The Best Of Times Or The Worst? You Decide!

Posted on March 31, 2010 by Mary Nack

I am a big Robert Kiyosaki fan ( of “Rich Dad, Poor Dad” fame). One of the things Kiyosaki really harps on is that – rather than focus on income (i.e. getting a job, a salary, etc), focus instead on acquiring assets that will generate income. He says that if you invest in things that produce cash flow (income), then you don’t need to worry about what the value of the asset is doing. SO TRUE!!

The one asset that I have been able to keep through the ups and downs of this economy has been my parking space downtown. I bought it through my retirement plan in Dec ’03. I had a mutual fund that I cashed in and I used the money to buy the parking spot. The mutual fund had done pretty well – it was heavy in technology stocks and technology had done very well while I owned it. But technology crashed and so did my fund – so I decided it was time to do something different with it. Now I own a parking space free and clear through a self-directed SEP-IRA.

I wish I had bought a few more spaces!! It is been such a great investment! Even in this economy, it’s worth about 50% more than what I paid for it. I’ve had it for a little more than 6 years. Not a bad ROI - particularly when you consider that most people’s real estate is DOWN 25% – 30% in that time frame! Now, mind you, there’s no chance of retiring on the income. However, I’ve kept about 1/2 the rent checks this past year instead of putting them back into the fund to help out with my OTHER negative cash flow areas. (I like to keep a buffer in the fund to cover expenses in case I sit empty without a tenant for awhile.)

About 2 years ago, because of the poor market and resulting losses in my brokerage business, I decided to convert the asset from a conventional IRA to a ROTH IRA. That sucked up my cash reserves. I had to pay a 10% penalty to withdraw the asset out of the conventional ROTH. However, I ended up getting all that money back (as I said, due to the heavy losses in my brokerage business.) And what’s WAY cool is I was able to do all that just from the income that the space generated. And now, with the conversion to a ROTH IRA, I have an asset that I can eventually sell or withdraw income from and not owe any taxes on! So I am very pleased with that outcome!

In “Rich Dad, Poor Dad”, Kiyosaki said that your home is a liability. At the time (10 years ago?), it seemed to be quite an outrageous statement. People were quite upset about it (including me). He’s not against people owning their home – he just says that people are confused if they think their home is an asset. Your home is a place to LIVE. A home doesn’t generate income the way my parking space does - it generates EXPENSES! Well, with 10 years’ of hindsight, it’s pretty clear that Kiyosaki wasn’t so crazy. That’s why people are losing their homes - they can’t afford to meet the expenses of owning it!! Now – granted – you have to spend money to live SOMEWHERE…it may as well be in something that you own. But to think of something that costs money rather than pays you money as an asset… well, Kiyosaki would say that you don’t understand the definition of “asset”.

In one of Kiyosaki’s lastest books: ”Conspiracy of the Rich”, he compares his lifestyle with that of a high school buddy. The buddy and his wife have high paying jobs and good salaries. They focused on generating income through having good jobs. Instead, Kiyosaki and his wife focused on generating income through owning assets that create cash flow (i.e. income). And 30 – 40 years later, they are sitting in very different places. Kiyosaki went through some rough patches to get to where he is – but today, he is financially free. He doesn’t need to worry about retirement or losing his job or not having income. He is set for life – and beyond! When I read that, my thought was:

“I need to start figuring out ways I can generate more income-producing assets like my parking space!”

One final Kiyosaki thought: this can either be the best of times or the worst of times. How you approach it and what you do about it is what will determine which one it is for you. From my perspective of being in real estate for 30 years, I have not seen a better time to buy income-producing assets. These are not just limited to real estate – that just happens to be the one I know the most about. Let me know if I can be of help!

“To Your Success!”
mary!

For more information on how you can profit from the current real estate market, download my free report now! >>>>>

3/30/10: Trulia Question Of The Day

Posted on March 30, 2010 by Mary Nack

How can I find an agent experienced in dealing with foreclosed, bank-owned properties?

Asked Fri Mar 19 2010, 15:14 by Beth - Foreclosure in Chicago

Mary Nack answered:

Dealing with the agent whose primary business is listing REO’s, on the surface, would seem like the best agent for a buyer to work with. However, those agents tend to focus their business on LISTING the properties and working with lenders rather than working with the buyers interested in purchasing them. Often times, they simply don’t have TIME to return a phone call – from ANYONE (though I’m sure they talk to their lenders all day long) – not even a bona fide buyer.

This is not meant to find fault with them. Those agents are drowning in paperwork. That business is all about volume. They simply do not have the time to spend with buyers. Just so you know, I had put a call into an REO listing agent 2-3 days ago – and wrote him an email (his voice mail said that was a better way to contact him). He finally called me back last night at 10:15 to talk to me! Which, frankly, was impressive. The poor guy is clearly working 80 hour weeks.

If you like your agent, give them a chance. They may be learning along with you about REO’s. We ALL are! I know 5 years ago, I really didn’t have a CLUE about this side of the business – and I have been in real estate for 30 years!

Hang in there. There are LOTS of opportunities for you to jump into the foreclosure fray. Don’t get your heart set on just one property. Keep your options open. You’ll find the right property. Just be patient.

mary! – Fri Mar 19 2010, 16:49

3/26/10: Today’s Trulia Question

Posted on March 26, 2010 by Mary Nack

Asked by A. Martinez – A Home Seller In Chicago:

“I own multiple properties and two of them were cited with violations such as the need to replace the porch in both buildings and a possible deconversion. These repairs will be way too costly for me and may not be a able to afford the repairs and possible deconversion. What are my options?”

Mary Answered:
If you are upside down on your loans and have no equity in the properties, then you will have to pursue a short sale. It’s probably best just to dump them as quickly as possible rather than throw good money after bad.

A. Martinez replied:

Hi Mary, thanks for your response to my question regarding my two properties that were cited with building violations. I saw your response that indicated that it’s probably best to dump the buildings vs. throwing good money after bad money. I have been really considering this option as I am upside down on both of my mortgages but it’s a very difficult decision to make being that I have excellent credit and it would break me emotionally to see my credit go down the drain. I want to see if I can buy time from the city in order to make all the necessary repairs. When I bought these properties they were meant to be sold at the time I retire for income and I never thought I would be dealing with this issue now.Thanks so much for your guidance.

Mary Responded:

Hi Alicia,
You know, after I wrote that answer, I felt badly that perhaps I was too harsh. I confess to having a lot of exactly these types of hard conversations nowadays with sellers. So the first thing I want you to know is that you are by no means the only one who has gotten caught in this nightmare – not by a long shot!!

I know you’ve worked hard to build an excellent credit score - and the fact that you are concerned about it tells me that you are a good person just trying to do the right thing. Selling your buildings “short” will unquestionably give you a ding that will take a few years to straighten out. However, a short sale is a much better solution – and much less of a hit on your credit – than a foreclosure or simply ”mailing the keys back” to the lender. (See my blog post “Should You Strategically Default On Your Mortgage“). And if it’s a matter of having money to retire on vs. a lower credit score… Well, to me, anyway, the choice is pretty clear: you need to be able to have money for retirement. You need to be able to keep a roof over your head and food on your table. And those things are much more important than your credit score.

The next thing you need to know is that your lender will not even CONSIDER negotiating a short sale with you as long as your are current with your payments. You will need to be at least 3 months in arrears before they even consider you a problem.

As for the city, I am not such an expert on violations – but I’m pretty sure it would be a big mistake to ignore them. You probably need to go to court, talk to the judge and let him know your situation. As I said, by no means are you alone in this predicament and I’m sure the judge has heard this many, many times.

“I Do Well When YOU Do Well!”
mary!

3/25/10: Today’s Trulia Question

Posted on March 25, 2010 by Mary Nack

Q: Should I just offer my highest offer on a Fannie Mae owned property because Fannie Mae doesn’t seem to negotiate much. Should I submit same offer amount each month?

Asked by Lucky - Home Buying in Chicago

Mary Answered:

I work with investors that buy REO’s. What is typically done is you figure out what you are willing to pay for the property and then offer it. If it buys the property, great. If not, you just move on to the next one. From an investor’s standpoint, there is so much inventory there is no shortage of deals to be found (and made) – so you should never pay more than what you think makes sense. And you shouldn’t get too hung up on any one particular deal. You may need to make several offers before you get one accepted.

My experience has been that the banks don’t typically negotiate – they either accept the offer or reject it. Also, they will typically only look at cash offers – particularly if the property is in bad condition. I had one client make an offer on the property with 30% down. The lender accepted a cash offer for $30,000 less than his! The lender wants to know it’s a ‘done deal’.

The lender will also require “proof of funds” – meaning they want some evidence that you actually have the cash – i.e. copy of bank statements or brokerage account statement.

Hope that helps.

“To Your Success”
mary!

Investing In Capital Gains Is Gambling

Posted on March 25, 2010 by Mary Nack

Wednesday
March 26, 2010

This morning, I was re-reading Roberty Kiyosaki’s (“Rich Dad, Poor Dad”) book Conspiracy Of The Rich. At one point in the book, he makes the statement that when you invest in capital gains, you are actually gambling – gambling that prices will go up. Because if prices go down, you loose your investment.

5 years ago that statement would have been difficult to grasp. However, in today’s environment, it is clear: real estate prices do NOT always go up! And although he does not limit his statement just to real estate, it is probably the easiest example to point to in today’s economy.

In real estate terms, investing in capital gains is “flipping” – buying low, fixing a property up a bit and selling high. I know several investors that are doing very well these days “flipping” foreclosures – and it is a formula I have taught both in my case studies (click here now to see those) and in my live teleseminars. You can even find my “Investment Formula For Success” in my free report “High Yield Returns In Wholesale Real Estate” available by filling in the form to the right >>>>.

However, Robert Kiyosaki warns against “flipping”. And he is not wrong. The SAFEST way to invest is to invest in cash flow. Now, any investment carries with it a certain degree of risk. But then life itself carries with it a certain amount of risk! As Mark Twain said: the only certainties are death and taxes. However, when you invest in cash flow, you are less concerned about what values are doing. To invest successfully in cash flow, it is important to be able to buy at a price that is low enough that the property can generate cash flow. And the less money you borrow to purchase the asset, the more likely you will be able to see cash flow from it.

Until recently, it was virtually impossible to buy apartment buildings at a price at which they would cash flow – unless you paid cash for it. Apartment buildings were not bought for cash flow – rather they were bought for their potential to earn capital gains: i.e. to convert into and then ”flip” as condos. Nowadays, that no longer is the case. With the huge inventory of broken condo developments, it is once again possible to purchase apartment buildings at a price at which they will cash flow.

If this is a subject that interests you, I invite you to call me. I would love to spend a few minutes over a cup of coffee discussing the opportunities available to investors in today’s economy. As Rich Dad says, this is an environment where fortunes can be made or lost. My goal is to help you succeed!

“To Your Success!”
mary!
888-834-7085

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