Take It Easy
Archives: Daily Issues
Issue #2204
- WEALTHY: Make real estate investing "easy" with these 5 steps (Justin Ford)
- HEALTHY: Power up your body’s defenses with this winter fruit (Kelley Herring)
- WISE: George Bernard Shaw on life
ALSO IN THIS ISSUE:
- Avoid the biggest rip-off in the HDTV market (Charlie Byrne)
- 10 little things Sharika’s thankful for
- It’s Fun to Know… about the bald eagle vs. the turkey
- Add "masticate" to your vocabulary
“Just Say NO to Black Friday”
The National Retail Federation reports that more than 140 MILLION bargain-hunting shoppers hit the stores on “Black Friday” last Thanksgiving weekend… and now this year it’s expected to be even worse.
What a zoo! Waking up on 5AM (on a day off no less)… Parking lot bumper-car madness… mob scenes at the cash registers… or worse, “sold out” signs on your item.
There’s got to be a better way!
Well actually… now there is…
Announcing ETR’s Special “Giving Thanks” sale going on right now! Shop from the convenience of… well, wherever you are this instant.
You get savings of up to 64% on many of ETR’s top programs… some of which are discounted by as much as $298!
There’s a very special deal for the first 17 people who take advantage of one particular offering. Orders will be time-stamped so please check it out right now.
"Life is not meant to be easy, my child; but take courage – it can be delightful."
George Bernard Shaw
Take It Easy: Why Making Good Money in Real Estate Shouldn’t Be That Hard
By Justin Ford
"Business is easy," according to Sam Zell. "If you’ve got a low downside and a big upside, you do it. If you’ve got a big downside and a small upside, you run away."
That philosophy has stood Zell in good stead. He started out buying and renting out small properties to college students while he was an undergrad himself at the University of Michigan in the early ’60s. More recently, he sold one of his flagship Real Estate Investment Trusts to a leading hedge fund for $36 billion.
In real estate, the best way to keep your investment decisions "easy" – with low risk and a high potential for profits – is to act on values others can’t see. Often, that means going against the herd, especially against dominant ideas in the mainstream media.
Zell grew his portfolio rapidly from the ’60s through the ’80s. But he only leapfrogged into the league of billionaires in the early ’90s. He bought aggressively during the real estate recession of those years, while the headlines and public sentiment about real estate were at their worst.
I’ve tried to help you see beyond the mainstream hysteria. Go through the Early to Rise archives, and you’ll see that I’ve been warning you about bubble markets for about four years now.
I advised you not to get caught up in the hype. Instead, I recommended to be sure to buy below market value; buy cash-flow properties only; fix your interest rates; have a margin of safety in the form of ample cash reserves, cash flow, or both. And always have a Plan B. (If, for instance, you were planning to flip, to be prepared to rent, sell on terms, or do a lease option that would keep you in the black if the flip didn’t work out.)
That advice ran contrary to the headlines. It also cut against the advice of real estate gurus who figured the easiest way for them to make money was to sell you on the idea that real estate is a can’t-miss proposition.
The height of the "can’t-miss" mania was marked by the publication of Are You Missing the Real Estate Boom? It was written by David Lereah, former shill… er, "chief economist" of the National Association of Realtors. It came out in February 2005, just months before some of the hottest markets in the country peaked. For timing, it ranks right up there with James Glassman’s Dow 36,000, published in 1999, shortly before the second-worst stock market crash of the last century.
Different Headlines, Same Story
Today, the real estate headlines are all about doom and gloom. But, once again, there are tremendous opportunities out there. You just have to tune out the herd, focus on the facts, try to understand the true, larger trends, and look for values others can’t see.
For instance, I live in South Florida, one of the worst markets in the country. Prices are down. Volume is down. (The number of transactions is off 50-60 percent in many areas.) Insurance and real estate taxes have soared, and foreclosures are setting new records. Yet, I’ve continued to make good money in real estate.
That’s basically because I’ve followed my own advice. Over the last two years, I’ve been writing about exceptional values outside the bubble markets. And I’ve gone into these markets in search of undervalued properties.
In one western state, the first property I bought was a four-plex in an area where college students live. We bought it for $180,000 on a street where comparable properties were selling for $220,000. It produced just over $25,000 a year in gross revenue. So we bought it under value and it cash-flowed comfortably. We also fixed the interest rate.
Even though this was a market that offered great values and strong growth… and where sales volume remained (and remains) high… we followed the deep-value, low-risk/high-potential-reward formula I’ve always recommended. And it’s continued to work well.
Within six months, we got an unsolicited offer for $60,000 more than we paid. Since then, we’ve received two more offers for as much as $80,000 more than our purchase price. Not long after we bought this property, we bought another four-unit property not too far away. We ended up selling it for $129,000 more than we paid in just under 14 months.
In another market in another state, I closed on a 14-unit apartment building five months ago. The seller was asking $565,000 for this mostly vacant building. We ended up buying it for $397,500. Today, after about $68,000 in rehab, the property is fully leased (with a waiting list) and generates just over $7,000 a month in gross revenue. It also generates about $4,100 in net operating income (NOI – revenue minus expenses).
A conservative eight percent cap rate puts the current value of the building at about $615,000. That’s about $145,000 more than the roughly $470,000 we have into it, including purchase price, closing costs and repairs. (A cap rate is basically the yield you would get on an income-producing property if you bought it for all cash. It is arrived at by dividing the NOI by the purchase price.)
Even an ultra-conservative 8.5 percent cap rate would put the value of this property at about $579,000. That means we’ve been able to create – at a minimum – an additional $109,000 in equity on a cash-flow property in five months. And yet, the prospects going forward are even better.
It Pays to Invest in Value & Growth Cities
Right now, I’m looking at properties in one of the most affordable oceanside cities in America. It’s a major city that not only offers value, but strong growth as well. It’s the fastest growing city in its state. In fact, its population growth has been 75 percent greater than the national average over the last 15 years. Jobs have grown at nearly twice the national rate over the last two years.
The fact is, value cities like these are actually benefiting from the mayhem going on in the bubble cities. There is a huge flow of money moving from the bubble areas to the value areas – from homeowners, individual investors, institutional investors, and operating companies.
This will continue for years to come – even while the national headlines shout "sub-prime crisis" and "real estate meltdown."
Here is a quick overview of how to look beyond the headlines that everyone sees… so you can find the true opportunities that few can see.
- Tune out the noise: Get facts and figures from media outlets, professional associations, and government outlets. But draw your own conclusions. Look for the emergence of "value gaps" and the flow of money from overvalued to undervalued areas.
- Always buy cash flow: If you do this, you dramatically reduce your chances of seriously being hurt in any market. Even if you don’t want to be a landlord and you prefer to "flip" houses, why not flip them at prices where you could rent them out on a cash-flow-positive basis if you had to? If you like million-dollar deals, why should you deal with luxury homes when you can do million-dollar cash-flow apartment houses or offices or warehouses instead? If cash is king… cash-flow is the Holy Roman Emperor.
- Buy at or below market value: Know your target-market values cold, on a dollar-per-square-foot basis and on a price/rent basis. If you’re in a good value market that also has strong growth and where real estate sales are brisk, it may make sense to buy cash-flow properties close to, or even at, market value. But the more overvalued your market, the more undervalued a purchase should be. The greater the discount at which you buy, the more of a cash and equity cushion you’ll have if and when the market corrects.
- Fix your interest rates: This alone would have prevented half the foreclosures going on in the country right now. If you have to do some negative-amortization, adjustable, time-bomb mortgage to make a deal work… chances are it’s not a deal after all.
- Focus on value and growth cities: Remember, real estate is local, yet all markets are connected. Extreme overvalue in certain markets can create extremely attractive undervalued investment opportunities in other markets.
When you combine these criteria and buy undervalued properties in undervalued, growing markets… consistently making money in real estate almost becomes "easy," as Sam Zell says.
[Ed. Note: Justin Ford is in Miami right now, sharing with approximately 250 investors some of his favorite value & growth markets. He's joined by private money expert Alan Cowgill, commercial real estate investor Toby Unwin, short sale expert Dwan Bent Twyford, Apartment House King Dave Lindahl, and a half-dozen other leaders in their fields. To learn more about how they're taking advantage of the major opportunities in today's real estate market, click here.]
Are YOU Ready to Snatch YOUR Share From This $300 BILLION Cash-Pile Looking for a Home?
"They " thought they’d keep it all for themselves, but "they " were wrong…
Retire NOW by getting revenge… on Wall Street!
Here’s how the "mercenaries" ruthlessly cream off fat lump sums and monthly checks for doing NOTHING but following simple instructions…
Consumer Advice: Navigating the High-Definition TV Minefield, Part 2
Looking to avoid what is probably the biggest rip-off in the HDTV market? Today, I’ll show you how. Plus, I’ll give you some useful tips for buying your first high-definition television.
Yesterday, I mentioned some key first steps: (1) Plan early to get an upgraded cable or satellite box, (2) determine the ideal size for your TV, and (3) figure out where you are going to put it.
Now, a few more crucial but sometimes overlooked steps:
- Do you use TiVo? If so, you’ll need to upgrade to a high-def TiVo box if you want to record HD programming. (Of course, that’s if you don’t already have TiVo’s HD unit.)
Alternatively, that new HD cable box you get may have a built-in HD DVR – and so you may not have to buy (or keep) the separate TiVo hardware.
The good news for TiVo fans is that some cable companies (Comcast, for example) are rolling out cable boxes with integrated DVRs that use TiVo software. That gives them the same "look and feel" of a TiVo box. So the cable-company-supplied box may be built by Motorola or Scientific Atlanta, but it’s just like using TiVo.
- Once you get an HDTV, you’ll want a new DVD player as well. Now this gets tough, because there’s a technology war going on. The two opponents are BluRay (backed by Sony) and High Def DVD (supported by Microsoft and Toshiba).
I suggest waiting this battle out. Just spend $99 for a conventional DVD player with "upsampling." This will convert the signal so even old DVDs will look just fine on your new HDTV. Then sit back, let the war play itself out, and replace your player in six months to a year. By then, they’ll all probably be about a hundred bucks.
- So now you’re at the store, you picked out your HDTV and DVD player, but the salesman is not done with you yet. Watch out for what’s coming. It’s the cable upsell rip-off. "You’ve just spent thousands!" he’ll exclaim. "Now you need these gold-plated $100 ‘monster’ cables to connect your new TV to your DVD player for the best hi-def quality!"
No you don’t.
Sure, you want to go up to the best cable "standard." Your choices – in increasing order of quality – are Composite, S-Video, Component, and HDMI. Get the HDMI cables. But you don’t have to pay a fortune for them.
Since the prices on HDTVs have gotten so competitive, the stores are making their money via huge markups on the accessories. But that HD signal is a digital signal and the wire is copper. Either the signal gets through or it doesn’t. Getting a gold-plated cable can’t make the signal "better."
Those ultra-high-end cables are huge rip-off. The $25 cables you can get on the Internet are just as good as the $100 ones! Check out TigerDirect.com, PartsExpress.com, or PCCables.com.
If you are rushed for time, buy a set of $10 Composite cables and use them for a few days until your HDMI cables come in the mail.
[Ed. Note: Have more ideas, comments, or criticism on Charlie's HDTV advice? Join the discussion on ETR's Speak Out Forum here.]
A Juicy Way to Protect Your Liver
Holiday indulgences silently take their toll on our health. We may not feel it at the time (or even the next morning), but alcohol can make us more prone to the ravages of aging and chronic disease.
Fortunately, simple additions to your diet can protect your liver.
The journal Carcinogenesis published a recent study evaluating the protective effects of grapefruit juice against aflatoxin. This toxin – produced by mold – can severely damage the liver. In the study, researchers gave lab animals grapefruit juice five days before exposing them to aflatoxin. The animals had 65 percent less DNA liver damage than those not given the juice. What’s more, the juice group reduced total DNA damage by 74 percent compared with the no-juice group.
You’re not likely to ingest aflatoxin in alcohol, but research has clearly shown that alcohol itself can damage the liver. And the study in Carcinogenesis shows just how strong the protective effects of grapefruit juice can be.
So, make grapefruit your juice of choice. It ranks a low 48 on the glycemic index. It’s an excellent source of antioxidant vitamin C. And it can help protect your liver from degenerative damage.
[Ed. Note: Kelley Herring is the founder and CEO of Healing Gourmet and the author of the new e-book, Guilt-Free Desserts: 20 All-Natural, Fail-Proof, Low-Glycemic Desserts Just in Time for the Holidays, which shows just how easy it can be to make delicious, healthy desserts in 30 minutes or less. Learn more about how simple lifestyle choices can improve your health by reading ETR's free natural health e-letter.]
10 Little Things I’m Thankful For
By Sharika Kellogg, ETR’s Customer Service Manager
1. Dad’s new Hummer (Absolutely love the heated seats. Best thing since sliced bread. Wonder if he knows he’s going to have to give up the keys for the holidays?)
2. Tastykake Butterscotch Krumpkins (My favorite treat. And I do not feel guilty eating my fill of them during the holidays.)
3. Getting re-acquainted with friends from high school that I haven’t seen in 15 years and re-building those relationships over a glass of Cognac
4. Figuring out HTML (Learning and conquering it is my new hobby.)
5. Getting my mom to actually stay awake the WHOLE time during a movie or Broadway play (She did pretty well with American Gangster, but it took two tries.)
6. Family members that actually cook, unlike me, so that I can get a "home cooked" meal that does not come from Boston Market or Kentucky Fried Chicken
7. Expanding my growing collection of Christmas angels
8. Getting to my goal weight and physique and sticking to it – one mile a day
9. Having time to curl up with a good book and read it from start to finish – relaxing my mind and building my library
10. The New Year (I know it is going to bring some more exciting times into my life. I cannot wait!)
It’s Fun to Know: The Turkey as America’s National Symbol?
You might be surprised, even slightly alarmed, to learn that the bald eagle and the turkey were both in the running to become America’s national symbol. Benjamin Franklin was the most vocal proponent of the turkey. Franklin believed the eagle was lazy and immoral, a horrible symbol for the young nation. The turkey, he thought, although vain and silly, was courageous, attacking intruders into its territory without hesitation.
(Source: Infoplease)
Start Making Money Today
Interested in getting a nice little side-business going on the Internet? Or maybe even from your living-room table?
But you don’t have too much money, you don’t have too much time, and you’re not exactly Bill Gates when it comes to technology. Sound familiar?
A lot of people are in the same boat. The good news is that ETR has heard you. And now we’ve done something about it…
We’ve asked our colleague Marc Charles to be on the lookout for profit opportunities that can be run from a kitchen table, your desktop or out on the road.
Criteria? They’ve got to be inexpensive, easy to start, and still have great income potential, but without a lot of red tape.
They say when you’re first getting your feet wet with a side-business, the most important dollar to make is the first one. Well, Marc is an expert at taking beginning entrepreneurs and showing you how to make that first buck. He knows, because he’s done it dozens of times for himself, his family and his friends.
If you’ve been dreaming about starting your own business… now you can get started for about the price of 2 lattes.
And get this – you could be making money literally just hours from now. Imagine the feeling of finally getting a side business launched – TODAY!
- Patrick Coffey
Word to the Wise: Masticate
To "masticate" (MAS-tih-kate) is to chew. The word is derived from the Greek for "to gnash the teeth."
Example (as used by Bruce Handy in a New York Times review of Can’t Buy Me Love: The Beatles, Britain, and America by Jonathan Gould): "There is no aspect of [the Beatles'] music and lives, however trivial or arcane, that hasn’t been ritually masticated in print, online, or in conversation."
[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.]
Michael Masterson
Copyright ETR, LLC, 2007
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