The Sky Is NOT Falling!

With all the hoopla about the economy, environment, politics and global unrest in general, it might be easy to get depressed. In fact, recent talks about GM considering a merger with Chrysler resulting in a number of plant closings and over 30,000 jobs lost – one might conclude that Armageddon and the end of the world must be just around the corner.

In fact, many people are pulling their money out of stocks, money markets, and even banks and putting their cash under their mattresses. Not a good idea! In fact, if you’re in the stock market and the value of your account seems to be down about 40% you should probably be doing two things. First, leave your money where it is!! It will come back. The number of shares you purchased is still the same and when the market rebounds, your balance will increase. Second, now is the time to be buying more shares and adding to your portfolio. Look at Warren Buffett, for example.

My friend Dennis, however, has been completely out of the stock market for the past three years. He cannot stomach the roller-coaster ride of the market. Can’t say that I blame him! He’s doing something else. And that’s OK! We all have our own approach to things in life. Be a leader, not a follower. Make your own rules rather than follow everyone else’s.

What is Dennis doing? He’s doing what many of us have chosen to do – invest in real estate! That’s right. Many of us have decided to put our money into something we can see and touch. Something we can analyze in terms we can understand. Everyone needs to live somewhere. Many people like the benefits of home ownership without the long-term commitment to a mortgage. So, these people are perfect candidates to rent a house.

I have been buying houses, fixing them up, and putting renters in them while I hold on and let the housing market recover. My tenants get the benefits of home ownership while I get the benefits of increasing home value (in terms of equity as the mortgage is paid down), tax deductions from my income (interest on the mortgage is tax deductible as well as all the maintenance costs, etc.), monthly income from rents that exceed all my expenses, … you get the idea. Ten years or more down the road, I will be sitting on tons of equity in the properties.

The problem all of us investors run into is the issue of money. There just is not enough of our own personal money to go around and buy up all the properties that are out there. Additionally, there is a limit to how many mortgages (currently it’s 4) any one person can have in their own name. So, the next level investors turn to is private money sources. There are some people out there who choose to invest their money in real estate rather than stocks but they have neither the time or desire to find, buy, fix, and manage properties for themselves. So what do they do? ……

These investors with money and no time or no desire to do the nitty-gritty, use people like me to help them with their investment goals. They basically serve as the bank and fund the investments with their own money while holding a first lien position. This is about as secure an investment there is!

If this sounds like something you would like to be involved in, contact me! I would love to work with you. The opportunities right now are almost unlimited!

The point is this. The sky is not falling. For some, times may seem unbearable difficult. But that is only because this change in circumstances has caught them unprepared! Don’t let this happen to you. Keep learning new skills, keep improving on your communication skills, keep building your network of friends and professional contacts. You never know when you will find yourself making a change. Be prepared. That is the lesson to be learned from today’s newspaper headlines.

Do not be afraid, just be prepared.

A Very Sad Day ...

Saturday, September 20, 2008 was a very, very difficult day for me. I had to make the unfortunate, but correct, choice to surrender my dog, Adam, my cherished companion for the past seven years, to another family in order to ease my daughter’s chronic allergy symptoms. It turns out my daughter has a severe allergic reaction to peanuts, tree nuts, eggs, cats … and yes, her own dog, Adam!

I circulated posters for four days and then I had to pull them down because I received a tremendous outpouring of support from so many people. It was tough to decide who to award custody of my friend but I had to make a decision. Finally, I made my selection. I selected a husband and wife who lived way out in the countryside. They had a 9-year old beagle named Lucy who had just recently lost two companions herself - Snoopy (13) and Cuddles (15). Lucy was home alone all day and seemed very lonely. This, so I thought, ought to be the perfect fit!

A few short hours after a very emotional hand off, I received a call that Adam was really much bigger than they had realized and that it really wouldn’t be the best fit. I had to go back and get Adam and start the drama all over again!

Fortunately, I had a waiting list of caring dog lovers standing in line just waiting for the opportunity to take Adam. I contacted Jennifer and I brought Adam to her and her daughter, Claire.

Claire and Adam hit it off like you wouldn’t believe. The neighborhood is filled with a bunch of other labs and I just knew Adam had found the perfect retirement home. Not only would he be walked every day and get a huge, fenced yard to run in, but he also inherited a summer cottage on Lake Erie that he would be able to roam and swim … I’m a bit jealous!

So, tonight is my first night without my companion. I do hope he is adjusting well to his new home. I’m sure he is -- after all, he is the PERFECT DOG!

Many thanks go out to all of you who circulated flyers and spread the word that Adam needed a new home. This has certainly been a wonderful demonstration of a community filled with caring folks showing love and support to people and pets alike.

Adam will be sorely missed but never forgotten!

Back From California Vacation - Ready To Work!

I am back from a ten day trip to California for a family reunion - both my wife's side and my own. My wife has a lot more family than I, but it was a very, very good time to visit those I haven't seen in thirty years and those whom I have never met. It was a great time of food, family, and fun!

Although it's great to take some time away from the grind of work, work, work ... there is something exciting about returning from that time of refreshing and getting back to the work that brings fulfillment. For me, that is real estate investing!

There are many challenges that I face as a new investor. Some are expected and you work to overcome them. They are the obvious things like negotiating with the bank for the greatest price discounts so that your numbers "work", getting bids from a variety of new contractor sources until establishing your "inner circle" of trusted vendors and contractors, networking with like-minded investors to build relationships and potential business deals, etc. But these are the known and expected challenges that we face as investors with every business transaction. I'm talking about unexpected challenges like the two I have faced recently. For example, as you know from my previous posts, I am working for the most economical solution for the repair and maintenance of the steel windows in my project in historic Rosedale Park - a beautiful neighborhood located in the north-west portion of the city of Detroit. I made the mistake of purchasing this home without knowing that the area had been designated historic just three years before. Shame on me! But I will overcome the challenge and move on.

Another challenge has popped up today. My project in Mt. Clemens is coming along just grand! (pun - it's located at 125 Grand Ave. in Mt. Clemens) The exterior work is almost complete (a few minor details remain) and now the interior work is well underway. The rough plumbing is being done but the water department didn't want to turn on the water until the supply line was pressure tested. Sure enough - it failed the test indicating that there is a likely break in the supply line under ground between the street and the meter in the basement.

CAN'T I CATCH A BREAK?!

Fortunately, this is likely the only "surprise" I am to encounter as this is mostly a straight forward rehab. I am waiting to hear from the plumber what the proposed cost will be to dig up the line and replace it. I have some room in my budget for contingencies, but not a huge amount. I'll wait for the quote before making any decisions on what adjustments to make elsewhere.

With regard to the above question - can't I catch a break? - the answer came just today a few hours later. My current (and only) tenant called me today to ask if I had anything available for a friend who needs a place to rent. It's quite possible I may have a renter for this property well before I have it renovated and ready for occupancy. That would be awesome if it can work out. I look forward to talking with this person to see what their need is. I'll do my best to help.

So may vacation is over and, in two short days I am back into the thick of things right up to my neck - just the way I like it! (Feel the rush?)