Real Estate 2.0: Real Estate, Investing, and the New Way to Fund Your Retirement

By Martin Stone and Spencer Strauss

When it comes to retirement your cars side-view mirror is spot on when it warns that, objects in the mirror are closer than they appear. Yes, your retirement is looming. The question is, what are you going to do about it?

Buy and read REAL ESTATE 2.0, thats what.

Within the pages of REAL ESTATE 2.O you will learn how to build real wealth wealth that lasts, wealth that is real, valuable, and solid. Here will easily learn how to build a retirement portfolio using time-tested techniques for real estate investing such as leverage, compound interest, and tax deferred exchanges. Any willing investor who follows a plan utilizing these moneymaking techniques can safely and successfully create a fulfilling, wealthy, and abundant retirement. This is true whether you begin investing at age 26 or age 66.

If you want to retire and not worry about money, if you want real wealth and the life you have always dreamed of, then you need REAL ESTATE 2.0.

• Language: English
• Publisher: AuthorHouse
• Release date: Mar 8, 2013
• ISBN: 9781481721127

Martin Stone

Martin Stone is the coauthor of The Unofficial Guide to Real Estate Investing (John Wiley & Sons, 1999, 2nd Edition, 2003). A graduate of USC with a degree in finance, Marty has built more than 40 multifamily apart¬ment buildings, managed more that 1,000 units, and written and lec¬tured extensively about all areas related to real estate investing over the past 40 years. He is also the managing broker of Buckingham Real Estate Investments and Richmond Financial Services in El Seg¬undo, California. Marty lives with his wife, Lori, in a home he built himself. Feel free to contact him by e-mail at [e-mail], or visit the office Web site at . Spencer Strauss makes his living as a real estate broker work¬ing side-by-side with his writing partner, Martin Stone. In that capacity, Spencer has bought, sold, traded, and managed countless buildings and has helped scores of investors get their start in real estate. Besides coauthoring The Unofficial Guide to Real Estate Investing, Spencer also cowrote The Complete Idiot’s Guide to Impeachment of the President (Macmillan Publishing, 1998). He has been featured on television on KABC Eyewitness News, as well as on radio stations KFI and KABC, all in Southern California. Addi-tionally, Spencer’s analysis has been featured in USA Today, the New York Post, the Chicago Tribune, the Long Beach Press Tele¬gram, and the Los Angeles Times. Spencer can be contacted for free real estate advice via e-mail at [e-mail].

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© 2013 Martin Stone and Spencer Strauss. All Rights Reserved.

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Published by AuthorHouse 03/04/2013

ISBN: 978-1-4817-2112-7 (e)

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ABOUT THE AUTHORS

Martin Stone is the coauthor of The Unofficial Guide to Real Estate Investing (John Wiley & Sons, 1999). A graduate of USC with a degree in finance, Marty has built more than 40 multifamily apartment buildings, managed more that 1,000 units, and written and lectured extensively about all areas related to real estate investing over the past 40 years. He is also the managing broker of Buckingham Real Estate Investments and Richmond Financial Services in El Segundo, California. Marty lives with his wife, Lori, in a home he built himself. Feel free to contact him by e-mail at [e-mail], or visit the office Web site at www.buckinghaminvestments.com.

Spencer Strauss makes his living as a real estate broker working side-by-side with his writing partner, Martin Stone. In that capacity Spencer has bought, sold, traded, and managed countless buildings and has helped scores of investors get their start in real estate. Besides coauthoring The Unofficial Guide to Real Estate Investing, Spencer also cowrote The Complete Idiot’s Guide to Impeachment of the President (Macmillan Publishing, 1998). He has been featured on television on KABC Eyewitness News, as well as on radio stations KFI and KABC, all in Southern California. Additionally, Spencer’s analysis has been featured in USA Today, the New York Post, the Chicago Tribune, the Long Beach Press Telegram, and the Los Angeles Times. Spencer can be contacted for free real estate advice via e-mail to [e-mail].

Dedication

MARTIN STONE: To my wife Lori who inspires me with her attitude of gratitude and her willingness to give back by helping others.

SPENCER STRAUSS: For the sweetest, prettiest, funniest, and most loving girl in my life, my dear Ingrid.

CONTENTS

       Preface

RETIREMENT REALITIES

GREAT EXPECTATIONS

RETIREMENT STRATEGIES

THE APPRECIATION GAME

COMPONENTS OF RETURN

YOUR WINNING LOTTO TICKET

TAX PLANNING

APPRAISING VALUE

FINANCING REAL ESTATE

MINDING THE FARM

       Conclusion

       Appendix

       Glossary

       About the Authors

PREFACE

A simple amazon.com search would uncover more than 10,000 books available on the topic of real estate investing. By reading any of them you could certainly get a great jump on the real estate investing game. You can learn how to buy bank-owned properties and foreclosures, fix ‘n flip buildings, manage homes or small apartment buildings, find extra value in mismanaged units, as well as a host of other, savvy, investment-building maneuvers that any budding real estate investor might want to try their hand at.

Regrettably, what is missing in the lion’s share of those 10,000 books are chapters devoted to discussing the reasons to invest – that is, recognizing what the true and long term financial benefits are to owning income property are and then, and most important, learning how to use those benefits to fund the kind of life and, ultimately, the kind of retirement you truly desire. Our plan here is to tackle this missing piece of the real estate investing puzzle head on.

The birth of this book came about from lessons we learned in two areas. The first was in our everyday business as real estate brokers; selling investment property to people like you for more than 40 years. The lessons we are going to share with you here are the same ones we have been preaching to our own clients for all these years. These lessons have helped to create wealth and stability for them and they can do the same for you too.

The second, and more pressing reason to write again was due to the reaction to our first published work, The Unofficial Guide to Real Estate Investing (John Wiley and Sons, 2000 and 2003), where we sold over 150,000 copies. With that book we were confident that if we did our job correctly then everyone who read it would make sure to either beg, borrow, or steal enough money so they could immediately make a down payment on a small set of units and get started and be well on their way to a comfortable future.

But by and large it did not turn out that way. Sure, we managed to attract a number of converts along the way. In fact, we personally helped to create more than a few small empires for some readers who were really committed to someday retiring from the rat race. Yet even people who raved about our content, wrote glowing reviews about our books online, and came to learn about investing from us at book signings across the country often confessed that they just hadn’t made up their minds to take the plunge and invest yet. This was troubling.

Visit any online source or walk into any bookstore and you will see shelves full of books (including ours) promising to make you wealthy using this system or that. In fact, lots of books offer sound advice on how to build wealth in may arenas, not just real estate. We concluded that the problem is most books on this subject are offering a road map to riches to people who aren’t truly committed to the trip.

For many busy working people saving money and thinking about setting up a retirement plan is the last thing they want to consider. They are pulling in a decent paycheck every week, spending it on bills and pleasure, and because they are young and energetic, they are confident that they can keep that train running for as long as necessary. Hopefully, something kicks in—let’s call it maturity— and they realize what a dead-end merry go ‘round they are on. Now, investing a portion of their salary toward a fruitful future becomes a top priority. Better late than never, right?

At this point, most working people willingly turn over the critical component of retirement planning to someone else—usually a stranger—whether it’s the government through Social Security, their company’s pension plan, a 401(k), or a similar arrangement administered by some expert.

Regrettably, even a cursory look at any online source or newspaper will show that most retirement vehicles administered by so-called experts come with serious problems. As for Social Security, when our turn comes, at best it will provide us with a modest supplement to what is needed; at worst it will be nothing but a cruel joke.

What we’re getting to is this: Unless you were born with the privilege of, for example, Prince William or Harry, you absolutely need to begin investing to protect you and your family in your retirement years.

Statistics show that for almost 95 percent of all retirees, there is no golf club membership in your future, no exciting vacations to be had, and literally, no rest for the weary. You would like to help your kids with college or to help them purchase their first home, but the truth is you will be lucky to just keep yours. Sadly the blessing of abundance in our country has created a generation of people who believe everything is going to work out just fine in the end. The sad truth is, it is not.

Many people spend a good deal of time planning the profitability of the companies they work for yet do nothing to create the same kind of security for their own families. Often it is not until they get the boot because of company cutbacks that they realize it is too late. Or worse yet, they do not wake up until after they get a gold watch and a round of ‘For He’s a Jolly Good Fellow.’

The reality is that once the novelty of being home during the day wears off your spouse will get pretty tired of seeing you hanging around every day—because in retirement in 2012 and beyond your backyard is the only place you may be able to afford to go.

Everyone has read about the golden parachutes that top executives get when they leave major companies. Those executives planned for those parachutes when they started their jobs. In fact, without a guarantee of one on the way out, they refused to take the job. Now check with the human resources department where you’re working; did anyone create a golden parachute to help protect you when your tenure is over? Of course not.

The truth is there probably is only the equivalent of a teeny-tiny umbrella set aside for you, if anything. Two weeks severance pay for years of service is hardly what anyone would call golden. And as mentioned, you will get an even smaller umbrella, if anything, from Social Security—not very comforting after a lifetime of paying into the system.

Our plan in this book is to show you how to create your own golden parachute via investments in real estate. It can be done. We’ve done it for ourselves, and we have helped countless others do it for themselves. Stick around.

Take this simple illustration:  For many years the most successful investment that most people made was the purchase of their home.  Over the years they saw their equity position magically flourish.  In the early 2000’s this happened so fast that many took advantage of the newfound equity to refinance and buy even more property. Unfortunately this was usually done without a written plan and in the hopes that the rapid price increases would just keep happening.  Well, as we all know, this did not happen and the ensuing property value drop was devastating to many in our country.  We could write an entire book about why all this happened but we just want to make three points now.

First, this cycle of value increase followed by a drop in prices is what economists call a business cycle.  Business cycles happen in most industries and real estate is no exception.  We will be giving you more details on this later but the point is that we have been through this before and we will go through it again in the future.  As devastating as the fall may have been to some it needs to be noted that disaster did not strike everyone. Those who invested with a plan weathered the storm and in fact are getting ready to take full advantage of the next run up in values.

The second point is about planning. Planning is a topic we will be talking about through out this book.  Refinancing your home to buy more property is a great way to get ahead. That is, provided it is part of a well thought-out plan.  But even under the best of circumstances borrowing to buy without a plan can lead to big problems.  Many people experienced problems borrowing money without a well thought-out plan during this recession, and doing it before a recession can yield even worse results.

Finally a note to those of you who didn’t refinance but have watched your equity vanish.  This has happened many times before and will happen again.  Hang on; our belief is that the next run up in property values will be just as drastic as the previous drop.  In this book we will be teaching you how to take advantage of the upswings and give you the planning skills to be able to ride out the dips in the business cycles. The idea is to be armed with knowledge this next go around.

Note that we are not talking about getting filthy rich or making a killing flipping fixer-uppers or buying foreclosures for under market. There are plenty of other books on the market to help you do those things. In fact we are telling you up front that this is not a get-rich-quick book. This is because real estate, by nature, is not a get-rich-quick investment. Our purpose here is to help you create something much more real and tangible than that - - long-term security for you and your family. We have done it for ourselves, we have helped others do it, and with this book we are going to teach you how to do it.

The plan is to educate you in the same conservative investment techniques that we have espoused to our readers and clients for the past quarter of a century. Here we will teach you that success in real estate does not take smoke, does not include mirrors, and does not require luck. Rather, success here simply requires a well thought out road map. The good news is that the nucleus of your road map is now resting in your hands. These techniques have helped to provide a cushy retirement for many an investor.

Thomas Jefferson said, Most people believe that they’ll wake up some day and find themselves rich. Actually, Jefferson got it only half right—eventually people do wake up, yet unfortunately when they do it is usually too late. Our hope is that you grab the ideas in this book, couple them with your own dreams and actions, and make something fantastic happen for yourself.

We encourage you to do it before time runs out.

CHAPTER 1

RETIREMENT REALITIES

Lack of money is the root of all evil.

-GEORGE BERNARD SHAW

Most aspects of our modern culture focus primarily on immediate gratification. The idea of planning ahead for retirement, therefore, isn’t very appealing. For that reason, most of us race through our lives acting as if a retirement fund will simply take care of itself. This laissez-faire attitude towards planning for the future was especially true when we were younger—probably because when we were new in the working world, we were too busy stretching our newfound wings of freedom. When we were young and invincible, nothing could harm us and nothing could stop us.

In those years the possibility of failure and of not being rich never even entered our minds. Sure, our parents and mentors tried to warn us about what lay ahead. But in truth, most of us went on living our lives thinking and acting as if we always knew best. Because we were so much smarter than our parents, we had little doubt that we would succeed.

Eventually, we came to understand that becoming a mature and responsible adult wasn’t as easy as we thought. Why, we ask, didn’t the folks hold our feet to the fire on some truly important things that would have made a real difference to us? Where were the lessons about savings and investing for a safe future? Perhaps it was because our parents had their own troubles. They were probably so caught up trying to salvage their own dreams they didn’t have anything left to help us with ours. Even more likely is that after leaving their own youth and dreams behind, they spent the remainder of their lives in survival mode. In reality, most parents probably just lacked the money to pay for the things that they would have liked to do or have (for themselves and for us). Empty bank accounts as senior citizens simply left them drained, both emotionally and financially.

TIME COSTS MONEY

In Lionel Bart’s musical Oliver!, Fagin sings, In this life, one thing counts, in the bank, large amounts. Truer words, especially for anyone who has hopes of hanging up