Believe What’s Being Sold – OR – Believe Your Lyin’ Eyes

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Show of hands, how many of you believe we’re in a general economic recovery as touted by the vast majority of news media? When Mom told you it wasn’t terrible goin’ to the senior prom with your weird cousin, did you believe her too? Or, did you believe what you knew were the facts — and by facts I mean empirically understood reality taken in the context of real time?

Unemployment is currently up to just over 9%, or that’s what they’re admitting to. We all know government doesn’t count groups of people who are, you know, unemployed. Many economists believe the actual number is closer to twice what’s published as ‘official’. The same goes for real estate’s current status.

The so-called accepted explanation for the most recent downturn in real estate values across the country is a double-dip. Ya gotta be kiddin’ me. If your 10 year old can’t swim, keeps sinking, you don’t put them in the deep end, right? But then your helpful neighbor brings over some floaties that little Timmy can wear around his arms, and voilà! he’s not sinking. Yet sans the artificial buoyancy Timmy just ain’t gonna float. Oops, there he goes.

Same thing with the government’s tax credit and it’s end. The downward spiral in prices ended in many markets as long as many of the buyers were armed with the GI floatation device. I’ll let the obvious result since then speak for itself.

The Point?

The markets are still headin’ south cuz the factors in play before the floaties were made available remain in full force today, sans artificial assistance. Banks still warehouse way too many foreclosed properties. Then there’s the foreclosure pipeline which is equally well represented from 30-120 day ‘lates’. Those properties will all do their part to drag most local markets’ median price down.

We’re not in a double-dip. It’s the same one that originally kicked us in the shins, and keeps kickin’. This, in my opinion, will continue till we stop playin’ musical chairs and get rid of the bad loans on the banks’ books once and for all. Duh. Don’t know about you, but I just can’t see this happening any sooner than summerish of 2013. In fact I’m not real confident in that timing.

This is all good for real estate investors.

There are markets, just a few, where closed sales prices, including the loan appraisals haven’t dropped in the last three years or so, regardless of the macro economic realities elsewhere. The price/rent ratios are straight out of a 1959 real estate investment text book. Many of  of the locations are where you’d put your 80 year old mom (grandma?) to live alone. The icing on this wonderful investor cake is the macro economics in some of the regions — the core beliefs and attitudes towards capital and investors from state government on down.

Add to all that interest rates at the 5% level, and what you get is the ability to enjoy floating in the deep end of the pool without any artificial aids whatsoever. These investments, in this economic atmosphere are thriving magnificently. Imagine how they’ll fare in normal to relatively good times.

Lookin’ back several years from now — thoughts to ponder.

  • If you now own in markets that are down, i.e. most of the midwest, Florida, Vegas, and many others, don’t despair. Get out now if you can. Move your equity to where you and your capital are welcomed, not punished.
  • If you’re a first time investor, what on earth are ya waitin’ for, your guardian angel to tap you on the shoulder? This is the perfect storm. I’ve literally not experienced an investment opportunity like this one in my nearly 42 years in the business. Stop gettin’ ready to get ready and do it.
  • Five years from now guys like me are gonna be hearin’ the same buncha lamentations we heard when similar, but far inferior opportunities have been passed up. “Man, I coulda” . . . on and on. I’ve heard those regrets three different times already.
  • This market will literally be a game changer for thousands of families’ ultimate retirement reality. If they proceed with a Plan, and solid expertise/experience at their side, the retirement income on which they’ll live will be 50-500% higher than if they stay their current course.

Here’s an example from today — as in this morning.

A client called me, wondering about the timing and capital distribution of the Purposeful Plan I’d set up for him. We’ve already put some of it in play. The details aren’t important now, but the context of his question is eyeopening.

The question was centered around how to best create the end game goal of retirement income when we’re were balancing two separate strategies, using them synergistically. Again, the actual question isn’t important. The assumption in his question is all important.

He’d just realized, maybe to the extent of an epiphany, that just half of what he was doing was gonna generate a minimum six figure retirement cash flow — after tax.

Now, it’s not that we hadn’t cussed and discussed that very fact multiple times, or that he didn’t completely understand the concepts and strategies involved. He did, as he’s an exceptionally bright individual, not to mention that this ain’t his first rodeo. He was more successful than most of his peers before he knew of my existence.

But I strongly suspect this is the first time he’s accepted the new reality that just a portion of his new Plan will literally generate over $100,000 a year — after tax — when he decides to retire. It’s not a stretch to say his outlook when executing his plan for retirement has changed dramatically — and he was already walkin’ his talk admirably.

It’s not a dream any longer. It’s not a hope. It’s gonna happen. When folks understand that as real, their thinkin’ changes big time. It’s fun to watch.

He won’t be kickin’ himself 5, 10, 20 years down the road for not creating a viable and comprehensive Plan or in not executing it.

Floaties? He don’t need no dang floaties! 🙂

Photo: Eden, Janine, & Jim

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.

4 Comments

  1. A wonderful look and overview at where the real estate market is. I’ve often discussed the market with my USA agents, and you’ve pretty much hit all the points spot on. There’s great opportunity out there for real estate investments.

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