Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
9:00 AM EST, Tuesday, February 3, 2009: Slowly,
slowly, the bargains are appearing. The story is simple. The banks have real
estate loans that have gone bad. They can't carry them on their books forever.
They can't manage them -- collect the rents, fix the roof, etc. They need
Buy distress real estate now -- or in coming months when there'll be more
(and maybe cheaper). You will be assured of quadrupling your money in three
Patience. Banks don't like selling assets at less than they paid for them
(more correctly -- what they loaned on them). They are dribbling these out.
Bankers have the same ginormous egos you and I do.
You must cultivate relationships with your local banks and key brokers.
Make sure they know you're in the market. When they sell, they often sell
fast and often to their favorite people. Make yourself a favorite person.
3. Get your
friends together. Better to spread your meager shekels over five properties
with five friends than blow it all on one property that may have hidden "gotchas."
4. Bid low.
Bid firm. Bargains are just appearing. There'll be an avalanche in coming
months. There is no urgency to buy now. They'll be cheaper later. Bid ultra-low.
The major determinant of profits in real estate is the price you paid. Repeat
after me: It's the price we buy it that determines how much we make.
5. Bid only
on developed properties with cash flow. You don't want half-finished buildings
or raw land. Trust me. You don't want raw land. Though God isn't making more
land, there's still plenty of it -- especially in California, Arizona and
Four to five
times your money in three to four years are the rewards for being in cash.
Cash is King. Hallelujah.
bad was the real estate "boom" in Florida? It was ugly.
You must read George Packer's piece "The Ponzi State"
in the latest New Yorker:
excerpt from this ultra-long piece:
By 2005, the
housing market in Florida was hotter than it had ever been and the frenzy
spread across all levels of society. ...Nearly everyone you met around Tampa
had a Realtor's license or a broker's license or was a title agent. ...."When
the yardman comes and says he's not going to mow your hard anymore because
he's going to become a mortgage broker, that is a sure sign that something
is wrong." Flipping houses and condominiums turned into an amateur
middle-class pursuit. ... Ross Baurer, a manager at a Toyota dealership
in Tampa, told me that between 2000 and 2007 he bought and sold half a dozen
properties, in a couple of instances doubling his money within two years.
I could say that the market here was driven by end users and retirees, but
it wasn't. Two-thirds were speculators. You could flip 'em before you had
to close on 'em."
The New Yorker
abstracts the article thus:
a number of inland real-estate developments near Tampa, Florida. Developers
there dreamed up instant communities, parceled out lots, and built look-alike
two-story beige and yellow houses. The houses sold to some of the thousand
or so people who moved to Florida every day. Now many are ghost subdivisions.
In one community, Twin Lakes, property values dropped by more than a hundred
thousand dollars in the past two years. Writer interviews Angie Harris,
a Navy veteran and mother of five, who says of her neighbors, It used
to be people would wave. Now they dont. In another community,
Hamilton Park, the writer interviews a woman named Lee Gaither, whose only
income came from Disability payments. She was facing eviction and planned
to sell many of her possessions on eBay. Florida is one of the places where
the financial crisis began. Gary Mormino, a professor at the University
of South Florida in St. Petersburg, tells the writer that, Florida,
in some ways, resembles a modern Ponzi scheme. Everything is fine for me
if a thousand newcomers come tomorrow. The state depends for revenue
on real-estate deals and sales taxes. By 2005, the housing market in Florida
was hotter than it had ever been. Flipping houses and condominiums turned
into an amateur middle-class pursuit. Writer tells about Floridians with
modest incomes who made money buying and selling real estate. Mentions one
case in which a house appreciated in value by almost fifty per cent overnight.
According to an investigation by the Miami Herald, government oversight
of the real-estate market was so negligent that more than ten thousand convicted
criminals got jobs in the mortgage industry. Flipping and fraud burst the
bubble. But in places like Pasco County, it was the ordinary desire of ordinary
people to buy their own home that turned things toxic. Tells about Anita
Lux, who moved to Florida from Michigan with her husband, Richard. Gives
a brief history of Cape Coral, Florida, which was first developed in the
fifties by two businessmen from Baltimore. Writer interviews a number of
Florida residents who have lost their jobs or homes. A Fort Myers real-estate
agent named Marc Joseph tells the writer, Greed and easy money. That
was the germ. By last year, the highest foreclosure rate in the country
could be found in Fort Myers and Cape Coral. Mentions other indicators of
the economic hard times, including the closure of auto dealerships and the
theft of copper. Writer visits the office of Tampas mayor, Pam Iorio,
who is determined to build a light rail system to revive the citys
fortunes. A number of people in Florida told the writer that the state needs
a fundamental change in its political culture.
It's a fascinating
article how the boom happened and the resulting abject poverty that it's thrown
many Floridians into. You can't read the full piece online, unless you're
a subscriber. Buy a copy on the newsstand. Recommended.
to watch all the Super Bowl ads? If you didn't get your fill of
them, you can watch each of them and vote on the best and the worst. Go to
Wall Street Journal site and watch them all.
I'm guessing you have nothing better to do with your time.
"sales" abound. Eddie Bauer sent me an email promoting
70% off on their Winter Clearance.
In fact, they'd
raised prices on many items, including the jeans I wanted.
announcing "sales." We expect them. Many retailers have figured
that with our expectations, now is the time to raise prices.
They think we're idiots.
useful travel gadget:
This is six inches long. It takes one outlet and makes it into three -- one
on one side and two on the other. Radio Shack sells it for $3.99 online.
Don't leave home without it.
conversation this morning:
Harry: Are we going to have to spend our old age together?
Got a better idea?
better things about the Canon G10. This is
now my favorite "point and shoot." It is much heavier than lighter
point and shoots, like the Canon SD990 IS (which I'd recommend if weight and
size are critical).
The G10 has a thousand useful features the smaller SD990 doesn't have. Ones
wheel. Most pictures look better when you underexpose by 2/3rd of stop.
You can see the results on the big 3" screen before you take the photo.
for 4" x 6" prints.
You can gray out the top and bottom of the screen. This will fix the problem
of chopping heads when you print your photos.
settings. There's C1 and C2. You can have two sets of manual settings
permanently ready. I have one for black and white and high ISO. The pictures
look just like Tri-X. No red eye in black and white.
movies. You can make an non-stop hour movie with this thing. The results
look as good as any camcorder.
playback and finding of photos. The fastest and easiest I've ever seen.
6. Flash shoe
for an external strobe. Very useful when you need the extra oomph.
7. Eye focus
adjustment. It has a semi-useful viewfinder which show 70% of the frame. But
sometimes you need it. It's faster and steadier than holding the camera and
shooting with the screen.
Read a full
review on dPreview.
sells the G10 for $405, which is $60 less than I paid.
York City "Humor"
+ Tourist walks over to a taxi cab driver and asks: "Can you tell me
where the Empire State Building is or should I go f..k myself?
+ Tourist asks
policeman where the nearest subway entrance is. Policeman answers, "I'm
sorry. You can't get there from here."
in subway, "Mary, quit bitching. I made the date with Lisa three months
before you and I were married."
And, from this
week's New Yorker:
played seven hours of singles tennis on the weekend. I didn't think I could.
I did. It was great. There's a lesson here somewhere.
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from
software scanning the Internet for email addresses to spam. I have no role
in choosing the Google ads on this site. Thus I cannot endorse, though some
look interesting. If you click on a link, Google may send me money. Please
note I'm not suggesting you do. That money, if there is any, may help pay
Michael's business school tuition. Read more about Google AdSense,
here and here.