Business has a fine line between emotionless action and dynamic production. This line must be clearer the more employees in the business. Employees require the predictability of systems so that time wasting indecision is eliminated therefore increasing profitability. Owners should create predictable outcomes given a future set of scenarios which allow for quicker decisions to run the business more efficiently. Another systems by-product is the affect it has on the employee’s feeling of empowerment and ownership in the overall purpose of the business. If an employee does not know the next step or if the next step changes on a whim then gross inefficiencies are created within an organization. An employee is left impotent and disengaged about his or her contribution to the greater good. Systems should allow for intelligent decisions to accomplish the ethos, pathos and purpose of the business without yielding to the “This is the way I do it” entrenching of employee entitlement. Systems should yield a clear path from start to finish while integrating all the necessary parts of your business from the receptionist to the janitor.  AH 

My wife is celebrating her 35 years on the planet on Sunday. She is one of the unsung heroes in the world. I sincerely believe that her best hopes, dreams and accomplishments are bottled up inside her. I will spend a lifetime waiting for them to overflow and cascade over the lucky ones who get to spend time with her. I have known her for a lifetime it seems now but I am always suprised when she lets me in to tour her mind. You won’t find a more clear, positive and hopeful place. My greatest joy has been her humor, candor, class, beauty, grace and wisdom. Most of the people focus on me because I am the loud mouth or the Horshack of the crowd. On my best day I could not compare to my lovely and incredible wife. I love her and count it all blessing for being able to experience her life. Happy Birthday Amy.

Everyone has 24 hours in a day. What I struggle with is making the right choices on what things to spend my time on so that results are generated exponentially. I experience a tremendous amount of guilt when my time is wasted. In other words when something new I am working on does not bring home the bacon for my wife and kids then I could look at this as a waste of time. I am trying to build a legacy for them but if I am not here now what good does all this work do if I am not here to spend time with them and enjoy it. Caution! Warning! You can’t get time back - it is precious. Don’t waste time.
AH

WARNING! Don’t get caught up in the hype of short sales. When a bank is moving a house by taking less on the mortgage than what is owed this is a short sale. Seller receives no funds and many times the only person that benefits is a owner occupying buyer. Investors are getting in the game but before you get into a short sale you better have the buyer ready to go or an exit strategy that assumes a flat appreciation for the next 2 years.AH 

Real Estate flips are the most challenging of real estate projects. First they require a very detailed analysis of the cost of repairs. Second, they require management to guarantee that the budget stays on track. Third, the repairs will always be more than you expected. Fourth, the word flip assumes that their is someone to catch it once you flip it. Market times must be included in all analysis. I suggest you use 12 months of carrying costs and 5% seller concessions to give you a conservative rate of return and a realistic project cost.AH 

My mentor, Marc Overman, recently gave a talk about the need for changes in traditional retirement planning. Check out is blog insanemoney.com.He advised that any form of retirement planning in the 21st century required an “active educated risk manager” versus the static ignorant risk avoider. He also advocated a self-managed retirement plan. I agree. A largely ignored part of retirement plans is a consistent real estate investment portfolio. In other words, cash savings should continue on a dollar cost average basis but with the seeds of real estate sown in to yield a crop of retirement benefits in the future. An analogy that might help you look at real estate in a new light is what happened to the logging industry. At the turn of the century, logging companies would clear cut acres of land. After years of cutting without a thought of future timber shortages, the idea of replenishment took hold. This is the idea that as logging companies cut they will replant the trees and allow a new crop of trees to grow in the future. In retirement, clear cutting real estate should be replenished by seeds sown and then harvested when the crop is ripe.  Some real estate might be held for 10 or 20 years before it ripens to the point of harvest. Here is the lesson if you are not sowing seeds of real estate to harvest when the crop is ripe then you will be failing to be an active educated risk manager. Go out and sow some seeds.AH 

The following technique is an advanced technique for investors who owners who want to sell to someone who can’t qualify for a loan. Risk in this technique is that you put the property in someone’s name and they file bankruptcy, a judgment is rendered against them and attaches to the property or they go missing. Protect yourself with a power of attorney to be able to convey property if there is a breach of contract. Also, do some investigation of their credit history to see if they would qualify for a bankruptcy.

Here is how you lock your profits, put the person on title and create a win/win for your buyer.

First: You as the owner file a deed of trust and a note to another company that you own so that the profit and equity you want to protect is covered by this lien. You have to do this before adding anyone to title so that it has priority.

Second: After the lien is recorded, you then grant the property to yourself and the person who wants to buy the house. They should pay rent in an amount equal to the projected house payment for them.

Third: Make sure that you collect rent checks not cash from the tenant/owner so that you can show the mortgage company a 12 month payment history.

Fourth: Instead of the tenant/owner purchasing the house, they are going to refinance the home thus paying off your first and second mortgages while simultaneously receiving the remainder of the property interest you held during the 12 months you have been on title together.

You cash out, your loans are paid off, their closing costs are lower because they don’t have to bring the downpayment it is in the house already. Win Win all the way around.

AH

A 1950 industrial age approach to business has gone by the wayside. Businesses that have stayed in the “Build it, Sell it, Repeat” business model are not going to make it. Blockbuster is a dying business model because they own it, rent it, repeat has led the way for a better more convenient model to surpass them via the internet. Blockbuster is trying to integrate the model with new technology but you have to ask yourself if Netflix’s cache, ease of use and internet dominance will drive the last nail in the Blockbuster coffin. Diversification with partners at every level of business creates a mosaic of business opportunities that rise and fall depending on the changing marketplace. Partnerships allow businesses to make the adjustments quicker by using the resources of a more specialized party to reduce the learning curve on a required innovation. Partnerships are the insurance for business in the 21st century.AH 

I think the federal government should create FEPA. The Federal Emergency Pet Association so that middle class families can petition for aid when their pets have to go to the vet. I have 3 people that I know that have spent an average of $1416.00 in vet fees in the last week. Money well spent to stop the puking, defecating and urinating caused by a sick pet, however, if the Feds are going to be bailing out people who took out negative amortization loans and stopped paying their mortgages (because of vet bills probably) I think the middle class needs a hand out so that their pooches can receive better health care than their owners receive. Maybe Hillary can add a Universal Pet HealthCare to her platform that way when illegal immigrants come to the United States they can bring their pets. AH 

You have heard of the phrase other people’s money but what about other people’s equity. Money can be hard to obtain from sellers or lenders. Equity is money that has not been transferred into cash. Sellers are more likely to give up equity for cash because equity is an intangible for many distressed sellers. The key to obtaining OPE is speed. You need to be able to move quickly to fill the Seller’s need for liquidity. Here is a technique in a slowing or downtrending market that I have used in the past which might yield a powerful win/win for both parties in a transaction.You identify a house with substantial equity but very little prospects of selling at the current asking price. You approach the Seller to discuss the possibility of a joint venture. You take over the payments and move the seller out and become a co-owner on the deed. You tell the Seller that you will give the seller a portion of the equity now and take over the payments until the property sells. The Seller agrees to give up a percentage of the equity to you for taking over the payments and the remainder of the equity is divided 50/50. For example: House is worth 250,000 but the market selling time is 12 months. Equity is 100,000 and the house payment is 1400.00 PITI per month ($16,800 yearly). You agree to give the seller $10,000 and take over the house payments. You have them agree that you will control the selling of the house. Seller agrees to divide the equity as follows:Buyer receives the 10,000 plus all payments of $16,800 back at closing.Seller and Buyer divide remaining equity 50/50.  You make the decision to drop the price $30,000 to sell the property quickly thus eliminating $8,400 in payments which gets added to the overall equity for the Buyer and Seller to divide. After commissions (if you use an agent) and costs your net equity being divided is as follows:Sales Price 220,000 less $15000 (costs and commissions), less $18,400 ($10,000 to Seller and $8,400 payments) to Investor less payoff of 150,000 equals net equity of $36,600 divided 50/50.$18,400 cash back to you as Buyer plus $18,300 in equity equals total of $36,700. That is a 99% rate of return on your investment in 6 months (profit of $18,300 divided by $18,400 investment = .994).Seller receives $10,000 in cash from you and $18,300 in equity returned for a total of $28,300 in 6 months. The Seller made $28,300 and the Buyer made $18,400 from OPE.  Not a bad way for the Seller to hedge the risk of cash crunch and to manage illiquid equity. AH  

Banking on the rigidity of a bank is important. One of the most successful techniques for a real estate investor is to create a cash out refinance on a piece of property. I like to buy property no money down. Learning how to do this is information for another post. Here is how it works. You have your banking relationship and now you are getting ready to take title to the property. Before the old seller signs a deed over to you, you ask the seller to sign a deed of trust to a company that you control. This deed of trust is recorded against the property prior to your deed going to record thus creating a second lien on the property for the amount of equity you want to cash out. After the documents are recorded, the bank will typically allow a refinance for up to 80-95% of the cash value of the property. The refinance pays off the old first for the seller and the second to your company thus cashing out of the deal. Make sure your new loan does not create negative cash flow and always leave 20% equity in the deal. AH 

” It requires less character to discover the faults of others than it does to tolerate them.” J. Petit Senn

I have a Stitch coffee cup that my girls bought me in Disney World. Now this cup is not a normal coffee mug. This is a man’s coffee cup. Round and Deep. It has volume not like those Starbuck’s girl cups that are slim, skinny and petite. You know the ones that when you pick them up you can’t get all your fingers into the handle so when you hold it you look like Carson from Queer Eye for the Straight Guy. My girls know their daddy and got me a mug that will hold 6, that’s right, 6 cups of coffee. After you hammer one of these mugs in 10 minutes, you can feel the caffeine race through your veins like an 8Ball. Sometimes I look at that mug with Stitch saying, “I hate mornings” and doing his crazy Stitch dance and right there at 5:30am sitting in my fart shorts and soaking in the quiet of familial tranquility I realize what pure joy is. Gifts from my girls that provide simple pure expressions of true manhood.What are you drinking out of?AH 

“If we all did the things we are capable of, we would astound ourselves.” Thomas Edison

I would like to share with everyone my struggle with consistency around food. If you compared my life against others (a practice I am never in favor of but for argument sake will suggest), I would probably be considered a consistent person. Food is my downfall. I am overweight because I choose to be overweight. I eat food that I know is bad for me. Last night for example I abstained from getting dessert at the restaurant. When I came home, however, I saddled up to a bowl of ice cream like a crack addict on a crack pipe.I am not talking about normal bowl but a bowl large enough for a NFL linebacker. My wife, looking at me with astonishment as I sat in the dark making love to this bowl said, “are you ok?” I looked up ashamed and said, “look away, I am hideous”. She laughed and I continued eating. Unfortunately for me I was eating unconsciously to allow my food to handle my emotions. This is a very self destructive excersize.I wonder if people could have seen this 35 year old, attorney, entrepreneur and father eating ice cream in the dark like an obese gollum from the Lord of the Rings would consider me consistent? Good thing I don’t have a Krispy Kreme near my house or things could get publicly ugly. For now, I will seek the precious in the privacy of my own home.AH  

Other people’s money includes bank money. Many of the no money down guru’s advise on ways to get a seller to jump through financing hoops. My experience is most sellers want there money but banks don’t. In other words, sellers are in the business reaping money. Banks are in the business of lending money. Sure, they want deposits but all of their loan officers, shareholders and executives want to loan money so that they can earn a rate of return. Surprisingly, it is easier to get money on large transactions than it is on small transactions. Why? The large transaction has qualities that a bank likes such as cash flow, marketability, low risk to reward ratios, multiple exit strategies, and sophisticated borrowers.HERE ARE THE TWO SECRETS TO BANK OPM: Credit Rating and Loan to Value Ratio.Your credit rating is the most essential 21st century indicator of financial success.Obtaining a property at a price that proves to a bank that you are able to be patient and acquire property at a price below market value proves the quality of investment to the bank instead of trying to prove the quality of the investor. AH 

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