I just got this picture from my buddy in NY that was taken a few weeks ago when he was down and wanted to share it with you. These are two of my favorite women Dawn and Mary enjoying themselves on the terrace of Dawns Penthhouse. It is a little out of focus but any blindman can see that they are having a great time feeling each other up! LOL.
Whoops there bottoms aren't showing in the picture.
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My buddy Jackie made a comment in the last blog bit about real estate and I am going to quote it here:
"Do you remember the conversation we had that night at Dori's regarding risk associated with real estate investment? I thought about saying something then, but thought it better that I let you get around to making the point. Hang in there and stick to your guns. I have been looking forward to seeing what your place would eventually become. "
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This is something I want to talk about for a few minutes. First off I was saying that I didn't think that Real Estate had a risk factor to me. He said everything does.
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My take is this. If I purchase to hold the risk factor is non existant. I have been doing this for 35 years and have a little experience in the field. If the market is going down in a cycle I am usually not a buyer or when I do I am a very picky buyer. I will buy only under the market or I may see something in a property that others do not possibly in a twist on a renovation. I am not usually a big buyer in a down cycle but I believe you can still make money on certain projects at any time whether in cash flow which requires more work or appreciation. When it is an up cycle everyone makes money even if they are more dumb than a box of rocks. If you are in the market you are a winner.
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When I purchase a piece of property I think of it as a Bank Account. Yup each piece is in a separate passbook. Only difference is that it is NOT liquid. I also don't spend my last cent (I am such a liar, I have done that a lot over the years) on a piece of property and usually keep enough liquidity for rainy days.
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What Jackie was saying was that when I bought a certain piece and they opened a Massage Parlor with a Happy Ending right next door my plans went out the window and there was the risk. I take exception to this for the following reasons. What I paid for the property was minimal. I feel that I can sell it for much more immediately just by hanging a sign on it and bailing out. Instead I am going to wait a bit because I am confident that things are going to change with the neighbor. When someone rents their future is not assured and is subject to many things. This is especially true when their business is not in the mainstream and the same type of businesses have been closed down by the government in the Capital. I am a patient guy and have no problems waiting a little for things to happen and to change.
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Real Estate always has an underlying value which is the land. If you buy in a growing area on a good street (Location, Location and Location) you can't go wrong. If you are a long term investor like me It doesn't matter if things happen quickly or slowly. Same thoughts whether the property is in New York or Sosua, Dominican Republic. I use a guage of interest I make down here to what I need to make to make things make sense. If I am making 30% in interest I certainly won't do any stinkin work for 24%. That would be a net -6% loss to me so I would need to make 36-40% to make it make sense as a basis and build up from there.
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Unlike getting interest rents rise and you don't even have to compound it. Being a landlord is definately a pain in the ass though and you have to weigh that against the additional income to see if it is worth it.
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Ok I hope I made some sense here and you all understand my point. I just wanted to respond to Jackie's comment about risk and why I still am not worried about investments especially in an up market like we have here. I see at least another 5 years of upwards growth here but it could actually be longer.
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Three or four years ago I turned the corner and started purchasing property here. Before that I use to do spread sheets explaining that it was a down market here and it paid to rent. I even broke it down into how many Presidente Beers you would have every week if you followed my instructions.
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My first purchase here was a building lot that I paid 15k for. I wrote this up and also mentioned that the previous owner paid 36k for it. The comments I received from one guy was "You will end up losing more money than the guy you bought it from". Now that guy was a rocket scientist I can tell you. I would have had to lose more than 21k on a 15k investment which just doesn't fly but the guy was just too stupid to come down off of his arguement no matter how much fun I made of him. He just didn't get the simple math. I am confident that the 15k is now worth more than 60k in 3 years judging by what has been selling in the same subdivision. Now that is the math I like to see!
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Things are still hot here and now heating up again in the last 3 months. Tourist season is in full swing and we are starting to kick here again. Large villas in the 500,000 dollar range are selling and so are large parcels of land. Housing starts are going crazy here although there are no figures to quote living in the third world. in the Gated Community I have property in they are starting a new home just about every month and every where I drive in Sosua-Cabarete new construction is SCREAMING.
Thats it folks. Hope you made some sense out of my writings.
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Hasta Pronto!
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4 comments:
Mr. Escott, what part of my previous comments even implied that "your plans went out the window?" So that I don't take up too much of your blog space, we'll talk some more when I see you.
In spite of the fact that I hold you in high esteem and am impressed by your wealth of knowledge, particularly as it relates to Real Estate, I will always remain a firm believer that there is risk associated with any investment. How well one gambles against or with that risk, is another story.
I still expect my Bud.
I said that my plans went out the window. I thought you were trying to say that was the risk involved because of the neighbor.
In my lifetime I have lost money in the stock market, the bond market, the futures and options market and just about everywhere else I have invested money with the exception of Real Estate. As a matter of fact I took profits out of real estate to lose somewhere else more times than I can believe.
Risk is what you experience. If you do something for a living such as invest and develope real estate and have always been successful you will feel there is no risk or at least that is my feeling.
Sometimes you hit it bigger than at other times and there have been times where I bought a shopping basket of different stuff thinking I may lose on one and win on two but even the loser became a winner for me. Experience is what tells you what to do and not to do.
Man I thought you were trying to say because my plans went up in flames that was the risk but I guess I got that wrong. At least there was no cartoon involved this time! LOL
Escott
You define risk as being "what you experience." I define it as being "unforseen circumstances" and, as a result, don't believe that you can ever eliminate risk but, rather, mitigate it. I don't worry about it. My opinions are constantly in a state of development.
I had never for a moment believed that your plans had "gone up in flames." Delayed maybe, but not gone up in flames.
BTW, I didn't see a response regarding the Bud you keep saying you're going to buy me. Does that mean I'm on my own? LOL
Ah, risk is something you/I have to weigh. There is risk even in a bank account.
I would rather have my money tied up in dirt.
Bud? I have all the Bud on the north coast now. First one is always free! LOL
Escott
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