Mommy Real Estate

Some of the Perks! The Kevin Costner Band.

   Most of the perks of owning real estate are the obvious ones....the increase in the value of your investment and having a seocnd (or third or fourth) home in a fabulous location.

But, there are other perks that I've learned to take full   advantage of, like taking incredible vacations (write-offs?) to check out real estate opportnities.  And the little things, like an invitation to see the celebrities play the pros on the fabled Pebble Beach Golf Course during the coveted ATT Pro-Am.  As a guest of IMI Resort Properties (go to www.imiliving.com and tell them Barbara Barrielle referred you) we spent fours days watching golf, eating well and listen to rock bands....but who knew that Kevin Costner knew how to sing.  And act and golf!

Mr.Costner and his band played for hours, and played well. The fiddle payer was amazing as well as the roster of original songs. It was a great time, and while I watched and danced, my real estate investments were only going up more! 

The IMI guyys know how to do it well   and show us a good time while making money.  More on them later.

You Are the Last Resort!

Usage of Your Resort Investment Property

I like to say that we have to own the properties where we like to vacation because we would never be able to afford to stay there!  For example, a hotel room at The Kahala Hotel next to our Hawaii condo rents for about $400 per night…and it’s only a small room. 

I can buy the place next door with the same cool beach (minus the pool attendants and room service, of course) and stay there in a two bedroom place…and it’s a tax write-off.

But, I have a strict policy about usage.  We never use our resort investment properties unless no one else is.  If, and only if, there are no paying customers, will we consider using our condo in Hawaii or any of the other places where we own homes. 

We are not rich, but we are building wealth through real estate.  Therefore, we do not get to vacation like the rich when the rich vacation.  There is no ski usage or beach usage (or any usage) during the Christmas holidays, long weekends, Spring Break, President’s Day or any of the many holidays when other people want to pay us to use our places.

The beauty of this is that we can stay at home or we can go somewhere completely different…like a cruise…or to Europe when no one else is going.  We put our properties to work for us and let them work, using them only when no one else wants them.  In Hawaii, that turns out to be June or July, which is perfect for us.  For our places in Tahoe, we would go mid-week or Springtime when others aren’t clamoring to get there. 

The basic rule of investment usage is “don’t use”, cash the checks and wait for the time no one wants to pay.

Aloha...encore!

“Mahalo” for the patience on the Hawaii subject.  Don’t you just love how Hawaiians always toss in those native words?  And, how there are really true Hawaiians left…they’re not just the dancers at Luaus.

Our Hawaiian investment has turned out to be a joy and a challenge.  First, I had to completely redo the place…and I don’t live in Hawaii.  I do not recommend taking on complete redecorating projects of you live thousands of miles away, but they can be done.

 

I took the advice of Kimo (gotta love that name), my property manager, who set me up with the requisite gay designer and local construction company with a project manager named Rome.  I went to Honolulu for three quick days to put the wheels in motion.  For a flat fee, Richard met with me, compared tile, flooring and paint samples and we planned the overall look of the condo.  I chose fabrics and hit Costco, Macys and Home Depot a dozen times for appliances, kitchen furnishings and linens.  It was a whirlwind and over the next three months, Richard and I were in constant, sometimes strained constant contact.

A caution on designers….they usually do not like to deal on a budget, so find one who gets that this is your investment property, not your dream home.

When I returned six months later, the place was pretty good.  I am always updating, but plan on using the place every June for my daughter’s sailing and surfing lessons in Waikiki, and, each time, we have a great time making new improvements…and, if I must say, I am quite proud of the airy, comfortable place it has turned into….and the value of the condo, while not skyrocketing, has seen a decent increase and stays rented continually.  Mahalo.

Balancing the Portfolio

I see all these courses on different real estate investment ideas.  They are all offered to educate you and to, presumable, make you rich using the value of the real estate market.  The problem is, as I see it, that depending on one method to create your real estate wealth, is just that. 

Once you have learned one method, and learned that method well, you may make money.  And, hopefully, you make a lot or money.  But, if for example, you have learned to profit from foreclosures and suddenly fund that there are too few foreclosures in the market, or possible, more people have learned to do what you do and the competition to pick up bargains is greater, then you are in a bind.  You haven't balanced your real estate investing.  And, to make the damage more humiliating, you may actually own a bunch of truly unsexy houses or condos that you must unload.

Why not look into balancing your approach.  I fell into it out of sheer desperation to make money from all aspects of the market.  I own several rentals homes, have completed a total renovation on a country house, manage a business of vacation rentals, have down payments on several properties in the pre-development phase in many parts of the U.S, own well-managed resort real estate and have deposits down on several more of these resort properties. 

In the next few blogs, I will break down some of these investments and offer information on how to approach this balanced management of your portfolio.  Manage it geographically and by product type.  Have those properties you are madly in love with and those that are simply the conveyors of wealth.  Have the "flippers" and the "keepers." 

Own real estate in exotic locales for great vacations and those scrumptious tax write-offs when you travel to visit your investments.   Own real estate in your own backyard so you can easily manage it yourself.  There are so many opportunities and no need to limit your investments to what you may have once believed to be the path to wealth creation.  And we're talking wealth here.   There is no reason that all of us should not join the over one million Americans that are worth over a million dollars!

Confessions of an RE Addict..

There is no reasoning with an addict.  They are hooked.  They need a fix.  Their behavior is predictably uncontrollable.

My nine-year-old daughter and I have moved to Los Angeles so that she can pursue fame...I'd settle for fortune, but we'll see if she has an opportunity at either.  For three months, we are planted here in the San Fernando Valley while she takes acting classes and auditions.  Believe me, this is a strange world and it WILL be covered in an upcoming blog entitled "Starlet!"

We are renting a condo.  The operative word in that phrase is "renting."  I have not rented anything, other than a hotel room, in twenty years.  I HATE throwing money away.  I can not stand paying others who own real estate because I want to make money from the inflating market.  The two bedroom condo we are renting sits right on an extremely busy road and, frankly, triple pane windows just don;t do the trick.  And when the traffic dies down, the construction next door fills in the noise gap.

I was in the condo about three hours when I had the MLS up looking for places in the area.  Truth be told, I was looking even before we moved here.  I have lived in LA before, but never the "Valley."  I always thought it was for those less fortunate folks.  No more.  The prices are not just creeping up...they are leaping.  And the temporary slowdown I was counting on to get into the market ended the day I got here.  Really, I think it ended Friday when the houses I had been following on the MLS, those that had been on the market for months, suddenly ALL went into escrow.  Damn sunshine and buoyed stock market.

I can not say whether I will buy this week or even this month.  I really want to be off this busy street and into some cute bungalow that needs a bit of "TLC," as appears often in the real estate descriptions.  But, in one day, I got a great overview of the market in this corner of the Valley.  And I landed on some hip realtor that was stuck showing a house with the owner sitting in one of the bedrooms, chain smoking.  Not a very motivated owner.  Even then, they received an offer on the 1800 square foot house, marketed at just under a million dollars.

And I got a good sense of the neighborhoods where I may want to buy.  Sometimes you get a feel for a realtor and I did here.  Not pretentious, not greedy... and happy to make circles on a map that represented where SHE would consider buying.  Good enough for me.  So, this week we'll talk and strategize....and just see if there's still time to get in.  Maybe it will rain.....who wants to buy a house in So Cal in the rain?  I do.

Know When to Fold Them...

These are difficult times in the real estate market....most difficult for sellers who are pressed to sell their homes but also difficult for buyers who must make difficult decisions.  Things that would appear to be great deals, even magnificent bargains, only a year ago, are now decisions we must ponder and weigh against what the future may hold.

These decisions are less difficult if you plan to buy a home as your primary residence, because most likely you will stay in that home two years or longer.  But, if you are speculating about a purchase of distressed real estate to be "fixed up" or real estate as an investment for rental purposes, it is time to really analyze your potantial purchases.  For example, I pride myself in knowing a good bargain and things have proved well over the last few years.  But, the earlier "bargain" I mentioned in a blog six weeks ago, turned out to be a great deal I felt obliged to pass up.  The house was a wreck, but on a great lot.  That lot was in a historic district and plans would therefore need to be approved by the planning commissions of our small town.

Regardless of the bargain I saw in front of me, the risks were just too great.  And, the time with which to accomplish my due diligence was just too brief.  I could have beaten up myself and made everyone around me crazy over the holidays to meet our early January deadline, but I chose to retain sanity and leave my money in the stock market a but longer.  The risks were unknown, and I am in the real estate investment business to make money.  Asta la vista, good buy!  Hello sanity!

Aloha Time!

Everyone loves Hawaii.  It is generally considered a place where everyone wants to visit at one time…or many times in his or her lives.  And wouldn’t you love to say you had a place on Hawaii??

Whenever I travel I look at real estate.   It’s a habit, addiction, whatever you want to call it.  And that’s how a Thanksgiving trip to Oahu turned into a great investment with more than financial rewards.

We got lost driving to Hanauma Bay and ended up dead-ending into the fabulous Mandarin Oriental hotel (now the Kahala Hotel) and taking a bathroom stop.  When the kids (we were with another family, too) saw the dolphins frolicking in the lagoon, we knew we had to come back. 

On the return trip, I popped in to see the real estate agent with an office in the hotel and asked about properties in the neighborhood.  In the next couple days, we found one priced pretty low ($330K for a two bedroom, two bath) but it was disgusting.  Great view of the water (one unit back from the beach on the third floor) but yuck!  I knew, though, that a fabulous view of your private beach from the huge lanai would mean, with a little work, this place could be fabulous.

The price was low but the management fees, at almost $1000 monthly, we astronomical.  There was also the VERY tricky lease situation, which is common only in Hawaii and governs land put in place for the benefit of education for Hawaiian children, King Kamehameha Schools.  A long story.

We pay another $1000 per month for the lease so our returns on this property would have to pencil out.  I checked with the management company that manages many of the units and found out that $5000 monthly was what we would expect in rent and units were rented out on a month-to-month basis, not daily or weekly.  So, it could almost pencil out…but at least we’d have a place in Hawaii!  More tomorrow….

Tiny Bubbles

Everyone seems to have frozen in their real estate decisions…panicked because the good times seem to be over.  Home prices in many areas are dropping significantly and trying to sell a home seems to take ten times as long…and then you don’t get what you want.

In California, we are experiencing it, although I think our pain is less than some other areas….say, like Florida.   I am on a cruise right now, and, of course, cruises appeal to an older audience so about half the boat is from Florida. One couple told me foreclosures in Palm Beach County are up 80% and another man told me that he had bought four houses in pre-construction for about $450,000 only to have them worth about $275,000 a couple years later.  Fortunately, the many times I was invited to look at Florida real estate, I accepted the invitation, had a great time, then declined to purchase!

Panic and fear are inevitable, but this is also a good time for a few things.  First, reflect on real estate investments and remind yourself to choose wisely…don’t be greedy.  Spread the risk.

It is also a time to pick up bargains if you can.  Before I got on the boat, I secured a contract on a true fixer-upper on the best street in the little town we live in.  I have always wanted a house in town, but recently prices, even for junk, have been out of control.  This house listed for $649,000, which would have been $750,000 a year ago.  There was also a divorce involved.  I am in contract for $589,000 with a 75 day escrow – unheard of even six months ago.

Partners....can't live with them....that's it.

In my real estate holdings, I have several partnerships.  What seemed like a good idea at the time has inevitable become a bad, sucky one!

Partnerships look great from the outside....a few partners on several different projects can frankly double your holdings.  Want a place in Mexico?  Scrape together the funds and find the project.  But, a place in Mexico AND Tahoe?  Oh la la...so much more sexy.....bragging rights double....potential to profit a bit more....balancing your portfolio more attractive.

But, alas, the human factor creeps in.  Beware.  There will always be difficulties with the financial end.  Presently, a very nice family with which we are partners on several projects has grown horns.  We are trying to sort our financial contributions out to see where we stand before refi-ing or divesting of a property....somehow I have records....they are too busy to get theirs together.  I put in an extra amount to pay down debt...but where has this gone on the spreadsheet??

The furious e-mails and backtracking on receipts is time consuming and aggravating.  You know that tweak you get in your neck muscle when you are just anticipating conflict....yeah, it's there taut and tight.  Off to the masseuase before round four....more on partners later.

The Duh! Factor

I am sitting in my office on a Saturday morning....looking at some contracts for a new project in Austin, Texas, and looking for a weekend flight to Angulla.  Yes, the prized Caribbean island that is the relaxation spot for celebrities and just plain old rich people.

I own a one bedroom condo there.  It has not been built yet, so I can't really say it's mine, but on paper it looks damn good.  And I can drop that line about my place in the Caribbean easily....I really will have one someday...2008 to be exact.  The best part is that ....(oh, there are so many best parts!) we bought the one bedroom place in the first phase of the luxury hotel development.  But, first, my family was treated three days in a beachfront bungalow, complete with gourmet meals, snorkeling trips and a great massage by a strong island woman.

We couldn't resist the lure of owning there.  It killed us to come up with the 20% of the $900,000 price tag, but we did it.  And, wouldn't you know that the same unit, in Phase 2 and less than a year later, will be $1.45MM.  This is what I call the "duh" factor.  Cool condo on killer island that will rent for a fortune, great family vacation, and, that crown jewel, appreciation.  Duh!  What's not wrong in this picture?

So, Phase II is around the corner.  I've been invited down to see what's happened since the Phase I launch and I have my eye on a beachfront studio.  I am trying to get a friend to go with me, but it really seems too good to be true for most people.   Fortunately, I am not one of them.