Greetings from the metropolis of Cedar Crest, NM.

My ten year old son, Colt, loves football.  Colt’s football season came to an end this past weekend and he was devastated.   In an effort to pick up his spirits, I promised him that we would practice basketball this coming Monday.  My words of basketball did not keep the tears back….but he did realize that a new season of basketball was just around the corner.  Colt knew football would come to an end….just did not realize how quickly the last day would come….but we all knew it would come.

No truth in politics and YES…..that includes the politicians

As we go through this very difficult economic season, we hear the cries and shouts from all corners of the class ladder.  Turn on the TV or any AM radio station and you will hear the desperate voices…complaining and blaming.  With every complaint and every tear….there is a politician ready to listen and ready to wipe the tears.  But we all know there is no truth in politics…no matter what party you follow.  So when I see the bumper sticker with the face of a politician and the word “HOPE”….I laugh to myself.  Hope where there is no truth….how foolish are we?

We told you so…..

But….underneath the media stories and the political ads lies a small group of individuals that saw this coming.  These individuals are not all on the same page and do not all agree with each other…BUT…they saw it coming. I am not saying these people saw it coming a year ago or two years ago….but some saw it several years ago and some saw it decades ago.

These sophisticated and not so sophisticated individuals wrote articles and books of what is to come.  Others just created websites of the coming gloom and doom.  There were those that studied the cycles and based on history, predicted this economic down turn.  There were others that studied conspiracy theories going back hundreds of years ago.

No matter how they came to the same conclusion…..they all saw it coming.

The “I told you so” group

There are a handful of “I told you so” prognosticators.  Most of the have to do with the stock market, a few with real estate, the others with the banking system.  But if you are interested….here is how I started down this path…..

1) Prophecy by Robert Kiyosaki. Like most of you, as a budding entreprenuer, I started out with the series of Robert Kiyosaki books.  Rich Dad, Poor Dad got me thinking differently.  Robert’s book Prophecy…just got me thinking.  Mostly about stocks and retirement funds, the discussion on cycles was very intriguing to me.

2) The Next Great Bubble Boom by Harry S. Dent.  Again…mostly about stocks….but real estate is also mentioned.  This book freaked me out…a little.  But….Harry is almost on the money….so now it freaks me out a lot!  I think it is worth a read…I will probably read it again.

3) The Pirates of Manhattan by Barry J. Dykes.  This is a newer book but worth a read.  A little on the conspiracy theory (okay…a lot) but very interesting and a bit demoralizing.  If that hopelessness feeling does not hit you with this book…the next one might do it.

4) The Creature from Jekyll Island by G. Edward Griffin is the “king” of all conspiracy theory books I have come across regarding the banking system.  This is a great book if you want to understand banking system from it’s roots….but this is a text book…not an easy read…but the conspiracy stuff reads like a novel.  Per Griffin….everything that is happening today was part of a plan devised in early nineteen hundreds.  Griffin wrote this in the early 90’s.  To give you a better feel for the book…Congressman Ron Paul endorses it.

Did we not all see it coming?

We all knew the end was coming….but did we just choose to ignore it?  In some cases, I knew it was coming and took action.  In other cases….I ignored what was coming and I may possibly pay for it.  Either way….we are all going to pay for it….right?

Until next time….rob

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Tags: banking, collapse, Economy, meltdown, mortgage meltdown

Greetings from the metropolis of Cedar Crest, NM.  Where my weekends are filled with  youth football, soccer…and then some.  As I yell at my boys from the sidelines to hustle and tackle and kick….the number 700 billion creeps into the forefront of my mind.  What in the heck is 700 billion?

What can one say about 700 Billion?

 
What does that number mean?  I cannot even fathom seven hundred billion.  I am used to using such a label on the number of stars in a constellation (I am sure I am off a billion or so).  How about the number of grains in a sand pile.   How about how old the earth is (okay…I am exaggerating now…right?)  How about the number of cells in one’s body?

Next question is …how does someone come up with the number “700 billion” as the magic number to bailout our financial institutions?

Am I the only one that finds that odd…? “Oh….700 billion should do the job!”  What is the bank failure formula?

Either way…something must be done….right?  Either way….we are going to pay for it right?  By the time this blog is posted….congressional leaders will have approved a bailout plan of some sort….at least some of us hope so.

I am not sure where I stand on this….and I realize that it does not matter.  But what I do know is there will be a lot of opportunity for those who prepared for this.  Everyone else will be in survival mode.

What is the truth?

The urgency of our congressional leaders to act was strongly worded by Bernanke during a commercial break at the most recent congressional testimony……..

“Senators, we live in a world that has bonds and bad construction loans and those assets need to be bought by men and women with balance sheets. Who’s going to do it - you, Chairman Dodd? You, Senator Schumer? I have a greater responsibility than you can’t possibly fathom. You weep for Bear Sterns and curse the banks just trying to get their collateral; you have that luxury. You have the luxury of not knowing what I know: that Lehman’s bankruptcy, while tragic, probably saved firms and that my existence, while grotesque and incomprehensible to you, saves markets. You don’t want the truth, because deep down in places you don’t talk about at parties, you want me buying assets - you need me buying assets. We use words like “foreclosure,” “Discount Window” and “TARP.” We use them as the backbone of a life trying to defend something. You use them as a punch line. I have neither the time nor the inclination to explain myself to a group of media hungry politicians who rise and sleep under the blanket of the very liquidity I provide and then question the manner in which I provide it. I would rather you just said “thank you,” and went on your way. Otherwise, I suggest that you purchase a defaulted option arm and pay par. Either way, I don’t give a dang what you think the American taxpayer is entitled to.”

Well….700 Billion seems to be the magic number NOW……unfortunately….there will probably be another magic number in the near future.

Until next time…..rob

Photo Courtesy: Jakerome - No way, no how, no bailout.

Tags: $700 billion, bailout, bailout bill, bank, banking, mortgage bailout

Greetings from the metropolis of Cedar Crest, NM. Wow….It feels good to be back!

It has been a long six weeks for me.  You see, six weeks ago, I returned from Maui Mastermind and came down with the flu…then pneumonia.  Not only was I stuck in bed but I was also hooked up to an oxygen machine.   It was definitely a humbling experience.  But it did get me thinking…..

During my time in bed….I did not do anything.  Fading in and out of consciousness and long hours of really bad daytime TV….In my long absence….my businesses continued to run without me.  How could this be?  How could the businesses that I spent that last seven years building, run without me?  How did they not LOSE money while I spent weeks coughing, vomiting, and hallucinating?   Well….It was all intentional….it was all planned.  The plan five ago was to make my business a “level three buiness.”

You see, five years ago, I learned about a concept of a “level three business”.  I remember attending the very first Maui Mastermind, where a speaker, Curtis Oakes, said a statement that I would never forget.  “My weekdays are my weekends, and my weekends are my holidays.” Curtis had built a successful business that ran without him.  At least, that I how I understood it.  When I heard Curtis Oakes say that magical phrase….I knew what I needed to do.  I needed to figure out how to make my businesses run without me.

So what is a “level three business”?

 
Well….it is a business that runs without you.  But, not only does it run…but it grows without you. At the same time, you can

So…..

How was I going to take myself out of the the day-to-day operations without driving my business into the ground?  Well needless to say, it was very difficult and there was no magic bullet (no matter what others tell you).  And still, to be honest, there is a lot of room for improvement. But….here are three big areas that I concentrated heavily to make the transition to a level three business (there are a lot more but…give you a good idea):

1)  Technology - Automation of several of the business processes was a priority.  Identifying the processes and implementing the correct technology was key.  Technology not only allowed for consistancy but also allowed for “easier” business management overall.  A big “plus” is the right technology is easily leveraged for other areas of the business.  For example, one of my companies is a commercial property management company.  We implemented Yardi Voyager (web-based property management software) in order to not only help on the management and accounting side but also to assist on the asset management side (more on asset management below)  This was a huge financial and time investment…and loaded with mishaps….but I can look back as say it was well worth it.

2) Outsourcing - We looked at all business areas to identify what could be outsourced.   Many areas were outsourced.  For example, our human resource department (including payroll and benefits) was outsourced to a Professional Employee Leasing company (Trinet).

3) Asset Management - Implementing  Asset Management  (True North Asset Management) was probably the most helpful in transitioning to a level three business.  I never heard of Asset Management before.  But asset management is a power concept of “managing the manager.”  I deal with one person who is managing all the property management companies that manage my properties (including my property management company)  different parts of the country.

Tags: business, entities, real estate business, running your business, structures

Greetings from a jam-packed airplane headed North. I am on my way to go Walleye fishing in South Dakota. I am not an avid fisherman by any means and I have no idea how to fish for Walleye….but off I go to make new friends and to reconnect with another.

Anyways….

As some of you know, I have been working on refinancing my shopping center for almost a year now….and guess what? We closed!!! As my attorney, Jay, said…”…what an ordeal.” An ugly ordeal it was….thankfully with a happy ending due to the work of my mortgage broker(s).

I have three strong (at least I think) relationships in the commercial mortgage business. Not only are they my friends but they are amazing at what they do. I consider them the best in the industry.

1. Brandon Haddon @ Omni Credit in Denver, CO
2. Scott Nelson and Karla Lyngvar @ Lyngvar Financial in Sacramento, CA
3. Terry Painter @ The Business Loan Store in Milford, OR

I now use all three in every deal I do. “How so?” you ask….well….let me explain.

The subject is an eighty-three thousand square ft, class C, retail shopping center located in West, TX. Solid cash flow, solid tenants, great history, great city, etc…. but there were a few issues:

1. Environmental Reports were not conclusive
2. Lease terms for credit tenants were up for renewal in the next few years
3. Loan needed to be defeased
4. A weak economy and tight credit (and getting tighter)
5. and on and on….

I started with Brandon Haddon at Omni Credit first. Brandon had pulled off a miracle the year before by refinancing my mobile home park which I acquired via a lease option. Many mortgage lenders, including Terry from The Business Loan Store said I could not do the deal without me having to put 20% down….and I could not pull cash out. Brandon was able to do the deal for me. Not only was it a no money down deal…I was also able to pull cash out… a no money down commercial real estate!

Now….the shopping center was a difficult deal for several reasons but the first hurdle was the environmental report. Many moons ago…there was a gas station on the premise. The gas station and the underground gas tanks are long gone. BUT…the tanks at one time leaked. Now, to understand the problem fully, the property where the gas station once stood was not part of the shopping center and not part of the loan…but because it was an adjacent property, the lenders had concern. This issue caused my first mortgage broker (Brandon) to fall off. I felt that Phase One environmental report would suffice and that a Phase Two was not needed…and I stuck to my guns. But the lender Brandon was working with (Union Bank of California…which screwed me once before via another mortgage broker) felt that a Phase Two was needed….even though, at one time, they were fine with the Phase One report (go figure).

Next…I decided to “two fist it” and go to both Scott/Karla @ Lyngvar Financial and Terry Painter @ Business Loan Store. Karla and Scott felt that I would need to do a Phase Two. Terry on the other hand thought I had a good chance of avoiding the Phase Two. So I went with Terry.

Now, I have dealt with Karla and Scott on a personal level….and they came through on a big way later in the process.

So…Terry and his right hand, Sarah, went to work. There were so many issues (the list above) but Terry was able to get me a lender commitment on the property. This was a huge accomplishment because Terry was able to bypass the need for a Phase Two as well as manage the lender regarding the changes in the economy and the impact on the rates. Not to mention dealing with the defeasance.

Now, when I got the commitment, I sent it to Scott at Lyngvar financial to see what he thought. Scott said “Rob, I would love to do this deal for you but I cannot beat this commitment. You are getting the best terms in the market. I cannot even come close.” Wow….at that very moment, I knew that I was going to add Scott to my commercial mortgage team. Integrity in the mortgage business is hard to find…..as if you don’t already know that.

I needed Brandon, Terry, and Scott to get this refinance done. Even though only one mortgage broker was able to close the deal, they all played a huge role.

“Okay Rob…so what?”

Well….having different mortgage lenders in your corner is crucial. Mortgage brokers have relationships with different lenders. Just because one lender cannot do a deal does not mean that all lenders cannot do the deal. Even when it comes to environmental issues, terms, market conditions, etc., different lenders handle issues differently.

Also, having mortgage brokers that you trust will go a long way in avoiding losing money and time. Have a resource you can trust to confirm if you have a good loan commitment or not is a HUGE plus.

I have been burned by several brokers in the past that I have contacted through forums or newsletters (I have never had a good experience). I have always lost money and or time dealing with people that I do not have a relationship with. But I have had great success from those recommended to me. I met Terry at a commercial real estate seminar that we both spoke at. I met Brandon through a friend of mine that highly recommended him. I met Karla through a friend while I was in Sacramento. I highly recommend all three of them.

I am very thankful for Brandon, Karla, and Terry for helping me get through this “ordeal.”

Until next time……rob

Tags: commercial loan, commercial mortgage, Commercial Real Estate, lending, Mortgages

Recently somebody said, “Hey, you lost weight,” and I said, “Yeah, thirty-five pounds and three and a half billion dollars.” So I’m quite a bit lighter and more flexible than I was.” - John Malone

Greetings from the metropolis of Cedar Crest, NM.

Friday evening, I was watching CNBC when the news broke out about the IndyMac Bank seizure. I was in shock. I just got to a peaceful place….well…not really peaceful…but a place of “acceptance” (for a lack of a better word) in regards to the unavoidable bailout of Freddie Mac and Fanny Mae. Now this?

Doing some quick research, this is the FIFTH FDIC failure of the year. Fifth!!! And guess what….we are not done. Based on what the experts are saying (…just pick one of your favorites), not only has the “fat lady” not started to sing yet….from my understanding….there are a lot of fat ladies and they all have a lot of singing to do.

Although this was expected (not specifically IndyMac but obviously Freddie and Fanny), the reality of it all is still surprising. I guess it is still surreal to me.

I have written a lot in my own blog about how to invest in a tumultuous economy….so I was very aware of the prognostications by many experts regarding the future of the economy. One particular opinion stood out….Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University’s Stern School of Business.

Back in February, I wrote a post that discussed Glenn Beck’s “DEFCONOMY” scale regarding the “worst-case scenario” forecast of the economy. This DEFCONOMY scale is based on Nouriel Roubini’ s “twelve steps to financial disaster.”

Based on Beck’s DEFCONOMY definitions….I think we have met the requirements of DEFCONOMY 3….and well into DEFCONOMY 2. According to Roubini, in DEFCONOMY 2, we will see “Most forms of credit become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.”  Roubini also states that “…credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.”

Now…DEFCONOMY 1….according to Roubini is “A full economic meltdown.”  In other words, “The Great Depression has arrived.”

I doubt DEFCONOMY will ever materialize.  Too much has to happen…..but then again….what do I know?

There is my “feel-good” article for the week…..until next time……rob

Tags: Credit, Economy, federal reserve, housing, real estate, Real Estate Market

“BOOM!  Here comes the BOOM….ready or not!” - from the song Boom by P.O.D.

Greetings from the Metropolis of Cedar Crest, New Mexico!

With a torn achillies tendon, I hobbled my way into the gym and turned up my Ipod.  The song Boom by P.O.D. (one of the best workout songs there is) came on and I started to tear it up…pain and all.   Pull ups, bench press, back rows……..Arrggh!

I hate working out…but I have a body type that if I do not workout I will ballon.  Bad memories of being called “fat tard” back in the sixth grade start to infiltrate my mind when I move up pant sizes.

Anyway…..

After my workout, I sat on a bench and listened to the song again…..and I started thinking real estate.  “Boom…here comes the Boom…ready or not!” The chorus continued to repeat itself in my mind..and I  thought long and hard about all the articles and books I have read in the past about what is to come in the Real Estate Market.  Unfortunately, the “boom” is not in regards to “good times”…but…bad times for most…and opportunistic times for the smart investor.

One thought that sticks in my mind is what I read in Harry S. Dent’s April 2008 newsletter “….due to the fact that we have three major concurrent bubbles - stocks, real estate, and commodities - all unwinding in a similar time frame within a global economy with very different demographic and bubble trends.  The last time all three major assets cycles peaked was the crash from 1835 to 1843, which led to the depression of the early 1840s”  (there is a lot more to the report….but this caught my eye and my simple mind).  Interesting huh?

“Obviously things are not going well.” - Captain Obvious

So….assuming things are going to get worse (which they are) and assuming real estate values you are going to plummet (which they are).  Also assume that gas prices go up (which they will) and the population starts to hoard it’s money (economics 101). One more thing….assume we are heading into what most experts agree…deflation.  Now the questions are….what is a real estate investor to do?  Is it too late?

What do the experts say?

Well… here are three schools of thought (there are hundreds more…but who would read all that?) that come from a range of so called experts (Harry S. Dent, Robert Kiyosaki, Nouriel Roubini,  Robert Prechter, and  John Williams) and they all have to do with the philosophy that “cash is king” (This is how I interpreted the information and by no means should you think that I interpreted the information correctly…do your own research please):

1. Raise as much cash as possible via LOC (lines of credit…if you can get one), HELOC (Home Equity Line of Credit…if you can get one)…then hold on.  Be a scavenger and cherry pick deals as they come up.  My feeling is you will not see the “cherries” until early next year.  Remember…when the market hits bottom…here is where you will make your money….on the purchase…and you will be ready if you have cash.
2. Sell everything….and hold on to your cash.  Same as number one…but with the thought that if you sell now, most experts believe you can buy it back at 40 - 50 cents on the dollar in the future.  Holy cow!
3. Sell your non-cash flowing properties (i.e. land) and under performing assets now (if you have a buyer).  Also sell your A and B properties.  Hold on to properties that serve lower income populations.  The thought process here is that class “C” apartments, mobile home parks, and retail shopping centers (retail that caters to lower income populations) will provide nice cash flow and probably over perform (if you purchased right) in the coming years.

Smart investors make their money in good markets and in bad ones……which one will you be?  Only time will tell.

OH…..I would love to hear what you are doing to prepare.  If you are not…I want to hear from you anyway..so please comment….

Until next time…..rob

Tags: cash, cashflow cash flow, depression, Economy, finance, Harry S. Dent, heloc, investor, real estate, Real Estate Investing, recession

Greetings from the metropolis of Cedar Crest, New Mexico!

I just got back from a fun filled week with my youth group in Durango, CO. I (and three other adult sponsors) took twenty one high schoolers to a C.I.Y. conference hosted at the Fort Lewis College campus. We joined over a thousand other kids for a fun filled week of God, music, learning and shenanigans. It was a blast. I love young adults….their energy…their boldness….their idealism….and yes…their practical jokes.

The events included river rafting, ultimate frisbee, basketball and games that encouraged projectile vomit. Entertainment at it’s best! My guess is that BiggerPockets.com will not allow me to show the vomit pictures…but below is a river rafting picture with me and some of the gang. I am the old guy…but not the real old guy (the guide at the back of the raft)

Anyway….

Overcoming the Moron Label

When I write….I try to have a deeper meaning with my topics and I try to go beyond the “how to…..” articles. Not because those articles are not important, they are. But because I feel that being an entrepreneur is more of an art than a “how to.” Like being an artist….being an entrepreneur usually looks/sounds silly to others until you are successful….then everyone calls you a genius and wants to know your secret. But…until you are labeled a genius….you are labeled a moron. If you never become a success….chances are the “moron” label will stick.

When I first started investing in real estate….like many of you, it started with a book. Then I went to a boot camp. Three or four day of intense instruction, a certificate and a hug at the end….and off I went…into the harsh reality of real estate investing.

When I came back from the boot camp, I told friends and family with bursting excitement of my new career as a real estate investor. As you can imagine….it was received as if I had told them “I was abducted by aliens….an oh…by the way…I am now an Amway distributer.” If that was not enough….having to explain to them that I did not need any money to buy real estate because I learned how to buy with no money down….gave me the label of MORON.

Now….years later….I no longer wear the label “moron” (ex-girlfriends and in-laws excluded)….well…at least I think. After accumulating residential real estate and then commercial real estate….the “moron” label dropped and now I was being asked “Rob…what is your secret.” Well….here is the secret(s)….

1) Don’t buy the book The Secret….it’s crap and you know it (let the hate mail begin). Blasting the book, The Secret, gave me tons of traffic on my blog…so I like to throw it in there every now and then.

2) Go deaf! Yes….hopefully you are still reading after my #1 secret. But the ability to not listen to your critics (friends and family especially) is by far the most important. For some reason, I did not give the words of my critics any value. I was so convinced that I was doing the right thing that…I became “verbally bullet proof.” Which is a blessing. My mind was on a mission….and nothing could distract me. I am not sure how I was able to do that….but the “burning why” (I did not want to get a job) was there and I ignored everyone….except my mentors.

3) Wear Blinders. Most entrepreneurs have A.D.D. (Attention Deficit Disorder). I am not sure if that is a fact…but I heard it somewhere (credibility at it’s best). So….I am going to assume that most entrepreneurs have a hard time staying focused. Whew….I sure did. When I started investing, I was approached by so many different opportunities that I tried to do it all. From real estate software to international investing to multi-level marketing. All good opportunities…but they were not in my business plan….so I said no to temptation and continued on. What a great decision. Staying focused and being blind to other opportunities kept me in the game.

I think business plans are a requirement not just for goals and objectives…but to help screen out opportunities that may take you away from what you are trying to accomplish.

So…..here is to all the geniuses out there….wear your label well!

Until Next time…..rob

Tags: business plan, goal-setting, real estate, real estate business plan, real estate goals, real estate investing