Welcome to Chez Cliff!

Ladies and Gentlemen, Boys and Girls, and the rest of you . . .

I’ve been keeping a secret.

Over the past few months, I’ve been on a enterprise of sorts; trying to expand my real estate investing skills.  No, I’m not referring to my search for property in the Long Beach area.  This is something completely different.

Starting next week details will be given about my successes, failures, lessons learned and maybe, just maybe a happy ending.

You never know.

For the weekend I encourage you all to call up your friends or your family, get a bottle of champagne and celebrate.  Why?  Because life is good. 

Enjoy this time; make "now" the most precious moment.  It certainly won’t come again.

Take care and I will see you all on Monday.

In the exciting days of yesteryear, my university was in Florida; my home in Michigan.  During the breaks, I would traverse this distance.  My route was planned out with great detail: maximized for efficiency.  After 21 hours, I would regain consciousness in my parents driveway.  The trip, nothing more than a blur.

That was the problem.  I spent that trip on pure auto-pilot, not remembering a thing.  Not due to some drug-induced haze or drunken stupor.  During a long drive this phenomena occurs whereas the brain shuts down.  A certain period of time passes and suddenly you’re aware that you’re driving.

White Line Fever.

So when my friend screamed "I feel so alive!!" I realized she was combating White Line Fever.

Not with regards to driving her car.  No, she was referring to her recent purchase of a condo in Panama.

It’s no secret; I’m an advocate for change, doing something different.  And by "different", purchasing real estate is not the implication.  My plea, my goal is for everyone to do something that makes them feel that they are alive.  If buying real estate does that, then go for it.  Learn a language.  Travel some place completely foreign.  Maybe go to outer space?

Something different.

It’s too easy for people to succumb to White Line Fever in their daily lives.  Go to work, come home, eat dinner, go to bed.  Day after day after day.  In Paris, this is called "Metro, Boulot, DoDo" – slang for taking the subway (metro), Working (boulot), then home to Sleep (DoDo).  Top this off with two hours of "must watch" television and you have the perfect recipe for a zombie-like existence.

In this department, I need work as well.  I’m not Mr. "Do something different" every single day.  Although a few weeks ago, I cooked a meal with Cactus as the main ingredient.  A version of Mexican Pasta.  It was quite tasty.  My Landlord agrees.

Where were we?

My friend had decided to enact her retirement fantasy now and purchase a condo in Panama.  The market in Panama is booming; there is a large ex-pat community consisting of Americans and Europeans.  This is fueling a high paying renter base in which she plans to finance her condo acquisition.  When she retires, her condo will be paid off.

When I asked her, "If this works out, would you purchase a second condo?" you could almost hear the gears turning in her head.

"I think I will."

Kudos for doing something different.

Remember the two houses?  The numbers show they don’t work.

The Spanish style house. 

Holy cow that house is beautiful.  It needs some work.  But the monthly payment, which was feasible, was just too tight for my comfort level.  In order for the mortgage to work, certain items in my budget would have to be sacrificed.

Such as eating.  I love eating too much.  Plus I can’t live without my trips to France.

The Cottage House.

The mortgage payment here was more comfortable.  The problem was the area in which the house was located.  For this particular house, in this particular neighborhood, the asking price was at the extreme high end of comparables (comps) in the area.

I’ll explain.  Please refer to Defense Exhibit 1 on the right.

When purchasing a house, it’s always good to look at what other houses are selling for in that area.  Look for houses that are similar size, same number of bedrooms, same neighborhood.  Obviously, some houses will be worth more and others less.

There is always a range.

In Exhibit 1, House A is the top end house valued at $650,000 and House B is the lowest priced house at $450,000.  What I want is a house at or around $550,000: the mid-point.

Why?

I’m glad you asked.

If I purchase a house at $550,000 and put $30,000 worth of renovations into it, the house has the potential to be worth $650,000.  Why?  Because other houses similar to this one are already valued at $650,000.

Since the asking price is at $650,000, if $30,000 worth of renovations were put into it there’s no guarantee I’ll get my money back out of it.

Some simple reasoning draws one conclusion: he may come down twenty or thirty thousand but not a hundred thousand.  For me to get what I want out of this deal, he would have to reduce his asking price.

This may take some time.  I thought for sure that either house would work but, as I’ve learned, you have to listen to what the numbers are telling you.  This is why we analyze.

Fortunately this is a buyers market.  I have a large selection.

Last week, some government posturing took place.

A senate sub-committee met with lenders, mortgage brokers, industry experts and, of course, former "dis-placed" home owners.  Their topic: the sub-prime melt down.

It was, more or less, a blurb in the headlines.

My thought process, "Oh yes, 2008 is an election year.  You can’t have a bunch of people getting kicked out of their homes during an election year.  This is bad for politics."

I’ll be very surprised if the government doesn’t step in to delay the inevitable.

If the subprime market continues to "melt-down" or "self-destruct" or whatever media-grabbing verb you wish to apply, then look for the Federal Reserve to drop interest rates.  The market will be, once again, flooded with credit to stave off the recession that, according to Greenspan, could happen.

Maybe, possibly, sort of, there’s a chance, could happen.

Then look for the government to slap their band-aid on the problem; that will carry us into 2009.  Then people can lose their homes.

The next round has begun.

Thank goodness I have comfortable walking shoes.

As predicted, there is a large selection of possibilities.  I have settled on two and a half.

First:  Spanish style house, very beautiful.  Three units with four car garage and a nice yard.

Second:  Cottage style.  This one needs some work but has lots of potential.  Three units with a three car garage.  Small yard.

Both are three blocks from the ocean.

The "half" . . . we’ll I haven’t made up my mind.  Two large houses, sitting in an area called California Heights.  The owner is asking, quite frankly, a ridiculous sum for this property.  There are some stunning houses next to it.  But the justification for the price isn’t there.

We’ll see.

Definitely today I’ll be extending offers on both places.  The "half" will be contemplated, probably with my morning cup of coffee.

EDIT:  I managed to find photos of the two houses I like.  For visual, here they are!

Spanish Style	Cottage Style