January 2006 Each year at this time I set out for myself some of the things that I want to work for during the following year. The process is about the same every year. I measure my achievements of the preceding year against my prior list, and, if they're still relevant, I start a new list with the "leftovers"; then, I add any new objectives for the new year. You'll notice that these are things that I picked out for myself that I intend to work for. I don't just "hope" they'll come to pass.
When you stop to consider that every dollar in taxes you save is a tax-free dollar, it really pays to put taxes near the top of your educational agenda. Over the years, I’ve found that becoming informed about why, when, and how I am taxed has had a lot to do with the financial choices I’ve made and the amount of tax-free profit I’ve been able to glean and compound. So, my advice is to begin to take an active role in income and estate tax strategies, and to commence a self-study program to at least become familiar with those portions of the tax code that are applicable to your personal situation.
Today we’ve never had it so good, yet many readers seem worried about: (1) When the “housing bubble” will burst, (2) what will happen to retirement plans when employers file for bankruptcy, and (3)law suits. In this month’s newsletter I’ll try to put these threats into perspective and suggest ways in which to deal with them.
We’ve all seen those red knives with the Swiss cross on them. They’ve got multiple blades, tools, even scissors to cover every possible situation. They’re easy to use, and readily available to anyone who might want to have one. The same thing can be said of real estate Options. Options can be used in virtually every real estate situation. Often, they’re the best possible choice. I’ll elaborate on why you need to understand and use Options. In only four pages, I can only scratch the surface of the ways Options can be used, so I’ll limit their exposition to five situations: Used creatively, Options can do the following:
This month’s letter is aimed at those with appreciated equities. A few months ago, a front page story in the Wall Street Journal extolled the vision of an entrepreneur who was raising money with which to buy up thousands of low income and older single family houses in the New York and New Jersey area. The writer seemed impressed that our hero had devised a business plan based on the areas demographics. With the help of a crew of MIT graduates, he’d estimated costs associated with holding and managing these rentals. I’m not aware that MIT -- nor for that matter, the Wall Street Journal -- has any particular expertise with single family houses.
I think I’m the luckiest person in the world! When others get soaked, I walk between the rain drops. Each day, while I’m still sleeping, a seemingly endless stream of cars carrying worker-bees has already started clogging expressways for 20 miles in every direction. I don’t have to do that. Each morning when I wake up, my first conscious thought is to affirm how fortunate my life has been, and is today. Here are just a few of the things I appreciate about my life.
Ultimately, one of the greatest hazards an entrepreneur faces is change, yet, in recent years, the changes that have taken place have benefited entrepreneurs to an unprecedented degree. A case in point is the events that have transpired over the past decade or so. In 1995, interest rates for owner-occupied houses hovered around 7%. In recent months, they have been at least 1% lower. Where credit was based upon a loan officer’s judgment, now, applications can be done from a personal computer, and approval is based on FICO scores. Where mortgage loans required 5% down payment, today, 125% of fair market value can be borrowed on Home Equity Loans. In the mid-90s, house prices rose slowly from their slump that was caused by Reaganomics and Clinton’s cut-back in defense spending; and the aftermath of skirmishes in the Iraq, Somalia and Haiti. Despite the 9/11 attack that changed the way we lived, the housing market remained strong in most areas. Fortunes were made as house prices exploded. The boom is now described as a “housing bubble” by those who had sold too soon or who had failed to buy and had been left behind.
When notorious bank robber Willy Sutton was asked why he robbed banks, this month’s headline was his reply. When people ask me why I switched from being a long-term holder of houses to going into the fixer/flipper business, my answer is that, today, “where the money is” is in the business of buying, fixing, and flipping houses and mobile homes. Dollar for dollar, nothing in real estate rewards entrepreneurial effort as much and as fast. Even though just about anybody can go into the fixer/flipper business, to be able to make a profit consistently, there’s a lot to learn. Finding, negotiating a purchase, and financing a suitable fixer/flipper is only half the battle. It requires skill to be able to rehab it at a cost that that will leave you a large profit margin. That’s the bad news. The good news is that there are very few fields of study that will pay you back as fast in as short a time. In this month’s letter, I’ll try to give you a few tips that can make the fixer/flipper business more profitable.
Some time in the far distant past, the Readers Digest had an optimistic article that made the point that people miss out on a large part of life because they don’t let others know that they want something. Perhaps because they fear having a request rejected, many people are reluctant to ask for things that they want. This must be a characteristic of adults; children seem to have no problem with this at all. In fact, quite often, if they don’t get what they ask for, they throw a tantrum. That article had a lot to do with what has happened to me ever since. I think I’ve led a charmed life, and been able to do much more than others, simply because I made it a practice to ask for what I wanted. Sometimes my request was verbal, more often it boiled down to an application of sorts, but in many of the cases, I got what I asked for; simply because I asked.
Over the past few years -- in fact, ever since houses began to appreciate at double-digit rates -- hoards of “millionaire” real estate “experts” have come out of the woodwork; willing to share their “secrets” with the un-washed for a mere pittance, if you can call several thousand dollars a “pittance”. It seems a staple of these ads that, as a result of a single presentation, you’ll learn the secret of how to become fabulously wealthy virtually overnight. I remain skeptical. I make it a policy not to pay much attention to people who run expensive full page ads trying to give away their special insider secrets for free to all comers.