* Highly Recommended *
"I remember the day I met Michael Masterson ..."
By J. Christoph Amberger
I remember the day I met Michael Masterson for the first time. I was a young, rambunctious editor at the Taipan Research Department, not quite thirty. During my tenure, I had faced down a number of superiors, publishers, and consultants who had intended to meddle with what I considered "my business" ... the development of our newsletter's editorial platform and the trading philosophy of Taipan. Never one to avoid a confrontation, I was geared up to fight tooth and nail against whatever harebrained idea this new consultant was about to impose on my product.
Only he didn't. I left the meeting bemused if not downright befuddled. Because Michael had skillfully played the ball back into my court. He had no problem with whatever I planned to do with Taipan ... if I was able to come up with a viable vision (not, mind you, "vision statement"!) for the business and was willing to put in the elbow grease to make it work. That day, I turned from an editor into a publisher.
The years that followed were tough. The learning process I embarked on made my university education look like a summer picnic with the Montessori kindergarten. Michael guided, questioned, drove, pulled, advised, critiqued, nitpicked, built up and tore down ... many hours a week at first, a few hours a year these days. Taipan turned from an investment letter with three editors and a dozen stringers into the Taipan Group, a publishing business with over a dozen services that each employ more talent than we mustered back in the early days.
Today, I realize that Michael had expertly manipulated me right from the first moment. He had figured me out before I had closed the door behind me, intuitively grasped whatever value I had for the business, and skillfully redirected my outward-bound ambition back into myself. (It took me years of studying aikido to figure out what had happened in that half-hour.)
That's one of the few cases in my life where I didn't mind being manipulated. In fact, it's been one heck of a ride!
I am not alone in my experience with Michael. In fact, I personally know dozens of people whose lives were affected this way. Some of them brought a lot of talent to the table. Others were complete screw-ups who succeeded in life despite themselves, thanks to Michael's coaching. So when Michael asked me to review his latest book, Power and Persuasion: How to Command Success in Business and in Your Personal Life, I eagerly agreed. And there it was: Page after page, as Michael reveals his philosophy, observations, and experiences in making people succeed both in business and in private life, I found myself recognizing elements that happened to me and that are staples of Michael's interactions with his clients and partners.
I have been able to build a wildly successful business based on what Michael has taught me. It cost me many years of grappling with his methods, many sleepless hours of figuring out just what to make of his observations and recommendations. It was worth every second of discomfort and aggravation. But what took him years to teach to me and many of my colleagues can be yours for less than twenty bucks. Power and Persuasion is a book you should own, read, and internalize - especially if you have wondered why all the glitzy, glossy business magazines you've been buying don't help you out a bit. (He tells you why that is so.)
Power and Persuasion: How to Command Success in Business and in Your Personal Life not only has the Taipan Seal of Approval, but my express personal endorsement as well.
- J. Christoph Amberger
Executive Publisher, The Taipan Group
"Property in land is capital; property in the funds is income without capital; property in mortgage is both capital and income."
- James Mansfield
A Tale of Two Cities: Bubbleville vs. Bargaintown
By Justin Ford
It was the best of times to buy real estate. It was the worst of times.
First, the worst ...
In Oakland Park, Florida ... not far from where I live ... you can buy a 35-unit apartment building for $4.5 million. For that price - if you bought this property with 100% cash - you'd get about $184,000 in net operating income (NOI) per year.
NOI is the money you have after deducting rents lost because of vacancies (2%, according to the sales sheet for this property) and paying operating expenses (such as insurance, property taxes, property management, utilities, maintenance, and grounds care).
That works out to a yield of about 4.1% on your cash. Or, you could simply buy a liquid, government-guaranteed, 13-week T-bill and get a higher yield ... about 4.5%.
So why buy the apartment house instead of the T-bill?
Well, for the appreciation, of course. T-bills don't appreciate. But, then again, how much appreciation can you expect from a building with a lousy 4.1% yield ... especially when area properties have already tripled in value in the last six years?
Not much, I think. But here's the real killer in this deal ...
You usually don't buy properties with 100% cash. Not even Donald Trump does that. You use leverage. Leverage is the thing that lets you put money to work at higher rates of return. But that's if - and only if - you buy an asset that generates a lot of income relative to the price you paid.
So, say you have $100,000 in cash and you use it to buy a $100,000 property, all cash. If your NOI is 4% and the property appreciates 6% in a year, your total return is 10%.
But if you use that same $100,000 as a down payment to buy a million dollars worth of property, you can make a lot more money (as long as the property pays for the $900,000 loan and all operating costs). If the property appreciates 6%, you've made 60% on your money.
How? Well you put $100,000 down and get a 6% return on $1 million. That's a $60,000 gain on your $100,000 investment. And that's 60%.
If you pick up another, say, $20,000 in net rents (after expenses and loan payments), that's another 20% on your $100,000 investment. Total return in the first year: 80%.
But again ... that would only work if the property's rents were high enough to pay for the $900k loan, cover all other carrying costs, and generate some net rents to boost profits and create a cash cushion (margin of safety). But that isn't happening anymore in the bubble markets.
Take our Oakland Park property again ...
Forget 10% down. Let's say you put 25% down to buy the building. You'd end up with a loan of $3.375 million. With a 25-year commercial loan at 6%, that works out to annual payments of $261,225.
But this property only has a net operating income of $184,000 a year. So you have negative cash flow of over $77,000 a year!
And that's after a hefty 25% down payment. And it also assumes the miniscule 2% vacancy rate claimed for this property ... and that the operating costs weren't under-reported in order to beef up the meager NOI.
Truth is, you're probably really looking at a negative NOI of $85,000 to $90,000 a year here.
And, by the way, this property was on an Investor's Wholesale List! If that's the "wholesale" price, you don't even want to know what retail would be.
That's how it is in the bubble areas. Real estate agents have turned into agents of the unreal. The prices at which they're listing properties have nothing to do with the real world.
And South Florida isn't the only bubble market.
In California, only 14% of residents can afford the median-priced home. That's down from 19% a year ago. If you're selling one of these properties, you just lost a quarter of your market. In parts of Northern California, it's worse. Only 7% of the state's population can afford a median home there.
In Boston, the median home sells for about 300 times the monthly rent! You can't cover your mortgage and expenses at those ratios. A lot of recent homebuyers and investors are now learning this the hard way.
The Providence Journal reports that foreclosures shot up 34% in Massachusetts. In some of the pricier counties, they're up 40%. And if interest rates continue to climb, the slew of ARMs could send the foreclosure numbers higher still.
But it's not all bad news. Just as there are bubble markets, there are still some excellent bargain markets in the U.S. today.
In fact, thousands of homeowners and investors are fleeing the bubble markets and heading to the bargain markets ... and they're helping create the Next Great Real Estate Bull Markets in the process.
Deep Value, High-Quality-of-Life Cities: The Next Great Bull Markets
Now ... let's take a look at Bargaintown.
A bargain is NOT a cheap price compared to what you're used to. A bargain is a property that (1) sells for less than comparable properties in the area, (2) produces good income relative to the purchase price, and (3) is located where the market is in the early stages of steady appreciation, bolstered by a high quality of life, diversified economy, and rising population and employment.
You have these characteristics in spades in select markets in Texas, North Florida, Georgia, North Carolina, and New Mexico - to name just a few.
For instance, The Houston Chronicle reports 48,000 residential housing starts last year, an 18% jump from the previous year. Yet Houston is still priced at a fraction of the bubble cities - relative to the average household income and relative to rents.
In another Texas city, I recently bought a multi-family property in an up-and-coming area for 20% below comps and at just 82 times the monthly rents. That's far better than the properties in Boston, which are going for nearly 300 times their rents.
And this city has a temperate climate (a big plus for the millions of baby boomers who will be retiring soon). It's also culturally rich, with a major university, tech industry, diversified local industry, and growing jobs and employment. And it's consistently rated among the top two or three cities in the country in national quality-of-life surveys.
In this same neighborhood, I also just missed out on a 24-unit apartment building in a B area, with $144,000 in monthly rents and selling for just $850,000. (The deal was an "REO," owned by a bank. Not surprisingly, it was snapped up in a heartbeat.)
But compare this deal with the bogus "wholesale deal" we looked at in Oakland Park, Florida.
The Texas property had a net operating income of about $65,000 (after taxes, insurance, property management, maintenance, legal and accounting, and a 5% allowance for vacancies). If you put 25% down and took out a 25-year commercial loan on this property at 6%, you'd pay about $49,000 in yearly mortgage payments (principal and interest). That would leave you with positive cash flow - on a leveraged property - of about $16,000.
As a percentage of your $212,500 down payment, that's a 7.5% yield - after all operating expenses and your loan payments!
Remember, the Florida property would only produce a 4.1% yield if you bought it all cash! If you used a 75% mortgage, you'd be hemorrhaging cash to the tune of about $85,000 to $90,000 a year.
And if our Texas property goes up by 6%, you would gain $51,000. Add the $16,000 in net cash flow and another $6,000 in amortization (the reduction of your loan balance), and your total gain after one year would be $73,000. That's about a 34% return in a year on a property that pays for itself.
More importantly, you're in a market where the prospects for appreciation are excellent.This Texas city is just starting to move upward. It hasn't tripled in value in the last five to seven years, as many markets in California, Florida, Massachusetts, New York, and other parts of the country have. In fact, it was up only about 7% total between 2002 and 2005, even while the bubble markets exploded.
But that was because the tech crash kept prices cool in this Texas city. Now that's changing in a big way. This city is getting hot.
It's starting to attract out-of-state buyers (including many bubble market "refugees"). And its solid economy, high quality of life, population growth, job growth, and still-affordable real estate all indicate that it's in the early stages of appreciation.
I would expect this city to appreciate much better than the long-term 6%-a-year average. In my view, you could see 25% appreciation in the next two to three years.
A 25% rise would basically double your money (if you put down 25%). Add in the net rents and amortization, and you could be looking at leveraged gains in the neighborhood of 125% to 150% on a property like the one we found ... even while the bubble markets deflate.
And you could do it with much lower risk than you'll find in a bubble market, because you're buying a property that kicks off plenty of cash to pay the loan and all expenses while steadily piling up a cash cushion.
And this is just one example. There are many other value-rich cities in the U.S. that are just beginning their bull markets. Not only do they have good values and solid growth fundamentals working for them ... the deflation of the bubble markets is actually working in their favor, as retirees and investors seek the once-promised land of properties that are affordable for homeowners and actually cash flow for investors.
(Ed. Note: Justin Ford is the editor of the Main Street Millionaire real estate investment program.)
Today's Action Plan
Justin Ford has made substantial profits investing in real estate in South Florida. Today, he considers South Florida largely a bubble market, though he continues to focus on special-situation, undervalued investments there. But he has also branched out to some of what he calls "The Best Value Cities in America." He and his staff at Main Street Millionaire have just released a report on these cities, including tools to help you evaluate markets all around the country. To learn more, go to:
http://www.isecureonline.com/Reports/700S5CR/E700G356/
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Property Makes Money, Right? – But what Type of Property???
It’s no secret that the list of the world’s wealthiest people is littered with the word ‘property’ to explain how they prospered. A closer look reveals that they concentrated on commercial properties, not residential. What you may not realize is that the solid income and wealth building benefits of commercial property is not “closed to the public.”
That doesn’t mean you have to run out and buy a skyscraper like Donald Trump – the reality is that there are commercial properties available that cost less than residential ones, with higher profit and less risk involved. To learn more about the types of opportunities available to you right now, click here.
http://www.isecureonline.com/Reports/700SODFR/E700G360/
Can a Low-Fat Diet INCREASE Your Risk of Heart Disease?
Yesterday, I told you about the eight-year, $415 million health study which showed that - contrary to what the researchers expected - a "low-fat" diet did not reduce the risk of heart disease or cancer. When the study was published in February, the media gave it some attention. Certainly not the attention they have given the "low-fat diet is healthy" myth over the last 30 years ... but at least they covered it.
But mainstream media sources didn't tell you everything about that study. In fact, they left out a very important finding. They reported that the low-fat diet was useless ... without adding that, in some cases, it was worse than useless. It was potentially life-threatening.
Among the women studied, 3.4% had pre-existing cardiovascular disease. The researchers found that when these women went on the low-fat diet, their relative risk of heart disease (fatal and non-fatal) was increased by 26%!
This is consistent with previous studies in which researchers instructed subjects to reduce their saturated fat intake and replace it with "healthy" omega-6 vegetable oils ... only to discover an increased risk of cardiovascular mortality.
In an article titled Why the Low-Fat Diet Is Stupid and Potentially Dangerous, Australian health researcher Anthony Colpo argues that the focus on cholesterol and saturated fat is costing lives. People are dying because they are not being told about the REAL causes of heart disease: excess omega-6 vegetable oils, elevated insulin and blood sugar, chronic stress, a lack of antioxidants, and a diet of processed foods lacking critical nutrients such as omega-3 fats, magnesium, selenium, zinc, folate, and vitamin D.
Tomorrow ... what you need to know about fat to live long, lean, and healthy.
- Jon Herring
Writing Tip: The "Breath Test"
Are your sentences too wordy? Here's how to find out: Read the sentence aloud. If you run out of breath before you get to the end, the sentence is too long.
The solution: Use a dash (-) or ellipses (...) to break the sentence into two or more parts. Or rewrite it as two or more shorter sentences. Doing so will make your writing livelier, more conversational, and easier to read.
- Bob Bly
[Ed. Note: Bob Bly, a popular Early to Rise columnist, is the editor of ETR's Direct Marketing University - a program to help you start your own successful direct-mail business.]
Dear Michael Masterson: A Question About Being a "Gold Collar Worker"
"In a recent article called 'The Gold Collar Worker' by Brian O'Connell, I saw something that didn't quite mesh with another valuable lesson. I was taught that if you make yourself indispensable in the workplace, you will be. Meaning that if you are highly effective, a hard worker, and take on extra responsibilities, you will be irreplaceable in your current position - and, thus, you will essentially be stuck at that position and pay rate for the rest of your life.
"Could you explain to me, please, how doing more, better and faster than anyone else, could cause an employer to advance a worker instead of thanking the heavens they don't have to pay more for what they already have ... and leaving the worker stuck in a dead-end?"
- Christina Anderson
Springfield, Missouri
Well, Christina, if you know anything about how a business works and grows, you'll understand that only the most foolish of employers would not promote a smart, hardworking person.
Think of a business as a lake fed by many smaller rivers and streams. If you stifle the flow of the rivers, the lake begins to dry up. Every entrepreneur knows that.
To become more successful, you need to learn to be great at the business you are in. You should do that even if you have a boss who's not smart enough to promote you.
When you get really good at your job, one of two things will happen. You will either get promoted (maybe even over the head of your boss) ... or you will get fed up and find a better job with one of your company's competitors (hopefully with the fastest-growing company in your industry) who will recognize your value.
But never let fear of a vindictive or oblivious boss keep you from making yourself indispensable. Becoming smarter, shrewder, and tougher will do you nothing but good.
- Michael Masterson
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I’m The King Of Business Opportunities
I'd have to say the knack for business was born into my bones. Over the years I had dozens of successful ventures.
I look for business opportunities that can be run from a kitchen table, desktop or on the road with a laptop, and still have great profit potential - without the red tape!
Best of all, I make lots of money. And live exactly the way I want to live.
If you're serious about getting out from under the nine to five grind, I'd like to introduce you to the way I've been helping people.
Let me introduce myself:
http://www.isecureonline.com/Reports/PCD/EPCDG304/
Word to the Wise: Contumely
"Contumely" (kon-TYOO-muh-lee) is rudeness compounded by haughtiness and contempt.
Example (as used by Nathaniel Hawthorne in The American Notebooks): "The pedlars find satisfaction for all contumelies in making good bargains."
