Let us create a 3d Digital eBook for you! DigyCat.com
|
||
|
||
|
Real Estate Information | Let us create a 3d Digital eBook for you! DigyCat.com |
|
|
|
Greed Can Cost You Your Shirt!
The proper action when things are going well is to pay off debt and consolidate your position. Then you will be financially strong and can go for further expansion without fear of loosing what gains you already have. When you are not deep in debt you do not have to worry about your creditors getting paid. Since the usual history of a business is cyclic (boom and then every 7 years (plus or minus) bust) you can predict when it is time to consolidate. When the prices are "too good to be true, they are." In the two years just before the top of the market is reached, prices are going up at very incredible rate. I have seen real estate go up 25%, per year, right at the top. This is incredible and I guarantee you it cannot sustain itself, at that rate. As hard as it is to give up a profit, it is harder still to sell an investment when it is going straight up. But, understand this is when you need to sell. If that is not what you want to do then you need to go to plan B: pay off your debt and get ready for the market drop. If you are debt free you can survive the drop and then be solvent and financially secure when the recovery comes. I would like to tell you a story of the largest apartment owner in Hollywood. It was 1980 when I met Nick. He owned 11 buildings at that time. He bought the worse buildings in town. These had the best cash flow. He owned mostly brick buildings. This was because they cost less money than stucco and wood buildings. This lower price allowed Nick to generate higher profits. Nick would buy a building. He then did a market study, and figured out what size apartments and what numbers of bedrooms were generating the highest rent, per square foot. Then he remodeled his building to get the highest price per square foot he could. He spent over $100,000 per building to do this. He also had to earthquake proof all of his buildings. One of the reasons that brick buildings sold so cheaply was that they needed to be earthquake reinforced. When Nick finished remodeling a building, it was producing a very nice cash flow. Nick would use that cash flow to buy and remodel the next building. This was very smart thinking. Where did Nick fall off the rails? First he would find a great deal, while he was still in the middle of a remodeling job. He just couldn't pass it by. He borrowed on one of his finished buildings to get the down payment to buy the building. Then he would borrow on a second building to get the money to remodel the new building. Now he was remodeling two buildings at the same time. By borrowing on two of his successful buildings, he now had to pay the loan payments on the two new loans. The rents from the older buildings now went to the lenders instead of to Nick's remodeling project. The new building, just bought, didn't produce enough income to cover the new loan on it because half the building was empty due to the remodeling. Nick now needed to keep borrowing money to fix the buildings and pay the loan payments on the buildings that didn't generate enough income. When a building was completed it then supported itself very nicely. Was Nick happy with that? No, he wanted more and more buildings. If at any time Nick had stopped borrowing to buy new buildings, and just finished all his buildings in remodeling, he would have been able to catch up with himself and started expansion from a new level of security. That was, using the buildings profits after paying all of his loan payments to buy and remodel more buildings. Nick just couldn't wait and consolidate his position. He had every building he owned loaned up to the maximum value that he was able to. The rents were more than enough to cover the payments on each individual building. So what happened? Two things. The first was his greed. We entered the 1991 recession, and the price of buildings went down. The banks were starting to foreclose on buildings and put them back on the market for very cheap prices. Nick just couldn't let a deal pass him by. He bought 3 of them. He borrowed the last dime he could squeeze out of every building he owned to buy these buildings, thinking that he could do no wrong. One bank made him the deal of a century. They wanted a lot of money down but the price "was just too good to be true." Nick was so much in a hurry to get his hands on this great deal he didn't bother to do his normal structural inspections and research. After all, Nick owned 17 buildings in Hollywood by now and knew the market better than anyone else, he thought. He looked at the building and saw it was only 20 years old. The building was empty, which meant it brought in no income. That didn't bother Nick, he would just get it rented quickly and the building would support itself. What Nick hadn't noticed was that the foundation was damaged and a $100,000 repair was needed. This was a repair that Nick couldn't afford. I begged Nick to walk away from this building and let the bank have it back. He refused and squeezed more money out of his collection of buildings. As you can imagine, Nick was loaned to the hilt and had no money set-aside for an emergency. At his peak he owned 17 buildings worth $45,000,000 with him estimating his net worth at $7,500,000. He was definitely worth a lot of money. That was for sure. Before we get jealous of him, lets look at these numbers a different way. If Nick was worth $7,500,000 then his real estate loans had to be the difference. That is $37,500,000. These were sure big numbers. Let's look at these numbers in terms of their percentages. This $37,500,000 was 83.3% of $45,000,000. $45,000,000 had to be the retail value of all these buildings. Nick would not think in terms of selling them. He never sold a building. He only bought, and bought, and bought. What Nick saw was the potential. If property values went up only 10%, Nick's net worth would go up $4.5 M. Property values had gone up over 20% in the 1980's but the recession that had started was of no concern to him. It is clear that he had stretched himself to the limit. The last building the bank sold him put him in trouble. He might have even survived it if he sold one, two or maybe three buildings. No, Nick wouldn't do that. One year later the recession was not over. Unemployment in California went up and up. Businesses were closing, President Reagan was closing down Aerospace, and workman compensation insurance was so high no one could stay in business. Vacancies in apartments were going from 1% to 5% to 10%. Then it happened, we had the LA riots. Hollywood became a ghost town and then it happened again, the earthquake of 1994. Brick buildings fell down on Hollywood Blvd, none of Nick's buildings. People moved away and vacancies rose in Hollywood too as much as 17%. Do I need to tell you what happened to Nick? He lost everything when vacancies went to 5%. He had no reserves or cushion for a margin of error. For 18 years Nick lived like a pauper, in one of his small apartments. He did his own property management for all of his buildings. He drove an old car, worked seven days a week, took no vacations, always had to worry about paying his next loan payment and where to borrow his next dime. His plan was to make $10 Million Dollars and sell everything. What he got was nothing for 18 years of his life. I have no idea where Nick is now. He disappeared off the face of the earth. So, "A BIRD IN THE HAND IS WORTH, A MILLION THAT ARE PROBABLY NOT IN THE BUSH! About The Author Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetgroup.com
MORE RESOURCES: Real Estate - Google News TEXT: S&P: Nomura Real Estate Residential Fund Bonds Rated 'A' - Reuters
Apple Valley real estate developer rejects offer in San Bernardino County ... - San Bernardino Sun
Asia real-estate bull turns bearish - MarketWatch
Rogue Valley Commercial Real Estate In Upswing - KDRV
Real estate market likely to see an increase in M&A activity - China Daily
Real estate developer says he plans to make cash bid for Philadelphia's 2 ... - Washington Post
Real estate market rebounding - Park Record
Alexandria Real Estate Q4 FFO Rises - Quick Facts - NASDAQ
REAL ESTATE: Refinancing expanding for Fannie/Freddie borrowers - Press-Enterprise
|
 |
|
|
RELATED ARTICLES
5 Steps To Choose the Best Cincinnati Realtor Excluding some professional real estate agents buying a house is a lifetime decision for most people. Whenever a person is decided about purchasing a house he is ready to invest a hefty amount of his lifetime savings for acquiring the house. Selling Houses: Cutting Edge Design Tips for Selling In this article, you're going to discover new techniques for marketing houses, and you'll find that these fresh, new interior design ideas will help sell your home faster, and for a higher price than the competition!Buyers' physical senses respond to a home's design, and what a buyer feels is based upon their psychological reactions to sight, hearing, smell, touch, and even taste. Design Psychology employs new strategies in interior design to entice buyers. Best Places to Retire Places to Retire: Popular Doesn't Always Mean "Best"Las Vegas, Nevada; Phoenix and Yuma, Arizona; Las Cruces, New Mexico; and Ocala, Florida-just a few names that rank among America's most popular retirement destinations. Unfortunately, their popularity doesn't necessarily mean that they are especially appropriate choices for astute consumers. How Not To Blow Your Build Budget Most people who complete a self build will go on to make a profit if they decide to sell afterwards, but what steps can you take to ensure that you don't totally blow the budget?There are lots of advantages to a totally unique self-build but most important is sound financial planning before and during the self-build, to ensure you stay within budget and make worthwhile savings.Research all your costs carefully and get as many perspectives and quotes as possible. 10 Ways To Find Investment Properties If you really want the best deals in investment properties, you have to increase your odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources? Here are the ten:1. Things To Consider Before Buying a Condo Hotel or Resort Residence Resort home ownership, such as condo hotels and fractional shares is different from typical home ownership. So it is important to ask certain questions before signing the purchase agreement on a resort property. Want To Be Profitable In This Real Estate Bubble? I'll Show You How In Just Three Easy Steps STEP#1. First you have to recognize that in order to make money in almost any market (i. Home Inspection Checklist - Home Inspectors Although architectural details, wall and floor coverings, modern conveniences and many other factors are important in the buying decision, the focus of this inspection is on the structural/mechanical/electrical condition of the property.The inspection is designed to give the real estate agent or prospective purchaser a system to detect some of the readily accessible major flaws or deficiencies in the significant components and systems of a home. Taxes When You Sell Your Home What's the difference between death and taxes?Death doesn't change every time Congress meets. But taxes certainly did in 1997, and the Taxpayer Relief Act of that year made a dramatic difference in the tax liability of those who sell their own homes. Real Estate Investment - Why it is Big Business? When examining the different asset classes, real estate is generally far less volatile than shares and real estate tends to be the haven that investors flock to when other asset classes are suffering.It is true to say that investment properties can have many benefits in terms of building long-term wealth, but we must never forget that this wealth is not guaranteed!Following the global real estate boom of the late 1980's many investors learnt this hard lesson when they found their properties were worth far less than they had actually paid for them and the bottom seemingly fell out of the over-inflated market. Real Estate Investing - Maximum Leveraging of Your Money At this moment, you have access to some amount of money, from the extremes of only pocket change to the reserves of Bill Gates or Warren Buffet.Suppose you want to invest your funds into some vehicle that will multiply the return. Property Auction & Why You Should Run A Mile From Them That's A Funny Thing To Say About Property Auctions; They're All The "RAGE, Aren't They?"From The Desk Of Colm DillonHello Colm here .. Five Things to Help Sell Your Home Fast, and For More Money Selling your home requires some thought and a clear plan of action. Here are five things to consider when you're getting ready to sell your home:1) Know Your BuyersAre most of the homes in your neighborhood being bought by first-time or move-up buyers? Depending on which group will be looking at your home, you'll want to do the things that will make your home appealing to those buyers. Should Sellers Order a Pre-sale Home Inspection? One of the main reasons home sale transactions fall apart is inspections. This happens when something unanticipated is discovered during the buyers' inspections of the property, and the buyers and sellers can't agree on a remedy. Sell Your California Home For Top Dollar HOW TO SELL YOUR HOME FOR TOP DOLLAR1. Make your home look like a model - even if it isn't. The Listing Contract: Its All in the Details Now that you've chosen a real estate professional to sell your home, you'll need to work together to complete a listing agreement. This legally binding contract authorizes a broker and his or her real estate professionals to find a buyer for your home, according to the conditions specified in the contract. I have a buyer for your property and I can sell it now! A Realtor has just talked to you and said, "I have a buyer for your property and I can sell it now; perhaps for more money than the price your current real estate agent has it listed for." Have you heard this or a version of this? Or, "I have a buyer for your property and I can sell it now; for Big Bucks (with an incredibly high figure named) perhaps for more money than that. What to Look Out For When Buying Off Plan Buying Off PlanIt can be difficult to decide when every deal seems to be not to be missed!There are some key things I look for when buying off plan, whether it's in the UK or abroad it makes no difference.The property must be good value now ie it compares favourably with similar properties today, and is not based on properties going up in value 10% each of next 2-3 years. Good Faith Deposit - Real Estate Transactions In a real estate transaction, a touchy issue is how much trust the seller has in a buyer. The existence of a good faith deposit helps put a seller at rest. Appraisal or Home Inspection? People sometimes confuse a home inspection and an appraisal when they are in the process of buying a home.Most mortgage applications involve an appraisal, which can be a physical inspection of the property plus a written analysis of similar homes that have recently sold in the area.
|
|
Looking For Royalty Free Photos for your Website, Business or Advertising?
List4Sale Domain Is For Sale - $10,000 For Enquiries eMail Us © www.List4Sale.biz 2011 |
|
