The Death of Real Estate Is Greatly Exaggerated, Again
Issue #1990
- WEALTHY: Getting prime properties in the "dying" real estate market (Justin Ford)
- HEALTHY: How you can follow my path to your ideal weight (Jon Herring)
- WISE: Euripides on tough times
ALSO IN THIS ISSUE:
- 5 records that can keep the IRS off your back (Eric Taylor)
- Michael Masterson on why you should throw out your TV
- It’s Fun to Know… what, exactly, you are reading
- Add "obloquy" to your vocabulary
We Couldn’t Have Made it Without You!
I’m sorry to say that you are not invited to the office party celebrating ETR’s milestone 2000th issue. After all, we have our reputations to think of… and you never know when someone might break out the lampshades and digital camera!
But seriously, you will get something far better than hors de oeuvres and champagne…
Today, you get to change your life. Today you get to start the future you’ve daydreamed about. Today you get moving on the spur-of-the-moment weekend trips to Europe… the $99 bottles of Chardonnay instead of the house wine… the invite-the-whole-family-on-a cruise surprises. Today you get going on everything you want out of life.
ETR is here to give you the information, the tools and the encouragement you need to get going and reach every one of your dreams and each of your many aspirations.
Right now our programs that help you reach those goals are available at up to 65 percent off regular price.
"The darkest hour is that before the dawn."
Euripides
The Death of Real Estate Is Greatly Exaggerated, Again
By Justin Ford
Like it or not, we are entering a time when a growing number of properties will be unloaded at bargain-basement prices and a handful of investors will make a fortune.
Let me explain…
The last time real estate died was in the late ’80s. The Tax Reform Act of 1986 took away tax shelters that had been key drivers of investment. Accelerated depreciation was gone, capital gains tax rates became (usually higher) income tax rates, and passive income losses (such as from rental income) could no longer be used without limit to offset active income (such as wages from your job).
Suddenly, many investors stopped buying, others dumped properties at bargain prices, foreclosures rose, and a bear market in real estate began that, in some categories and markets, would last almost the next 10 years.
The late ’80s and early ’90s were particularly tough on office space and apartments. Overbuilding took place in many markets in the first half of the ’80s thanks to the 1981 Tax Act, a big incentive for builders. So the 1986 Act - taking away many incentives - was a major flip flop.
As a result, some landlords offered "concessions" of 25 percent or more of the nominal lease … just so they could show lenders they were getting the rents needed for comfortable debt coverage. In reality, they were getting far less, and foreclosures rose in the commercial sector too. In the words of Sam Zell (CEO of some of the largest real estate investment trusts in the country), the goal for real estate companies was to "survive to ‘95."
In residential real estate, there was no nationwide bear market, but markets flat-lined in much of the country. In some markets, aggravating factors led to prolonged slumps.
The plunge of oil prices in the second half of the ’80s led to a 21 percent drop in Houston residential real estate in three years. In New York City, housing prices fell after the stock market crash of 1987. They wouldn’t surpass their pre-crash levels for good until 1998. In Los Angeles, big employment cuts in the aerospace and defense industries in Southern California led to a 21 percent decline between 1989 and 1997. Adjusted for inflation, the fall was about 40 percent
There are lessons to be learned from this period - both of caution and of opportunity.
On the cautionary side, never listen to anyone who says real estate always goes up. Markets can fall, and bubble markets can fall hard. So always buy cash flow, always buy value, and always buy with a large margin of safety - so that your expected income could fall 20 percent or more and you wouldn’t be forced to sell.
Never forget that real estate is local. Even while markets like LA, NYC, and Houston were hurting, other markets continued to post steady appreciation. That especially applies to today, where many formerly hot markets are deflating and many value markets are experiencing strong demand and steady price appreciation.
Finally, whenever bubble markets do implode, there is plenty of opportunity for value investors.
Remember the Resolution Trust Corporation (RTC)? The government agency was formed to dispose of nearly a half-trillion dollars of distressed assets in the wake of the failure of many Savings & Loans. Much of what was sold were the distressed loans themselves, but it also included over 300,000 pieces of real estate. And many investors made fortunes as many properties were sold for 50-60 cents on the dollar or less.
Similar events are unfolding today. A rising number of mortgage loans are in arrears and foreclosures are on the rise across the country. You may end up helping to pay for some of these problem properties even if you don’t buy them. That’s if the government opts for another taxpayer-funded bailout of loose-money lenders as it did in the late ’80s and early ’90s.
So you might as well consider buying some of these properties before they end up on the courthouse steps, save a property owner from foreclosure, and pick up some cash-flow properties at good prices in the process.
I happen to live in one of the worst bubble markets in the country, South Florida. Not only did prices practically go vertical in the first half of this decade, but property taxes have soared as grasping government officials are now assessing at full "market value." At the same time, insurance has skyrocketed in the wake of a record number of hurricanes in 2005 and 2006.
Yet because I never "chased the market" and insisted instead on buying undervalued, deep-cash-flow properties, my properties are doing fine. More important, in the coming year, I expect to uncover some extraordinary opportunities even in this market.
At the same time, I continue to invest outside my area - in select value markets in the west, southeast, and mid-Atlantic states. In fact, these markets are benefiting from an exodus of investors and homeowners from the bubble markets. And, given a growing number of telecommuter-friendly jobs and a steadily rising pool of baby boomer retirees, this flight from expensive to affordable should be a strong one for decades to come.
When the going gets rough, smart investors know now is precisely the time you’ll find diamonds in the rough.
[Ed Note: Justin Ford has invited some of the most successful real estate investors he knows to join him in Miami May on 18th-20th. They will reveal the strategies they feel will make the most money in 2007 and 2008. For the most part, these are investors who started with little or no money and have gone on to make millions. They include Dave Lindahl on apartments, Ray Alcorn on commercial properties, Marko Rubell on pre-foreclosure marketing, Steve Cook on wholesaling, Thom Phelan on 1031 exchanges and using self-directed IRAs to buy and sell real estate, Alan Cowgill on private money, and more. Please click here.]
The $2.7 Million Difference 24 Hours Can Make
Ten days ago, I met Walter G. at an investors’ event in Dallas. Walter is a relatively new real estate investor from Atlanta. He told me that, like a lot of “newbies,” he was scratching and scraping practically every day, trying to build up just a little more cash and credit to do his next deal.
But that was ten days ago… nine days ago, Walter was in a whole new league as an investor. Read On….
Tax Tip: How to Protect Yourself From an Audit
By Eric Taylor, CPA
If you are self-employed, your risk of an IRS audit is up to 10 times higher than it was when you were someone’s employee. But don’t panic! Your chances of an audit remain very slim. And as long as you’re not taking enormous deductions against a modest income (deducting way more than you’re bringing in), the IRS isn’t likely to come calling.
Nevertheless, you should keep certain documents on hand so you’ll be prepared should you be audited. These include: a copy of your return with 1099s, bank and brokerage statements, receipts or other proof of payment of business expenses, and records justifying your deduction for a home office.
The IRS can audit you any time within three years after a filing. (This can be extended to six years if you’ve understated income by 25 percent or more, and indefinitely if you don’t file.) Don’t discard any records until you’ve checked your state’s laws. Some states can audit your state tax returns for longer than three years … and you’ll need all the same records on the state level as on the federal.
[Ed. Note: CPA Eric Taylor specializes in taxation and business development and is certified to represent his clients before the IRS. Listen to Eric’s recent teleconference for more Smart Money-Saving Tax Strategies for Freelancers and get a free copy of The Writer’s Tax Guide: A Money-Saving Manual for Travel Writers and Other Freelancers.]
3 Simple Steps to Less Fat and Better Health
By Jon Herring
If you are looking to burn fat rapidly and dramatically improve your health, I strongly suggest following Dr. Sears’ nutritional and exercise recommendations. And I don’t say this because of any obligation to Dr. Sears. I say it because of the superior results I’ve experienced personally.
Two years ago, I was 25 pounds over my ideal weight and I wasn’t happy with the way I looked or felt. I made a firm commitment to achieve and maintain my ideal weight, and I did it by following Dr. Sears’ recommendations.
- I ate breakfast every morning and four or five small meals and snacks throughout the day. I never starved myself or went hungry. I simply focused on eating more of the right foods so there was no room for junk. I ate plenty of protein (primarily eggs, grass-fed beef, fish, nuts, and dairy), healthy fats, and low-glycemic carbohydrates.
- Rather than work out for a long duration, I emphasized the intensity. I never ran farther than two and a half miles (from my house to the beach and back). Instead of increasing the distance as my fitness improved, I worked to reduce the time it took me to complete the route. And rather than jogging at a steady pace, I would run intervals at 70 or 80 percent of my max effort, followed by brief periods of walking or jogging.
- To build and maintain muscle, I used a number of bodyweight exercises that allowed me to improve my strength, balance, flexibility, and cardiovascular conditioning all at the same time.
In only eight weeks, I reached my ideal weight (for the first time in five years). My body became lean and muscular… my mental sharpness increased… and I had a LOT more energy. And the best part is that I have maintained this ideal weight and a high level of fitness for two years by following this simple program.
If you are interested in learning what to eat and how to exercise to shed fat quickly and achieve optimal health, I highly recommend following the plan that is so clearly laid out in Dr. Sears’ books, The Doctor’s Heart Cure and PACE: Rediscover Your Native Fitness.
Treasures From the ETR Archives: Michael Masterson on Why You Should Throw Out Your TV
[Ed. Note: Our mission at ETR is to help you reach all your goals, and to help celebrate our upcoming Issue #2000, we are presenting you with some of Michael Masterson’s most powerful, life-changing messages to date. To read each full article, click the link embedded in the text.]
"I don’t deny that TV can make you laugh and cry. I don’t deny that it can inform you. The problem with TV is that while you are laughing, crying, and learning, you are also losing energy, losing mental sharpness, and losing the natural inclination to be active. Watch any TV show and afterwards you are somehow duller, less energetic, less acute. Your mind has lost its acuity. Your spirit is down. Even your body is worse off - a little stiffer, a little more tired.
* * * * *
"I’ve been watching, while stairclimbing, a BBC series on wine. It’s very enjoyable and seems instructive. But since I make notes directly after watching each program, I get to see just how informative it really is.
"It’s amazing. A half-hour segment might - might - give me three bits of useful information.
"It doesn’t feel that cheap when I’m watching it, but that’s because so much of what I’m viewing - the interesting scenic shots, the gripping little conversations - is illustrative but not instructive.
* * * * *
"It’s easy to trick your brain into producing alpha or theta waves. Just switch on the television.
"But realize that you’re also training your brain to operate at what is, essentially, a lower frequency. And research proves that people who produce an excess of alpha or theta waves - from head-injury patients to plain old slackers - have consistently weaker powers of concentration. On the other hand, those who have a great sense of focus also have a much higher ratio of beta brain waves."
[Ed. Note: Learn how you can be part of an exclusive group of 25 to 50 ambitious businesspeople that Michael will be leading through an elite 5-day program that can help you dramatically increase the profitability of your business here.]
ETR Contributors Weigh In On Our 2000th Issue Celebration…
"Most of all, I’ve appreciated Early to Rise’s emphasis on total success."
"One of the best things about ETR is that it doesn’t always make me feel better! Michael has definite opinions about what works and what doesn’t… and a lot of success to back them up. So whether I like the advice he gives or not is really beside the point. I at least know I have to take the time to consider it and put it into practice to find out for myself.
"Much as I hated putting the entire ‘early to rise’ concept into practice, I have to admit that it’s spot on. When I do it consistently, I reap the reward. And when I slide back into my old ‘night owl’ ways, I notice the difference in my productivity within a few days. Much as ‘ready, fire, aim’ goes against conventional wisdom about how to start a new business venture, I’m sure it saved me considerable time and expense. First, when I launched an idea that didn’t work … I discovered the flaws right away and was able to shut it down as quickly as I started it. And next, when I launched something that did work, I knew right away that I had a potential success on my hands and that it was time to take aim. All in a fraction of the time it takes most people to research, prepare, launch, fail, and suffer the consequences - and possibly give up altogether on being successful in their own business.
"But most of all, I’ve appreciated Early to Rise’s emphasis on total success. The understanding that accumulating wealth is nothing if you don’t have your health. Or that life has little meaning if you don’t have a hobby you can devote yourself to passionately. Or that living rich doesn’t always have to mean buying the most expensive and flashy toy, but rather enjoying a higher quality of life at a reasonable expense is a worthy pursuit.
"I hope ETR keeps shining the light on the path to success for many years to come. Such simple and practical wisdom is rare today - and considerably more valuable than what it costs to receive ETR in my inbox every day!"
Monica Day
Copywriter and occasional ETR contributor
It’s Fun to Know: What, Exactly, Are You Reading?
Over the years, our readers have asked us to include more in ETR … more money-making and money-saving ideas, more on health and fitness, more on self-improvement skills, and more on stuff that’s just plain good to know. As a result, the average length of ETR has nearly tripled. Here are a few statistics…
The average number of words per issue:
- 2000: 1,072
- 2006: 2,807
The average number of words per article:
- 2000: 446
- 2006: 473
The average number of sentences per article:
- 2000: 42
- 2006: 43
ETR Issue #2000 Celebration “FLASH” Sale – 24 Hours Only!
Interested in discovering how one man turned $10 into $514,000… and how you can duplicate his plan quickly, cheaply and easily?
The earnings potential is huge… the cost to get in is practically nothing… but the clock is ticking!
Let me explain…
For our Issue 2000 Celebration, we’re offering a series of 24-hour only sales. The time allocated is VERY limited - but the discounts are VERY deep. When 24 hours are up, we’re promptly removing the page from our web server. We want success stories from our readers, and the best way is to make sure we get this program into your hands ASAP.
Right now, get what many consider the most underutilized system of creating almost instant wealth on the Internet today… and at a savings of over 40%!
But this offer expires at 6AM EDT SHARP on Friday March 16, when the price nearly doubles.
Act now and get started on your own online auto-pilot income stream.
Word to the Wise: Obloquy
"Obloquy" (OB-luh-kwee) - from the Latin for "to speak against" - is strongly condemnatory or abusive language.
Example (as used by Jonathan Keates in Stendhal : "There he remained, weeping indignantly at her stream of obloquy, bitterly ashamed of his tears, until it was time for supper."
[Ed. Note: Become a more persuasive writer and speaker… build your self-confidence and intellect… increase your attractiveness to others… just by spending 10 VERY enjoyable minutes a day with ETR’s new Words to the Wise CD Library, on-sale now through the 28th to celebrate the 2000th issue of ETR.]
Michael Masterson
Copyright ETR, LLC, 2007