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 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.
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. 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.
Tags: Podcast
Woot!
You can subscribe to The AntiGuru Radio Show a number of ways. Now, one of those ways is through iTunes.
All of the subscription options are available on The AntiGuru Radio Show page. If you don’t see one you want, let me know and I will try to get it added.
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.
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.
Tags: Apartments, Cash Flow, Increasing Profits, Investing, Real Estate Investors
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.
Tags: Advice, Chase, Interest Rates
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.
Tags: Apartments, Investing, Property Management, Real Estate Investors, Taxes
In an earlier post, I wrote about a testimonial Chris received from a Field Guide for Real Estate Investors 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. 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.
Tags: Consulting, Field Guide for Real Estate Investors, Investing, Money, Private Money, Real Estate Investors
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.
Tags: Advice, Field Guide for Real Estate Investors, Investing, Private Money
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