Well, on friday, February 23, I volunteered a day of my time to help the folks at Habitat for Humanity build a house for a family in need. I'd been wanting to do this for a while now, and finally just told everyone that I was going and doing it. Well, I had a great time. I suggest everyone takes a day every month or so and puts in a couple of hours of time for a good cause. The world would be a much better place if we all did, not just for those in need but for those who have as well.
Two more cents worth.
Monday, February 26, 2007
Saturday, February 24, 2007
Bonnie Spindler's Got It Wrong
I noticed an advertisement that Bonnie Spinder has in the SF Examiner. It Says "Buy, Sell, Repeat. Then Retire."
She's got it wrong. The best way to get there is "Buy, Work Hard, Repeat. Then Retire". Selling is not the necessary component. In fact it only delays the end goal. If you keep selling the properties that you buy, then you'll keep paying Bonnie lots of commissions which will allow her to keep purchasing those big full page ads in the newspaper, but it won't get you any closer to your retirement. On the other hand, if you keep the property, rent it out or use it for a business, then it will generate revenue which can initially pay down your mortgage, and ultimately pay for the miathai's that you'll be ordering on the beach during your retirement.
Don't get me wrong, I've sold a building or two in my career, and there are good reasons to do so. For one, if the building doesn't cashflow, then dump it. Or if you need the money for a bigger more profitable investment, or for your kids education. Well, we do what we gotta do. But in retrospect, I don't think I really needed to ever sell any of the properties that I sold.
I also want to mention the work hard part. Its not just like flipping pan cakes here. Real Estate investment is not a free lunch and to get to the end goal, you can't really be living off of your investments (otherwise it would be retire, then buy, sell .... it doesn't work that way). This means that while you are buying and buying you need to be working your 1st job. Even if you 1st job is a Real Estate agent like me or Bonnie, or a contractor or a street sweeper. You gotta eat while you are biulding the equity in your properties.
Further, don't think that Bonnie is just mis-informed herself, she may sell lots of properties, but can't believe that she doesn't have a pile of rental properties that she's keeping for the long haul. And I know she's working hard..... to get you to sell that property to her.
That's just one investors opinion: Think and justify your actions before you sell it.
She's got it wrong. The best way to get there is "Buy, Work Hard, Repeat. Then Retire". Selling is not the necessary component. In fact it only delays the end goal. If you keep selling the properties that you buy, then you'll keep paying Bonnie lots of commissions which will allow her to keep purchasing those big full page ads in the newspaper, but it won't get you any closer to your retirement. On the other hand, if you keep the property, rent it out or use it for a business, then it will generate revenue which can initially pay down your mortgage, and ultimately pay for the miathai's that you'll be ordering on the beach during your retirement.
Don't get me wrong, I've sold a building or two in my career, and there are good reasons to do so. For one, if the building doesn't cashflow, then dump it. Or if you need the money for a bigger more profitable investment, or for your kids education. Well, we do what we gotta do. But in retrospect, I don't think I really needed to ever sell any of the properties that I sold.
I also want to mention the work hard part. Its not just like flipping pan cakes here. Real Estate investment is not a free lunch and to get to the end goal, you can't really be living off of your investments (otherwise it would be retire, then buy, sell .... it doesn't work that way). This means that while you are buying and buying you need to be working your 1st job. Even if you 1st job is a Real Estate agent like me or Bonnie, or a contractor or a street sweeper. You gotta eat while you are biulding the equity in your properties.
Further, don't think that Bonnie is just mis-informed herself, she may sell lots of properties, but can't believe that she doesn't have a pile of rental properties that she's keeping for the long haul. And I know she's working hard..... to get you to sell that property to her.
That's just one investors opinion: Think and justify your actions before you sell it.
Friday, February 09, 2007
Ups and Downs of Inexpensive Housing is SF
The following was I response I sent to Carol Lloyd who writes Surreal Real Estate regarding one of her recent posts. I take a particular interest in housing for the rest of us in this world and I thought this would be useful for agents as well as buyers and sellers of TICs:
Carol,
Your article a couple of weeks ago about the BMR studio in the fancy condo development down town was very interesting. I found it somewhat apropos, as I recently encountered some problems with a similar foundation while working on a deal to purchase a 1br TIC for one of my clients. It is 1 of 4 in a newly developed TIC building, which is to close next week.
Well, when at last the 4th partner got into contract and all the buyers were able to meet. One of the buyers (not my client) pulled me aside and told me that my client was "the weak link" since she was putting only 5% down and that he wanted assurance that my client had the reserves to cover unforeseen expenses like replacement of the aging roof. I'm felt a bit pressured, but standing my ground I told that buyer that my client was as strong as anyone in the group having a higher credit score than everyone else, a smaller loan than others (because of the particular unit she is buying) and she has plenty of reserves. I said she's got a better credit score than you!
In response I was told "I have a net-worth over$10 million" in a tone that suggested how dare I cast doubt on him. At this point I recognized the problem. While my client had less equity than the others, she was actually more closely aligned to the other two buyers in terms of financial status than this guy who had the $10M in the bank. Really, everyone except george lets call him, was really just one broken leg away from being in the poor house, and barely able to scrape together the down on a 1br TIC as their first owned home. George, on the other hand, was buying this as a 2nd home for his spouse to stay while in SF.
hmmm. I wondered to myself and to my client what other sorts of troubles could arise out of such a situation; Everyone (with good reason) loves the place, though, so the minor financial worries were brushed aside in favor of progress.
Now its time to get insurance... I did the leg work for the group since my pushing people to get quotes of their own resulted in silence; I presented the group with a quote for insurance. Well, surprise surprise, our fiend is back in 2 minutes pushing a quote of his own, except the personal liability and personal property coverage is next to minimal!!! why would that be? possibly that George has lots of coverage for those things though the policy on his primary residence... Should the rest of the group be exposed to that extra risk? Is this the last of the incompatibilities of this group? My client is no dummy and is going into this with eyes open of course.
Not sure why I relay this story to you. I guess the moral of both of our stories here, is not to push segregation between rich and poor, or one group and another, but to educate people about agreements that they are entering into: you as a journalist, and me as a advocate for my clients. Really, its a reminder that anyone buying/selling real estate should have a good real estate agent as well as read the Chronicle every week.
ps: I held off sending this to you until the deal closed. Anyway, the story has a happy ending, as they all got what they wanted and are now living happily ever after.
Carol,
Your article a couple of weeks ago about the BMR studio in the fancy condo development down town was very interesting. I found it somewhat apropos, as I recently encountered some problems with a similar foundation while working on a deal to purchase a 1br TIC for one of my clients. It is 1 of 4 in a newly developed TIC building, which is to close next week.
Well, when at last the 4th partner got into contract and all the buyers were able to meet. One of the buyers (not my client) pulled me aside and told me that my client was "the weak link" since she was putting only 5% down and that he wanted assurance that my client had the reserves to cover unforeseen expenses like replacement of the aging roof. I'm felt a bit pressured, but standing my ground I told that buyer that my client was as strong as anyone in the group having a higher credit score than everyone else, a smaller loan than others (because of the particular unit she is buying) and she has plenty of reserves. I said she's got a better credit score than you!
In response I was told "I have a net-worth over$10 million" in a tone that suggested how dare I cast doubt on him. At this point I recognized the problem. While my client had less equity than the others, she was actually more closely aligned to the other two buyers in terms of financial status than this guy who had the $10M in the bank. Really, everyone except george lets call him, was really just one broken leg away from being in the poor house, and barely able to scrape together the down on a 1br TIC as their first owned home. George, on the other hand, was buying this as a 2nd home for his spouse to stay while in SF.
hmmm. I wondered to myself and to my client what other sorts of troubles could arise out of such a situation; Everyone (with good reason) loves the place, though, so the minor financial worries were brushed aside in favor of progress.
Now its time to get insurance... I did the leg work for the group since my pushing people to get quotes of their own resulted in silence; I presented the group with a quote for insurance. Well, surprise surprise, our fiend is back in 2 minutes pushing a quote of his own, except the personal liability and personal property coverage is next to minimal!!! why would that be? possibly that George has lots of coverage for those things though the policy on his primary residence... Should the rest of the group be exposed to that extra risk? Is this the last of the incompatibilities of this group? My client is no dummy and is going into this with eyes open of course.
Not sure why I relay this story to you. I guess the moral of both of our stories here, is not to push segregation between rich and poor, or one group and another, but to educate people about agreements that they are entering into: you as a journalist, and me as a advocate for my clients. Really, its a reminder that anyone buying/selling real estate should have a good real estate agent as well as read the Chronicle every week.
ps: I held off sending this to you until the deal closed. Anyway, the story has a happy ending, as they all got what they wanted and are now living happily ever after.
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