January 1991 I've been cleaning out my files going back to my first house that I built in 1952. In the intervening years I've been a real estate investor/operator during recessions in 1954, 1958, 1960, 1966, 1970, 1973, 1982. I've also been lucky enough to have been a highly leveraged landlord with fixed rate assumable loans during the 1970's real estate explosion that created fortunes. One thing my files revealed was the contrast in ways to approach the real estate game between good times and tough times. In general, 'good times' are characterized by easy availability of credit. This enables buyers to enter the market with maximum leverage at relatively low cost, increasing demand and driving up prices

Continue reading “When Times Get Tough, History Can Provide Solutions . . .”

December 1990 That's an old Chinese curse that seems particularly appropriate when we take a close look at the way 1990 has introduced us to the final decade of this century. No one can say it hasn't been interesting. 3000 on the Dow followed by an almost 600 point drop. 200,000 battle ready troops poised to enter what could turn into WW-III with nuclear weapons and a global conflict - or WW-I with poison gas and massive battlefield casualties - all in the name of oil and money. Deficits and accumulating interest that are compounding toward $3,000,000,000,000.00 at the rate of some $275,000,000,000. per year with no end in sight. A banking and credit calamity which could reach into the $trillion range once the unprotected insurance companies are counted and which will deprive millions of our elderly of their financial security and comfort. A vacillating President who refuses to lead and a Congress that seems incapable of placing the public good ahead of its members job security.

Continue reading “May You Live In Interesting Times . . .”

November 1990 I just returned from Southern California - supposedly the site of massive layoffs as a result of cut-backs in Defense spending. The Peace Dividend has been steam roller'd in a rash of new government orders aimed at defense industries everywhere. Where the L.A. and Orange County investors were petrified at the prospect of some 27,000 highly paid wage earners being deprived of the funds they need to make payments on over-leveraged houses, they are now contemplating a resumption of price inflation fueled by new government orders and overtime pay.

Continue reading “So Far, It’s A ‘sarah Lee’ War! Nobody (among The Politicians) Doesn’t Like It . .”

October 1990 In his play, Julius Caesar, Shakespeare goes on to say, 'which, taken at the flood, leads on to fortune.' apparently he knew quite a bit about real estate investment. Come to think of it, so did Caesar, considering that at one point he owned and operated most of the civilized world. Implicit in this quote is the recognition of the EBB TIDE, which taken at the flood can have the opposite effect. Or as Kenny Rogers expressed it, you've got to know when to hold 'em and when to 'fold em. In this letter, we'll try to summarize the various currents and cross currents that are present in any tide, and some of the things we should be considering as we confront them in our investment lives.

Continue reading “There’s A Tide In The Affairs Of Men . . .”

September 1990 A few years ago I went to see a Dermatologist about removing a mole. In his routine examination, he discovered a malignant melanoma located in a glace out of my line of vision. Fortunately, it was removed before it had had a chance to spread to other more critical organs. The key was early detection and immediate REMEDIAL action. Over and over, I think of Cancer when I'm told of the financial calamities that have befallen many investors over the past couple of years. They share a lot of similarities. At the start, there are only a few minor symptoms, if any. The disease grows slowly and silently even though the victim feels that all is well. By the time it is detected, only heroic effort and radical procedures, at great expense to the sufferer, will prevent a disaster.

Continue reading “How Do You Deal With Financial Melanoma?”

August 1990 Recently, Peter Fortunato and T presented a weekend seminar called 'DYNASTY'. It dealt with multi-generational family cooperation involving the creation and the preservation of wealth. It was as much a learning experience as a teaching experience as the group collectively explored this topic. I came away from it with the sound conviction that the cooperative family group is the true secret weapon in everyone's quest for success. And I discovered something else. Where mother nature hasn't blessed a person with a natural family, one can be assembled from among one's close associates. In this month's letter I'd like to explore the ramifications of both the natural and 'financial' fancily as each pertains to estate building and estate planning.

Continue reading “We Need An ‘industrial Strength’ Family . . .”

July 1990 In last month's letter my emphasis was on my forecast for the next few years and ways the market would change. Going way out on a limb, I predicted that the coming near term might include tough times for real estate investors with indexed loans, marginal cash flows, management problems, burnt-out tax shelters and limited cash reserves. On the other hand, I also predicted that there would be dazzling opportunities for most of this decade. What's going on? Am I talking out of both sides of my mouth? No! The paradox is that, people with highly liquid positions will be able to jump either way to the side of profit as it's perceived. People who are locked into marginal investments will have to bite the bullet until things improve. So it boils down to how deep your pockets are.

Continue reading “Take The Money And Run . . .”

June 1990 When Charles Dickens wrote the lines in our topic heading he was contrasting the turmoil present in France during the revolution with the comparative serenity that existed in England. In many ways 1990 - and indeed the decade of the 90s - reflects the same contradictions experienced then. In the face of mounting unemployment and inflation most Americans are concerned about a stagnant economy and the threat of recession. The RTC's efforts to cushion the banking collapse have resulted in record lender losses and mounting estimates of the cost of the bailout - now approaching $500 Billion. And your Government is now the largest holder of real estate and mortgages in world history. Yet, in spite of this, the stock market continues to set records on the Dow.

Continue reading “It Was The Worst Of Times, It Was The Best Of Times . . .”

May 1990 For some reason or other, creative real estate has grown into two different camps. Some people swear by PROPERTY OWNERSHIP AND CONTROL while others passionately believe that they can divorce themselves from the problems of real estate ownership by concentrating on ways to make money with real estate 'paper'. Who's right? Neither of them - - and both of them. Why? Because the world of property and paper are being merged in the more creative reaches of both mortgages and real estate.

Continue reading “Real Estate And Paper – The Ultimate Partnership . .”

April 1990 The key to creating wealth in real estate lies in acquiring it at a cost below the price someone else is willing to pay. True profit must be NET after taxes plus any inflation. You can get this from gain on sale or income. You can BUY AT A DISCOUNT in the distress markets. You can NEGOTIATE a BARGAIN PRICE, either by virtue of the AMOUNT paid or the TERMS/TIMING of payments. You can CHANGE THE USE. to increase value through re-zoning. You can HARVEST the property - extracting minerals, livestock or agricultural products for sale at a profit. You can LEVERAGE property so that your return exceeds the rate of inflation. And you can BUY IN THE PATH OF PROGRESS, and let DEMAND drive up the value of your investment. And of course, you can just get lucky and make a killing.

Continue reading “Negotiation Makes The Deal, But Management Makes It Pay Off . . .”