This Weekend In PCH Real Estate

This week in Real Estate along PCH in SoCal offered some interesting new listings and a change that I will be following closely.  The biggest change for me of course was bringing my marketing and business skills on board with my wife at Keller-Williams.  I have officially made the move from investor to agent/investor.


Back the the weekend notes, I found some interesting things, starting at the north end of OC.  The Seal Beach super home offered for $12 Million appears to have been taken off the market already.  After personally seeing the house,  I wish I still had the sheiks financial advisors number.  The house was fit for a king.  In fact I am still digging hoping to find that business card just in case. 


At the same time at the south end of my area in Corona Del Mar, not one but two Cameo Shores tear downs hit the market empty and running.  This is something I haven't seen in the nearly three years I have been monitoring the Cameo Shores and Cameo Highlands areas.  Just 18 months ago I was trying to put together an offer just under $2.0MM for a home that didn't even have a view just to get into that area.  The home sold before i could get a lender to commit.

The big news starts with an ocean front home sitting on a stunning lot that is going to auction.  It was originally listed at $14MM and had no takers for over 6 months.  The tax value is very low indication an original owner, so I am guessing the family for whatever reason just wants to sell it and get the money.  


The Auction information lists a starting price of $5.5MM making the property a smoking bargain.  The agent dropped the price to $9.9MM before the seller agreed to auction off the house.  If you are interested in more information call me, and I'll get you the details on bidding.  There are some great architects and builders in the area that could turn this property into a once in a lifetime buy.  

I think the lot at $5.5MM is a deal beacuse you could knock down the house or live in it.  There aren't many lots for sale at a price like this that include a livable house.  Just up the street off the water is a another original house with some great ocean views for $2.5MM.  

Having two homes in Cameo Shores at lot pricing isn't something that happens every day and both of them will likely sell this week unless the ocean front home has a high reserve at auction.  For those of you that don't know Cameo Shores, it boasts one of California's few private beaches.  There are three access points for the homes that are off water.  Several waterfront homes have a private path to the water.  

Both of the properties have a great opportunity to build some stunning subterranean space and create a very unique finished property.  For the short term the property might not be a huge profit move for an investor, but givin the current market changes, I'd bet my commission that by the time the new houses are finished they will be money makers.

Some time ago I said the sub $1MM bottom had hit Orange County, and the numbers are backing that.  Above $1MM there is still a lot of concern and homes are all over the board.  

In between Seal Beach and CDM there are a couple of nice new waterfront listings in the Huntington Harbor.  More than once I have heard the Huntington Harbor called the "half price Newport Harbor".  This might be true, a nice waterfront home with Viking Appliances and a 50 foot boat dock came on the market this week for $1.975MM.  Less than the price of the knockdown with a view in Newport. 

For buyers in the $1MM-$5MM market there are some deals to be had, digging for deals below $1MM is getting tougher every day.  Word on the street is the auctions have dried up at the courthouse and the banks are holding out.

If you are thinking of buying or selling along the coast in OC give me a call.  If you see something else happening, let me know your thoughts.

Rental Real Estate

I am sitting here in Maui enjoying a condo just across from the beach.  The condo is one of hundreds that are here on the islands which are available by the week.  A well run vacation rental can be a great money maker that lets you have a condo or a house in a great location for up to 14 days a year basically for free.

Basically there are a couple of things to keep in mind, both have to do with 14 days.  The first is how often it is rented each year.  If you rent your property for more than 14 days each year, it triggers tax rules for rental property.  If you use it 14 days each year or less yourself then you get the better deductions like depreciation if you want them.

There are another set of local rules that have to do with sales taxes and hotel taxes.  Hawaii is considering legislation to force vacation rental owners to use a local property manager because they believe the mainland owners are renting properties and not paying taxes.

Nothing good can come of this.  The assumption is that more people are cheating than following the rules.   If that is the case then maybe the rules should be reviewed.  As an agent, forcing owners to use a local property manager only will increase the cost and decrease the benefit of owning a vacation rental.  Generally these increased costs drive down value.  Driving down value drives down price.  When you drive down price, you drive down property taxes and real estate sales commissions.

All of this sounds counter productive to long term revenue generation which is what Hawaii is really looking for isn't it?

This is a case where I don't know the good answer.  The hotel industry of course wants a fair playing field and if they have to pay a hotel tax, then the condo owners should pay some taxes too.  I get that.

The reality is that the income from the tourism, food, drink, souvenir and tour sales is money they don't want to lose either.  If Hawaii is going to force the owners to use a local property manager, then they may need to cap the rates much like many areas do for Taxi cab drivers or smog check stations.  Say some fixed cost of $20 per rental when the owner finds the renter?  How much more work could collecting the checks be for the property manager than smoking an old car?

Your thoughts?

Overwhelmed by Real Estate and Don't Know Where to Start?

Sitting out on the balcony at a nice resort after a weekend of Real Estate Investing seminars is a very refreshing break.  After two full days of listing to people talk about how to be a better investor and talking with several people about their investments I am glad to just be sitting alone with my thoughts on the balcony.

Once in a while people will walk by and look up, probably wondering why I am not at the bar or out at the pool, but other than those few wandering souls it is pretty quiet up here.

Having been “investors” part time for nearly 20 years, my wife and I decided to step it up a little this year and put more money where my mouth is.  On Beach Street News, I called the bottom of the Orange County Market just after buying my current home.  From what I heard over the last two days, Phoenix and Las Vegas also appear to have bottomed.  This is great news for everyone.

We came here to learn how to “wholesale” property.  Wholesaling means that I find property really really cheap I do all the negotiating and get a contract on the property.  I find property that nobody else wants because they can’t figure out it’s value or it has been marketed wrong.  

Next,  I use my marketing skills to reach out and find buyers that want to make 15% on their money and have it secured by real estate.  I make somewhere between 5% and 12% on the deal.  My buyer is still getting a smoking cheap property, and I help them with the fix up, rental and maybe even find them a property manager.

If you are asking “How do I buy one of those deals from you?” the answer is simple, send me an e-mail with how much cash you can come up with and when, and I’ll build the deal.  No financing just cash.  As the old saying goes, “Cash is King”.  Banks and distressed owners don’t want any risk in the deal if they are going to let the property go at a 35%-50% discount from retail value.  You gotta have cash.

Many of the people here were seasoned investors so I learned some new methods I had never heard.  I also saw some wide eyed people who were totally overwhelmed by the whole idea of having to buy and sell a property in 14 days in this market.  Some didn’t even own their own home and had no idea about title, escrow, attorneys and agency fees.

The guy hosting the seminar was Dean Graziosi, the de-facto king of Real Estate Informercials.  As hard as Dean tried to cater to all levels at this event, there was a small group of about 15% who were totally overwhelmed and lost.  One lady even lost a small fortune using a competitors “system” which was a joke the way she explained it to us.  

I am sure at least one person is wondering why I would pay an infomercial guy to learn about investing in real estate.  I met Dean about a year ago at an event not related to Real Estate and was impressed with him as a genuine expert, and more importantly as someone who wanted to see the people who paid him succeed.  I felt like he was a guy who could help my wife and those who are close enough to me that I can’t teach them.  So I bought a small program that included tickets to the event which also let my wife start learning more on Dean’s website.  This afternoon, it was clear that Dean was a little disappointed to see how many people at this event had read the books and never “done a deal”.  

My wife is very keen to these things from her 18 years of class room teaching experience and introduced or pointed out several people who were clearly stunned over the weekend.  Noticing that isn’t easy in a room of 200 or more people.  I really didn’t want to speak at all during the event and was able to keep my appearances on the microphone down to one.

At the end of today I snuck out a little early to enjoy the resort pool and while I was working on my sunburn, I realized that I should have got on the microphone one more time.  I laid there thinking that I might be able to help the people who where still in shock.  They all had the same problem.  They needed a “simple” place to start.  Something that would take the pressure of the 14 day wholesale deal off of their shoulders.  To Dean and the other Pros, this was easy stuff.  Enough people got it to the point that it felt easy across most of the room, but not all of the room.

What I needed to say was this:

Keep in mind that every investor in here started with just one deal.  Wholesaling is not how Dean started.  I personally haven’t yet wholesaled a deal, and as an agent, I may never be able to wholesale a single family home.  Luckily the commissions are about the same as the “spread” on a wholesale deal, so I just need buyers ready to jump.

What I did, what Dean did and what many people in the room did, was start with one deal on one property.  In fact, I think we all started out purchasing a place that we lived in, fixed up and later rented.  Chad, the youth pastor with the “Buy and Hold” strategy started there and stayed there.

If you don’t own a home today, before you even become and investor, I would say go buy a home.  Find a Realtor like Kelly and go buy a government owned home in the 14 day window where investors can’t get it.  Start with a deal there.  If you own a home, even better.  Rent the house you live in and go buy another home with little or no down through one of the government foreclosure programs like Homepath.com.

Start with your house and your first rental.  Even if you get a Homepath house, you only have to live in it for a short while before you can go get another one.  When you have one home and one rental, you are learning lessons of business, property management and real estate investing the way Dean, Chad and I all learned it. 

The big difference is you can read about our headaches in Deans books so you at least know what to expect and how to avoid most of them.  With that experience, you are ready to come to a seminar like this weekend's E.D.G.E and start learning more advanced methods of presenting offers and doing deals faster.

Start with your house, and your first rental.  Use a Realtor As soon as you have done that, you are a real estate investor without any doubt.  You’ll know it, I’ll know it, Dean will know it.  You might not be any good at it yet, but now you have experiences to help you ask the questions and really learn from the pros here.  You can really step on the gas and accelerate your learning curve at an event like this if you know how to use it.  Until you do at least the first deal, it might all be jargon, gibberish and $2500 out of your account.

Read the books, buy a house, then buy another and rent the first, and you have just done what took me 3 years to do in less than a year.  Do that and next year, this event will be fun and you will learn a lot more, and be even better the year after. 

If you are dead broke, I mean really have no money, find someone in this room who lives in your city and intern with them on a per deal commission basis.  Learn how to “bird dog” one deal for them.  The first one will take time, and you won’t make much money.  The second will go faster, the third even faster.  After they have paid you for bird dogging three deals help them find buyers.  After you have helped them find 5 buyers.  GO DO IT FOR YOURSELF.

If you commit right now to doing one of those two things. Better yet if you commit to doing BOTH of them, when you get here next year, I guarantee you will be having a lot more fun, and making a lot more money.  

It is your choice.  What do you want to say when you are here next year?  “I did nothing” or “I helped Kelly with three deals, helped her get 5 buyers, bought a house and bought my first rental and now I make $200 a month more than I did last year.”  

You can’t even walk across the street unless you take the first step.  Start walking.

Maybe next year I’ll grab the microphone just one more time and say it, that is unless I am too busy making deals on my iPhone to leave the beach.

The Sub $1Million Bottom in Orange County Real Estate?

Lately we have seen a couple of interesting trends.  Homes that are below $1 Million and priced right are selling relatively quickly.  This  means banks are lending and closing.  This is a big difference after last year where 50% of the "Approved" buyers couldn't get funded and didn't close.  It was making agents crazy.  All that work and no commission.

Buyers were having fun either and many just gave up after one try.  Personally I had five "pre approved" loans when I made the offer on my house.  Three of the five cancelled my approval after the 17 day contingency period leaving me to lose my deposit.  Thankfully two kept moving forward, and yes I paid fees to all five of them.

At the very last second, the bank I was about to sign with backed out.  At the end of the day only one lender stuck it out and closed the deal.  My wife and I were not the listing or selling agents on the deal, and I can tell you that poor woman called almost every week to see if the banks were still going to loan.

The difference between me getting the house and the people that didn't close that month was simple.  I didn't quit when the first bank said "No".  Quitting isn't how you get a deal on a house, or any other kind of deal for that matter.

These days the above $1.0 Million homes are still soft, even if they are priced right.  When I say soft, they are closing more than last year, but they are sitting unless they are priced very low.  The spread between wholesale foreclosures/short sales and retail in the sub $1 Million home priced in Orange County and LA County is narrowing.  The $1.0 Million plus market is getting a little wider.  My guess is people are holding out longer and getting into more trouble, and banks don't want to dump those jumbo loans.

Sunday the L.A. Times had a pretty good chart that showed LA county was seeing a similar change.  Homes that were hit the hardest in areas like Lancaster were starting to see a little rebound.  The water front homes of Long Beach and Manhattan Beach were still falling although in single digits now indicating we are near a bottom.

I want to use a little caution here and say this isn't a "demand" bottom, rather it is an inflationary bottom.  What that means is that houses are just following the increasing prices of everything else.  While the Fed is still loaning money at record low interest rates, they are also printing it at record rates.  That is the real definition of inflation, more money available without an increase in supply of goods equals inflation.

That inflation is what we are seeing right now, and the benefit to the housing market is that the loans are worth less as the house prices follow inflation upward.  If the home market falls at 5% relative to the previous year and there is 5% inflation, the result is no change in home prices.  This looks good for the president in the short run, but sets us up for double digit inflation in the next couple of years.  Look back at the Carter-Reagan years.  Remember 18% home loans?

The second interesting trend reported by the National Association of Realtors last week was a significant drop in the number of "low ball" cash offers.  Another indicator that we have hit bottom and the cash buyers are looking for a different kind of deal.

Of course the banks still hold the wild card with over one million homes in the foreclosure process at some stage.  I don't imagine they will dump all of these homes at once.  Instead as the new foreclosure rates decline, they will start releasing a few homes for sale.  That is exactly what we are seeing in Orange County right now.

What is going on in your part of the state?

Save California Save Prop 13? Say What?

There is a lot of grumbling from Jerry Brown and the people in Sacramento we elected to work for us up there about Prop 13.  I agree in California we have a budget problem.  Everyone does and you can't overlook it.  I normally don't like to talk politics but this is an important issue for everyone that is being clouded by rhetoric and outright deception.  

Gov. Brown is blaming the budget problem on the rich and the land owners.  Specifically he says Prop 13 killed the state and county budget.  When a company loses money they borrow a little and then start cutting.  Thousands lost their jobs at airline after airline after September 11th.   Walk in to any airport and look at how many computer kiosks replaced people.  The line at the DMV is still around the corner every morning in Newport Beach Ca.

When a company can't pay it's bills, the state shuts it down and takes away the owners property.  Maybe it is time the Governor move into a FEMA trailer for a while.  After all he has had since 1978 to figure out how to lead a government and budget accordingly.  

Governor Brown is complaining that his credit card is maxed out and he needs more money.  If you or I do that the banks say no.  Our choices are simple.  1. Go bankrupt and lose everything, which I wouldn't do. 2. Negotiate a better deal with your creditors and workers, and 3. Work harder to add value.  Right now number 3 is the choice the Governor is overlooking.

Instead of chasing businesses out of the state that create jobs, maybe he should welcome them.  Make it harder to collect unemployment, and easier to employ.  That increases income to the state and decreases expenses.  Instead he cut the state employee roster just 1.3% while the state lost nearly 8% of the private sector jobs.  The private sector in some way shape or form pays all of the bills for both the private and public sector.

When the state of California Economy shrinks 20%, you can't cut 1.3% and expect to keep up.  That is simple bad fiscal management we all have to pay for, both now and later.  Since 1999 California's GDP is nearly off 50% according to the analysts at Chase.

Governor Brown anti business budget for 2012 chases businesses out of the state and yet he wonders why he can't get a budget increase.  That is like chasing your boss out of the room with a broom stick and promising the people standing there the TV's that he was carrying in.  

If you let the government raise taxes at will, two things happen.  The people that can really afford the taxes leave, or it turns out the taxes are just rhetoric.  Just look at the residents of Incline Village Nevada that are former California residents.  Or take a look at how little President Obahma's "Millionaires Tax" really created in revenue.  Tax hikes on the rich don't even scratch the surface.

We have to face facts, it is time to hold the elected representatives fiscally responsible.  That means we need to take their charge cards away.

Everyone knows that when you take out a loan for something the interest fees make it cost a lot more.  In California, cities have high permit prices to help pay for things like fire stations and police stations and schools before the neighborhood is finished.  Paying in advance is how investors get rich and states can do more with less money.  Politicians don't like it because they have to be responsible.

California wants to change things and the Governor says Prop 13 is killing his budget.  When home prices skyrocketed in 2006-2008 far outpacing inflation, you didn't hear any county or state rep talking about how they were saving or investing the new income.  What new income you ask?  Well, in 1995 I bought a home for $235,000 that the previous owners paid just $75,000.  That meant an increase in the tax income from my home of over 300% to the county.

Did the county save that money?  Over the next 4 years, 32% of my neighborhood sold.  Statistically in California from 2003-2008, at least 50% of the homes changed hands and increased the tax revenue to the locality 50% or more.  Many areas got 100% raises in tax revenue.  Did you get a 100% raise? Did you hear them complain?  Take a look at where the money went and you will quickly vote no and vote them all out.  

In 2000 the local schools attempted a bond measure.  I brought the increase in taxes due to the new neighbors to the meeting and the measure quickly died.  The school district didn't bother to tell anyone they had a 400% increase in income, and a 5% decrease in students over the previous 5 years.  

Don't be fooled by the man behind the curtain.

In California we have two problems. First we have a very high number of people who have "good jobs" working for the state.  Working for the government should be a service.  We should all give four years just so we can see how crazy people get when they are trying to register a car in the DMV line.

In many border areas, the "State" workers don't even live in the state.  With high unemployment, California is hiring out of state workers and contractors to do the job.  Why aren't we training people receiving benefits from the state to do these jobs?  The answer is simple. A free ride buys votes and Governor Brown depends on it.

Politicians are getting very good at pulling the heart strings and using the very unions they helped create against you.  You don't want to lose teachers do you?  You don't want to lose firemen do you?  Did you once hear "You don't want to lose your representative do you?" or "You don't want your representative to lose his government car do you?"  Why does he get a car and I have to pay to commute to work anyway?

Maybe "they" should start cutting the budget and start with their salary and benefits.  Maybe they'll quit chasing business out of the state and figure out businesses bring in money, so they don't have to keep raising taxes to pay their bills.

Just think all of this through.  If we repeal Prop 13 we all know taxes go up.  If taxes go up, house payments go up because most people have their taxes paid by the bank.  If people are having trouble with their house payments now, imagine what happens when the payments go up again.  Do you want your vote to cause people to lose their homes because the rent went up or the payment went up?  I don't, the banks don't and you don't.

Personal bankruptcies are still on the rise in California, let's not push anyone else over the edge.

Let's remind Governor Brown, and the other representatives in Sacramento who they work for.  Keep prop 13 and make them learn to manage money better so we cal all save California.  

Now I have to go find the website to donate to that Jarvis guy.

Has Orange County CA Bottomed Out

I have been saying for some time that we are near the bottom in Orange County.  Last May I bought a home near the beach at a price that I thought was pretty good.  More than once I heard something like "You are nuts, what if prices go lower and interest rates drop?"

My answer then was simply "So What?".  I didn't think that prices would drop much further.  I could easily stomach a 10% decrease in my home value if that really did happen, and a 4.25% fixed loan was pretty cheap. In the world of retail finance, 4.25% is as close to free as I think you are going to get.

The big banks hold the cards right now, so my crystal ball is filled with a giant logos for the big three banks.  Rumor has it that BofA and Wells Fargo are sitting on over 1 Million homes each that are over 120 days late and waiting for foreclosure, in addition to the 1 Million homes they already have foreclosed on or are in the process of foreclosing.

Now those numbers are pretty much conjecture as far as I can tell.  Time Magazines Business blog last August said "There are nearly 1.7 Million homes in the U.S. in some state of foreclosure."  Which is probably a more realistic number.  In the big scheme of things, that number isn't that bad.  Another tracking agency I use to find foreclosures for my wife and her investor clients says that in Southern California, the number is 1 out of every 687 homes.  Last year it was 1 out of 542 according to the same site.

That means there are fewer foreclosures.  Keep in mind there will always be some.

I said it before and I will say it again now.  If you can buy, and you live in Southern California, by all means buy everything you feel comfortable that you can afford.   If you are thinking about moving up, call my wife, get your home listed and start looking.  Inventory is thin.  The good deals go in less than two weeks.  Great deals in a couple of days.

The difference between a good deal and a great deal isn't $50,000 anymore, it is condition.  Any home in really good condition at a fair price doesn't last.  If your home is on the market and sitting for more than 30 days without an offer, there are one of two problems.  Your agent isn't doing their job, or it is priced too high.  The good news is someday the market will catch up to your price again.

For those of you that walked away from your home, I am sorry you did it.  A quick economic lesson here.  When the U.S. Government prints money, there is a short term boost to the economy of 2-3 years and then inflation follows.  In simple terms if there is $100 in the world, and there are two houses, then each house can only be worth $50.00.  If the government magically creates $300 and convinces two people to build to more homes at $50 each, there are now four homes and $300 in circulation.  When the people figure out what is going on, then instead of building two more home, the existing owners raise the prices.  Each house is now worth 1/4 of $300 or $75.

In the last three years, to slow the economy's downward spiral, it is estimated by several sources that the U.S. Government tripled the money supply.  The economy hasn't grown much and now inflation is rearing it's  head.  This is going to be one big inflationary baby.  Home prices will follow.

If you are on the verge of losing your home, and it is worth at least 80% of the current market value, Call Your Bank.  Work out a deal.  They don't want anymore foreclosures, and you don't want the headache of moving.  At the very least get an agent and consider a short sale.

Already I have seen several investor newsletters saying the courthouse auctions are getting more competitive and it is time to start getting creative.  Investors are now approaching the owners and the banks directly to try and work a deal.  These same newsletters are also saying in Southern California "low balling" isn't working because there are other buyers for just about every house.

I am not saying we are back to the craziness of 2006-2008, but I am saying, the banks are tired, the people are tired and the government has pumped up the money supply.  This is as close to bottom as I can ever see it getting.  That means one thing.  Buy if you can, hold if you can't, and if you don't own, now is the time.  We all know that rising inflation means rising rents, no matter what the price of houses does.

There is one other variable, but I'll save that for later in the week.

Is there money to be made in Real Estate Today?

For nearly 20 years I have been investing in Real Estate.  If you own a home, you too are an investor in my mind.  I have read just about every "get rich in real estate" book out there.  They really all say the same thing, but once in a blue moon something new comes off the pages.

Since most of my friends don't like to read, they are always asking me for the highlights of different books when they see the bookshelves in my office.  I don't mind sharing because the highlights won't get them the understanding they need.  As Malcolm Forbes famously said "With all thy getting - get understanding."

Just a few months ago, my wife finished her real estate license, and entered the field as a Realtor.  I of course handle all of her online marketing thought my SEO and online marketing company, the Bourquin Group.

People give us all kinds of peculiar looks when they find out we are moving head first in todays Real Estate market.  We are both amazed at how many people say something like "I was an agent but after the crash I quit and let my license expire."

The next question out of their mouths is "Do you think there is money to be made in Real Estate today?"  Now I really wonder how I should answer that question.  Should I say "No of course not, we are just plain stupid."?

So as Mr Forbes said, it is clearly time for them to get understanding.  Most people measure a market incorrectly in my opinion.  They look at how fast they can buy something and "flip" it for a profit.  Short term gains like that are simply gambling.  No real value is added to the market so it will eventually cost somebody some money.

The real answer to the question "Is there money to be made in Real Estate today?" is the same as always, "Yes".  Every market will dictate what method you need to use in order to make money in a market.  What most people want to know is "How do I make a quick buck in Real Estate today?".  That I can't answer.

What I can tell you is that if you are an investor or just starting out, now is the time to buy.  Nobody will know the exact bottom of the market, but Dean Graziosi uses "Days on Market" as a key trend indicator.  I would like to add "year over year inventory".  Both numbers are starting to shrink.

Banks still hold the wold card with unreported foreclosures.  Those are foreclosures where people still live in the house, and haven't made a payment in years.  The banks are just waiting to protect their investments .  Empty houses attract problems.  Letting people live there rent free is an interesting approach, but they are doing it.

Given all of the key indicators, we are nearing the bottom or possibly past the bottom of the market.  My bet is that in real dollars we are past the bottom.  Inflation alone will hold house prices right where they are.  In adjusted dollars, there may be one to three more years of price erosion.  That means that while everything else will go up in price, home prices might be flat.

So I can hear you asking "If home prices stay flat, how can there be money in Real Estate?"

The answer is simple.  I don't think real estate should ever be used for gambling unless you have a lot of cash to risk.  In the long run, Real Estate will always go up.  If inflation drives up wages and the price of lumber, building a new house will cost more, and that adds price pressure to existing homes.

History says, Real Estate always goes up.  More specifically with a couple of exemptions, any given piece of land will always go up in value over the long run.  Stocks that is not true.  Any company can go bankrupt.  Look at the names littering the grounds outside of Wall Street like American Airlines and Enron, in fact 87% of the Fortune 500 in 1987 aren't there any more.

Now the one Caveat to Real Estate.  Government intervention and Environmental Hazards, which usually result from Government intervention.

The city of Detroit is a stellar example of the freebie program gone silly.  hundreds of millions of dollars line the pockets of corrupt politicians and there are city blocks that are totally worthless because the government is attempting to control those areas.

Rent Control.  Another great social experiment to give more to those who haven't earned it at the expense of the those who worked for it.

Sometimes even environmental problems are caused by government intervention.  California made MTBE mandatory in gasoline to save the environment and reduce smog.  That was until the MTBE leaked out into the ground all over the state.  The gas station owners lost everything and the bureaucrats kept their jobs.  If the gas stations added MTBE on their own, the owners would all be in jail.

So as an investor, it is in your interest to limit the governments involvement to the bigger picture like zoning and safety.

Where does that leave us today?  There are two methods I am encouraging everyone to use to make money in real estate today.  The first is the method I call the path to retiring on the beach.  It is a simple method and will be expanded in my next book.

The short course to the "Path to retiring on the beach" is this.  Step one, buy a house that you can afford now, no matter if the price goes up or down.  Step 2, save money so that in 5 years you can buy another house.  Step 3. Buy another house and rent out the first house.  Step four, repeat at step 2 for 20 years.  At 20 years, the first house is paid off, and if inflation is normal, it is making the payments for the 5th house, your retirement home on the beach.  Every 5 years as each subsequent house is paid off, you get a pay raise in rents.

The second method is for people with great credit and already own a home. Go to step 2 and start there.

You can hope that your retirement is there in 20 years, or you can buy a house today and have four money makers when you retire.  The best part is, if you really dig and find good deals, you might not have to wait 5 years.

I used a VA loan, to get my first house.  Two years later I bought an FHA and rented out the house with the VA loan.  I bought a VA repo as my third home.  I paid about $5,000 more than it was worth but the VA interest rates and low down payments for investors made it worth the extra risk.

As home prices went up, I refinanced the VA loan to a 15 year so that I was still making $125 a month in positive cash flow and then used the VA loan again to buy a third house.  T

Even if you don't have VA benefits, FHA loans can do the same thing. You just need to pay PMI which means you keep more cash up front and pay a little more over time.

So is there money in Real Estate, the answer as always is "Yes", as long as you don't gamble and can keep the government from trying to "help" you or your neighbors.

The clouds are clearing up, so time to go to the beach.  Would you like to join me?