Robert J. Abalos Real Estate Watch Million Dollar Challenge

I will be announcing the terms of the new Million Dollar Challenge sometime around November 15, 2005. So far, we have structured it this way:

1. I will be doing the Challenge myself but limiting my purchases to land transactions.
2. I will be seeking THREE other investors for FREE mentoring and other help so they can do the Challenge along with me.
3. These investors will concentrate their efforts on single family homes, small multiunit properties, and commercial properties. In other words, one investor will buy SFHs, another apatment buildings, duplexes, etc. and another office or retail rentals.
4. Real estate experience is helpful but not essential when it comes to single family home investment. It is crucial in the other areas. Newbie investors should not be buying office buildings and likely don't have the resources to do it anyway.

All participants, including me, will begin investing on January 1, 2006 and post our findings in a blog maintained by Real Estate Investor Magazine.

So far, those are the terms. PLEASE WAIT to contact us if you want to participate. I'm posting the official rules here and on the new Real Estate Investor Magazine website around November 15, 2005 so contact us then.

I'm very happy all the enthusiasm about this project is exciting people. I've gotten about two dozen emails from readers already who want to participate. This will be fun, lots of fun.

Stay tuned.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine

I've gotten a large number of emails from people wanting to volunteer for the new and improved Million Dollar Challenge starting this January.

The new Real Estate Investor Magazine website will be online within 3-4 weeks, or such is the estimate I have been given by the people building it. I don't know anything about building websites so I treat the whole experience as I would using a contractor to build a house. I don't know anything about laying tile or taping sheetrock either but I know how to find someone who can do it right. I also understand (after 25 years in this business) that when a contractor tells you something it's usually never accurate or the truth. Not that they are being deceptive or mysterious, mind you. Just that what's true on a project on Tuesday can be a bold faced inaccuracy (to be polite) by Friday.

I'll be posting complete instructions for new Million Dollar Challenge details on the new website. For those who have a real life and actually can get a date on Friday night, let me explain what this all means because you probably missed my previous description of it. I'm going to do the Million Dollar Challenge myself the right way starting this January 1, 2006 and I want THREE people from this blog to join me. You can live anywhere and start anyplace. They'll be some free mentoring and consulting from and with me in exchange for telling your story to my magazine readers.

I'm happy to report that many of you want to volunteer and already have----before I've even released all the details or logistics. I want the largest pool of individuals available so I'm pleased there is so much interest in this project.

How will this all work? I'm not a fan of Robert Allen's real estate books like NOTHING DOWN but he has written some excellent books, starting with MULTIPLE STREAMS OF INCOME and especially THE CHALLENGE which I feel is by far his best book. I think the Million Dollar Challenge will work something like the course of this book, although I don't think I need to go to an unemployment line to find participants. I think there are plenty of "average" (I hate the term) people in the world with jobs and kids and dreams that can benefit from this project. I want people with imagination and vision and who are trying to succeed in real estate for reasons other than just to make nothing but lots of money.

I'll post when I have more available for you. The application process won't even begin until the new Real Estate Investor Magazine website goes active so please don't think you'll miss out on anything here in the meantime.

Thanks for all the kind words of support and encouragement. That's why I do this.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine

I'm pleased to announce that the Million Dollar Challenge will be a feature of the new onine version of Real Estate Investor Magazine.

But we have added a new twist.

It won't be just me doing the Challenge. I will have THREE people selected from this blog along with me doing their own deals with my advice.

Like I previously said in my last posting, this version of the Million Dollar Challenge was a great idea that was horribly executed. For me the Challenge became a chore instead of an education. I wanted to wrap it up as quickly as possible so I looked for properties that suited me as an investor rather than the "newbie" or other investor that might need this sort of encouragement. The Challenge became a "See What I Can Do" event for me rather than a detailed step-by-step plan for investors wanting to break into this business or REALLY make it to a million through real estate.

I got off on the wrong foot at the beginning and stayed there.

But this time around I'll have three other investors along for the ride with me, all telling their stories in the online pages of Real Estate Investor Magazine. This way we all can stay on track, the real track, sort of like having a friend pace you as a runner.

So anyway I'll announce who is eligible for all this and when it starts in a few weeks. The architecture and backbone of the new Real Estate Investor Magazine is being built at this time and I have no clue how long that all takes. I don't know anything about building websites or how they work so I have to rely on faith what is told me by people I trust---but sure do not understand. They speak in a computer lingo that makes my head spin after about ten seconds. They seem to enjoy "writing code" for the project but what they actually do is a mystery to me. Spending time with these computer guys is like being an extra in a Revenge of the Nerds movie. Still, I super admire what they do and how they do it. They are amazing me with their ideas which seem to be endless. I like being around creative people and this bunch has it in abundance. I'll be introducing them personally to all of you over the next few months as the project moves towards completion. They literally are building the most sophisticated real estate website in the world for me so how do I thank them? The entire project has become a science-fiction adventure for me. I saw Tom Cruise in MINORITY REPORT and all that high-tech gizmo stuff from the movie has nothing on these guys.

If you want to be part of the new Million Dollar Challenge, I'm thinking it will start after the holidays (and make the new MDC a New Year's Resolution) and will require some classroom learning from me and some mentoring. The cost will be free so long as you agree to keep an online diary and share your experiences with the world. I will help you with advice but not with financial resources or contacts. I'm thinking we should have three newbies to keep the process clean but I'm still thinking on that one. I want to maximize the learning experience for readers here and not just participants.

I've gotten some great emails about the Million Dollar Challenge from all of you out there. Most have applauded my decision to stop it where it was and start again. Others were disappointed. I think I made the right choice. Admitting you were wrong is not easy, especially publicly, but continuing on a path that ultimately is teaching the wrong lesson made no sense either. I stumbled into a lose/lose situation so I did what I know as an investor. You cut your losses short and hold your gains dear.

I will be updating this blog in a few days with more progress on the website and the new Million Dollar Challenge. I want to hit the ground running with three of you around January 1, 2006 and that's not far away.

In the meantime, I hope you read my FREE email newsletter. You can sign up for it at www.investinginland.com. This will give you some understanding as to where I'm coming from as an investor and what I see in the short-term market ahead.

Also, one more point. Real Estate Investor Magazine is actively hiring freelance writers and editors to work on a variety of real estate related articles. If you enjoy writing, contact us. Real estate investment experience here is desired but not essential. Many great real estate investors are not good writers and need editorial assistance. We want their stories too.

The writer's guidelines for Real Estate Investor Magazine are here:

www.reinvestormagazine.com/write_for_us.htm

PLEASE follow these instructions to the letter, okay? We do not enjoy chaos as much as some people think.

That's it for now. Much more in a few days.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine
also at www.investinginland.com

I can now speak about some issues that have been on my mind for a while, especially the fate of this mysterious Million Dollar Challenge property I have written about for some time here.

First, the property I had found and targeted was at 1921 Fifth Avenue in Seattle. I walked past this abandoned and vacant property every day for about two months before I begun to investigate it for the Million Dollar Challenge. It was PERFECT. Great location downtown, right under the tracks of the current Seattle Monorail, a glorious relic of the 1962 World's Fair that gave Seattle the Space Needle. 1921 Fifth Avenue was the home of a former nightclub and entertainment real estate is one of my specialties.. Residents of Seattle may remember this location as a club called The Weathered Wall in the 1980s and early 1990s, famous in some quarters because the band Foo Fighters did an impromtu gig standing on the garbage dumpster in the alley where you actually entered the club.

I could not have been more excited about this location or the money that could be made there. My plan was very simple. Option the vacant property from its owner, arrange a new entertainment company filled with talent like nightclub designers, acoustic engineers, chefs, and DJs I knew in the industry, and then lease the property to this new entity, making a very nice profit on both the lease and the option. On a club like that in a location so ideal in a city so entertainment obsessed like Seattle, the Million Dollar Challenge was no challenge at all.

But there were problems. The first was that no matter what we tried the landlord would not return our letters or phone calls. Our book is long and we tried every trick in it. No answer. Not even a "Leave Us Alone." NOTHING.

Then we learned why. This property was being acquired by the Seattle Monorail Project so they could build a downtown train stop. For those of you outside Seattle, this city has voted to build a monorail linking a number of city neighborhoods but the project has become a major embarassment and boondoggle and likely will never be built. This has not stopped the Seattle Monorail Project from buying 34 prime properties all over Seattle worth hundreds of millions of dollars.

One of them is 1921 Fifth Avenue.

The story gets more twisted. The current owner of the property wanted this location to open a strip club, to be honest a wonderful use for this property.. But strip clubs were essentially banned in Seattle under a land-use moratorium restricting the license approval of such clubs. This "temporary" one-year moratorium was extended, as is typical in laid-back Seattle, for SEVENTEEN straight years. The strip club owner sued the city of Seattle and a judge overturned the moratorium. But since the monorail now owns his location his victory in the courts is hollow.

As were my plans for this property.

At around this time I also began to think of a second problem revolving around the Million Dollar Challenge. I was approaching it all wrong. I was concentrating on the goal rather than the real reason I was doing this. It's not to prove a point, it's to educate other real estate investors, especially newbies in this business, what is possible and what is not. I had begun to approach the Million Dollar Challenge as merely a chore, something to do and get done fast, rather than a journey designed to teach others what can be done with few resources and a lot of imagination.

If I had gotten 1921 Fifth Avenue, a big IF for sure, but if I had I would have been drawing off talent, contacts, and resources the "average" (I hate the term) investor would not have.

The Million Dollar Challenge would have been met, but only technically. I would have proved I could meet the Challenge but only when I had twenty-five years of experience in real estate, contacts in the entertainment industry, and friends with deep pockets.

I would have proved a point but not taught anyone anything really because my success would have been virtually impossible to duplicate.

So I rethought things. After all, it's my magazine and my Challenge.

My focus here has been wrong. All wrong. It's not about meeting the goal with speed. It's about reaching the goal with information people can use.

So I'm making some changes here. It's the same Million Dollar Challenge but I'm eliminating the ticking time clock. Days don't matter here so much. Ideas and lessons do.

Plus I'm concentrating on doing what average investors can do with the limited resources the Challenge allows. I'm going to find a cheap condo or junker house to rehab as my first project. No grand gestures right now. I want to teach along the way rather than race to the finish line and leave students happy but filled with no new ideas. A cheap condo or junker house is the perfect first time real estate project and I need to approach the Million Dollar Challenge as a newbie and not someone with decades of experience and resources to fall back on.

And I'm going to reset the financial counter. Starting right now I've got $10,000 in cash and an income of $100 per week just like I had in the beginning. The original accounting turned into a mess with stocks and dividend purchases everywhere. It's easier to start clean and fresh.

I don't apologize for getting off course. I thought of a great idea on 1921 Fifth Avenue and it would have made a super article, even a book. We even had a new name for the club and a menu for the restaurant inside. But this nightclub venture wouldn't have helped the newbie investor out there much learn much about real estate investing. So you live and learn.

I start my new and improved Million Dollar Challenge investment program tomorrow.

I never went to the Weathered Wall at 1921 Fifth Avenue in Seattle but it must have been a rocking place. Too bad those days are gone for good.

Maybe.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine
www.reinvestormagazine.com

I wrote last night about our heavy buying of mortgage REIT shares lately. We were expecting to hold these shares for the long term to make a profit and we will. Just not as many shares as we purchased over the last couple weeks.

The recent disaster in New Orleans has made it very clear that the Federal Reserve cannot continue to increase interest rates. The U.S. economy is going to take a major hit over this crisis, everything from having an important American city rebuilt from scratch but a whole area of the country economically off-line for months. No sales, no revenue, nothing but red ink at all those Wal-Marts, Targets, and mom-and-pop stores everywhere. Not to mention the spike in oil prices caused by so much U.S. capacity being crippled for the immediate future.

So the yield curve isn't as flat as it was 48 hours ago. No new interest rate rises means mortgage REITs can maintain their current spreads instead of risking a futher deterioration that was already built into their share prices. This sent the per share price soaring today on many issues we bought such as INH, LUM, MFA, ANH, NLY, TMA, and others.

As I teach in my Investing in Land Home Study Course and explain in articles on my website at www.investinginland.com, you should never maintain a buy-and-hold position in any stock, real property, or anything else unless your "investment basis" is zero. That is, you should never have any of your original capital in any deal over time. If you invest $10,000, figure out a way to get your $10,000 back PLUS maintain ownership of an income producing asset. This way the transaction has NO RISK to you and your return-on-equity on this income stream is INFINITE.

How can you lose money if you invest $10,000 and get it all back? If you have no equity in an asset, the cash flow on that asset, however slim, has a ROE of infinity to you. If you own a note that pays 1% per year interest but you own the note with no equity in it, the note's actual yield to you is infinite. Not a bad deal even with a measly 1% coupon yield.

So we sold many positions we held and now maintain ZERO INVESTMENT BASIS ownerships in many mortgage REITs. These positions we will literally hold forever unless the fundamentals of these companies deteriorate due to poor management or other factors. Why should we ever sell these shares? We have no risk in holding them and we earn an INFINITE ROE on them?

Thanks to the quick pop we made a great deal of money very quickly today. The circumstances are not ideal, the people in New Orleans are suffering badly. But notice the DJIA was up yesterday on a day that brought only grim news. Business is business, sometimes a cold and calculating arena of ideas where human sentiments find no quarter.

We don't make the rules, we just play fairly with them. Plus I do plan on donating a great deal of money to the rebuilding efforts in and around New Orleans and I suggest you do too. Karma comes into play here. If you make money on a quick pop essentially caused by human misery, you need to give some back to eliminate precisely that.

I'll have an accounting on Million Dollar Challenge stock buys and cash positions next week. And also more information on this new property I found and mentioned yesterday. I had a Bird Dog I know prepare a complete report on it and I'm looking forward to seeing what he found.

Happy Labor Day. Get some sun, eat some BBQ, and enjoy yourself. Winter is coming way too fast.

It is still my hope to wrap up this Million Dollar Challenge by the end of the year.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine
www.reinvestormagazine.com
www.investinginland.com
robert@investinginland.com

When last I wrote here thirty-eight days ago, I was describing a property I had found with enormous potential. I was just getting ready to contact the owner to work out a deal.

Well, I'm still trying to contact them.

I've tried every trick in the book to get them to talk to me and they just won't. You can't be rude but you can be assertive and nothing is working.

This property has been vacant for a long, long time and sometimes a sense of inertia sets in on a deal. People just begin to take the status quo for granted. Things are never going to change.

It also works both ways. When you have a live one on the hook but just can't reel it in, sometimes it is better to cut the line than wear yourself into exhaustion. Those who fight and run away, live to fight another day.

So I'm still trying on that property but I have found another. Not so potentially profitable but still a great prospect if I do say so myself. I've always loved vacant properties. Something about not dealing with occupants I like. Owners are often very motivated too, but not always as this first case clearly proves.

On another front, I have been a heavy buyer of mortgage REIT shares lately. The yield curve is flattening and higher interest rates have reduced the interest rate spread these entities thirve on for profitability. Some of these shares have also been beaten so low by dividend cuts that the entire sector gets penalized. I expect no quick rebound in these shares and possibly even more downside risk. But we are accumulating positions for investment as well as for the Challenge so we plan on being long-term investors and sticking around. Therefore, the lower share prices go, the more we like them.

I have to provide a full accounting of Million Dollar Challenge earnings and cash status. I think I'll work on it tomorrow.

I'm sorry for not writing sooner. Lately, things have been crazy, busy, but good. I'm hoping they will get even better very quickly.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine
www.reinvestormagazine.com

It's been twenty days since I last posted here. Way too long but things, or more accurately, sh*t happens. One of the most important rules I've learned over the years as a real estate investor is that when things go wrong, they always do, especially those things you always thought never could. But you live and learn and adversity makes you stronger. They temper steel and give it strength by beating it, don't they?

Anyway, I've been busy trying to find an apartment building that meets my criteria under The Million Dollar Challege and I haven't. Most are way too overpriced or just plain pieces of junk in slummy areas without development potential.

I was out looking at an apartment building one day and was very disappointed in what the seller had to offer. But I ended the day happy.

I've found something better.

In fact, I think this deal is potentially so good I will meet the requirements of The Million Dollar Challenge by the end of this year.

It is too early to report on many of the details but things are progressing slowly but steadily forward. Talking about the facts of this transaction now in this forum would be like describing how you want to seduce a girl next Saturday night to her father. Some things you want to keep in your own mind, at least for a while.

Nevertheless, I have this piece of good news to report and one other. This website has now made adding photographs a whole lot more friendly than before. I actually understand the instructions on how to add photos to this blog and if I can grasp how, literally ANYONE can. I complained about how complicated the process was here a few weeks ago and I'm sure no one listened to me and made changes but I'm grateful someone did.

I'm also going to have a complete financial update on how things are going with my Million Dollar Challenge cash and stock positions too by week's end. It's been a while since I've checked how IP or BUD have been doing and those weekly $100 "paychecks" have been piling up.

I have my fingers crossed here on this deal but I believe I've stumbled onto a gold mine.

Robert J. Abalos, Esq.
Publisher
Real Estate Investor Magazine
www.reinvestormagazine.com

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P.S. I just added details on the FREE two-day real estate investment seminar for all paid subscribers to Real Estate Investor Magazine to the website. Learn about buying and improving rental properties in a detailed two-day seminar offered at NO ADDITIONAL COST to all paid subscribers. Visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com for more details.