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some cartoons from here
Friday, August 9, 2013
Quiz time..............................................
Think you know your fears? Can you match these ten phobias with the correct description below? Happy guessing.....................
- ANUPTAPHOBIA
- ATHAZAGORAPHOBIA
- BLENNOPHOBIA
- GELOTOPHOBIA
- GERASCOPHOBIA
- GLOSSOPHOBIA
- HELLENOLOGOPHOBIA
- KAKORRHAPHIOPHOBIA
- LOCKIOPHOBIA
- MACROPHOBIA
a) The fear of being or staying single.
b) A fear of long waits.
c) The fear of speaking in public.
d) A fear of slime.
e) The fear of childbirth.
f) The fear of failure or defeat.
g) The fear of being forgotten, ignored, or abandoned.
h) The fear of being laughed at.
i) The fear of growing old.
k) The fear of Greek terms or complex scientific terminology.
Fifty years ago..................................................
Smokey Robinson & the Miracles/You've Really Got A Hold On Me
This song was recorded in October of 1962 and released the next month. Smokey was writer, lead singer, and producer. It peaked at number 8 on the Billboard Top 100 in February of 1963.
This song was recorded in October of 1962 and released the next month. Smokey was writer, lead singer, and producer. It peaked at number 8 on the Billboard Top 100 in February of 1963.
33 Guidelines to investing in real estate........................
Guideline #24: Pay attention to your financing.
A few examples are in order:
In the late 1970's a group of local investors were buying small apartment complexes with the assistance of "owner financing." They would make a small down payment, borrow some from the bank, and then borrow the rest from the seller on a five year note. Their plan was to have built up some equity by the end of the fifth year, which would allow them to refinance with a bank to pay off their loan to the Seller in a timely fashion. They thought of "five years" as being a long time. Add five years to 1978 and your end up in 1983. The history majors amongst us will remember that interest rates spiked in the early 1980s. In 1983, rates for commercial loans were in the 15% range. It is hard to make real estate investments profitable paying 15% interest. It made for some interesting times and real scrambling for those investors.
In 2002 a local investment group refinanced a 250 unit apartment complex. Times were good, values were appreciating, they had significant equity, lenders were eager, interest rates seemed reasonable, and the appraisers were all optimistic. Our investor friends decided to free up as much equity as possible by borrowing as much as they could, which was a lot. Flash forward nine years. The note is coming due in January of 2013. It had to be either paid off or refinanced. Paying it off was not an option. Times were difficult, values had fallen, their equity had disappeared, lenders were scarce, interest rates were very low, and the appraisers were all pessimistic. Failure to secure new financing would have had catastrophic implications for the partners. While the mortgage was non-recourse, the tax consequences of a forced sale was in the seven figure range. It was a bit tense for them for awhile, but this story has a happy ending. Because the investors were paying attention, they consulted early on with a trusted mortgage broker, on his advice they took the necessary steps of spending many hundreds of thousands of dollars to upgrade units. It did not hurt that the market for commercial loans also improved quite a bit in 2012, As a result, the partners were able to secure new financing for another ten years, at a very interest rate.
Just as the economy runs in cycles, so does financing. Between 2002-2006 you could borrow money if you could "fog a mirror." Between 2008-2009, heaven help you if you needed to borrow money. It should be noted that in the 30 some odd years we have been doing this investment real estate thing, financing has only been problematic in four or five of those years. The other 25 or 26 years , borrowing money varied between a reasonable business proposition and way too easy. The important thing is to be prepared for the problematic years.
It should be noted that, if you invest with a plan similar to these guidelines, most business cycles will not be an issue for you. You just weather the storm, and maybe even take advantage of it. A lot of money gets made when markets are in turmoil. This last-go round was no different.
Every investment is different. There are no hard and fast rules, other than "pay attention."
A few examples are in order:
In the late 1970's a group of local investors were buying small apartment complexes with the assistance of "owner financing." They would make a small down payment, borrow some from the bank, and then borrow the rest from the seller on a five year note. Their plan was to have built up some equity by the end of the fifth year, which would allow them to refinance with a bank to pay off their loan to the Seller in a timely fashion. They thought of "five years" as being a long time. Add five years to 1978 and your end up in 1983. The history majors amongst us will remember that interest rates spiked in the early 1980s. In 1983, rates for commercial loans were in the 15% range. It is hard to make real estate investments profitable paying 15% interest. It made for some interesting times and real scrambling for those investors.
In 2002 a local investment group refinanced a 250 unit apartment complex. Times were good, values were appreciating, they had significant equity, lenders were eager, interest rates seemed reasonable, and the appraisers were all optimistic. Our investor friends decided to free up as much equity as possible by borrowing as much as they could, which was a lot. Flash forward nine years. The note is coming due in January of 2013. It had to be either paid off or refinanced. Paying it off was not an option. Times were difficult, values had fallen, their equity had disappeared, lenders were scarce, interest rates were very low, and the appraisers were all pessimistic. Failure to secure new financing would have had catastrophic implications for the partners. While the mortgage was non-recourse, the tax consequences of a forced sale was in the seven figure range. It was a bit tense for them for awhile, but this story has a happy ending. Because the investors were paying attention, they consulted early on with a trusted mortgage broker, on his advice they took the necessary steps of spending many hundreds of thousands of dollars to upgrade units. It did not hurt that the market for commercial loans also improved quite a bit in 2012, As a result, the partners were able to secure new financing for another ten years, at a very interest rate.
Just as the economy runs in cycles, so does financing. Between 2002-2006 you could borrow money if you could "fog a mirror." Between 2008-2009, heaven help you if you needed to borrow money. It should be noted that in the 30 some odd years we have been doing this investment real estate thing, financing has only been problematic in four or five of those years. The other 25 or 26 years , borrowing money varied between a reasonable business proposition and way too easy. The important thing is to be prepared for the problematic years.
It should be noted that, if you invest with a plan similar to these guidelines, most business cycles will not be an issue for you. You just weather the storm, and maybe even take advantage of it. A lot of money gets made when markets are in turmoil. This last-go round was no different.
Every investment is different. There are no hard and fast rules, other than "pay attention."
Thursday, August 8, 2013
An abundance of talent......................
Eric, Ringo, Paul, Billie, Dhani, etc./While My Guitar Gently Weeps
About that budget....................................
The infographic above can be more easily read and better used
by going here. Once there, allow your cursor to roam over the
graphic. Magically, stuff will be enlarged. Enjoy. Let me know
if you figure out what it all means, other than government in the
2014 era is very expensive.
thanks Seth
opening chart via/cartoon via
Opening two paragraphs........................
Robert Moses was born on December 18, 1888. He was not given a middle name - because his mother saw no reason for one.
Bella Moses was a strong-willed woman, so strong-willed, in fact, that some of her relatives said she was too much like her mother - and not enough like her father. Bella's parents, Robert's grandparents, were first cousins. Both had been born - Bernhard Cohen in 1821, Rosalie Silverman five years later - in the small Bavarian village of Reckendorf to struggling merchant families, two of the tens of thousands of German-Jewish families made highly susceptible to "America fever" by laws that segregated them in crowded Judengassen and forced them to pay the humiliating "Jew toll" whenever they made a trip away from the ghetto. The statutes also prohibited Jews from owning any land except that on which their houses stood or from dealing in any goods that could not be carried with them. Bavaria, where German anti-Semitism was most virulent, had even set a limit on the number of Jewish marriages in an attempt to keep the Jewish population down. The Silvermans left Reckendorf for New York while Rosalie was in her teens. Bernhard Cohen had been taken to Frankfurt am Main as a child by parents who hoped that life for Jews in Germany would be better outside Bavaria; when this hope was dashed, they waited until Bernhard was twenty-one, and then sent him and a younger brother, Samuel, to America, where the brothers opened a small dry-goods store in Mobile, Alabama. In 1848, they moved to New York, rented a small office and became dry-goods importers. Bernhard met his cousin and in 1849 they were married.
-Robert A. Caro, The Power Broker: Robert Moses and the Fall of New York
Bella Moses was a strong-willed woman, so strong-willed, in fact, that some of her relatives said she was too much like her mother - and not enough like her father. Bella's parents, Robert's grandparents, were first cousins. Both had been born - Bernhard Cohen in 1821, Rosalie Silverman five years later - in the small Bavarian village of Reckendorf to struggling merchant families, two of the tens of thousands of German-Jewish families made highly susceptible to "America fever" by laws that segregated them in crowded Judengassen and forced them to pay the humiliating "Jew toll" whenever they made a trip away from the ghetto. The statutes also prohibited Jews from owning any land except that on which their houses stood or from dealing in any goods that could not be carried with them. Bavaria, where German anti-Semitism was most virulent, had even set a limit on the number of Jewish marriages in an attempt to keep the Jewish population down. The Silvermans left Reckendorf for New York while Rosalie was in her teens. Bernhard Cohen had been taken to Frankfurt am Main as a child by parents who hoped that life for Jews in Germany would be better outside Bavaria; when this hope was dashed, they waited until Bernhard was twenty-one, and then sent him and a younger brother, Samuel, to America, where the brothers opened a small dry-goods store in Mobile, Alabama. In 1848, they moved to New York, rented a small office and became dry-goods importers. Bernhard met his cousin and in 1849 they were married.
-Robert A. Caro, The Power Broker: Robert Moses and the Fall of New York
Fifty years ago.............................................
Kyu Sakamoto..........................................................Sukiyaki
(as always, please click on through to YouTube)
(as always, please click on through to YouTube)
33 Guidelines for investing in real estate......
Guideline #23: There is a lot of land.
Some lessons are learned harder than others. Value is derived from use (Guideline #4), location (Guideline #5), and difficulty of replacement. Look at Google Earth sometime. Vacant land suitable for development is anything but scarce in this part of the world. If you invest in land, be prepared to be very patient.
Wednesday, August 7, 2013
Because you need to experience Bagrock & Roll.....
Red Hot Chili Pipers......Smoke On The Water/Thunderstruck
Happy anniversary...............................
......................to Kurt Harden's Cultural Offering, the blog and blogger that got me started. Thanks for being there. More of same would just be perfect.
image via
image via
Touch of your hand........................
Roy Orbison...............................................Crying
Fifty years ago...............................................
The Jetsons................................................................TV Intro
The original Jetsons was an ABC show. 24 episodes ran on Sunday evenings from September of 1962 into the fall of 1963. It is considered to be the first color TV show aired on ABC. Now there is a trivia question for you.
The original Jetsons was an ABC show. 24 episodes ran on Sunday evenings from September of 1962 into the fall of 1963. It is considered to be the first color TV show aired on ABC. Now there is a trivia question for you.
Flashback City......................
The wonder of it all. We must have been in third grade. The special alarm would go off and the whole class would "duck and cover," crawling under our desks and covering our heads with our hands. Of course this was a drill to protect us from a nuclear explosion initiated by those pesky Russians, but what where the adults thinking? "Duck and Cover"? One can see the danger shattered windows and flying glass, but still..................
thanks gerard
Simplify, simplify, simplify................................
If the process of simplification is the striping away of the non-essential, we best know what is essential. Fortunately for us folks here in the Heartland, John E. Smith has been doing some of the heavy lifting. His full post is here.
33 Guidelines to investing in real estate....................
Guideline #22: Don't borrow just because they will lend you money.
Just because there is a willing lender doesn't mean you should become a willing borrower. While this certainly applies to investment property, it is doubly applies to single-family, owner-occupied houses.
While this quote is now "dated," it offers some insight into what I would call a faulty philosophy held by many very smart people:
"Many commentators have noted the effect of home mortgage refinancing and equity extraction on economic growth, particularly consumer spending, over the period 2000-2006. For example, former Federal Reserve Chairman Alan Greenspan (2002) stated:
'Especially important in the United States have been the
flexibility and the size of the secondary mortgage market.
Since early 2000, this market has facilitated the large debt
financed extraction of home equity, that, in turn, has been
critical in supporting consumer outlays in the United States
throughout the recent period of economic stress.' "
(source of quote, and erudite paper on the subject, is here)
How "extracting" equity to pay for "consumer spending" can be considered economic growth is a mystery to me. What did they think was going to happen when all the equity was gone? How did they think the newly acquired debt was going to be repaid? While the trend line of real estate values over time is upwards, we often forget to remember that is a "trend," not a constant. If you are going to buy something with borrowed money, make sure that something has enduring value. Jet skis, boats, hot tubs, fancy cars, super large screen TVs, and the like do not have enduring value.
There have been a few times that our favorite bank has denied us financing. In one particular case, our loan officer said, "We know you can buy it, we just don't believe you can afford to own it." A classic line that proved to be true. Since we were not able to secure financing, we sold our contract to purchase this particular investment to another group of investors. The new buyers owned the investment for about a month when a particularly nasty cold snap swept through Ohio. Somehow, part of the sprinkler system froze and broke, flooding the basement, including the boiler. While this group of buyers could afford to solve the problem, we would not have been able to. We were thankful for the denial and appreciate those particular lenders who know that sometimes saying "no" is the path to successful investing.
There have been a few times we wish the lenders had said no when they said yes. Banks are in the business of lending money. Wealth accumulation is easier if you don't make a lot of mistakes, or one big mistake. Eager lenders sometimes contribute to our ability to make mistakes. Don't borrow just because the bank will lend. Make sure borrowed money gets put to a safe and productive use. Some independent thinking and a little discipline goes a long way.
Just because there is a willing lender doesn't mean you should become a willing borrower. While this certainly applies to investment property, it is doubly applies to single-family, owner-occupied houses.
While this quote is now "dated," it offers some insight into what I would call a faulty philosophy held by many very smart people:
"Many commentators have noted the effect of home mortgage refinancing and equity extraction on economic growth, particularly consumer spending, over the period 2000-2006. For example, former Federal Reserve Chairman Alan Greenspan (2002) stated:
'Especially important in the United States have been the
flexibility and the size of the secondary mortgage market.
Since early 2000, this market has facilitated the large debt
financed extraction of home equity, that, in turn, has been
critical in supporting consumer outlays in the United States
throughout the recent period of economic stress.' "
(source of quote, and erudite paper on the subject, is here)
How "extracting" equity to pay for "consumer spending" can be considered economic growth is a mystery to me. What did they think was going to happen when all the equity was gone? How did they think the newly acquired debt was going to be repaid? While the trend line of real estate values over time is upwards, we often forget to remember that is a "trend," not a constant. If you are going to buy something with borrowed money, make sure that something has enduring value. Jet skis, boats, hot tubs, fancy cars, super large screen TVs, and the like do not have enduring value.
There have been a few times that our favorite bank has denied us financing. In one particular case, our loan officer said, "We know you can buy it, we just don't believe you can afford to own it." A classic line that proved to be true. Since we were not able to secure financing, we sold our contract to purchase this particular investment to another group of investors. The new buyers owned the investment for about a month when a particularly nasty cold snap swept through Ohio. Somehow, part of the sprinkler system froze and broke, flooding the basement, including the boiler. While this group of buyers could afford to solve the problem, we would not have been able to. We were thankful for the denial and appreciate those particular lenders who know that sometimes saying "no" is the path to successful investing.
There have been a few times we wish the lenders had said no when they said yes. Banks are in the business of lending money. Wealth accumulation is easier if you don't make a lot of mistakes, or one big mistake. Eager lenders sometimes contribute to our ability to make mistakes. Don't borrow just because the bank will lend. Make sure borrowed money gets put to a safe and productive use. Some independent thinking and a little discipline goes a long way.
Karl Lagerfeld...........................................
Karl Lagerfeld is a German born designer, photographer and artist. He also has said some neat stuff:
“Clear thinking at the wrong moment can stifle creativity.”
“Don't look to the approval of others for your mental stability”
“Books are a hard-bound drug with no danger of an overdose. I am the happy victim of books.”
"I like the idea of craziness with discipline."
“Youthfulness is about how you live not when you were born.”
“People who say that yesterday was better than today are ultimately devaluing their own existence.”
“I’m very much down to earth, just not this earth.”
“In a meat-eating world, wearing leather for shoes and even clothes, the discussion of fur is childish.”
"I am like a TV antenna. I catch everything that is in the air, and then I do it my way."
Tuesday, August 6, 2013
Making me laugh.........................
Just caught the end of the newest episode of Whose Line Is It Anyway? Ryan, Colin, and Wayne are back and in fine form. Might be missing Drew, but still.... good fun!
Russ Freeman and friends................................
The Rippingtons.............................................Sahara
Opening paragraphs.........................
George Phydias Mitchell was born in 1919 in Galveston, Texas. His parents were first-generation immigrants from Greece. His father could neither read nor write. He first worked as a laborer on a railroad gang. One day the foreman told him that his Greek name, Savvas Paraskevopoulos, was too difficult. He named him Mike Mitchell.
-Jurgen Schmandt, George Mitchell and the Idea of Sustainability
-Jurgen Schmandt, George Mitchell and the Idea of Sustainability
What a great country we live in...................
Monday is a "looked forward to" kind of day, mostly because that is the day our friendly mail man kindly drops off at the house the latest issue of The Economist. Picking up the magazine after dinner, I quickly discover - actually I already knew because of the Intertunnel - that George Mitchell is featured in the Schumpeter essay. (One of the first things one does when reading The Economist is look for the Schumpeter essay.)
George Mitchell is one of those people that makes one glad to be a part of the human race. What an interesting man! I thought to myself, while reading the essay, that I would certainly buy a biography of Mitchell. Then the thought...........I wonder if one has already been published? The Amazon Book Store was quickly consulted. No biography as such, but there was a book, George P. Mitchell and The Idea of Sustainability. Through the magic of Kindle (Sorry Jeff. I only kindlize books when the immediate gratification itch needs scratched.), I now have a copy of said writing. If someone does choose to publish a biography of George P. Mitchell, consider me a buyer for your book.
You may read the whole Schumpeter essay on Mitchell here. I hope you will not content yourself with this wee excerpt:
Mr Mitchell was also the embodiment of the entrepreneurial spirit. He did not discover shale gas and oil: geological surveys had revealed them decades before he started. He did not even invent fracking: it had been in use since the 1940s. But few great entrepreneurs invent something entirely new. His greatness lay in a combination of vision and grit: he was convinced that technology could unlock the vast reserves of energy in the Barnett Shale beneath Dallas and Fort Worth, and he kept grappling with the unforgiving rock until it eventually surrendered its riches.
George Mitchell is one of those people that makes one glad to be a part of the human race. What an interesting man! I thought to myself, while reading the essay, that I would certainly buy a biography of Mitchell. Then the thought...........I wonder if one has already been published? The Amazon Book Store was quickly consulted. No biography as such, but there was a book, George P. Mitchell and The Idea of Sustainability. Through the magic of Kindle (Sorry Jeff. I only kindlize books when the immediate gratification itch needs scratched.), I now have a copy of said writing. If someone does choose to publish a biography of George P. Mitchell, consider me a buyer for your book.
You may read the whole Schumpeter essay on Mitchell here. I hope you will not content yourself with this wee excerpt:
Mr Mitchell was also the embodiment of the entrepreneurial spirit. He did not discover shale gas and oil: geological surveys had revealed them decades before he started. He did not even invent fracking: it had been in use since the 1940s. But few great entrepreneurs invent something entirely new. His greatness lay in a combination of vision and grit: he was convinced that technology could unlock the vast reserves of energy in the Barnett Shale beneath Dallas and Fort Worth, and he kept grappling with the unforgiving rock until it eventually surrendered its riches.
Fifty years ago..........................................
Robin Ward.........................................Wonderful Summer
33 Guidelines for investing in real estate....................
Guideline #21: Pyramiding is not to be undertaken lightly
Pyramids stand the test of time.........only if they have really strong foundations.
Pyramiding, the practice of using the equity in one property to secure the financing to acquire another property, is not to be undertaken lightly. As with leverage (See Guideline #20), pyramiding can be your friend, or your worst nightmare.
With a strong foundation (well maintained properties with strong tenants, ample cash flow with reserves on hand, and a respectable amount of equity) a pyramid will build solid wealth.
With a weak foundation (poorly maintained properties with transitional tenants, little or no cash reserves, but perceived equity) a pyramid is nothing but a house of cards - soon to be tumbling down.
Not so many years ago, a good friend, who was a really smart stock market guy, was in a real estate partnership with an aggressive and hungry partner. The two made an investment in a 20 unit apartment that threw off lots of cash. After a cash rich year, the aggressive partner convinced my friend that they should buy an 8 unit apartment complex, 100% financed with zero money down. While the newly acquired units would have negative cash flow at first, the surplus money from the first project would certainly cover the losses and then some. Next, they bought a 16 unit building under the exact same conditions. Not bad. Except that they forgot Guideline #14 (sometimes cash flow is just another word for deferred maintenance). The first investment building that was supporting the other two investments had a dire need for maintenance, however, all the cash flow from that building was going to support the mortgages on the second and third investments. The maintenance did not get done. After a passage of time the tenants publicly complained, and the Health Department got involved. Ultimately, the Health Department declared the 20 unit apartment "unfit" for human habitation and caused it to be vacated. Ouch. Their house of cards came tumbling down. It was not pretty. Ultimately, the partners reached a separation agreement and my friend was left to solve the whole problem himself. It was a struggle and cost a him great deal of money and time, but it got solved. If only......
Pyramids stand the test of time.........only if they have really strong foundations.
Pyramiding, the practice of using the equity in one property to secure the financing to acquire another property, is not to be undertaken lightly. As with leverage (See Guideline #20), pyramiding can be your friend, or your worst nightmare.
With a strong foundation (well maintained properties with strong tenants, ample cash flow with reserves on hand, and a respectable amount of equity) a pyramid will build solid wealth.
With a weak foundation (poorly maintained properties with transitional tenants, little or no cash reserves, but perceived equity) a pyramid is nothing but a house of cards - soon to be tumbling down.
Not so many years ago, a good friend, who was a really smart stock market guy, was in a real estate partnership with an aggressive and hungry partner. The two made an investment in a 20 unit apartment that threw off lots of cash. After a cash rich year, the aggressive partner convinced my friend that they should buy an 8 unit apartment complex, 100% financed with zero money down. While the newly acquired units would have negative cash flow at first, the surplus money from the first project would certainly cover the losses and then some. Next, they bought a 16 unit building under the exact same conditions. Not bad. Except that they forgot Guideline #14 (sometimes cash flow is just another word for deferred maintenance). The first investment building that was supporting the other two investments had a dire need for maintenance, however, all the cash flow from that building was going to support the mortgages on the second and third investments. The maintenance did not get done. After a passage of time the tenants publicly complained, and the Health Department got involved. Ultimately, the Health Department declared the 20 unit apartment "unfit" for human habitation and caused it to be vacated. Ouch. Their house of cards came tumbling down. It was not pretty. Ultimately, the partners reached a separation agreement and my friend was left to solve the whole problem himself. It was a struggle and cost a him great deal of money and time, but it got solved. If only......
Monday, August 5, 2013
Let us rejoice and let us sing and dance....
Donovan......................................................Atlantis
Even more beautiful..............................
At the end of June, 2012 a derecho blew through Licking County with 100+ mile per hour straight line wind. It was a nasty storm. Along with many other buildings, St. Luke's Episcopal Church in Granville was damaged. The Greek Revival styled building, erected in the later part of the 1830's, had recently received significant structural improvements - mostly to insure that the roof stayed where it belonged for another 180 years. While the old timber roofing system was replaced, the original timbers supporting the plaster ceiling were not. In the course of the derecho, the unusual wind pressure caused some of those ceiling timbers to crack. A quick and casual inspection would have shown no damage. A more studied review would have led one to say, "Wait a minute. Isn't that part of the ceiling out of level and lower than it used to be?" A thorough review showed that the entire ceiling was in danger of collapse. A life, and building, threatening event, should it happen. The building was secured to prevent occupancy and our friendly insurance agent was called. Several architectural studies later, it was agreed that the old ceiling must come down, and a new ceiling put back up. Easier said than actually completed. Fourteen months later, the ceiling structure has been rebuilt and the church put back together. Yesterday was the first church service in fourteen months in the restored old Church. It is a thing of beauty.
 |
| St. Luke's Episcopal Church, Granville, Ohio |
 |
| The new ceiling is looking pretty sharp |
 |
| The house was full and the choir was in fine form |
 |
| Yesterday's service included a brief wedding ceremony. |
Fifty years ago......................................
Bobby Vinton...............................There, I've Said It Again
Ouch..................................
"The pigs in Orwell's 'Animal Farm' have more suavity than the US government is demonstrating now. Their credibility is below zero."
-Bruce Sterling, as quoted at Samizdata
33 Guidelines for investing in real estate............
Guideline #20: Leverage is a two-edged sword.
It is through the miracle of leverage that real estate becomes such a fabulous investment vehicle. Leverage is borrowed money, a mortgage.
The following example is a fairly typical, if simplified, example of how all this works:
Imagine buying a $250,000 single tenant investment property, with $25,000 of your own cash and $225,000 of borrowed money. For arguments' sake, we will assume that the rental income from the tenant is sufficient to pay the mortgage, property taxes, insurance, maintenance, with all remaining cash flow going to the reserve for replacement account and to pay the income tax generated by the investment- in other words, you receive -0- cash flow. After the passage of ten years, you decide to sell the investment. With the combination of minimal (2.5%) inflation and correspondingly modest rent increases, along with the fact that the asset has been well maintained, the property is now worth $320,000. The original loan of $225,000 has, after ten years, been paid down (by the tenant's rental payments) to $98,000. After selling expenses (have to pay the broker their justly earned commissions) are deducted, your net from a sales price of $320,000 is $295,000, and then after paying off the $98,000 mortgage, you receive a net proceeds check of $197,000 at closing.
So, after ten years of prudent stewardship, you receive your original $25,000 back, plus an additional $172,000! Leverage indeed.
(Remember, this was labeled "if simplified" because our neat little example ignores the tax man, which one should not do. But we get ahead of ourselves. Wait for Guidelines #28 and #33, where and when more will be revealed).
Leverage, if not properly respected (See Guideline #21 and Guideline #22), may have a dark side. Trust me when I tell you that it is possible to buy an investment property with zero down payment. In previous times (and perhaps again in future times) it was possible to borrow more than the purchase price. In other words, one could buy a single tenant investment property for $250,000, and if the stars were properly aligned, borrow $275,000 or more. Situations like this may turn out very well, but they leave very little margin for error. If you lose your tenant, or if the market falters, such a loan may turn out to be problematic.
When one borrows money on real estate, one also signs a note promising to re-pay the money. Just make sure you can.
It is through the miracle of leverage that real estate becomes such a fabulous investment vehicle. Leverage is borrowed money, a mortgage.
The following example is a fairly typical, if simplified, example of how all this works:
Imagine buying a $250,000 single tenant investment property, with $25,000 of your own cash and $225,000 of borrowed money. For arguments' sake, we will assume that the rental income from the tenant is sufficient to pay the mortgage, property taxes, insurance, maintenance, with all remaining cash flow going to the reserve for replacement account and to pay the income tax generated by the investment- in other words, you receive -0- cash flow. After the passage of ten years, you decide to sell the investment. With the combination of minimal (2.5%) inflation and correspondingly modest rent increases, along with the fact that the asset has been well maintained, the property is now worth $320,000. The original loan of $225,000 has, after ten years, been paid down (by the tenant's rental payments) to $98,000. After selling expenses (have to pay the broker their justly earned commissions) are deducted, your net from a sales price of $320,000 is $295,000, and then after paying off the $98,000 mortgage, you receive a net proceeds check of $197,000 at closing.
So, after ten years of prudent stewardship, you receive your original $25,000 back, plus an additional $172,000! Leverage indeed.
(Remember, this was labeled "if simplified" because our neat little example ignores the tax man, which one should not do. But we get ahead of ourselves. Wait for Guidelines #28 and #33, where and when more will be revealed).
Leverage, if not properly respected (See Guideline #21 and Guideline #22), may have a dark side. Trust me when I tell you that it is possible to buy an investment property with zero down payment. In previous times (and perhaps again in future times) it was possible to borrow more than the purchase price. In other words, one could buy a single tenant investment property for $250,000, and if the stars were properly aligned, borrow $275,000 or more. Situations like this may turn out very well, but they leave very little margin for error. If you lose your tenant, or if the market falters, such a loan may turn out to be problematic.
When one borrows money on real estate, one also signs a note promising to re-pay the money. Just make sure you can.
A brief glimpse of history...................................or, they certainly had gumption back then.................
Speaking of Granville, Ohio.....................The community was settled in 1805. The historical marker honoring the occasion is classic:
"In 1804 a group of neighbors in Granville, Massachusetts and Granby, Connecticut formed the Licking Company for the purpose of moving to "Newlands" in Ohio. Inspired and informed by the development of Worthington in 1803, the Company purchased 29,040 acres in the U. S, Military District. Advance parties surveyed and mapped a site, established a mill, and planted grain. The Company planned a public square, a school, a library, quarry, burying ground, and property for the support of churches. In November and December of 1805, some 150 emigrants in ox-drawn wagons arrived in their new home and built temporary shelters on the designated public square. On December 9 through 12 1805, Company members selected their Granville lots in an auction that was described as peaceable and honest."
Imagine the nerve and fortitude of those 150 folks. Then repeat the story countless times. Not having a "frontier" does change things.
"In 1804 a group of neighbors in Granville, Massachusetts and Granby, Connecticut formed the Licking Company for the purpose of moving to "Newlands" in Ohio. Inspired and informed by the development of Worthington in 1803, the Company purchased 29,040 acres in the U. S, Military District. Advance parties surveyed and mapped a site, established a mill, and planted grain. The Company planned a public square, a school, a library, quarry, burying ground, and property for the support of churches. In November and December of 1805, some 150 emigrants in ox-drawn wagons arrived in their new home and built temporary shelters on the designated public square. On December 9 through 12 1805, Company members selected their Granville lots in an auction that was described as peaceable and honest."
Imagine the nerve and fortitude of those 150 folks. Then repeat the story countless times. Not having a "frontier" does change things.
Weathervane...................................
My Sweetie and I attended the final night of the final show of the 2013 Summer Season at the wondrous Weathervane Playhouse in Newark Saturday night. Monty Python's Spamalot ("a new musical lovingly ripped off from the motion picture Monty Python and the Holy Grail") was on the bill. Great show. We laughed ourselves silly. The cast was great, the voices and music in fine tune, the costumes perfect, and the set creatively put together. A fun ending to a great season of shows.
Sunday, August 4, 2013
Got that right..........................
Nicholas Bate, as only Nicholas Bate can, reminds us that "Life is good"...................
Life is good. Rarely easy. Often funny, outrageous, wonderful, thought-provoking. At times exasperating, doubt-inducing, desperately worrying and frightening. But deep down: life is good. Life lacks enough clear maps, timetables and simple instruction guides..............
Life is surely worth one or two hiccups in order to be exposed to the entire collection of Beatles masterpieces.
Life is good. Rarely easy. Often funny, outrageous, wonderful, thought-provoking. At times exasperating, doubt-inducing, desperately worrying and frightening. But deep down: life is good. Life lacks enough clear maps, timetables and simple instruction guides..............
Life is surely worth one or two hiccups in order to be exposed to the entire collection of Beatles masterpieces.
Uptight.........................................
Traveling Wilburys....................................Handle With Care
Trivia question of the day.............................
What is a dodecagon................................?
In status-symbol land.......................
..........the one status to be avoided is "victimhood." Cultural Offering provides today's lesson. For a more in depth look at the situation, go here.
Fifty years ago...........................
Dion DiMucci.............................................Drip Drop
On why we should believe the New York Times editors when they instruct us about the economy
New York Times sells Boston Globe at 93% loss.
John Henry, the principal owner of the Boston Red Sox, bought the 141 year old Boston Globe (without its $100 million +/- pension liabilities) for $70,000,000. The NYT had paid $1.1 billion for the Globe in 1993. Ouch. To put it in context, Henry acquired the paper for about half of what the Red Sox payroll is for 2013. No word on whether the deal includes an outfielder-to-be-named later.
John Henry, the principal owner of the Boston Red Sox, bought the 141 year old Boston Globe (without its $100 million +/- pension liabilities) for $70,000,000. The NYT had paid $1.1 billion for the Globe in 1993. Ouch. To put it in context, Henry acquired the paper for about half of what the Red Sox payroll is for 2013. No word on whether the deal includes an outfielder-to-be-named later.
33 Guidelines for investing in real estate..........
Guideline # 19: Read the fine print.
Read the fine print BEFORE you get to closing. Insist on being provided copies of the documents you will have to sign prior to the day of closing. Read them and understand them. Never forget Guideline #10 (these are business relationships, not friendships).
Have we always done this? No. That's why this is a guideline!
We once signed mortgage papers that contained a "yield maintenance" clause. It was fairly technical. We did not understand it. We did not ask our attorney's opinion. We just assumed it was a form of a pre-payment penalty. Yeow! Think pre-payment penalty on steroids. At the peak of the late-and-not-very-lamented real estate mania (very late in 2006), we had the opportunity to sell one of our larger investments at what we thought was a VERY good price. When we called the mortgage broker asking about the pay-off of the +/- $4,000,000 loan, we were advised that in addition to the loan payoff they would be expecting the yield maintenance payment of just shy of $500,000. Oops. We declined to sell. All in all, it was not a bad thing - we still own the asset and are very happy we do, but we felt a tad foolish for not knowing.
We have signed many mortgage documents that contain language giving the lender the right to ask for an appraisal. We now have a more thorough understanding of what that clause is for and what it can mean. After the retail real estate market imploded in 2007-2008, one of our friendly lenders send a very shell-shocked appraiser to look at a strip center we had developed about three years earlier. Said appraiser determined that our property was worth about two-thirds of the value we were supposed to have to support the loan we did have. This is known as a bad thing. The friendly lender asked for a meeting and suggested that it would be a good thing if we provided them with either cash or other collateral for the "missing" one-third of the value. Let me tell you....that hurts. Never missed a payment. Never late on a payment. Still in "default" because of the appraisal.
Read and understand what you are signing. Please.
Read the fine print BEFORE you get to closing. Insist on being provided copies of the documents you will have to sign prior to the day of closing. Read them and understand them. Never forget Guideline #10 (these are business relationships, not friendships).
Have we always done this? No. That's why this is a guideline!
We once signed mortgage papers that contained a "yield maintenance" clause. It was fairly technical. We did not understand it. We did not ask our attorney's opinion. We just assumed it was a form of a pre-payment penalty. Yeow! Think pre-payment penalty on steroids. At the peak of the late-and-not-very-lamented real estate mania (very late in 2006), we had the opportunity to sell one of our larger investments at what we thought was a VERY good price. When we called the mortgage broker asking about the pay-off of the +/- $4,000,000 loan, we were advised that in addition to the loan payoff they would be expecting the yield maintenance payment of just shy of $500,000. Oops. We declined to sell. All in all, it was not a bad thing - we still own the asset and are very happy we do, but we felt a tad foolish for not knowing.
We have signed many mortgage documents that contain language giving the lender the right to ask for an appraisal. We now have a more thorough understanding of what that clause is for and what it can mean. After the retail real estate market imploded in 2007-2008, one of our friendly lenders send a very shell-shocked appraiser to look at a strip center we had developed about three years earlier. Said appraiser determined that our property was worth about two-thirds of the value we were supposed to have to support the loan we did have. This is known as a bad thing. The friendly lender asked for a meeting and suggested that it would be a good thing if we provided them with either cash or other collateral for the "missing" one-third of the value. Let me tell you....that hurts. Never missed a payment. Never late on a payment. Still in "default" because of the appraisal.
Read and understand what you are signing. Please.
Why Is There Corn in Your Coke?
Here is another one of the fun videos from LearnLiberty.org. This one takes on the unholy alliance between sugar growers and the government.. One thing she leaves out - these regulations must make the corn growers pretty happy too.
Answers................................
A dodecagon is a polygon with twelve sides and twelve angles.
Saturday, August 3, 2013
Second paragraphs..............................
Where I want to start telling is the day I left Pencey Prep. Pencey Prep is this school that's in Agerstown, Pennsylvania. You probably heard of it. You've probably seen the ads, anyway. They advertise in about a thousand magazines, always showing some hotshot guy on a horse jumping over a fence. Like as if all you did at Pencey was play polo all the time. I never even once saw a horse anywhere near the place. And underneath the guy on the horse's picture, it always says, "Since 1888 we have been molding boys into splendid, clear-thinking young men." Strictly for the birds. They don't do any damn more molding at Pencey than they do at any other school. And I didn't know anybody there that was splendid and clear-thinking and all. Maybe two guys. If that many. And they
probably came to Pency that way.
-J. D. Salinger, The Catcher In The Rye
probably came to Pency that way.
-J. D. Salinger, The Catcher In The Rye
When I become king............................
Congress and their minions will be subject to all the same rules and regulations as all us other folks. If it is good for the regulatee it must be good for the regulator........
"For months massive discontent over a potential rise in out-of-pocket premium expenses under Obamacare has haunted Capitol Hill. Currently, the federal government pays 75 percent of the health insurance premiums for congressional staffers. Senators and representatives feared they would lose staff if this heavy subsidy disappeared as it was scheduled to do under the ACA. The White House, reportedly including the President himself, has now directly intervened to solve this knotty problem—for congressional staff, anyway."
"So congressional staffers will still be forced onto the health insurance exchanges, but they will get a subsidy much higher than average Americans in a similar situation would get. It’s a lot easier to look at Obamacare as a brilliant piece of legislation when you get its benefits without paying its costs."
Quotes, and more on the story, from WRM - here
"For months massive discontent over a potential rise in out-of-pocket premium expenses under Obamacare has haunted Capitol Hill. Currently, the federal government pays 75 percent of the health insurance premiums for congressional staffers. Senators and representatives feared they would lose staff if this heavy subsidy disappeared as it was scheduled to do under the ACA. The White House, reportedly including the President himself, has now directly intervened to solve this knotty problem—for congressional staff, anyway."
"So congressional staffers will still be forced onto the health insurance exchanges, but they will get a subsidy much higher than average Americans in a similar situation would get. It’s a lot easier to look at Obamacare as a brilliant piece of legislation when you get its benefits without paying its costs."
Quotes, and more on the story, from WRM - here
Fifty years ago.........................................
The Secrets.....................................The Boy Next Door
Ruggedness....................................
"Nations fail, Augustine argued, because peoples fail, and peoples fail because they love the wrong things. A people defines itself by what it loves, and false love produces a frail and fragile nation. America's exceptional history as the only nation in the world with two centuries of political continuity stems from its people's love for individual rights, which they hold to be inalienable because they are granted by a power that no human agency dare oppose.
"Americans selected themselves out from among the nations of the world to enter into the political covenant that is the American constitutional state. It succeeded because it is "a country with the soul of a church," as G.K. Chesterton observed. Individualism founded on God-given rights has triumphed over the alternative-the collectivist premise for the state in its various manifestations: Rousseau's "will of the people", for example, or Marx's proletarian dictatorship, or the blood-and-soil nationalism that led Europe and Japan into the world wars of the twentieth century. The only form of collectivism still embraced by a large part of the world's population is integralist Islam, which dominates most Muslim-majority countries."
-David Goldman, as excerpted from here
"Americans selected themselves out from among the nations of the world to enter into the political covenant that is the American constitutional state. It succeeded because it is "a country with the soul of a church," as G.K. Chesterton observed. Individualism founded on God-given rights has triumphed over the alternative-the collectivist premise for the state in its various manifestations: Rousseau's "will of the people", for example, or Marx's proletarian dictatorship, or the blood-and-soil nationalism that led Europe and Japan into the world wars of the twentieth century. The only form of collectivism still embraced by a large part of the world's population is integralist Islam, which dominates most Muslim-majority countries."
-David Goldman, as excerpted from here
33 Guidelines for investing in real estate
Guideline # 18: Have a professional team.
Have a TEAM. A serious minded investor values the talents of a quality support team. Team members include an attorney, an accountant, an insurance broker, a maintenance/handy man, and of course, a real estate broker. Your support team will help you avoid most troubles. For those troubles that cannot be avoided, you will be happy to have their support.
Have a TEAM. A serious minded investor values the talents of a quality support team. Team members include an attorney, an accountant, an insurance broker, a maintenance/handy man, and of course, a real estate broker. Your support team will help you avoid most troubles. For those troubles that cannot be avoided, you will be happy to have their support.
Friday, August 2, 2013
Came the day.................................................
Jimmy Dean.................................................Big Bad John
Persistence......................................
“Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan Press On! has solved and always will solve the problems of the human race.”
-Calvin Coolidge
Opening paragraphs................................
Around Moscow, the country rolls gently up from the rivers winding in silvery loops across the pleasant landscape. Small lakes and patches of woods are sprinkled among the meadowlands. Here and there, a village appears, topped by the onion dome of its church. People are walking through the fields on dirt paths lined with weeds. Along the riverbanks, they are fishing, swimming and lying in the sun. It is a familiar Russian scene, rooted in centuries.
-Robert K. Massie, Peter The Great: His Life and World
-Robert K. Massie, Peter The Great: His Life and World
Fifty years ago.........................................
Joey Powers.........................................Midnight Mary
33 Guidelines for investing in real estate.....
Guideline #17: What you do, or don't do, matters.
When you buy stocks, bonds, shares in a REIT, mutual funds, rare coins, commodities, gold, art, or collectibles, you have invested your money, which is a very good thing. Congratulations! If you have purchased wisely, you can make significant gains. It the markets appreciate, you can make significant gains. Other than deciding to sell, your role after making such investment is passive. You are at the mercy of "the market," that mysterious force. You get to watch and wait.
Real estate is different. As with all other investments, if you have purchased wisely and/or if the market appreciates, you can make significant gains. But......real estate is not passive. What you do truly matters. By refusing to fix things that need fixed, by not taking care of things that need taking care of, by ignoring the needs of your tenant - you can make the value of your investment decline. By fixing things that need fixed, by taking care of things that need taking care of, by tending to the needs of your tenant - you can keep the value of your investment stable. By upgrading the property, by maximizing its potential use, by upgrading tenants and/or rents - you can make the value of your investment go up.
A regular periodic review of the investment property matters. Is the rent appropriate for market conditions? Are the expenses in line? Are both you and the tenant following the provisions of the lease? Is the property in sound condition? What improvements and repairs are on the horizon? Is the neighborhood around the investment holding its own? Am I comfortable with continuing to own this investment? These are among the questions you, as the active investor, need to think about and answer to your own satisfaction.
What you do, or don't do, matters.
When you buy stocks, bonds, shares in a REIT, mutual funds, rare coins, commodities, gold, art, or collectibles, you have invested your money, which is a very good thing. Congratulations! If you have purchased wisely, you can make significant gains. It the markets appreciate, you can make significant gains. Other than deciding to sell, your role after making such investment is passive. You are at the mercy of "the market," that mysterious force. You get to watch and wait.
Real estate is different. As with all other investments, if you have purchased wisely and/or if the market appreciates, you can make significant gains. But......real estate is not passive. What you do truly matters. By refusing to fix things that need fixed, by not taking care of things that need taking care of, by ignoring the needs of your tenant - you can make the value of your investment decline. By fixing things that need fixed, by taking care of things that need taking care of, by tending to the needs of your tenant - you can keep the value of your investment stable. By upgrading the property, by maximizing its potential use, by upgrading tenants and/or rents - you can make the value of your investment go up.
A regular periodic review of the investment property matters. Is the rent appropriate for market conditions? Are the expenses in line? Are both you and the tenant following the provisions of the lease? Is the property in sound condition? What improvements and repairs are on the horizon? Is the neighborhood around the investment holding its own? Am I comfortable with continuing to own this investment? These are among the questions you, as the active investor, need to think about and answer to your own satisfaction.
What you do, or don't do, matters.
Asimov..........................................
Asimov said a whole lot of interesting things. To wit:
“Intelligence is an accident of evolution, and not necessarily an advantage.”
“Your assumptions are your windows on the world. Scrub them off every once in a while, or the light won't come in.”
"There is no belief, however foolish, that will not gather its faithful adherents who will defend it to the death."
“Never let your sense of morals prevent you from doing what is right.”
"Science fiction writers foresee the inevitable, and although problems and catastrophes may be inevitable, solutions are not."
“Violence is the last refuge of the incompetent.”
"All life is nucleic acid; the rest is commentary."
“The saddest aspect of life right now is that science gathers knowledge faster than society gathers wisdom.”
“In life, unlike chess, the game continues after checkmate.”
Thursday, August 1, 2013
Come..............................................
Spirit...........................................................Morning Will Come
Opening paragraphs.......................
On a winter afternoon, diving an inland lake, south of Orlando, every small thing was going right, far better than I had anticipated, but then it all went suddenly wrong in ways I could not have imagined.
-Randy Wayne White, Deep Shadow
-Randy Wayne White, Deep Shadow
Ultimately............................................
"Ultimately, the kind of government that makes having children or starting a business risky life decisions is a failed government."
-Walter Russell Mead, as excerpted from here
-Walter Russell Mead, as excerpted from here
Fifty years ago...................................
Bobby Rydell...................................................Forget Him
Something there is that doesn't love a wall....
Mending Wall
That sends the frozen-ground-swell under it
And spills the upper boulders in the sun,
And makes gaps even two can pass abreast.
The work of hunters is another thing:
I have come after them and made repair
Where they have left not one stone on a stone,
But they would have the rabbit out of hiding,
To please the yelping dogs. The gaps I mean,
No one has seen them made or heard them made,
But at spring mending-time we find them there.
I let my neighbor know beyond the hill;
And on a day we meet to walk the line
And set the wall between us once again.
We keep the wall between us as we go.
To each the boulders that have fallen to each.
And some are loaves and some so nearly balls
We have to use a spell to make them balance:
"Stay where you are until our backs are turned!"
We wear our fingers rough with handling them.
Oh, just another kind of out-door game,
One on a side. It comes to little more:
There where it is we do not need the wall:
He is all pine and I am apple orchard.
My apple trees will never get across
And eat the cones under his pines, I tell him.
He only says, "Good fences make good neighbors."
Spring is the mischief in me, and I wonder
If I could put a notion in his head:
"Why do they make good neighbors? Isn't it
Where there are cows? But here there are no cows.
Before I built a wall I'd ask to know
What I was walling in or walling out,
And to whom I was like to give offence.
Something there is that doesn't love a wall,
That wants it down." I could say "Elves" to him,
But it's not elves exactly, and I'd rather
He said it for himself. I see him there,
Bringing a stone grasped firmly by the top
In each hand, like an old-stone savage armed.
He moves in darkness as it seems to me.
Not of woods only and the shade of trees.
He will not go behind his father's saying,
And he likes having thought of it so well
He says again, "Good fences make good neighbors."
If I could put a notion in his head:
"Why do they make good neighbors? Isn't it
Where there are cows? But here there are no cows.
Before I built a wall I'd ask to know
What I was walling in or walling out,
And to whom I was like to give offence.
Something there is that doesn't love a wall,
That wants it down." I could say "Elves" to him,
But it's not elves exactly, and I'd rather
He said it for himself. I see him there,
Bringing a stone grasped firmly by the top
In each hand, like an old-stone savage armed.
He moves in darkness as it seems to me.
Not of woods only and the shade of trees.
He will not go behind his father's saying,
And he likes having thought of it so well
He says again, "Good fences make good neighbors."
-Robert Frost
33 Guidelines for investing in real estate..................
Guideline #16: Budget for taxes, income that is.
We do not believe in "investing" in things that are designed to lose money. Current tax law has removed most of the "tax shelter" benefits of property ownership. Profitable investments tend to create an income tax obligation. Prepare for it.
One of our youthful mistakes in investing was to believe that all the mortgages on our investments should be paid off within ten years. It is important for you to know that we typically put as little as possible cash into a deal, financing as much as possible. This was not some grand strategy. It was just a reflection of the fact that we did not have a lot of cash to invest. Most of our early investments were rehab projects. Back in the mid-1980's, we found a niche that had been mostly ignored; buying, fixing, and leasing older properties in the smaller "county seat" cities around Ohio. Ignored niches are typically cheap and often offer significantly good returns on investment.
Anyway, back to the guideline. We financed several of these early deals with ten year fully amortizing loans, trying to pay the debt off as soon as possible. We forgot, or more accurately did not realize, that principle reduction gets accomplished with taxable income. We put all of our cash flow into reducing the debt, then had to borrow money in April to pay the income tax obligation that the investment created.
After a few year of that nonsense, we changed our plan and refinanced to lengthen the mortgage amortization periods. This way we retain more of the cash flow within the project and, come tax time, are able to write ourselves checks to cover the demands of Uncle Sam.
One of my early teachers, Jim Rohn, stressed that paying taxes was something we should joyfully do; taxes being the price of tending to the "goose that lays the golden eggs." I'm not sure we have every reached Rohn's joyful state, but it is a comfort to know that there is money in the checkbook to cover the taxes owed.
We do not believe in "investing" in things that are designed to lose money. Current tax law has removed most of the "tax shelter" benefits of property ownership. Profitable investments tend to create an income tax obligation. Prepare for it.
One of our youthful mistakes in investing was to believe that all the mortgages on our investments should be paid off within ten years. It is important for you to know that we typically put as little as possible cash into a deal, financing as much as possible. This was not some grand strategy. It was just a reflection of the fact that we did not have a lot of cash to invest. Most of our early investments were rehab projects. Back in the mid-1980's, we found a niche that had been mostly ignored; buying, fixing, and leasing older properties in the smaller "county seat" cities around Ohio. Ignored niches are typically cheap and often offer significantly good returns on investment.
Anyway, back to the guideline. We financed several of these early deals with ten year fully amortizing loans, trying to pay the debt off as soon as possible. We forgot, or more accurately did not realize, that principle reduction gets accomplished with taxable income. We put all of our cash flow into reducing the debt, then had to borrow money in April to pay the income tax obligation that the investment created.
After a few year of that nonsense, we changed our plan and refinanced to lengthen the mortgage amortization periods. This way we retain more of the cash flow within the project and, come tax time, are able to write ourselves checks to cover the demands of Uncle Sam.
One of my early teachers, Jim Rohn, stressed that paying taxes was something we should joyfully do; taxes being the price of tending to the "goose that lays the golden eggs." I'm not sure we have every reached Rohn's joyful state, but it is a comfort to know that there is money in the checkbook to cover the taxes owed.
On greatness...................................
“I used to walk down the street like I was a fucking star... I want people to walk around delusional about how great they can be - and then to fight so hard for it every day that the lie becomes the truth.”
-Lady Gaga
via
Wednesday, July 31, 2013
Chastisement..................................
I have received several communications indicating that I do not understand what a messy desk looks like. Trust me when I tell you that I do, it's just that I have been on a behavior (or two) modification kick lately. Attempting to keep my desk clean is one of those modifications. I will confess to some early successes. Time will tell whether the new, or old, habit will prevail. Here are some famous desks that should qualify as messy (feel free to add your own):
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A classic......................!
Long John Baldry...............................Don't Try To Lay No Boogie-Woogie On The King Of Rock and Roll
(please click through to YouTube. Pretty Please)
(please click through to YouTube. Pretty Please)
Opening paragraphs..........................
From across the aisle Harry Bosch looked into his partner's cubicle and watched him conduct his daily ritual of straightening the corners of his stacks of files, clearing the paperwork from the center of his desk and finally placing his rinsed-out coffee cup in a desk drawer. Bosch checked his watch and saw it was only three-forty. It seemed that each day, Ignacio Ferras began the ritual a minute or two earlier than he had the day before. It was only Tuesday, the day after the Labor Day weekend and the start of a short week, and already he was edging toward the early exit. This routing was always prompted by a phone call from home. There was a wife waiting there with a toddler and a brand-new set of twins. She watched the clock like the owner of a candy store watches the fat kids. She needed the break and she needed her husband home to deliver it. Even across the aisle from his partner, and with the four-foot sound walls separating work spaces in the new squad room, Bosch could usually hear both sides of the call. It always began with "When are you coming home?"
-Michael Connelly, Nine Dragons
-Michael Connelly, Nine Dragons
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