by on April 5, 2012 2 Comments

Attention First Time (2nd Time?) Real Estate Investors

One thing many first time real estate investors learn is that what they perceive as their potential menu of options is mistaken. What’s encouraging is that as often as not, they’ve unvalued what’s actually possible, given their specific circumstances.

It’s fun watching conversations go from, “I think we can do this little bit” to, “We can do that? Really?! Sweet.”

I’ll be talkin’ soon about a youngish couple who’ve now been clients for a short few months. They’re textbook examples of what happens as real analysis weaves its way through the financial forrest of facts and fiction. When I say fiction, I mean in the sense that sometimes we find what we thought was this way, is actually the other way, plus a couple right turns. Add a little knowledge, a little expertise and experience, and before ya know it, KaBoom! Your Purposeful Plan is suddenly bursting with the promise of a magnificently abundant retirement. [Read more...]

Filed Under: Purposeful Planning, Real Estate Investing, Retirement Income
by on March 21, 2012 2 Comments

The Practical Ins and Outs of Present and Future Values

I’m often asked about the relative value of investment capital and/or cash flow. The question refers to the present and future value of money. A simple example would be the query:

If you know the yield on invested capital will be 10%, what’s better to have — $100,000 in 5 years — OR — $55,000 today?

I’ll leave the answer to you. :)

A reader made a comment. He asked if the income from an EIUL I’d quantified, was present or future value. The income was structured to begin 25 years from the inception of the policy.

My answer [Read more...]

Filed Under: Cash Flow, EIUL, Retirement Income
by on March 15, 2012 7 Comments

Bonds vs Real Estate Investment Property – No Contest

This has been, at least in my opinion, late in developing. Conservative investors, usually already retired, have been lookin’ at real estate’s cash on cash returns with eyes full of longing. Why wouldn’t they? They’re gettin’ a tick more or less than the 2% offered by the 10 year Treasury Bond. That can’t be what makes ‘em smile at the golf course or at the gym doin’ Pilates. “Oh yeah, I’m bankin’ almost 3% on my 40 years of ‘makin’ the donuts’.

I don’t think so.

Let’s say they retired a year or two ago, and have most of their liquid capital in bonds. How discouraging it must be to have managed to save $1,000,000, yet it generates only $20-30,000 a year. Adding insult to injury, it’s tax time about now, and their CPA just told them how big the slice of that unimpressive pie the government is about to take.

What could they do with that million bucks? [Read more...]

Filed Under: Cash Flow, Real Estate Investing, Retirement Income, Uncategorized
by on March 5, 2012 3 Comments

Why Does Financial Community Love Bonds? Why Doesn’t Warren Buffett? And Why Should You Care?

The financial planning community thinks you should have a significant piece of your retirement savings in bonds. How much? Well, the industry has come up with a handy “rule of thumb.” Subtract your age from 100 and put the resulting percentage in stocks; the rest in bonds. In other words, if you’re 40 years old, put 60% of your assets in stocks; 40% in bonds. And to make sure you can do this most 401Ks have a bond mutual fund offering. And most “experts” suggest rebalancing every year.

Now compare that advice to this out of Warren Buffett’s letter to shareholders that came out last week.

Investments that are denominated in a given currency include money-market funds, bonds, mortgages, bank deposits, and other instruments. Most of these currency-based investments are thought of as “safe.” In truth they are among the most dangerous of assets. Their beta may be zero, but their risk is huge. Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as the holders continued to receive timely payments of interest and principal. This ugly result, moreover, will forever recur. [Read more...]

Filed Under: Retirement Income
by on February 22, 2012 Leave a Comment

Real Estate Investment and The Information Age

There’s a false assumption about the age in which we live. It’s buried deep within the foundation of the almighty internet. We all think we can find anything we need — answers to all our questions. Know what? We’re almost 100% correct. Name something, and within 30 seconds to 30 minutes we’ve found the answers to the questions we so heartily desired.

Bodybuilding

You promise yourself to get fit, and bodybuilding will be a key factor in your plan. You research everything. You find out about all the many schools of thought. You opt for a full body workout three days a week. After awhile you begin to notice a good news/bad news scenario developing.

The good news is, your body is really lookin’ good. All the right places are showing muscle growth. Your wife begins feeling your biceps every now and then while smiling demurely. The bad news? The fact you’re getting stronger every week has resulted in your ability/need to employ heavier and heavier weight during your workouts. Though your strength keeps increasing, and your muscles look bigger and better each passing week, you’re also beginning to wear down.

Why? [Read more...]

Filed Under: Real Estate Investing, Retirement Income
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