be constructed on existing city streets, light rail in the Phoenix region is actually projected to increase traffic congestion. Furthermore, in no city in America does light rail transit account for much more than one percent of urban person-miles of travel. The Phoenix light rail system is projected to account for only two-tenths of one percent of travel in the region.

The average cost of light rail per passenger-mile is around $1.50, almost double the cost of bus transit, and five times the cost of automobile transportation per vehicle-mile. On average, taxpayers pay nearly 90 percent of the cost of light rail passenger travel, considerably more than for all other transit modes. Worst of all, light rail would do almost nothing to relieve traffic congestion. Because 80 percent of new light rail passengers in Maricopa County would be former bus passengers, light rail would remove less than one car in 1,000 from traffic.

To my knowledge, no one has ever challenged the numbers in this report — perhaps because it is based entirely on Valley Metro’s own projections. The Arizona Republic dismissed it with high-handed hand-waving, insisting — I kid you not — that people say that Read more

by Jeff Brown

Real Estate Investments Broker

Author website

My company is a two horse operation. And one of the horses has just been cleared to take on riders. Although in the past I’ve had several assistants, I’ve found that when it’s all boiled down, my business is built on the foundation of — homework. In the past my assistants were trainees on their way to becoming full time investment agents. So as soon as they became really good at being an assistant, they were allowed access to the next level. And I’d be back at square one — again.

It’s about to happen for the last time as my son has finished two years of training. He’s been my right hand, assistant, TC, ‘road guy’, and general doer of those things we’d all rather avoid. And now I have to figure out how to replace the irreplaceable. The cost to train and retain long term, an employee as effective as Josh would literally be unaffordable. How do you find someone who can solve problems, keep clients happy, snap the whip, and million other things? And on top of all that care as much as I do about the results? You probably don’t.

Enter Becky Bethke. Calling her a diamond in the rough would be damning her with faint praise. We’ve done about 20 transactions in the general Boise region in the last two quarters this year. Not a tremendous number, but enough to test the local supporting cast. I’ve gone through two escrows, two title companies, three lenders, two property inspectors, and a partridge in a pear tree. And one Transaction Coordinator. Though calling her a TC is an undeserved compliment to TC’s everywhere.

I won’t bore you with the details, but outside of delivering pizza and beer when escrows close, Becky does everything else. She calls her company The Closing Source. She calls herself a Transaction Coordinator. Trust me, she’s not a TC, not even close. My mom was an executive secretary back when that’s what they called executive assistants. In her prime she wouldn’t be a better assistant than Becky.

When we are successful in acquiring another Boise property Read more

by Greg Swann

Suburban Phoenix Real Estate Broker

Author website

Here’s a true fact of life for almost everyone with a real estate license: This job pays really badly.

Here’s a true fact of life for a favored few people with real estate licenses: This job pays really well.

I don’t know if we can safely count ourselves among the favored few just yet, but being Realtors is throwing off a lot of cash for us, and that cash is throwing off a lot of opportunities to make more cash.

Last year was phenomenal, of course, and this year hasn’t been awful for us, considering how awful it was for other Realtors in Phoenix. We got a lot choosier about listings, which helped keep our money in our pockets, and we’ve both done more than we ever have before with new builds.

But: Do Realtors “deserve” all the money they make? I’ve had transactions — two closing later this month — where my total involvement was around five hours. I’ve had others that have run to hundreds of hours over the course of years. But looking at my added-value by hours or tasks or ergs of energy expended is a mistake. The value I bring to the transaction comes from knowing what to do, how, when — and why. Our clients do a lot better because of our involvement, and they are gracious enough to say so.

For now, our earning goal is $1,000 a day, each, call it $700,000 a year, gross. Obviously our expenses are huge, as are our taxes (grr!). Worse yet, we’re not hitting that goal yet. And to put things in perspective, Russell Shaw’s annual broadcast advertising spend approaches our total earning goal.

In the near term, I think we can double our numbers to something like $1.5 million a year, before taxes and expenses. From there, with a couple of assistants each, we might be able to push things to that amount, gross, each. In other words, without growing our head-count very much, we might be able to knock down $3 million a year in gross commission income. The net from that might not be all that great, considering, but it Read more

by Jeff Brown

Real Estate Investments Broker

Author website

I just got off the phone with a delightful lady, who has been assigned the impossible task of editing my blog. She’s now reviewing what I’ve done so far, and her preliminary opinion is that I’m not inarticulate. I’ll await her final call with as little anxiety as possible.

She did pose an excellent question about what I do.

She asked, and I’m paraphrasing here big time, “What about regular folk who are just plain afraid of taking that first step in investing in real estate for their retirement? The thought makes me more than a little nervous. Don’t most people fear their first foray into that world?”

Well, yes and no. Most have concluded on their own that the plan currently in place for retirement might be lacking in foresight. However, many think that if they just keep paying down their home loans, saving money in their 401K/IRA’s, and not living beyond their means, everything will work out. This is when they need a heavy dose of “I’ll never live that way” reality. The old ‘free & clear’ home plan is one of the most dangerous myths going today for Baby Boomers. It’s a prescription for a spirit crushing existence in what should be some of the best years of their lives.

Spirit crushing? If your kids live out of town, you can’t afford to visit them very often if at all without them paying your way. Trips to tropical islands sipping exotic drinks with umbrellas in them are not on your menu. Birthday and various holiday gifts – send a card because the money simply isn’t there. It’s Valentine’s Day and you want to take her to that ‘special’ place? You just don’t have an extra $100 for that. It gnaws at your spirit.

Many of us know retired folks living that life. It’s not a ‘lifestyle’ — it’s a life sentence.

I show investors three possibilities for their retirement lifestyle.

One is the status quo plan. They end up with $50-100k in their 401k, have a Social Security check for up to roughly $2k monthly, and if they can earn say 6% Read more