Dear Friends,
As we approach the end of October it seems to me that the older I get the faster time flies by. So here we are enjoying the changing of the leaves again. The trees here in Virginia produce a visual treat this time of year.
I don't know if we have mentioned this before in the newsletter but Virginia is an absolutely beautiful place to live. We have lived in numerous states and they all have their positives to offer. Idaho has great skiing, Florida has great beaches and long summers, Colorado has majestic mountains and cool summer nights, New Mexico offers diverse landscapes with plenty of sunshine, Tennessee has a rich cultural history, Connecticut has the ocean and historical venues to explore, and Maine has beautiful lakes and ponds and a breathtaking coast line. Virginia has beaches, historical venues galore, and rolling hills (mountains to some) as well as the most beautiful spring and fall foliage we have ever experienced; all this and four distinct seasons to enjoy.
This month Mary Jane and I travelled to Boston to attend Dave Lindahl's Chunker Boot Camp. Chunker refers to the real estate investing strategies of short sales, foreclosures, rehabbing, flipping, and wholesaling. These are all short term strategies that you just repeat over and over, thus the term Chunker; you just keep chunking them out. Don and Craig were the presenters. They are both very knowledgeable and complete 40 - 50 of these transactions per year plus they are very entertaining to listen to. Needless to say we really enjoyed this course.
If you like this newsletter please feel free to forward it to anyone you think might be interested so they have an opportunity to join our mailing list. We do not sell or share email addresses outside our organization. |
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Are Your Investment Dollars Working Hard For You?
We've always worked hard for our money and have tried to put our money into investments that work hard for us. In September the rate of inflation, based on the Consumer Price Index, hit 3.9%. Therefore you would need an investment that pays a rate of return greater than 3.9% to actually have the purchasing power of your money grow. So we conducted a little research into some of the more popular investment options, banks, stocks, and Treasury Bills to see how they are performing today.
Banks: Per the company websites: BB&T is paying .25% on savings, and Sun Trust and Wells Fargo are both paying .50% on savings. If you invest in a 58 month Certificate of Deposit with Wells Fargo they will pay 1.40%. I also recently reviewed my 90 year old mother's brokerage statement and to my horror I noticed she was paid $0.12 on her cash account which had a balance in excess of $14,000. I calculated that the interest earned equated to about a .0008% rate of return.
Stocks: It is commonly believed that if you invest in the stock market and leave your investment in place you will earn a 10% rate of return over time. However a closer examination of the numbers reveals otherwise. The following rates of return on stocks are from observations and notes blogspot.com.
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Years |
Average Total
Yield |
Yield From
Appreciation |
Yield From
Dividends | |
110 |
9.4% |
4.8% |
4.7% | |
25 |
11.2% |
8.4% |
2.8% | |
10 |
3.1% |
0.7% |
2.4% | |
5 |
4.2% |
1.6% |
2.8% | |
1/1/11 - 10/1/11 |
-5.7% |
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It should be noted that many models that indicate an average return of 10% assume the dividend yields are reinvested to achieve that yield. However, unless the investment is in a tax deferred account then those dividends are taxed as income at the investor's tax rate and technically diminish the amount available for reinvestment and thus the average 10% rate of return is overstated.
According to Money, "the Vanguard Total Stock Market Fund returned 3.5% for the last ten years. The S&P 500 index returned 2.9%, or zero after inflation."
T-Bills: At the time of our research the 10 year treasuries were below a 2% yield.
The bottom line from all this research is that these options, while common, are not currently low risk because they do not preserve, let alone improve, the purchasing power of your hard earned dollars.
The rate of return your money earns can drastically impact your purchasing power, and therefore your quality of life. Suppose you had $50,000 to put to work and the bank would provide you a 1.5% rate of return. At the end of 30 years your money would have grown to $78,154. However, suppose this same money was put to work earning a 10% rate of return, then the money would grow to $872,470. Which will serve your retirement years better?
Our debt partners are routinely paid 6%, 8%, 10% or more depending on the opportunity. Furthermore their investments are often secured by a piece of property as well as the insurance on that property. So does diversifying your portfolio with the "right kind" of real estate investments make sense? We think it does. If you'd like to know more please contact us to see if you qualify. |
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Industry Related News
Should you Stage a home you have for Sale?
At the Chunker Boot Camp we met fellow real estate investor, Gayle Ethington. She related a story that I thought would be of interest to our readers and she graciously accepted so here it is.
She did a flip in the city of Scottsdale, which is pretty high end. After the home was listed, word came back that people were having a difficult time visualizing their furniture in it because the floor plan was a little different. She looked online for stagers, contacted one, and checked references before hiring her.
Gayle and the stager met at the property and decided what to do. She staged it on Friday and Gayle had an offer on Monday. The people that bought it had looked at it twice before but couldn't visualize it until they saw it with the staging. Therefore, for an investment of $2,400, that is what the stager charged for a three month rental and insurance, Gayle was able to quickly sell her investment property.
As real estate investors we have the ability to visualize the possible and we forget that many buyers do not. Staging makes good sense even in a home with a nice floor plan, especially if we want the home to sell quicker. Even partial staging can help, we know of one highly experienced investor who always puts towels, candles, flowers, etc. in the house. Yes sometimes the accessories walk off but the homes do sell faster.
Understanding Standards and Poor's Downgrad of U.S. Debt:
Patrick Riddle, one of our mentors, shared this insight on why U.S. credit's rating got downgraded. Check it out:
|
U.S. tax revenue |
.......... |
$ |
2,170,000,000,000 | |
Federal budget |
.......... |
$ |
3,820,000,000,000 | |
New debt |
.......... |
$ |
1,650,000,000,000 | |
National debt |
.......... |
$ |
14,271,000,000,000 | |
Recent budget cut |
.......... |
$ |
38,500,000,000 |
Now, let's remove 8 zeros and pretend this is a household budget...
|
Annual family income |
.......... |
$ |
21,700 | |
Money the family spent |
.......... |
$ |
38,200 | |
New debt on credit card |
.......... |
$ |
16,500 | |
Household debt |
.......... |
$ |
142,710 | |
Total budget cuts |
.......... |
$ |
385 |
I think it is obvious this househld needs to do more to get spending and income under control. As real estate investors we are doing all we can to create jobs and help get the income side of the equation up! Now if they can just hold the line on spending in Washington then we can get this thing fixed. |
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Laughs!
Something for Halloween:
On the outskirts of a small town, there was a big, old pecan tree just inside the cemetery fence. One day, two boys filled up a bucketful of nuts and sat down by the tree, out of sight, and began dividing the nuts.
'One for you, one for me, one for you, one for me,' said one boy. While doing this several nuts dropped and rolled down toward the fence.
Another boy came down the road riding his bicycle. As he passed, he thought he heard voices from inside the cemetery. He slowed down to investigate. Sure enough, he heard, 'One for you, one for me, one for you, one for me...'
He just knew what it was. He jumped back on his bike and rode off. Just around the bend he met an old man with a cane, hobbling along.
'Come here quick,' said the boy, 'you won't believe what I heard! Satan and the Lord are down at the cemetery dividing up the souls!'
The man said, 'Beat it kid, can't you see it's hard for me to walk.' When the boy insisted the man hobbled slowly to the cemetery.
Standing by the fence they heard, 'One for you, one for me, one for you, one for me.'
The old man whispered, 'Boy, you've been tellin' me the truth. Let's see if we can see the Lord.
Shaking with fear, they peered through the fence, yet were still unable to see anything. The old man and the boy gripped the wrought iron bars of the fence tighter and tighter as they tried to get a glimpse of the Lord.
At last they heard, 'One for you, one for me. That's all. Now let's go get those nuts by the fence and we'll be done.
They say the old man had the lead for a good half-mile before the kid on the bike passed him.
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Ongoing Projects
Our 138 unit MHC is coming along nicely and we are continuing bring in manufactured homes to lease or sell. Our 12 unit MHC is finally filling our last space. We have two single family rental homes and they are both performing as expected. All properties are generating cash flow for our team and our investors! |
Opportunities
During October we finished an 8 month process of negotiating a short sale on a house that needed a little work and offered a solid upside once the rehab was completed. We opened this up to our qualified debt partners and had the funds fully committed to the project within just a few days. The rehab is now underway and two potential buyers have expressed interest in this home. A win - win - win for all participants.
We have a continuing opportunity where our team is placing manufactured houses in our 138 unit community in South Carolina. There are two ways to participate in this opportunity. In either case our team will do all the work, locate the home, buy the home, rehab the home, find a renter or purchaser, and manage the project until it is completed. The minimum investment is $15,000. Debt partners earn 10% interest over 5 years. Equity partners have the potential to earn a better return.
We have several additional smaller opportunities in our pipeline that will allow interested qualified investors an opportunity to earn returns that are higher than can generally be earned elsewhere.
Did you know that you can invest in real estate from your IRA or other retirement account? This investment secret isn't well known but it is perfectly legal. Contact us and/or click on this Investment Secret link learn more.
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We are always willing to share information with you so please feel free to contact us
Driscoll Enterprises Inc. 332 West Lee Hwy., Suite 200, Warrenton, VA 20186
703-398-1188 or 800-887-0001 info@DriscollEnterprisesInc.com |
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