http://investingnotes.com Thoughts, observations and opinions from the host of The AntiGuru Radio Show Fri, 03 Jul 2009 14:18:29 +0000 http://backend.userland.com/rss092 As an investor, you know that time is money. You also know that every day a property sits unrented or unsold you are losing money. In the case of rents, a lost day of rent can never be made up. So, what do you do when your local inspection office staff is slashed? What happens when you can't get the inspections completed in a timely manner? This is a situation more and more investors are facing across the country as local governments deal with shortages of revenue. To the average homeowner, this type of situation is a minor inconvenience. But, to an investor who needs to get a property placed (back) into service or sold after a rehab, this type of situation could be devastating. Of course, we are talking about governments here so the options available to mitigate this risk are limited. The most effective is proper project planning. I know, you are probably thinking, that is your contractor's problem. Well, yes and no. Yes, they are ones the responsible for properly planning and managing the project. But, no, you are the one who will be making the extra payments on the mortgage while the project falls farther and farther behind. I am not saying you should micro manage your contractors and subs. Far from it. Anyone who knows me, knows I am not a micro manage kind of guy. Yet, you can make sure your contractor is that kind of guy or gal. Before the first permit is pulled, or demolition started, sit down with your contractor and go over the project plan. Look at every single timeline item. Discuss the estimated start, duration and end dates. Talk about the milestones, required inspections should be milestones. Discuss what can happen in parallel. Discuss what happens if things slip, for any reason. In other words, make sure you understand WHAT and WHEN is going to happen with your project. The HOW and WHY are the contractor's problems, unless of course you are doing the work yourself. See, re-inspections are number two reason projects fall behind. There is some deficiency noted in an inspection and it must be corrected before it can be re-inspected and that inspection is required to take the next step. For example, plumbing and electrical rough-ins must be inspected before the walls, floors and ceilings are covered with sheetrock and in some areas even before the insulation can be installed. And in those communities getting the insulation inspected may be required. So, you want to avoid re-inspections This is such a big deal I encourage you to write an incentive into the contract with the contractor to encourage them to do everything in their power to prevent the need for re-inspections. The local inspector is over loaded and they just want to do the inspection, find everything okay, sign the paperwork and move on. They are not interested in trying to make your life difficult so you owe to them, and yourself, to not make theirs difficult either. Some communities are experimenting with using outside inspectors who have been trained and tested to accepted standards. These private inspectors carry malpractice insurance and they do the inspections and certify compliance to the local authorities. Oh yeah, the number one reason projects fall behind? Changes to the plan requested by the property owner. http://investingnotes.com/2009/07/03/as-municipalities-cut-back-what-about-code-enforcement-and-inspections/ Last Thursday morning I spoke at a breakfast meeting of real estate investors. One of the questions that came up was about forums on the internet. The person asked me if there were any forums I could specifically recommend for general reading about real estate investing. I named several and noticed the pens flying to scribble them down. Which is great! I think everyone should have many sources they use for information. I happen to believe we maintain one of the best for our members but that is beside the point. Then another person stood to ask a question. They said they had a hard time dealing with all the flashing ads trying to their attention on some of the sites I listed. They said even when it just google ads they were often for scammy guru types. They asked me why I would recommend sites with advertising like that. I said, "I don't see their ads." "You mean you are able to ignore them?" was the follow up. "No, I do not see them, period." I then explained I use Firefox as my browser and a plugin called AdBlock. AdBlock comes preconfigured to block over 95% of the spammy ads you will see on these types of sites. The ones it doesn't block automatically you can easily add with just a click or two of the mouse. I then mentioned I could not stand to read the Drudge Report without this plugin because the number and aggressiveness of the ads was too much for me. I also talked about the pop ups and pop under ads and how most browsers effectively deal with those now. Then someone stood and said, "but isn't that the price you pay for using sites like that? Isn't it like ad supported television? Aren't you being unethical in telling others how to prevent the site from generating revenue?" "No," I said. See, I don't tell the sites I am looking at their ads but not doing so. In fact, they have no way of knowing whether I am looking at them or not. I just don't see the ads at all. Does that mean I miss out on some kind of once in a lifetime opportunity only offered through those ads? Well, do you really think that happens? Then someone said, "but your latest project you talked about, the AntiGuru Radio Show, that is advertiser supported..." "It will be, hopefully," I interrupted. "Doesn't that mean you will be using these same types of advertising for your site for the show?" "No, our advertising model does not rely on spamming our visitors with anonymous, uncontrolled and most importantly untargeted ads." I then went on to explain about the media agency we are working with to help formulate the right approach on ads. For giggles, they did a test with Google ads to see what kind of ads Google would place on the site. The result? We would be flooded with ads for the gurus. Now, why would that be a good match for someone who is, by definition, ANTI-guru? FWIW, I encourage everyone to use the FireFox browser with the AdBlock plugin. http://investingnotes.com/2009/06/27/very-interesting-discussion-on-ethics-2/ That is an EXACT quote I received from a "customer service" representative this morning. You are probably thinking, "So? You must've interrupted them." You are right, I did, several times. As Paul Harvey liked to say, "and now the rest of the story." Yesterday, in the mail, I received a new business VISA card to replace the one expiring next month. The issuer isn't important because they are all outsourcing their customer service overseas in an attempt to cut costs. So, this morning, I called to activate it. After keying in all of the bits their automated system asked for, I was rewarded with, "Please hold while I transfer you to a customer service member who can help you." Five minutes later I am met with the voice of someone I can barely understand. They ask for the exact same information I keyed in earlier and after having to ask them to repeat things a few times we finally get everything exchanged. Then the sales pitch started for their "credit protection services". "No thank you," I interrupted. She didn't even miss a beat, she just kept right on with the pitch. "No. Thank. You." I was more emphatic this time. She continued. Finally, I asked, "Has the card been activated yet?" Then she stopped and replied, "I am sorry, but I cannot be answering your question until I finish reading this." Then she started over! I hung up. Later today, I will visit the local branch of the issuer to share my opinion of this experience and to ask them to check to make sure the card has been activated properly. If it hasn't, they can either activate it for me or they can close the account. From this point forward, I will refuse to interact with any customer service member of this bank who is not fluent in my language. Say whatever bad things you wish of me for that, but life is just too damn short to waste time on basic communication issues with any company I do business with. There are other choices out there. http://investingnotes.com/2009/06/23/i-am-sorry-but-i-cannot-be-answering-your-question-until-i-finish-reading-this/ Over the last 18 months I have managed the rewrite of several software tools my partners and I use in our investing businesses. When we embarked on this journey we had very high hopes. We were going to outsource. The outsourcing firms give really GREAT interview, by the way. Our list of "benefits" was long. We were going to be able to get everything rewritten using current technology; we would get a long list of features added; save a ton of money; and productize them into something we could offer to others. The projects started well, as just about all projects do. I have developed enough software and managed enough teams to know the start is easy, it's the finish that's hard. As the months went by it became increasingly clear we were not dealing with developers in the sense I knew them. See, I am used to a developer who is a problem solver. If I have to virtually write the software for the developer to translate that into the programming language, I might as well take that last step. Every penny we thought we were going to save was eaten up by resources needed to guide and essentially spoon feed the "developers" writing the code. Finally, about four months ago I made the decision to freeze the code. The basic functionality had been written but it needed to be cleaned up and the performance improved. We concluded our business arrangement and parted company. The outsourcing firm has asked if we'd be willing to talk to potential clients about our experience. The number of new features added after more than a year of development? Zero. Hmmm, would I be willing to talk to your potential clients? Are you sure you want me to do that? For the last four months, I and one other developer have been cleaning up the code and improving the performance. I can't say enough good things about Dave and I really do wish I could convince him to come to work for us permanently. But Dave has other plans that involve traveling around the world. He knows he has a spot waiting here with us should he ever decide to settle down somewhere. Anyway, at this point, all but one tool has been migrated to the newer technologies. Unfortunately, it is the one tool I would've really liked to have migrated. However, it was apparent there was absolutely no way it would be successful if included in the outsourcing projects. I will be looking to hire some great development talent over the next few months and I've always had a long list of things I look for in a software developer. That list grew significantly because of this outsourcing ordeal. And that is about the only real positive that came out of it. http://investingnotes.com/2009/06/23/and-so-ends-my-absolute-last-participation-with-outsourcing-development-overseas/ I am on a quest. I want to add the blogs and other websites you read on a regular basis to this blog. It will be in a blogroll in the right hand column. You can submit them either through a comment below or the contact me page above. The link will be added as long as it is a site that covers or is related to investing, is not pornographic, does not promote anything illegal or hateful and in my sole subjective opinion, is useful to other readers. I am pretty generous with my "useful" designation. It does not matter whether the site links back to this blog or not. Getting links is not the purpose, compiling a useful list of resources is the purpose. So, submit those links! http://investingnotes.com/2009/06/22/useful-investing-websites-and-blogs/ Over the years, I've read a lot of guru materials. At the predecessor of the Field Guide for Real Estate Investors we used to do extensive evaluations of guru materials. A member would purchase a book, ebook, home study course, etc and send it to us to be examined and evaluated. That experience taught me a lot about the gurus, their methods and their real experience levels with the methods and successes they claimed. Over the years we developed some objective metrics to gauge the value of the materials. For example, margin size. There are accepted standards for "normal" margins in any kind of printed material. There are entire industry groups dedicated to helping with normalization of layout and such. Their standards adjust from time to time but they are amazingly consistent over time. When margins exceed the accepted norms, our objective metrics would reflect that. In the most extreme case the margins were 2.5 inches on each side of the page and three inches at the top and bottom. That left a "printed" area of 17.5 square inches out of 93.5 available inches on the page. In other words, less than 19% of the available area on a page is used. But, they also double spaced the text, so it was really less than 10% was used. Compare that to the typical or normal used in the printing industry of about 68% of the area being used you can see this guru's materials took up about 7 times more space than they should. So, the 150 "page" book they advertised was really about 21 real pages. At $99 that meant each page costs about $5. Another area that has always made me chuckle is the amount of time a guru will spend on background or filler material. Sticking with the example above, this guru's materials "taught" how to buy subject to existing financing. Yet, more than half the book was about their life story. Almost 11 of the 21 real pages were devoted to telling about where they started and how awful their life was before they "discovered" how to do this new thing! Of the ten pages left, five were spent telling how great the reader's life will be after they start following the "system". In less than five real pages, they described the mechanics of buying subject to the existing financing. Only five pages dealt with the subject advertised to sell the eBook! That means the real cost per page of the real subject matter covered was about $20 per page. Now, I am not saying motivational materials have no place in this world. But, motivational materials disguised the way the gurus do are useless to a serious investor. There are some really great motivational speakers and writers. They can help you make much needed mental adjustments in your thinking process that will directly affect your long term success. But, they don't claim to be showing you the secrets the rich keep for themselves and then spend most of time on self gratification through an autobiography. Just something to think about as you are reading your next squeeze page where the guru is breathlessly telling their life story leading to the discovery they want to sell you. Don't be surprised when you get to read that life story, in even more time and space wasting detail, when you get the materials. http://investingnotes.com/2009/06/22/why-do-the-gurus-spend-so-much-time-on-fluff/ One of the suggestions I've received is to make the podcasts more fun using parodies of the gurus. So, take a listen and tell me if this goes too far. Leave your reaction in the comments below. http://antigururadio.com/laksdruwqt423ngv384nqwr0e9 [1] [1] http://antigururadio.com/laksdruwqt423ngv384nqwr0e9 http://investingnotes.com/2009/06/18/guru-parody-too-much/ Yesterday, Vice President Joe "The Plagiarizer" Biden said everyone just guessed wrong about the employment numbers. He also said, even though they put forth the myth of The Porkulus Package keeping unemployment at 8% or less for the year, the fact that it is now over 9% AND CLIMBING should not diminish support for the Porkulus Package. Now, there are a number of problems with this. Not the least of which is it is an outright lie. Not everyone guessed wrong about the consequences of the Porkulus bill. In fact, intelligent people didn't "guess" at all. And, those of us who didn't "guess" have not been surprised by the unemployment numbers. Well, at least one thing has been confirmed. The numbers from the Obama Administration are just "guesses" and they aren't able to "guess" very well. http://investingnotes.com/2009/06/15/uh-no-mr-vice-president-everyone-didnt-guess-wrong-you-helped-the-obama-administration-spread-a-lie/ I got up this morning a little earlier than usual, fired up the MacBook Pro to check email (and because I'm a parent, the weather at the summer camp my son is attending this week.) Anyway, I open my email and receive this... I want to thank you, the last segment episode 5 of your podcast is exactly what I needed to hear. I am trying to get started but agents and brokers keep shutting me down hard saying my offers aren't reasonable. Thursday morning I sent a hand written letter like you said to do and the next day the owner called me! I was so excited we open escrow [Monday]. I have added this to my iTunes subscriptions. I look forward to learning beyond the same hype the others are covering. You cover stuff I have not heard or read any where else in the three years I have been learning. If you are ever in the Denver, Co area please let me know I know I would enjoy seeing you speak live. A new fan, Dan Ft Collins, CO. I have asked Dan if I can use his last name, if he agrees I will update this post. I am very happy Dan was able to gain something from the podcast. I am trying hard to not spend much time on the same old stuff the gurus and wannabes cover. After all, how many times do you need someone to walk you through the hype, uh, I mean, system for buying subject to the existing financing? The same old 50,000 foot view is pointless. I want to go beyond that and as Dan put it, "cover stuff [you won't] hear or read anywhere else." That's my goal for The AntiGuru Radio Show [1]. [1] http://AntiGuruRadio.com http://investingnotes.com/2009/06/15/this-is-a-nice-way-to-start-a-new-week/ Yesterday, I received a phone call asking if I would be interested in speaking at a conference. "Maybe," was my reply. "Great! We want to tie into the anti guru thing you've got going there because [removed] isn't your typical guru. I'm sure once you meet them you will agree they are the real deal and ..." "Do you know how many times I've heard that?" I interrupted. "Heard what?" they asked. "That so-and-so is the real deal and unlike the gurus I detest," was my reply. "No, really. [removed] has made more money for others than he has ever earned himself. He does this to pay forward. His fully automatic system makes it easy for anyone to get into real estate with no risk, no hassles and and unlimited income stream for the rest of their lives. He ..." "You must have brown eyes," I said. "What? My eyes are greenish. Why did you say that? Wait, are you saying I am full of #@$%?" "Actually, I said, 'You must have brown eyes'," was my reply, "but, I wouldn't disagree with the inference you drew from my comment." "By the way," I continued. "If this system of theirs is as good as you say, why do they need to spend time, effort and money to market it?" "Huh? They want others to enjoy the riches they have received from this system and that is why they are sharing it with the world. This is a life changing opportunity for anyone smart enough to ..." "Do they charge for someone to learn this magic system?" I asked. "Well, do you work for free? Do you host your show without the expectation of compensation? Do you do everything you do for free?" was their weak reply. "No, but I am not claiming my motives to be altruistic. What's more, I don't purport to have some kind of magic system like you describe. I provide information through a variety of channels targeted to serious investors. I ..." "Then you understand why they couldn't afford to just give something this powerful away, right?" they interrupted me this time. "Oh, I understand why they charge what they charge. I completely understand the marketing model. My problem is with the bogus claims. My problem is with targeting people who don't have a clue about what they are getting into." The conversation kind of went downhill from there. You know, for 25 years I've seen gurus come and go and it is always the same. They all claim to have the magic secret if you just pay them enough and work your way through the continual upsell process. Astonishingly, about an hour after the call, I received an email from them. They still wanted me to speak, but would need to "approve the text in advance". Yep, I'm pretty sure their eyes really are brown. http://investingnotes.com/2009/06/12/actually-i-said-you-must-have-brown-eyes/ I read many of the guru blogs. Why would I do that? There are a couple of reasons, first many of them are great for a good laugh or two as they breathlessly proclaim their latest invention/discovery/creation of a technique that will make you instantly rich, better looking and sexually satisfied while you sit and do nothing. As an aside, notice how the guru types hype passiveness? Almost like watching television? Now why do you suppose that is the case? Anyway, back to my point. They are good for a laugh or two. Another reason I read their blogs is because by aggregating multiple gurus you can determine the "trend" the gurus are taking. Make no mistake, the guru business is more incestuous and closer knit than just about any other you can imagine. The gurus now have their own conferences on how to be a better guru. No, they don't call them that but when the sole purpose of conference is to discuss and show ways to increase conversions in an email marketing campaign for infopreneurs, well, I think you get the idea. I am always adding the list of gurus I read and research regularly. If you have a guru's blog you'd like to suggest I add to my list of regular offenders, please either leave it in the comments below or through the contact link on the menu at the top of this page. Also, listen to The AntiGuru Radio [1] podcast later today to hear the latest thing that has the gurus all a-twitter. Yeah, that was a bad pun, but listen and hopefully it will make sense. [1] http://AntiGuruRadio.com http://investingnotes.com/2009/06/11/the-guru-blogs/ You know the kind I am talking about. The kind where no matter which way you turn, no matter what action you take, Murphy is just lurking in the wings to muck it all up. Off and on this morning, I have been trying to record audio for the podcasts. [1] I am a little behind and needed to get some recorded and passed to the techie guys to get it bundled and uploaded to the site. Well, first we have a contractor doing something in the area that is causing short duration power blips. No problem the said they would be finished by 10:30 AM and they were. The "celebration" was short lived and interrupted by the sound of chain saws across the street cutting down a large tree. There is a methodic process to cutting down a tree. They climb it and cut the limbs off and then start working on the trunk. The sound of the chain saw is only interrupted by the occasional thud as a large part of the tree hits the ground. I opted not to create a full recording chamber. Thank goodness for a white noise generator to dampen the ambient sounds. Doesn't do much for the thud though. [1] http://AntiGuruRadio.com http://investingnotes.com/2009/06/09/it-is-one-of-those-days/ Woot! You can subscribe to The AntiGuru Radio Show [1] a number of ways. Now, one of those ways is through iTunes. All of the subscription options are available on The AntiGuru Radio Show [1] page. If you don't see one you want, let me know and I will try to get it added. [1] http://AntiGuruRadio.com [2] http://AntiGuruRadio.com http://investingnotes.com/2009/06/08/the-antiguru-show-is-now-on-itunes/ The call for consumers to just ignore the realities of the current economy and spend are being made by marginal economists and incompetent politicians alike. The call to get credit flowing is loud and shrill. The hearings the nation witnessed last week punctuated the fact the politicians simply think the problem is the lenders just aren't lending. Time and time again they pontificated about how the money given to the lenders was intended to be lent. Since the lenders weren't lending the way the politicians thought they should all the problems of the country would go away if the lenders would just fall in line and start lending like they did before the current crisis. Yes, I know what you are thinking and you are right, there is plenty of blame to go around, if you want to play the blame game. Congress seems to prefer that course of action at the moment. But, if you want to move beyond the blame game and examine the situation rationally, you might notice the problem isn't with the amount of money to lend. It is isn't with the pool of available borrowers either. It is not even with the bonuses and private planes being used to generate class and wealth envy. Nope the problem is very basic. It all comes down to risk assessment and management and the recent actions by the administration to reorganize Chrysler are going to make it worse. http://investingnotes.com/2009/05/14/the-symptom-is-credit-but-the-disease-is-not-illiquidity/ [1] flowplayer("player1", "http://www.reitactics.com/flowplayer/flowplayer-3.1.0.swf", { plugins: { controls: { fullscreen: false, height: 30 } }, clip: { autoPlay: false, onBeforeBegin: function() { flowplayer("player").close(); } } }); [1] http://investingnotes.com/wp-content/uploads/2009/05/May11Podcast.mp3 http://investingnotes.com/2009/05/11/podcast-episode-one/ There are generally two ways to generate profits from your real estate investing. Your holdings either generate cash now, this and every month, or you expect them to generate cash at some point in the future. Future profits can come from appreciation, but unless it if forced appreciation, you are really just breaking even over the long term. Forced appreciation is the increase in value due to an improvement in the cash flow the property generates. A simple example is you buy an apartment building, make some changes and improvements and are then able to raise the rents and resulting profits. That increase in profits directly translates to an increase in the intrinsic value of that apartment building. But, in my opinion, your real estate investments should be cash generators. Each month they should be generating a net positive impact on your spendable cash in your bank account. If they aren't you are wasting your time. The biggest advantage of real estate is your ability to control cash producing assets through leverage. That leverage means instead of needing $1,000,000 to realize the income a $1,000,000 apartment building can generate, you would only need $200,000 - $300,000 and that could come from one or more partners. The test I use is simple, every dollar I invest in real estate must generate at least 3% in real spendable cash each and every month before taxes. I know what you are asking, why am I requiring a 36% yearly ROI on cash I put into real estate? Because that is the minimum I generate using various option strategies in the stock market. Yes, even in THIS market. If I can generate 3-5% per month for each dollar invested in the stock market, why in the world would I invest in real estate? I am glad you asked that question. One of the biggest reasons is, you can't get a 75-80% loan to buy stocks, but you can to buy real estate. You can't get a partner to cover most or all of that remaining 25% to buy stocks, but you can to buy real estate. I can also buy real estate at a discount based on any number of situations unique to the seller. I can also directly impact the value of real estate I buy by taking action. I can improve the property, add amenities and increase the rents as the market will allow. This increases the value of the real estate I bought at a discount. However, the correction we are working through now highlights the fact that long term profits from real estate don't always materialize. There are a number of people who have lost everything they thought they were building with the downturn. However, had they structured their real estate holdings during those good times to generate cash each month instead of trying to bet on the increase in value, they would not be in a situation of panic and desperation now. So, you might notice a pattern with me. It is all about the cash flow an investment generates each month. Yeah, I'm kind of selfish that way, and you should be too. http://investingnotes.com/2009/05/03/if-your-real-estate-holdings-dont-generate-cash-why-do-you-have-them/ Last fall, I received an incredible offer from Chase. Because I was one of their "best customers", meaning I had an Amazon credit card issued through them, I was being offered a fixed rate on an unsecured loan at a very low percentage rate. There was no prepayment penalty and the interest rate would remain the same until the full balance was paid off unless there was a default. Then it would convert to a hideous rate with all sorts of other penalties. Being just one day late, just one time constitutes default, by the way. No, I did not default, you are getting ahead of me. I executed the loan, at the fixed rate and setup an automatic payment each month to take place several days BEFORE the due date each month. I like automation. Everything was fine until this morning. I happen to notice a statement at the bottom of the monthly statement that my due date had changed. I checked and sure enough it went from being due on the 2nd of each month to being due on the 28th. No problem, I log in and change the payment date and all is well. Then I started thinking... WHY? Why did the due date change? So, I called. The representative said, "We are allowed to adjust from a 25 day cycle to a 20 day cycle." "So, you did it for no reason?" was my response. "Well, it isn't anything you have done," was the reply. I then explained my theory to her as to why this due date changed. I explained that I suspected they were targeting accounts like mine with these very low, fixed APRs in an attempt to get us to be late with a payment. That would then wipe out the low APR AND subject me to their much higher floating APR as well as penalties and fees. She became indignant, I became indignant and to be perfectly honest I don't know who first hung up on who. I honestly believe my theory is correct. I don't do business with people I don't trust. Chase has lost someone they describe as on of their "best customers". Thanks to online banking and no prepayment penalty my departing as their customer is immediate. I can only imagine how much worse they treat their average and sub-par customers. I know they are not alone in their scummy approach to these things. But, they are the one who tried to cheat me. They didn't get away with it and will never get the chance to do it again. http://investingnotes.com/2009/04/22/this-is-how-chase-treats-their-best-customers/ At one of our properties in NC we started an experiment at the start of April. All leases include language passing along fees and taxes imposed by local authorities. Things like required annual inspection fees, taxes and even the cost of the business license can be prorated to the tenants with our new lease language. This language is required in all new leases and renewals. There is no exception and no discrimination. Everyone in the complex will be subject to this as soon as the normal lease renewal cycle completes. It took about two weeks from the time we started this for the local government to start sniffing around. They were concerned this would unfairly impact renters instead of seizing money from our bottom line which was their intention. See, last year they passed local legislation imposing several very creative fees on us as a landlord of more than 10 units in their city. Our lawyers dealt with their first inquiries and sent them on their way, but I seriously doubt this is over. The local government is not at all happy about our approach on this and since other landlords around us have started doing the same thing, well, up with this I am sure they will not put! Many months ago, when they were considering this, I spoke at the public hearing. I said we absolutely would be forced to pass these new fees and taxes along to our tenants. We are a business and if we do not make a profit we end up being a failed business. The response from the council members was interesting. One went so far as to say they competitive pressures of the area would prevent us from raising rents. I said one of two things would happen, we would either find a way to maintain our profit margins, thin as they are, or we would exit their market. At that time, we had two complexes in the area and had been planning to purchase a third. We immediately put that on hold and someone else purchased the property instead of us. Instead we purchased a property in another area nearby. Yesterday, I received a phone call from a council member who said they are looking into figuring out how they can impose these fees and prevent us from passing them on to the tenant. They were indignant that we would have the audacity to try to pass along the actual costs of providing housing in their area. I said, I understand her position but it does not alter ours. We will find a way to maintain our profit margins, thin as they are, or we will exit their market. Take our losses and operate in a friendlier environment. We will see what happens but this is going to become much more common. Businesses do not pay taxes. They never have and they never will. Businesses collect taxes and fees, no matter what the politicians call them, from their customers and send them to the taxing authority. Whether they do it by raising their prices or through directly passing along and identifying the fees and taxes, the result is the same. The only ones paying the taxes collected from businesses are the customers of those businesses. So, what will happen if they prohibit us from directly identifying and passing along the various fees and taxes? We will find a way to pass them along somehow, someway. If that means the rents increase and the market will support the increase, fine, if not, well, there are other properties elsewhere. http://investingnotes.com/2009/04/22/more-landlords-will-do-this/ In an earlier post, I wrote about a testimonial Chris received from a Field Guide for Real Estate Investors [1] member about his Private Money materials on the Field Guide. I mentioned REITactics is releasing his materials in a new eBook titled, The Smart Investor's Guide to Raising and Using Private Money [2]. This is the first time we at REITactics released an eBook not authored by me. In the past, I've priced the eBooks I've written using split testing at the time of release. A price point emerges over time and all is well. This time, we did it differently. I wanted to make sure we were a little more scientific in how we priced Chris' eBook. So, we took the pre-release draft and approached attorneys and CPAs familiar with this area of practice. We asked them a series of questions and paid each of them for their feedback. They did not know who wrote the book, they did not know it would be an eBook, they only knew it was a "book" being considered for publication by a publisher. A third party was used to handle all of the interaction with the during the review process. This is a typical response received when asked for their overall impression of the book: "I spend a great deal of time trying to help a new client understand why they need to do this the right way from the start. At least half of my practice is spent cleaning up messes created by someone not knowing what they can't do when starting this process. While many think that makes me lots of money, I actually make more money if the problems are avoided instead of being corrected later. This book solves two major issues. The first is it helps a realestate investor looking to use private investors the way to do it in the most cost effective manner possible. The second is it helps me make more money practicing my craft because I can help my clients focus their resources on the areas with the highest return. Correcting a mistake is a total waste of time and money since that mistake could have been avoided from the start." While we did ask several questions, the one we were most interested in was the one about price. We wanted to know what they thought a fair price would be for the "book" when released. The range was astounding. The lowest was $99 and the highest was $2500. One nationwide firm wanted to buy the exclusive rights to the book for their use. We are still negotiating a non-exclusive license. Some of the reasoning behind the pricing was interesting too. From an attorney in Raleigh, NC: "A fair price would be a couple of hundred dollars, but selfishly I'd like it to be much more. I usually spend several billable hours working with a new client explaining how to find their investors. This book explains that and a lot more in less than 100 pages." From Denver, CO CPA: "I am a sole practitioner between Denver and Fort Collins. I do fixed prices for packaged offerings. I am going to buy and keep copies of this when it comes out to supplement the materials I give to new clients looking to raise money this way. I know I can shave at least a couple of hours off the time I spend providing this package by getting them to read your book" From NYC: "I hope this is not from a well known publishing house. Our firm uses paralegals and junior legal staff to deal with problems this book prevents. These services provide s a major addition to our bottom line and profits to the partners. If this book gets wide distribution our profits could be affected. If this book comes to market I hope it is by one of the late night commercial gurus. At least that way it will be seen as questionable by anyone using real professionals like us." This has been one of the most interesting processes I have been a part of during the entire time I have been the publisher at REITactics. We settled on the initial pricing for the release and it is nowhere near as high as even the lowest price the professionals said was fair. [1] http://www.reitactics.com/field-guide-real-estate-investors [2] http://www.raisingprivatemoney.com http://investingnotes.com/2009/04/21/pricing-chris-moores-ebook-on-raising-private-money/ As the publisher and owner of REITactics I am almost hyper sensitive about honesty, integrity, transparency and accountability. I always like to under-promise and over-deliver with everything we do. That is true whether we are talking about training, like the Apprenticeship Program, printed and eBooks, the Field Guide for Real Estate Investors, my own investing and every other aspect of the way I do business. Some have found fault with my political views but no one can claim they felt I didn't exceed their expectations. There are times when exceeding those expectations meant refunding their money and parting as friends or at the very least not as enemies. I am writing this post because we are in the process of releasing a new eBook titled The Smart Investor's Guide to Raising and Using Private Money. It is compiled from materials Chris Moore has written over the years. Chris is a subject matter expert at the Field Guide and a friend of many years. One of his specialties is in raising and using private money. However, this post is not about promoting his book, as you will see as you read on. Part of this process is gathering unsolicited testimonials and when necessary soliciting testimonials from some we know have used the product or subject matter involved. This new eBook is no different and the research staff was tasked with verifying and validating every single one submitted before any decisions were made on which ones to use. One of the ones given to us by Chris was from a private message he received from a Field Guide member about the materials Chris wrote for the Field Guide. We have permission from the Field Guide member to use that testimonial and we have talked to their attorney and accountant and verified the claims they made. Here is the testimonial received: "Chris, When I joined the Field Guide I was pleasantly surprised with the depth of the materials here. I joined hoping to get some little nugget that could further my efforts to find a couple of private lenders I could work with to buy duplexes to 12 unit buildings. I eagerly read your materials and for some odd reason I didn't get that excited feeling in my stomach like I had with some other things I've read. It was more of a calm, peaceful feeling. I don't really know how to explain it even now. As you recommended, I interviewed a couple of attorneys and chose one to sit down with for a one-on-one session to lay out what I wanted to do. I took your materials with me so I could refer to them during my meeting. Chris, I was floored by the reaction of my attorney. Time after time he would say, "Yes, this is the right way to do this" and "Yes, I wish all of my clients did it this way." It was incredible and supposed to be an hour meeting, it stretched to two and this is the incredible part, he only billed me for the one! Since that meeting, I have found not a couple of private investors but more than 20! My attorney and his partner and my CPA invest with me. The deal I am working on now (February, 2009) is a 130 unit apartment complex in a neighboring town. The investors are in place and we are ready to go. I really can't thank you and [The Field Guide] enough for everything. I really feel like a thief considering the membership fee here verses what my future looks like because of your private money articles. While I still can't accurately describe the feeling that came over me when I first read your articles, Now I know it was that calm quiet confidence from having the holes filled in and the right information to get the job done." I am incredibly proud when I read things like this and I am not boasting when I say, it happens often. This testimonial will be used on the materials promoting the eBook and the name, city and Field Guide user id will be included. This type of result is exactly why the Field Guide exists and why I am extremely proud to be the founder of REITactics. There is no better feeling in the world than to know someone's life is better due to your actions and their determination and hard work. http://investingnotes.com/2009/04/16/interesting-testimonial-for-chris-moores-new-ebook/