NOTE: Don’t confuse cap rate if cash on cash return. That’s another post altogether.

The NOI is what’s left after all vacancies and operating costs. Do NOT count what’s known as ‘capital expenditures’ as operating costs. If you repair something, or spend money maintaining it, it’s an operating expense. If, however, you don’t repair the stove/oven in a unit, you replace it with a new one, that’s a capital expenditure. Capital expenditures are NOT operating expenses, and therefore CANNOT be taken in the year spent against that year’s income. They must be depreciated over time.

Anywho, back to NOI.

Gross Scheduled Income (GSI) — minus Vacancy and ‘credit’ losses — minus all Operating Expenses — = NOI.

If you have loan payments, you want NOI to be more than your annual payments (debt service). NOI minus debt service = Cash Flow (CF).

Soooooo . . . NOI/Price Paid = Capitalization Rate

If NOI is $10, and you paid $110 for the property — $10/$110 = 9.1% Cap Rate.

I’d love to talk with you. Gimme a call at 619 889-7100 if for no other reason than you’re a kind person, and I need a fix. Or, click on the Contact BawldGuy button up top and do your best Mark Twain impression. Have a good one.

I’ve literally had clients leave me cuz I wouldn’t help ‘em invest there. Twice I’ve had those same clients come back to me for help. I’m pretty good at what I do, but a magic wand has never been part of my arsenal. They lost everything they bought in Vegas.

Why do I bring this up now?

Simple — A new list just came out. (Hat tip to AGBeat.com) It listed the top 100 zip codes in the country for foreclosures. In the several years I’ve been avoiding that market like the plague, not only have foreclosures dominated, but values consistently fall. At some point you’d think it’d lose its allure, but if that’s begun to happen, I sure haven’t seen it. There must be something emotionally pleasing in buyin’ a relatively young, nice looking home for not much — never mind that it keeps goin’ down. The ‘high’ of having paid what appears to be the lowest price in a neighborhood in Vegas, seems to have a shelf life of about 6-10 weeks.

Hint: That’s not a good thing. But again, this is merely one man’s opinion.

Let’s do what we do here, and avoid the guessing game. This new list shows empirically that of the top 10 markets in the country, Vegas now sports six of those zips. They can now lay claim to have all of the top five in the country. They have six of the top eight.

Yeah, I’m sure Vegas will recover at some point. To those who haven’t survived and those who’re hanging on, good luck. To those who bought for cash based on Happy Days just around the corner? Please, I’m beggin’ ya, call me. If I can ‘t show you how to do almost infinitely better, I’ll say I can’t help ya.

Fat freakin’ chance of that if you have even a $70,000 net equity.

1. 89031 – Las Vegas, NV
2. 89108 – Las Vegas, NV
3. 89121 – Las Vegas, NV
4. 89123 – Las Vegas, NV
5. 89129 – Las Vegas, NV
6. 93535 – Lancaster, CA
7. 92336 – Fontana, CA
8. 89110 – Las Vegas, NV
9. 93536 – Lancaster, CA
10.30349 – Atlanta, GA

BawldGuy Axiom: Markets do what they do. They’re all influenced by the macro economic factors of the region. They’re all subject to objective, underlying local market realities. Ignore them at your predictable peril.

Falling in love ain’t for real estate investing. Hardcore, objective, boots-on-the-ground analysis is what makes the difference. That analysis says Vegas might not be the place for your hard earned investment capital. (I got an A- in understatement.)

Own a buncha cheap properties free ‘n clear? Wanna do a whole lot better? Call me at 619 889-7100, and together we’ll figure things out. Rather write me? Click on the Contact BawldGuy button up top. Have a good one.

Serious people though, simply don’t rely on them for anything that matters more than the quality of their next cuppa coffee. Here’s my favorite example.

Buying income property based on (fill in number here) X gross scheduled rents.

In a nutshell the investor takes the monthly or yearly gross scheduled rents, and multiplies them by a number. The product of this simple formula will give them the price they should pay. An example would be the way most investors did for years in San Diego. They’d first come up with the annual rent figure. Then they’d multiply it by whatever number they felt was ‘market’. So, if the gross scheduled annual rent of a fourplex as $48,000, and the ‘multiplier’ was 13, the price would then be $624,000. Pretty neat, right? Well, like a lotta things, it’s pretty cool ’til is ain’t so cool.

Comparing apples to apples — or is it apples to dead cats?

You have enough capital to buy one fourplex. As luck would have it you boil your search down to a couple of ‘em, and they’re right across the street from each other. Here’s how they compare.

The first one, ‘A’, has current schedule rents of $48,000 annually.

The second one, ‘B’, sports a bit more, $51,000 a year.

How easy does it get? Given the multiplier our investor is using, 13, it means ‘A’ is the winner by nearly $40,000.

The fly in the ointment.

The owner of ‘B’ is offering his property at the same price as is ‘A’. Using the rule of thumb, 13 X gross annual rents, it appears the owner is selling a $663,000 fourplex for ‘just’ $624,000. These two properties were built the same year, by the same guy, with the same specs. How identical can they be? But wait just a New York minute. Seems when we closely scrutinize the last several years’ operating expenses it becomes crystal clear, that somethin’ just ain’t the way it appears. Prop ‘A’ has a much higher Net Operating Income (NOI) than ‘B’. This makes no sense, at least on the surface. ‘Course, if this wasn’t about lookin’ below the surface, there’d be no post, right?

There was an expense ‘B’ had that ‘A’ didn’t. Turns out, when they were first built, each of ‘em had just one electric meter. They’re all-electric buildings. However, a few years ago the owner of ‘A’ paid to have his units metered separately. He then was able to — duh — insist all tenants pay for their own power, dealing directly with the power company. This was a savings of no less than $6,500 a year. Funny how tenants will use way more electricity when the other guy’s payin’ for it.

All other expenses being more or less equal, the NOI for ‘B’ is roughly $3,500 a year less than ‘A’. What this means is that if he hadn’t looked at each property’s operating statements, he’d of bought ‘B’ based upon 1) The higher rents. And 2) he’d of assumed ‘B’ had much higher cash flow.

Wrong, GRM breath.

‘A’ is, in reality, the better buy. Also, if you’re following closely, you may’ve concluded that ‘B’, even with higher scheduled rents is actually a mirage. That’s especially true when you consider that ‘B’ was priced at far more than the 13 ‘multiplier’ used. Take away the extra $6,500 in expenses and its real ‘gross income’ is more like $44,500. Using our intrepid investor’s rule of thumb factor of 13, that makes it worth way less — about $578,500 or so. He’d of overpaid by around $45,000, but for his diligent analysis.

He also learned that increasing the rents was probably not gonna happen. They were lower cuz . . . the owner wasn’t payin’ for everyone’s freakin’ electricity.

BawldGuy Takeaway: Rules of thumb generally tend to do at least two things not conducive to solid investment decisions. First, they often either disguise or completely conceal crucial material facts. Second, concealed or disguised facts, more often than not, lead to more false assumptions and/or erroneously based conclusions. Either way, they smooth the way for some pretty costly mistakes.

Rules of thumb work kinda sorta reliably when comparing apples to apples, but only when the apples are clones. You might consider using ‘em to make your original ‘big net’ list of properties to consider. Even then, they can and will cause you to miss potentially solid properties, even when using a big net. In other words, when using rules of thumb, the best of all worlds is when they bring just neutral value to your investment decision process. In my experience, even that outcome is rare.

Do the analysis from Day 1. Leave rules of thumb to the amateurs, where they belong.

Let’s talk, OK? Gimme a call at 619 889-7100. Or, click on Contact BawldGuy up top and jot down a note to me. I’d love to talk with you about what’s possible. Have a good one.

There are times when a buddy, a reader, or family member sends me a link, or tells me about some real estate investment they read about online. Most of the time it’s a thoughtful gesture. They wanna know my take, or if I’d heard about this or that new ‘trend’. Then there’s the other day. There are some things so stoopid, you know the person tellin’ ya can’t possibly be makin’ it up. ‘Course this time it was a link, not a conversation, so I got to read it for myself. The sender, a local real estate agent for whom I have enormous respect, wasn’t disappointed in my response. I was staggered by what I’d read.

My response

I told my buddy, by now snortin’ at how he’d so easily set the hook in my lip, that he should print the post. Then he should put it a shredder, preferably one that crosscuts. Then take the resulting confetti and spread it evenly over his front and back lawns, watering moderately daily for a week or two. By that time he’d have the greenest lawns in his neighborhood.

The Advice

Buy 15 houses that generate $200 a month apiece in passive income. So far, so good, right? I’m there with ya. Sandwiched around the whole real estate income play is a comparison, pretty straightforward too, about having $1 million in your 401K. They quoted the well known Wall Street financial advice which says in retirement one should expect no more than about 4% return on retirement funds. OK, we’ll let that slide, though it isn’t terrible. Ask the retired couple across the street about the 4% they’re gettin’ on their nest egg. Then wait for the bitter laugh, followed by the predictable sneers. For Heaven’s sake, the 10 year Treasury closed at 1.897% today.

And that’s before tax.

But I digress.

This is when they take a left turn into the Twilight Zone.

They go on to explain how the typical person can buy 15 houses in the next 5 years — startin’ out with just $5,000 they saved.

• Buy the first house with $5K saved from job — using hard money.
• Save $5K and refinance first home for another $5K. Buy 2 more houses.
• Save $5K and refinance last 2 buys for $10K and buy 3 more houses.
• Save $5K and refinance last 3 buys for $15K and buy 4 more houses.
• Save $5K and refinance last 4 buys for $20K and buy 5 more houses.

And voilà! you’ve acquired 15 houses in just 5 years, simple as pie. Furthermore, they’re all dutifully providing you $200 a month in cash flow — $3,000 a month total.

But wait, it gets better.

You’re such a stellar real estate investor, you’re not only able to buy these 15 properties in five years, you’re also able to close escrow with $20,000 in built-in equity. Seriously dude, pat yourself on the back, cuz you’re freakin’ amazing. I can count on one hand the investors I know, around the country, who can do this. They’re slam dunk professionals, doin’ it 24/7/365. And when they’re lettin’ their hair down at Happy Hour, they’ll tell ya straight out, this plan ain’t doable.

Calm down, BawldGuy. OK, I’m cool.

The article goes on to tell you that in 20 years the homes will be worth twice what today’s value is, cuz, you know, that’s what real estate does. No, really, they said that, in black and white, no weaseling whatsoever. In hard and fast numbers, that means all 15 homes must appreciate 3.5% annually for 20 consecutive years. Go ahead, put this in perspective for yourself. Honestly figure what your current home is worth today. Start grinnin’, cuz when December of 2031 rolls around it’ll be worth twice that much. Congrats!

Oh, did I tell ya they want your refinanced loans to be 20 years? It gets worse, but let’s stop here before I blow a blood vessel somewhere.

Let’s list all the crappola in this plan.

1. Hard money charges 5-15 points per loan. If your favorite uncle, who loves you, is the lender, that’s 5 points. Um, that’s another $5,000 for each buy, which blows up the magic formula from the get-go.

2. Apparently there are never any closing costs when buying these 15 homes. In a gracious and magnanimous gesture, I hereby grant a closing cost holiday to this ‘strategy’. No closing costs of any kind, ever. (Almost threw up in my mouth a little on that one.)

3. Uncle or not, hard money loans, generally speaking, start at 10% interest and rise from there. They also demand a whole buncha equity, and a very experienced borrower. See a problem comin’ into focus here? Even if it was 10% interest only, the monthly payments would be around $834.

4. They wouldn’t get as far as the refinancing of their first home, but let’s humor them a bit. The appraisal would hafta be at least $120,000. The lender will insist on at least 20% equity, the Scrooge. They then would lend (Hey! You in the back row, stop gigglin’!) $100,000 at roughly 4.5%, a generous estimate of the interest rate. The payments would be roughly $633/mo. Anyone think there might be loan costs involved? Just askin’. Don’t wanna be a killjoy.

5. Let’s talk rent. These houses are already great deals, the script says they gotta be, right? Workin’ backwards with the $633 loan payment being the starting point, breaking even dictates the rent would hafta be around $900 or so. But that’s not nearly enough. Where’s the $200/mo cash flow? Oops. Now it’s gotta rent for at least $1,100 a month. That allows for minimum expenses, no big repairs, and 0% vacancy factor — always.

Can we all agree we’ve already entered the SillyZone with this crappola?

We’re not done though.

6. According to the script they’ve laid out, by the fourth year, the investor acquires their 10th house. Don’t wanna be Technical Tommy here, but assuming they own the home in which they’re living, Fannie Mae et al. says once the ninth home closed, you were done gettin’ loans they’d have anything to do with. Now, my experience is that most agents think that number is four, but in reality it’s 10.

Regardless, it ain’t 15. Oops.

7. Somebody, anybody, please, tell me where you’re gettin’ properties in solid neighborhoods, sellin’ for $100,000 — that rent for $1,100 or more. Yeah, I know, you do it all the time. Here’s something to ponder. Would you put Momma in that house to live alone? No? Surprise, surprise, surprise.

(Are there a few places where these houses can be found? Yep. They’re far away from where you live (98% chance). They’re extremely rare. And when we do find them, nobody will sell the dang things for 5% down, while giving away 20% of the freakin’ value.)

So what we’re faced with, is buyin’ 15 homes for $100,000 apiece, in areas that don’t suck like a turbo charged Dyson, while borrowing 95% of the purchase price — wait for it — from hard money lenders — at no cost whatsoever. We’re then gonna refi each of these houses a year after we bought ‘em, for what we freakin’ paid for ‘em?! And THOSE loans are gonna be cost free too.

Come on, let me do some flag wavin’ at this point.

Is America great, or what?!

To Review

You’re simply not gonna get a hard money loan for 95% of purchase price.

You’re not gonna get that loan cost free.

Ask yourself — How stable is your retirement income gonna be with 15 rickety houses bought for so low a price, in such relatively poor areas? What usually happens to substandard locations over time? Do they become more or less attractive to the buying public over time? Don’t answer. It’s a rhetorical question.

People, this sort of ‘strategy’ is just short of criminal, and I’m being kind. If I wasn’t convinced Grandma was watchin’, I’d put it a lot plainer than that.

This kinda garbage ‘advice’ is what almost always surfaces when the economy falters, and folks are lookin’ for a way to generate a stable retirement income. Again, I’ll recall what most of our grandmas said to us at one time or another.

“If it sounds too good to be true, it probably is.”

I’ll add Dad’s editorial supplement to that.

“. . . and here’s one for the horse you rode in on!”

OK, rant finished. I feel better.

I’d be on top of the world though, if you called me. We’ll figure out what actually can be done for your retirement. You’ll reach me at 619 889-7100. Or click the Contact BawldGuy button at the top of the page. Have a good one.

• Markets like San Diego — hit hard by the market correction, but still offering relatively unattractive price/rent ratios.
• Places like Las Vegas/Florida and other ongoing nightmares. Vegas, for instance, is over 13% down year over year. Every year I get folks in the area tellin’ me I’m missin’ the boat there. Every year I simply point to two lines on the chart. One is the price trend just mentioned, which has been consistently heinous. The other is the leadership position they maintain in default notices filed. It’s sad.
• Most of the rest of the country — areas with uninspiring demographics, employment, and overall, unimpressive macro economic factors in play.

Why Texas stands out

Check out nearly any survey showing employment; value trends; population growth; economic diversity; rents; taxation of both people and business; and, well, you get the idea.

When we talk about job creation in the private sector, where it counts, in the last year or so, Texas has created more new full time jobs than the other . . . 49 states . . . combined. That’s not opinion, or smoke ‘n mirrors. In fact, it’s the #1 so-called stat there is when deciding where to invest your hard earned capital.  Let’s compare that to California, a state on the sorry end of the spectrum.

In the first quarter of this year, 168 CA businesses (100 or more employees) either decided to expand, but not in CA, or left the state altogether. (Fled would probably be more precise.) That was just 90 days. I’m waiting to learn the numbers for the year. Got a feelin’ it ain’t gonna be pretty. Much of the state is under the pressure of double digit unemployment rates. The state is notorious — infamous is probably more accurate — for taxing and regulating businesses into the ground. It takes forever to get things done.

Take developing real estate

In California, if you buy the land, you’re considered a magician if you’re breakin’ ground in less than 12-30 months. Then there are the extra required reports, taxes for everything that doesn’t move, and fees to the myriad state, county, and local bureaucracies. Besides adding costs to the developer/builder via wasted time, it adds even more cost due to the many superfluous fees. God forbid an endangered species of cockroach is discovered.

That adds the cost of the new cockroach altar the contractor must build.

Developing property in Texas is more about fillin’ out paperwork than anything else. Buy the land, adhere to the zoning, show your plans, pay a few fees, then break ground. It usually takes less than 90 days. I’ve recently seen property in Texas (Austin) close escrow on the land acquisition, go through the building department for approval, and close escrow on the finished units in less than six months.

That was possible in California when the Dodgers were still in Brooklyn.

Maintaining Value

I’ve been in Texas now for goin’ on five years. The next appraisal reflecting a decrease in value will be the first. That’s an incredible statement, given the economic climate in which we find ourselves. In fact, values have inched up the last year or so. The rental values? Again, nothin’ but level or increasing — mostly increasing. Meanwhile, vacancy rates are falling. Austin? Try around 4% or so. In a recent project just north of San Antonio, a new unit was leased for $75 over what was projected. That’s just under 6% more than they thought. Boots on the ground research predicted the higher rent, but nobody would believe it.

Sure, in some places, San Diego’s one of ‘em, rents are edging up a bit. But it’s due to the virtually impossible dream of adding new inventory to the market place. No new competition in almost 30 years — ya think that might cause rents to rise a bit? Problem is, the units are becoming more outdated every year. It’d be funny if it wasn’t becoming so sad.

The bottom line

On every level I’ve analyzed, every boots on the ground research survey I’ve personally conducted since 2003, there’s been no state belonging in the same breath as Texas. The quality of locations offered is off the chart. This very positively impacts the tenant quality attracted to projects. The bang for the buck, an economics technical term, is huge, relatively speaking. A 3 bedroom/2 bath + 2-car garage with a fenced back yard — located in a neighborhood loaded with $250-500,000 homes — rents for $1,225-1,350 a month. Yet the investor pays just under or just over $250,000.

A crummy 55 year old duplex a half mile from my office sells for nearly half a million bucks. It offers a 2 bedroom and a 1 bedroom, along with all the really cool design features available when I Love Lucy was the #1 show on TV.

THAT’S why I keep tellin’ you to get your capital/equity to Texas.

Let’s figure out your situation together. Gimme a call at 619 889-7100 — we’ll put our heads together to figure out what’s on your menu. Rather write me? Click on the Contact BawldGuy button up top. Either way, it’s all good, as I need a fix. Have a good one.

The landscaping is pretty cool, isn’t it? It’s not the norm in San Diego as many might think, but it’s not rare either. Makes for pretty good curb appeal, that’s for sure. Anywho, let’s get started.

A note here, for those readers who might think, even a little bit, that I picked this duplex for it’s crummy location etc. Not hardly, as I’d easily apply the BawldGuy Mom Rule to this property without the slightest hesitation. I know this area like the back of my hand, having lived in or nearby the neighborhood since 1967 when I was 16. What’s the BawldGuy Mom Rule for Heaven’s sake?

BawldGuy Mom Rule: Brown and Brown Investment Properties policy is that no client shall be advised to invest in real estate in which I wouldn’t put my 80 year old mom to live alone. Period, over ‘n out, no exceptions. Hence the name of the rule.

The numbers tell the story 

Here are the assumptions used:

• They owe $100,000 on existing loan.
• This is the only property they own other than their home.
• Sales/Exchange costs will run around 10%. (We’re in termite country.)
• The investor is 50 years old.

At $470,000 +/-, the net proceeds from a sale would be approximately $323,000. They’d be moved directly from escrow to the Accommodator used in the exchange. (Another post altogether.) It’s from that account the second half of the exchange will be executed.

Maintaining the Status Quo

Having reduced the loan to $100,000, and if he’s like most investors, he’s already done the math figuring out the income this duplex will provide in retirement, sans debt. It’s even money it’ll be less than his projected Social Security check. In this case, $1,455/mo., not even $18,000 yearly. Sadly, he’s probably better off than most of his family and friends. But for fun, let’s say it’s $20,000.

His net worth, (only this duplex) is $470,000.

If he exchanges to a superior market

Here are the assumptions used:

• He’ll be puttin’ 25-30% down on any property acquired in exchange.
• All loans obtained will be 30 year, fixed rate, at 5%.
• His ‘depreciable base’ will be increased by roughly $700,000 or so.
• All retirement income/net worth numbers will be those at acquisition — no value appreciation or increase in Net Operating Income (NOI) will be applied, as per my policy.

I’d trade his equity (tax deferred, per IRC Section 1031) into four small income properties. The cost would average out to about $255,000 apiece. Three of ‘em would be with 25% down payments. The fourth would be using, give or take, 40% down.

The NOI for each would be a bit over $19,000. But we’ll be happy with the $19,000 for this example. Using the BawldGuy Domino Strategy he’ll have eliminated debt from all four properties in time for his 65th birthday/retirement party.

His two retirement scenarios in a nutshell

Status Quo — $20,000 a year in retirement income. Little if any of it tax sheltered. The property is now 80 years old, which virtually always means higher expenses than significantly younger buildings. Duh. We have a longstanding joke about old buildings. It’s possible the only reason they’re still standing is cuz the termites have agreed to keep holding hands. Bada boom!

His net worth, as noted earlier, is $470,000 — a kindness I extend to the elderly as policy.

Exchange scenario: $76,000 a year in retirement income. Roughly a third of which would be tax sheltered for around 12 years or so into retirement. Better than a kick in the head, right? The buildings would be only 15 years old, about broken in. They’re family sized units (3 bedrooms/2 baths with 2-car attached garages for each unit.) so over time they would’ve had less tenants in each one. This results in less wear ‘n tear, and therefore lowered expenses overall.

His net worth in this scenario would be in excess of $1 million.

Income/Net Worth if he stays the current course — $20,000/yr — $470,000.

Income/Net Worth using my suggested strategy — $76,000/yr — over $1 million.

When I constantly beat the Get Outa Dodge drums, it’s cuz it’s a no-brainer. This guy would almost quadruple his retirement income while more than doubling his investment property net worth if he opted for the exchange route.

It ain’t rocket science by any stretch.

Hey! You don’t need rocket science to find me. Call 619 889-7100 and we’ll be chattin’ before ya know it. Or, if you like, click on the Contact BawldGuy button at the top of the page. Together we’ll figure things out and make it happen. Have a good one.

Often times though real estate will be held in an entity such as a trust, partnership or corporation. All of these entities will require a special information return to be filed disclosing information to the IRS about this foreign entity.

Forms, there are forms

Investors also may setup a bank account or investment account in the country where there real estate is located. This may mean that an investor will be required to file two information returns (A form 8938 required in 2012 and an FBAR TD F90-22.1). Not all foreign bank accounts will require an information return but it is important to be aware and file if it is required. Form 8938 requires much of the same information that is on the FBAR but is not subject to the same disclosure requirements.

Penalties can be very significant for not filing these information returns. Not the least of these is the $10,000 fine for failure to report. There are several other penalties as well and they can add up fast.

If you are a US investor with real estate abroad I would strongly recommend seeking a tax professional familiar with these tax regulations. They can also review your foreign entities and financial investments to insure that any and all information returns are filed timely.

I will follow up next time with issues that a foreign investor should consider when investing in US real estate.

• The age range is late 40s to late 50s.

• Their net worth, read: available investment capital sans home equity — is less than $200,000. Sometimes way less.

• They have qualified retirement plans — 401k/IRA — with lousy returns, relatively low balances, and pretty grim lookin’ futures. If you’re almost or over 50, less than $200,000 is a sign you need a new game plan. Actually, less than $500,000 if you’re keepin’ score.

Fact: The average American man, 58 years old, has less than $100,000 in their qualified retirement plan, usually a 401k. Red flag.

Fact: A disturbing percentage of Boomers 47-58 years old simply don’t know how they’re supposed to right their ship as it relates to retirement income. What they do know is what doesn’t work.

Fact: The #1 conclusion generated by this sobering realization is that time is no longer their friend. The ticking in their head keeps gettin’ louder as each new year hurtles towards them. This isn’t the recipe for improved sleep.

Fact: They own little, or more likely, no real estate outside of their home.

What to do?

The first thing is to take a step back, breathe deeply, and know there are steps you can take to reverse this trend. You must, however, understand that being decisive is an absolute must from this day forward. By that I don’t mean to ‘react’ as much as I mean act deliberately. On these pages it’s known as Purposeful Planning. Have a plan — execute it with great purpose. Live off the results.

Let’s get specific.

So far, you’ve come to terms with your new reality — time ain’t your friend. Also, you must throw out what you’ve been doin’, cuz it’s what got you here. Surprisingly, for many that mindset has turned out to be difficult to create. Comfort zone is one thing, but when you’re close enough to retirement to see it threatened, ya gotta throw out your playbook and start over.

Einstein may’ve helped us more with his definition of insanity than with any of his genius mathematics.

Paraphrased: “Insanity is doin’ the same thing over and over again and expecting different results.”

1. Real estate, excellently located, in regions welcoming to both business and capital should be the foundation of your new approach. If you can’t wrap your head around that, I’m not sure what will ensure a livable retirement for you.

2. You may be lookin’ at redirecting your years long distribution pattern for after tax job income. That’s a sugarcoated way of sayin’ some sacrifices might be in your future.

3. Above all, you simply cannot have any more losing years. You don’t have one more treadmill minute left. The execution of your Plan better be bulletproof.

Finally, I’m here to tell ya, one Boomer to another:

All is not lost. You can salvage your retirement. Will it be the one you’ve dreamed of for so long? Maybe, but probably not. Still, it’s been my experience you can turn things around with a decisive attitude, seriously knowledgeable planning, and a laser-like focus on execution.

Here’s my first piece of advice:

Get started yesterday afternoon around 4:30.

Or, you can simply accept the fact you’ll be schlepping your way through a crummy retirement.

Tick Tock.

Speaking of tick tock, isn’t it about time you called me? Let’s get things turned around. My number is 619 889-7100. My guess is that things aren’t quite as dire as you might think. Wanna write me instead? Find Contact BawldGuy up top. Have a good one.

Here are some things to ponder — food for thought if you will.

• Know where you are now. Rudimentary? You bet. But try gettin’ to any ‘Point B’ without knowin’ your ‘Point A’ and see how it works out.

• Understand how crucial it is to comprehend the difference between capital growth and cash flow — when to use one or the other — and when to shift gears from one to the other.

• Yeah, we realize you’d like to retire around 4:30 yesterday afternoon, but given your current reality, how long till you might reasonably retire, given your end game financial goals?

• What capital is available to you today? What equities could/can/would you tap to increase your initial investable capital?

• What’s your range of comfort — your comfort zone? This will come up often, believe me. It’s important to stay within that self-defined zone. It will dictate how well you retire, and often how quickly. Whenever there’s a conflict, comfort zone should always be the trump card.

• Cash Reserves — this is not an option. A real estate investor without reserves — generous reserves — is a fool. Period. Harsh? You bet — but ask those who’ve been visited by Senior Murphy and didn’t have generous reserves, how it worked out for ‘em. How important do I deem reserves? If you don’t have any or even what I consider adequate? I simply will simply refuse work with you. Yeah, it’s that important.

• Flexibility — Having a Purposeful Plan is one thing. Expecting the execution to be unaffected by Murphy and his minions is fantasy. It’s not only negative events that require a flexible attitude. It can be an incredibly positive opportunity that comes your way. But in my experience, those windows are often narrow.

There’s more to gettin’ from Point A to Point B, but you get the drift, right? Almost everything you’ll find yourself doing will adhere, more or less, to the ongoing paradox that is real estate investing. What you’ll be executing will be simple in nature — but commonly not so simple when it’s you gettin’ things done. What most clients learn pretty quickly, is the difference between watchin’ those in the arena, and being in the arena themselves.

BawldNotes: Next week I’m back in Texas with a twofold agenda. First and foremost will be to have my own boots on the ground, vetting management firms in a couple new areas. Very few factors affecting real estate investors are more important than professional management.

Also, I’ll be attending a professional to-do in San Antonio. It’s called a ‘barcamp’ — pros teachin’ pros. I was at the seminal barcamp many years ago in San Francisco, and a bunch since then. The best part? Rubbin’ shoulders with those in the industry. Nothin’ better than swappin’ war stories at Happy Hour with fellow professionals who’ve also been in the arena a long time.

I’ll also be paying off a bet I lost to Chad Emerson of Prime Lending in San Antonio. Those who are regular readers know Chad’s the guy I rely upon for my clients’ income property loans.

If pondering these concepts has driven you to action, please, gimme a call. 619 889-7100 will find me every time it’s tried. Or, simply click on the Contact BawldGuy button up top and send me a note — brief or epic. Have a good one.