Harry Newton's In Search of The Perfect Investment
Technology Investor. Harry Newton
AM EST, Thursday,
July 9, 2009. The BIG lesson from this recession is
simple: Excessive debt is horrible. What's "excessive"? I'd
argue any debt is excessive. But then I'm crazy. I'm 67. I've had only one mortgage
in my entire life, when we bought a building to house our sales staff. I paid
it off a year later. I presently have no mortgages. So no slimy bank can take
my mansions away from me.
that brilliant philosophy didn't stop me investing in commercial real estate
syndicates they did
take on mortgages -- usually 75% of the purchase price. That's called leverage
and it's a wonderful thing because it increases the return on your investment
-- IF you can keep making the mortgage payments.
today's declining commercial real estate world, that's not easy. Tenants are
disappearing. Think Circuit City bankruptcy. Think all the firings from all
you go into default, the bank can take your building. It may take it. It may
run it. It may sell it. But, most likely, you've just lost your entire investment.
When things are tough (like today), leverage is bad.
One of the reasons
the stockmarket collapsed last year was people had borrowed money to buy stock.
When the stock fell in price, the lender simply sold the stock to get his money.
And that selling caused stocks to decline further.
In short, borrowing
money to get rich faster is bad. That's the primary lesson.
lesson is that funds are bad. Funds typically borrow money. Funds also give
management a false sense of what they can do. But that story is for another
fantastic Citigroup private equity fund. My latest Morgan Stanley
Smith Barney monthly statement shows that the managers of Citigroup Capital
Partners II have written down my investment in their crummy fund by 40%.
They have 37 remaining investments, including a bunch in bankruptcy like
Sports Authority, Clear Channel, CDX Gas, Advanstar and Chrysler.
When I bought
into the fund, I was extolled the virtues of a genius called John Barber who
was running the fund. Of course, he's long gone, but I'm not.
I think I should
rename this site: "In search of the perfect small fortune. How I
started with a large one."
of the times. Found yesterday on a SmartMoney web site.
a painless solution to those zillion photos. You
take your new Canon G10 to a family event. You take a zillion gorgeous photos.
Then what? Guilt.
a painless solution. Picasa.
Put all the photos in a separate folder on your computer. Delete the absolutely
awful ones. Turn the vertical ones horizontal.
2. Open Picasa.
(it's free. You can download it from here.)
3. Hit File.
4. Scan once.
5. Change description
of folder, if necessary.
your photos in Picasa by dragging them into the right order.
7. Sync to web.
8. Share with
your friends and family. That sends each an invitation to view your photos.
This morning I
grabbed a few photos, put them into a Picasa folder. I'm sharing them them,
as a demo, with everyone. Here's the link.
The slide show starts with Winnie. She's the best.
Things Your Real Estate Broker Won't Tell You. Excepted
open house is really just a networking party for me.
Hire a real
estate broker to sell your home, and one of the first things hell likely
suggest is hosting an open house so that potential buyers can casually check
out your property on a weekend afternoon. But while open houses are promoted
as a great way of finding a buyer, a National Association of Realtors study
found that their success rate is a mere 2 to 4 percent. No matter. Holding
an open house serves another important purposefor the broker. It
gives him a database of clients, says Sean McNeill, an independent real
estate broker based in New York City .
fees are negotiable.
to make it sound as if their fees are engraved in stone, but thats rarely
the case. During the housing bubble, for example, as the number of brokers
sharply increased, so did the competition for listingsone broker says
he lowered his fee by a full percentage point just to give himself an edge.
But even in the wake of the recent crash, you have a good chance of negotiating
a better dealthat same surplus of brokers is still out there competing
for even fewer listings, giving you something of a leg up.
youve had no offers? Actually, thereve been several.
broker you hire to sell your home is obligated to tell you about all offers
that come in. In reality, some do not. Perhaps he thinks the offer is insultingly
low for you, but more likely, the broker thinks its too low for
his own purposes, says McNeill. He wants to hold out for a bigger
commission. Another possibility is that theres an outside broker
(or co-broker) circling your house, and the primary broker is
waiting for one of his own clients to make an offer so he can keep the full
6 percent to himself.
not obligated to keep my mouth shut for you.
You spot your
dream house as youre driving through a neighborhood and call the broker
listed on the for sale sign. Thats how a lot of buyers stumble
on a brokerwho, in turn, happily shows you other houses, asking about
your needs, laughing at your jokes. Its easy to get loose-lipped and
forget whom youre dealing with: someone elses agent. Legally,
brokers are obligated to provide their sellers with any information that can
help them get the best prices for their homes, says Stephen Israel,
president of Buyers Edge, a Bethesda, Md.based company that represents
homebuyers. If you tell the broker that youre willing to pay $500,000
but want to offer $450,000, theyll pass that on to the seller. They
I forget whose side Im on.
The past 15
years have seen the proliferation of the buyer broker, agents who are supposed
to work strictly in the buyers interest, helping him get a fair price
on a home as well as avoid pitfalls along the way. Unfortunately, things dont
always unfold so nicely. While buyers may think theyre getting a broker
who isnt commission-hungry, many buyer agents are just that: They usually
get about 3 percent, the same amount any broker typically earns when he gets
involved with another agents listing. Buyer brokers are sometimes
too focused on closing the sale and getting that commission, says Max
Gordon, an Overland Park, Kan.based real estate broker and attorney,
so its often in their best interest to see you pay as high a price as
know zilch about zoning.
agents love to suggest big ideas to prospective buyerssay, removing
trees to enhance a view, or even squeezing a rental unit out of a roomy garagemeant
to happen once the deal is done and theyre out of the picture. But just
because it sounds like a good idea doesnt mean its legal. We
had a client who bought a dilapidated house with a beautiful piece of property
on a marshland, recalls New York Citybased architect Mary Langan.
The broker told him that he could fix the house up however he wanted,
insisting that this was a sleepy little town where nobody would care what
he did. Langan says that the client built a $15,000 shed in the backyard,
took down some trees, and had some of the marshland filled inonly to
have the town insist he put things back because of environmental zoning regulations.
wont let termitesor pesky inspectorskill a deal.
If a broker
is selling a house, you figure he knows the place pretty intimatelyafter
all, he talks a good game about the new kitchen, the big closets, the heated
garage. What you need to worry about, though, are the homes features
that he keeps to himself. Steve VanGrack, former chairman of the Maryland
Real Estate Commission, says, We have had cases where [brokers have]
been deceptive about termites and flood damage.
that the home inspector, who comes to check out the place before you close
the sale, might notice those things. And he probably willif hes
not in cahoots with the broker. Realtors give potential homebuyers lists
of home inspectors, says S. Woody Dawson, a structural inspector and
owner of Dawson Inspections in Connecticut. Those are people who will
rubberstamp the house in return for repeat business. ... One time
I had a broker tell me that unless I told her the results of my inspectionwhich
is confidential between myself and my clientshe wouldnt let me
get up on the roof, Dawson says. I got out my ladder and told
her that unless she was big enough to stop me, I was going up thereshe
wasnt big enough.
sometimes forget Im not a lawyer.
strictly regulate the contracts used in real estate transactions, stipulating
the use of boilerplate agreements that offer little room for creativitybut
some brokers cant keep their clauseadding instincts in check. I
see [brokers] pushing the envelope all the time with amendments and addenda,
says Gordon, the Kansas broker and attorney. They draft language that
can have consequences without really understanding it, but they want to keep
the sale going. ...
the buyer or the seller, its probably worth the legal fees to get the
offer contract reviewed by your lawyer before you sign.
website is a dead end.
that 77 percent of house hunters look on the Web, according to the National
Association of Realtors, sellers might assume that using a broker with a site
can help make a sale happen. But some brokers sites are better than
others, and you need to look beyond a well designed home page to figure that
One common flaw:
posting houses that sold long ago. While the mistake can be simple negligence,
others think that its a bait-and-switch-style ploy. It brings
people in, but it gets them upset when they find out that the propertys
[gone], says Frank DOstilio, Jr., sales manager for Coldwell Banker
in Newton, Conn. If a broker has to advertise properties that are already
sold, it tells you that he doesnt have enough inventory to keep his
[roster of houses] full.
Aside from checking
up on its prominently placed listings, prospective sellers should also make
sure that a site is easy to navigate. And Roger Lautt, a Chicago-based broker
with Re/max Exclusive Properties who has his own site, recommends using a
broker who keeps himself relatively high on the search engines.
Lautt says he pays a Webmaster to make sure this happens for his site, which
is linked with Realtor.com, Yahoo, and the Re/max site.
can probably do this without me.
to create a lot of mystique about selling homes, insisting that the process
is complicated and best left to professionals. Not so, say homeowners who
have sold their homes themselves (about 20 to 25 percent do so each year).
William Supple, publisher of the sale-byowner real estate magazine Picket
Fence Preview and author of How to Sell Your Own Home, says that properly
priced and advertised, a house sells itself. Supple adds that sellers
should plant a yard sign and post online ads for the property on local sites
aligned with print publications (call current advertisers to see if a site
When it comes
to the negotiations between buyers and sellers, Supple thinks brokers and
their commissions tend to just get in the way. Usually, the haggling
occurs over a 5 to 10 percent difference, he says. And that is
more or less the brokers cut of the sale price. You dont need
him. Just be sure you price your home well. The way most self-sellers
hurt themselves, Supple says, is in setting either an unreasonably high or
tragically low asking price. Hire an independent appraiser for $200,
he suggests, and he will tell you [the parameters of] what to charge.
The moral of this
story. There are few good brokers. But there are some really good attorneys.
Real estate is complex, not for amateurs. For the full SmartMoney article,
value of regular checkups: You need a regular
colonoscopy, regular blood work, regular chest exam, etc. You need to stop eating
so much. You need to exercise more. You need to get more rest. I've been inundated
with stories from readers about their health problems that could have been caught
earlier -- had they had the checkups.
-- stay out of the woods -- Lyme Disease is rampant.
dentist pulls out a numbing needle to give the man a shot.
'No way! No needles.
I hate needles' the patient said.
The dentist starts
to hook up the nitrous oxide and the man objects.
'I can't do the
gas thing. The thought of having the gas mask on is suffocating me!'
The dentist then
asks the patient if he has any objection to taking a pill.
the patient says. 'I'm fine with pills.'
The dentist returns,
'Here's a Viagra tablet.'
The patient says,
'Wow! I didn't know Viagra worked as a pain killer!'
said the dentist, 'but it's going to give you something to hold on to when I
pull your tooth.
The black Lab then turns to the yellow lab and asks, "Why are
The yellow lab
says, "I'm a digger. I dig under fences, dig up flowers and shrubs. I dig
just for the hell of it. When I'm inside, I dig up the carpets. But I went over
the line last night when I dug a great big hole in my owners couch."
are they going to do to you?" the black Lab inquires.
I'm losing my nuts too, the dejected yellow Lab says.
The yellow Lab
then turns to the black Lab and asks, "Why are you here?"
"I'm a humper,"
the black Lab says. "I'll hump anything. I'll hump the cat, a pillow, the
table, whatever. I have to hump everything I see. Yesterday, my owner had just
got out of the shower and was bending down to dry her toes. I just couldn't
help myself. I hopped on her back and started hammering away."
The yellow and
chocolate Labs exchange a sad glance and says, "So, nuts off for you too,
The black Lab
says ..."No, I'm here to get my nails clipped."
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, click
here and here.