Making the most of the recession
Everybody is hurting right now, and it kills me to see my fellow Americans struggling as they are. I give out my advice for free, and people eye me suspiciously, wondering what my angle is. Here’s my angle: I’ve been investing in and selling real estate for over 39 years. I’ve made my millions in real estate and other investments. I’ve worked many jobs from McDonald’s employee to Baccarat Dealer to Airline Pilot. I’d like to see more people succeed and less people fail during this rough period of time. What I stand to gain from this advice pales in comparison to what the reader will gain. So here is my advice.
1. Create a balance sheet – You can find out how to create a balance sheet online, it’s not difficult and there are websites that will do it for you. You need to figure out where every single penny of your money is going and how much money is coming in and from what sources. I mean every penny, if you buy a candy bar, write it down. You’ll be very surprised at how much money you can save by just cutting a few simple habits out of your life. You must adjust your spending using the balance sheet until you are squarely in the black. Your income is your “cash flow” obviously the higher the cash flow the better. When determining your cash flow, it’s wise to only count sources of revenue that are consistent, meaning a job, or dividends from a stock, your small business that you run on the side, a rental property. Etc. Figure it all out.
2. Learn some accounting terms – Yes it’s horrendously boring, but use some determination and learn a few terms that you hear from time to time such as: ROI, APR, or CAP rate. Learn those terms very well and learn to calculate them for yourself. If you have a smart phone, there is probably an application to do each of these for you, so you only need to learn what these mean. These terms are very important and once you learn them you’ll understand why. Some basic terms will tell you how you are doing, how much you are REALLY going to be paying for things, how other people are trying to rip you off, if that investment is worthwhile and more. It’s very important and free to learn. You DO NOT need to go to school to learn some simple terms! I bet you have a friend who will be happy to teach them all to you if you cannot learn from reading.
3. Set up an emergency fund – save up the equivalent to about 6 months of of your costs for an emergency. This means if you lose your job you could live off the money without a drop in living standards for 6 months. This will be very useful for many situations, not only job loss. If you have some kind of accident, if you need medical care, if something comes up, this fund will be there to bail you out. Do not dip into this fund for any reason besides an emergency.
4. Live within your means – Even if you make thousands of month from just your investments does not mean you should live a lifestyle that costs thousands a month! If you qualify to buy a $600,000 house doesn’t mean you should buy a $600,000 house when a $100,000 house will do. Living frugally is not the same as living cheaply. Extravagance is not something to take pride in. Nobody is jealous of you or looks up to you for living extravagantly! Live in such a way that you can save at least 20% of what you make, the more the better.
5. Learn how to do your taxes – If you do not want to learn how, get software to do it. If you do not trust yourself to do it correctly hire someone else. It’s expensive, but not as expensive as failing to deduct everything you can!
6. Be Self Sufficient – Never depend on your retirement to still be there by the time you retire. Don’t rely on the social safety net to catch you. Do not rely on food to always be available. Rely on others as little as you can! Learn to fix your own things. Learn to grow food. Figure out what you are depending on others for and learn to do it yourself. Skip a show that you have to watch and spend that time learning a skill. It will save you money and you become more independent. Do-It-Yourself should become your new hobby.
7. Become entrepreneurial – This doesn’t mean to jump on any whim you have. Get people to see your idea the same way you do, and ask them how they feel. A business that depends on customers cannot succeed without customers! Do not quit your day job, start a tiny business on the side and grow it slowly! Do not find a business partner if you do not absolutely need to, it’s very difficult to find anybody as motivated as yourself. Now is the time to let your creative side shine. Think of the recession as a forest fire, it burns down everything, but the ashes are the best fertilizer for new growth.
8. Always Invest – This is the real trick. Figure out how much you can invest, you may think you cannot invest anything, but look at your balance sheet again. There is definitely a way everyone could save at least $50 a month by cutting out unnecessary things, or finding cheaper alternatives. All that extra money needs to be invested. If you do not invest your money, then your money does nothing besides sit there. Investing is putting the money to work for you, like little workers that never get tired, never get sick, and never complain. Now how you invest the money is up to you. Mutual funds are a good way to invest if you want money for retirement. Bonds are great safety nets if you have enough to buy them. If you like a lot of risk, learn a lot about stocks and try your hand at that. Me and many investors, prefer real estate. Real estate is one of the only investments that you can see and touch. It’s there, it will never suddenly disappear. Remember what Will Rogers used to say “Buy Land, they aint making any more of it.” Rental income is good income. Here’s the best bit of advice I will give: If you can, get into real estate, right now.
I’m sure by now everybody knows about the housing market crash. Many investors foresaw this coming and pulled out beforehand, and many did not. Now, people, especially those that lost big during the crash, are afraid of real estate. This is not the attitude to have towards something that has fallen so hard in price. Like Warren Buffet famously said “Be greedy when others are fearful, and fearful when others are greedy”. Don’t be too greedy though, the reason so many lost so big in real estate was because they overextended themselves. Las Vegas’ houses have taken the largest hit of all, some falling an upwards of 65% in value, people should be scrambling to Las Vegas to snatch up the properties, many already are. It’s actually pretty tough to get a good property, people fight over them. People want the high rental income for the relatively small price they paid for the property. Are you renting right now? If you are then some investor is making all that money you are paying, think about how much that is. This is where all the action is.
Not everyone can invest in real estate, especially now, that’s understandable. It’s hard to get a loan especially when your credit took a dive during the crash or you’ve lost your job. If you are lucky enough to have a job and have been working at it for at least 2 years, you can try getting pre-qualified for a loan even if you have bad credit. Getting pre-qualified is free. For those that can qualify for a loan and are looking for something that will give them a leg up, consider real estate, but be smart about it. If you aren’t an expert in real estate investing, find someone who is, that is what REALTORS® are for. Drill your REALTOR®, ask a ton of questions, if they don’t know the answers, find another one. Find one that knows everything about investing.
And Finally:
9. Be good to others – Even if you suddenly come into money, it’s never a good idea to treat others poorly. Building strong healthy relationships with others may open up opportunities that you never knew existed, and it’s always good to have someone lend you hand if you are in need of it. Never pass up an opportunity to help, even if the only thing you can give is advice.
A last bit of advice, make sure to vote for who you believe will create jobs.
Wall Street Journal & Forbes: It’s Time to Buy A Home
Stay Hungry, Stay Foolish. The famous speech by Steve Jobs
Tips On Finding The Perfect Neighborhood For You.
The Housing Market WILL bounce back February or March 2012
Not many brokers are willing to make such concise statements, for good reason. If you are wrong, you look like an ass and your reputation suffers. In a business like real estate where reputation is king, brokers cannot afford to hurt their reputation. I am going to stick my neck out on the line here and make such a concise statement.
THE HOUSING MARKET HAS HIT THE BOTTOM IN LAS VEGAS AND WILL BOUNCE ALONG THE BOTTOM FOR 5-6 MONTHS BEFORE BEGINNING A TRUE RECOVERY.
You’re probably wondering how I can be so sure about this, how anybody can be sure of anything in a era as volatile as this. I’ve been in real estate for 39 years. I’ve been an investor, a buyer, a seller, an agent, and a broker. My prediction is based off all the knowledge of markets I have gained over my nearly 4 decades of experience.
I will not reveal what equations and what data I’ve used to conclude this. They are my secrets, and I plan on keeping them secret. I will tell you though, it is not simply technical analysis, this prediction is based on much more than that. Many will say it’s impossible to forecast that far into the future. We’ll see who’s right.
The second coming of Las Vegas
It was clear to everyone that Las Vegas was falling apart from recession. Because the city relied primarily on entertainment and gaming without any production or export, it suffered far more than any other city. The city was dying. Skeletons of partially finished luxury buildings on the strip. Newly built vacant houses out in places nobody in their right mind would live; houses built on speculation of an ever expanding city. From an outsider’s perspective, it might have seemed Las Vegas was dealt a death blow, rotting away attached to an IV.
But like the great fighters who have fought many mighty bouts in this city, Las Vegas does not fall, it adapts.
The art scene is exploding in the valley and businesses from all over are starting to migrate to our defiant city, drawn by low overhead, low taxes, and large population. The locals are not leaving either. We’re tough, like the weather worn desert megafauna. Long droughts will not kill us. Like the city we adapt. You can sense it now in the locals. They are not afraid, they’ve seen the worst of it. Hope is blooming in the desert.
When the economy starts to recover you can expect Las Vegas to soar.
The housing market is ready to come back. Wait till February and you’ll see.
Investors in London are scrambling to protect their investments by buying into real estate. Real estate has always had a special place in the hearts of investors because they are investments that can be physically felt and seen. The housing market has hit bottom or at least near bottom, it’s a safer investment than even the best blue chip stocks.
It will not be long until investors in America begin scrambling to stash their wealth in real estate too. Evidence is showing that many are already doing so. Rental properties are doing very well.
http://money.cnn.com/2011/08/30/real_estate/rental_property_investing.moneymag/index.htm
Las Vegas being rated as the #1 best city for buying a rental property by cnn:
http://money.cnn.com/galleries/2011/real_estate/1107/gallery.best_investment_markets/?iid=EL
With the overwhelming evidence, you do not need to be an analyst to see what’s going to happen. Real estate is going to boom in Las Vegas as investors run in to buy the rental properties. Best to get in now before the larger flood of investors.
6 mistakes investors make when buying rental properties
The wall street journal has a nice little article detailing some of the common and easily avoidable mistakes people make when buying rental properties. You can read the article here: Read here.
The most common mistakes seem like they’d be easily avoidable to anybody with any real estate experience.
-You should know the area you are buying in, you need to know that area’s reputation in your city. I’m not sure if people actually go around buying homes in areas they are unfamiliar with, but you really should not without a local’s opinion.
-It costs money to fix and maintain the home, also money for closing costs on the deal.
-You are not making money when there are no renters. So when you are calculating how much you are making, choose a pessimistic vacancy rate (maybe 60%) and calculate with that.
-If you live near your investment property it’s easier to manage. You can collect rent yourself and fix things yourself. If you are close to your investment property you don’t need to hire property managers to collect rent and whatnot (and collect a percentage of the profits)
-Renters have high expectations. Don’t rent out your home if things are busted. If something becomes busted, fix it.
Honestly if an investor does not consider these factors when investing, they need to spend more time talking to their broker about all the ins and outs of property management. It’s helpful to find a broker or agent that actually has experience owning investment properties.
And now for a shameless plug: I have 39 years of experience in Las Vegas real estate, including over 20 years of experience owning and managing investment properties. If you want to learn the ropes fast, give me a call. 702-496-4004.
House prices stabilizing
Non-distressed house prices are starting to stabilize, but are stalling.
http://realtytimes.com/rtpages/20110905_realestateoutlook.htm#.Tm5DvW9iAoY.twitter
Although it may be difficult to take my opinion seriously as I am a real estate broker and not an economist, and not utilizing statistical data, I am certain of my position. Before when all the others thought the market would bounce back, I was always the cynic, saying it wouldn’t yet, and I was correct every time. Now it’s me saying it’s about to turn around. It’s more of a gut feeling formed by my experience in the industry more than anything, but I predict the market will bump along on the bottom for a while, then in February it’s going to turn and start back up again. This time most people will have learned a thing or two about bubbles and will be more weary and therefore the market will rise steadily rather than chaotically during the bubble years. Lenders have learned a valuable lesson already. In fact, the requirements on obtaining loans right now are so stringent it’s hard for anybody without a 720 credit score to qualify for anything. This time the rise will be stable and sustainable.
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