Wednesday, July 30, 2008

'Lovely Listing' Illustrates The WRONG Kind Of Photos To Market Property

A fellow blogger clued me in about this website. While it is not commercial/investment in nature in relation to real estate, it still is hilarious to scroll through. Called Lovely Listing, it is a collection of . . . unusual . . . photographs taken from actual real estate listings.

A handful are Photo Shopped -- contrived, if you will, just to be sillier than usual. But the vast majority are REAL, and some of the worst examples of photos being used to "promote" residential property.

As a real estate agent, I look at some of these and wonder . . . "WHAT WERE THEY THINKING???"

I throw this out mostly for humor. Just because . . .

What do YOU think??????

hat-tip to Lucy

Tuesday, July 22, 2008

Analysts Worried About Ford, GM

Okay, not to be alarmist, but here is another reason why all those people who feel safe with their investments in blue-chip carmakers might want to rethink things:

Granted, predicting the outcome of a coin flip is a 50-50 proposition. But General Motors and Ford have been in dire financial straits for several years. Now, financial analysts are predicting the two companies could be bankrupt within five years.

I would like to see this analysis restated a few months after the presidential election in November. The economy generally improves after a presidential election. The key is going to be oil prices, not the overall general economy.

Now why do I bring all this up? Because there are so many people who fear commercial/investment real estate, but seem content with their Ford and GM pension funds, if they are current or former employees, or shareholder investments. I am all in favor of supporting my employer if there is stock to be owned, but to keep all your eggs in one basket is a big risk.

Also, money in these pension funds, now held by corporations on shaky financial ground, often are sitting in self-directed IRAs. And the IRAs, at the direction of the individual investor, are invested in the corporate stock. These same funds can be invested in income-producing real estate complete with a plethora of tax advantages.

If people will keep an open mind. Bottom line: Now is not the time to be invested in American automobile stocks, IMHO. It is a buyers market for certain types of real estate, especially for first-time investors. THAT is where people should be moving money. It has nowhere to go but up.

Questions For The Day

A conversation with a colleague this morning relating to blogging made me realize I haven't posted to this site in a while. In fact, when I looked at the date of my last post I freaked a bit.

A question for the day: How many times have you been approached to purchase real estate as an investment? No, I don't mean someone trying to sell you tapes or DVDs in the middle of the night, but someone who actually sat across from you and explained Cash on Cash returns, depreciation, cost segregation, and more.

Here's another question (perhaps this should be "questions of the day"): If the concept of investment in real estate makes people so nervous, why do many of these same people blindly turn their hard-earned savings over to people they do not know, working far off in offices they have never seen, in a hope that the funds will grow? Isn't that a bigger risk?

It was pointed out in a recent meeting that despite insurance firms and giant investment houses success at selling their products, managing their clients' money doesn't always go so well. One gentlemen whom I know watched his pension fund value drop in a single calendar year. Oh, the broker was trading, but the only person getting any money was the brokerage in the fees that were charged each time a trade took place. The pension fund holder saw his value drop.


And what's more? Why are giant investment houses like Merrill Lynch and others posting billion dollar losses? They are the first to be paid. They take the fees. Last week, Merrill Lynch booked its fourth-straight quarterly loss, this time losing nearly $5 billion, as the nation's largest brokerage was forced to once again take massive writedowns. Why?

"Merrill said it lost $4.9 billion overall. On a continuing operations basis, it lost $4.6 billion, or $4.95 a share, down from a profit of $2.01 billion, or $2.24 a share a year ago. Analysts polled by Thomson Reuters were expecting the company to report a loss of just over $1.8 billion, or $1.91 a share on this basis.

"The company has now lost more than $19.2 billion in the past twelve months . . ."

Because even though people say the thought of real estate investment makes them nervous, they blindly turn their money over to people they do not know in the hope that it will grow. And it has not been growing.

But when you invest in real estate, your initial entry can be large or small. It does not have to be in a Class A office building. Further, each time you receive a rent check from a resident (in the case of residential properties), you are getting an amount equal to approximately one-fourth of that individual's income for the month. People pay you, so you can pay your bills. Rent checks from office or industrial tenants are strong, also.

It is less risky than stocks these days. In fact, the stock market is so volatile that many people have moved holdings into real estate, gold and other metals. But real estate not only gives you appreciation (added value) over time, it also provides you with monthly income, tax deductions for your expenses to operate the property, depreciation, and more.

And as a buddy reminded me this morning, changing market conditions dictate you change with the market. There is still this mindset that people want to flip. It is these bloody TV shows that perpetuate the myth, THE MYTH that flipping houses is lucrative. You may as well walk out into the middle of a Las Vegas street, pull all your cash out of your pocket and set fire to it. Flipping is a dumb move at any time, IMHO. You will get a little cash doing that.

But to build wealth, you hold real estate. And today everyone is buying single family homes ias fast as they can. It is a buyers' market. Everything is negotiable. Holding real estate for income today, and future appreciation is far smarter. The value builds. As your equity increases, your net income grows also. And then there are the advantages of the 1031 tax-deferred exchange, which I have written on ad infinitum. You indefinitely defer any capital gains taxes on the increase in value in your investment.

Can you do that with shares in a company?

The bottom line is that there isn't a smarter approach right now than investment real estate. Too many people say "I wish I could be doing that." You can't do it if you don't find a way to jump in. You can earn extra cash by working extra hours, or taking a second job. Building wealth is about sitting back and having other people share with you the earnings they work hard for.

Let others work hard. Let them pay you for a place to live or work. Its far more simple than most people realize. So then there should be a third question of day, don't you think? It would be . . .

. . . How can an individual build wealth without taking a second job? Asked and answered. See above.