Robert J. Abalos Real Estate Watch Million Dollar Challenge

More Million Dollar Challenge Details

2005-11-03T11:43:00.000-08:00

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

More Million Dollar Challenge Details

2005-10-25T19:44:00.000-07:00

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

New Beginning Coming Soon

2005-10-21T20:50:00.000-07:00

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

Wrong Focus : Day Whatever, September 19, 2005

2005-09-19T19:07:00.000-07:00

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

Quick Pop : Day 177, September 1, 2005

2005-09-01T14:13:00.000-07:00

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

Inertia : Day 176, August 31, 2005

2005-08-31T20:36:00.000-07:00

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

Hold The Presses : Day 138, July 12, 2005

2005-07-12T15:42:00.000-07:00

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

For Subscription information, go to www.reinvestormagazine.com.

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.

Pictureless : Day 118, June 22, 2005

2005-06-22T12:23:00.000-07:00

Well, I have been looking at apartment buildings and FINALLY taking pictures but I can't figure out how to put them on this blog site. Our ignorance of technology is legendary and this is but another example. So I'm going to create a series of pages on the Real Estate Investor Magazine website at www.reinvestormagazine.com so you can see some of the properties I'm seeing too. I know how to put photos there but not here. I don't understand why this website doesn't make it easier......

No success yet finding what I want. Inventories of all rental properties are fairly tight these days as owners hang on trying to squeeze every drop of equity out of them. What these same owners don't realize is that they will most likely never realize the "gains" they think they've earned anytime soon. Who is going to buy an apartment building with a cap rate of 2? Maybe someone desperate to do a deal but not me and not most investors. Why buy and run an apartment building when you can make more money buying a safe, secure, and maintenance-free U.S. Treasury bond?

Despite the formal inventory for properties being very low, there are lots of seller inquiries in the market. Most know prices are high, too high, and if the right buyer can be found, they're gone. Much of this is merely trying to save broker commissions but it has become a "Who You Know" type of market. Networking rules the day.

Those of you who read my Investing in Land Newsletter at www.investinginland.com know I talk alot about the real estate bubble popping. It sure will, but I have no idea when. Each price rise merely increases the risk of investing now. I will feature strategies for reducing bubble risk in the next issue of Real Estate Investor Magazine but realize now is a dangerous time for real estate investors and especially those who throw prudence to the wind and speculate on the short-term price fluctuations of real properties.

So in the meantime for the Million Dollar Challenge I'm going to buy some additional real estate stocks in the near future. Again, there aren't a lot of bargains out there but I see at least some more reasonable valuations. I'll have a complete synopsis and accounting in a future post.

I will also try to blog with greater frequency. Things have been chaotic here lately but that's no excuse.

Real Estate Investor Magazine
www.reinvestormagazine.com

High Tech Bust : Day 109, June 13, 2005

2005-06-13T15:57:00.000-07:00

Well I looked at some properties this weekend but I couldn't figure out how the digital camera worked so I didn't take picture of them. Anyone who knows me or regularly follows my free newsletter postings on www.investinginland.com knows how ignorant we are here when it comes to high technology and I set the lead for my office. I promise to read the owner's manual on the camera......AGAIN......and try once more to share my visual perceptions with you.

Anyway, the properties themselves were a bust. If you are a reader of Real Estate Investor Magazine you know I've chosen apartment buildings as a vehicle for the Million Dollar Challenge and you know why. But finding good investments these days is a real chore. The cap rates on most buildings are far too low to make them worthwhile. Two ways to think of this problem are that the net rental income is too low and the asking prices just right or the property income is perfect but the prices too high. Both situations can be true but more likely it's #2 these days.

I'm also seeing many more marginal properties put on the market. To be blunt and honest, junk. Properties with major deferred maintenance issues or in poor locations, that sort of thing. Sellers are dumping their bargain basement remnants onto the market since buyers will pretty much buy anything real estate these days. I keep my ear pretty close to the street and I hear lots of fraud stories too. Bogus paperwork on properties, phony leases with inflated rental payments and terms, all the usual sinister stuff. Again, buyers seem so happy to finally find a property for sale they don't look too closely under the hood. This new wave of real estate prosperity has brought many novice and unprepared investors into the marketplace, in many cases the same individuals who got burned buying NASDAQ stocks five years ago. They are now applying all the lessons they learned the hard way by overpaying for rental properties the same way they overpaid for stocks.

So to all that expect pictures today, sorry. I'll try again next time. Can someone make a camera with just one setting on it, CLICK?

Real Estate Investor Magazine
www.reinvestormagazine.com

New Camera : Day 106, June 9, 2005

2005-06-10T16:24:00.000-07:00

I'll be putting up my first real official Million Dollar Challenge post on Monday. Why do I say that? Because I just bought a digital camera and a scanner and I'm looking at apartment buildings this weekend.

Up until now I've been TALKING about stocks and other ideas.

Now I'll be SHOWING you some real properties and what I like and dislike about them. Not just photos of the properties but the listing documents and fact sheets as well.

See you Monday, in more ways than one.

Real Estate Investor Magazine
www.reinvestormagazine.com

I'm Back : Day 100, June 3, 2005

2005-06-03T14:20:00.000-07:00

Just because I haven't been writing lately doesn't mean I've been sleeping.

I've been looking at properties and have much to report.

Just not today.

I'll try to catch up on events over the weekend. I have a plane to catch and it will leave without me. I just wanted to say hello to all those who have been wondering where I am and how the Million Dollar Challege is going.

Real Estate Investor Magazine. www.reinvestormagazine.com

Gearing Up : Day 77, May 10, 2005

2005-05-10T14:39:00.000-07:00

It's been a long time since I blogged, wrote, whatever. Readers of my Investing in Land FREE email newsletter know what I've been up to lately. To be blunt, I've been busy having fun and working hard too.

I begin my Million Dollar Challege project in earnest on Monday, May 16, 2005.

Up until now I've been building, learning, planning, studying, thinking. That time is over.

I'm also cancelling all additional stock purchases for the moment. No more buys in BUD, IMH, IP, or ANH. My goal at that start of the Million Dollar Challenge was to teach you to buy all sorts of real estate assets and I started with publicly traded securities because it was easy. I'll throw those assets into the mix when calculating my success under the Challenge. But don't think all real estate is physical properties or even REITs. There is lots of real estate owned by someone out there.

For the record, my stock holdings accumulated under the Million Dollar Challenge are:

23.131 shares of BUD with an approximate value of $1,048.
113.298 shares of ANH, value around $1,087.
49.926 shares of IMH, value around $924.13
22.031 shares of IP, value around $745.53

Not a bad portfolio essentially created by skipping some lattes, cancelling a gym membership, and not buying lunch out so often. These stock positions will also keep growing because I routinely reinvest dividends. I'll report those additional purchases here as they happen.

Starting on Monday I'll have almost daily postings here too.

One final note on these stocks buys. I was very pleased to learn that Warren Buffett's Berkshire Hathaway has accumulated a "substantial equity position" (his words) in BUD. I'm glad he saw value where I did too.

Over the next few months you REALLY will need Real Estate Investor Magazine to follow the Million Dollar Challenge. You'll get the bare bones of what's happening here but not much else, sorry.

For subscription information, please visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com. There are FREE articles on real estate investing there and lots of other stuff worth skipping an episode of EVERYBODY LOVES RAYMOND to read.

Plus you can see an in depth analysis of the Million Dollar Challenge and how I will turn $10,000 in cash and an income of $100 per week into $1 million so you can do it too.

Welcome to the Machine : Day 62, April 25, 2005

2005-04-25T17:54:00.000-07:00

Somebody was blasting Pink Floyd's album WISH YOU WERE HERE in my office today at lunch time. That's okay, I grew up on it. But the song WELCOME TO THE MACHINE is very appropriate because my Million Dollar Challenge "machine" is complete. I'm ready to start investing in some physical real estate. Despite a few setbacks and challenges God threw in my way, things I sure did not plan on, I'm poised to begin and ready to rock. Lock and load.

I'm off to the annual Berkshire Hathaway shareholder's meeting in Omaha, Nebraska this week so I won't be blogging until at least next Tuesday. A gap yes, but oh so necessary to attend the Warren Buffett lovefest. That man is one of my idols and I have learned so very much from studying him, his investment methods, and the way he runs his business empire. After that, however, expect daily blog postings from me because......

The machine is ready.

It's plugged in.

All systems are go. Countdown is T minus seven and counting.

All I need is throw the ignition switch. And subscribers of Real Estate Investor Magazine get a front row seat to all the fireworks. The rest of you grab your binoculars. Your seats are in the nosebleed section of the upper deck with obstructed views.

But before we crack a bottle of champagne on the side of my new toy, let's take care of some old business.

Last Wednesday I made another series of stock purchases with my weekly $100 "paycheck" and a $900 draw off of retained capital. I purchased $250 each of ANH, IP, BUD, and IMH.

This is what I bought:

26.539 shares of ANH at $9.42 per share
3.641 shares of IP at $34.33 per share
5.520 shares of BUD at $45.288 per share
14.409 shares of IMH at $17.35 per share

These are my current Million Dollar Challege holdings:

102.772 shares of ANH
13.196 shares of IP
20.993 shares of BUD
44.423 shares of IMH

And $7,575 in cash.

I'll be trimming back the stock purchases to just $100 per issue this week, if any at all. I'll need the remaining $7,575 to feed into my "machine."

Anyway, next week is what you have all been waiting for. I enjoy buying stocks but it isn't exactly fun to watch. You click the mouse on your computer a few times and BAAM, you owe a few shares of XYZ and ABC. Not exactly the stuff of wild adventures. But it is profitable. The real action starts next week and I hope you take the time to be a part of it.

Please subscribe to Real Estate Investor Magazine to get the WHOLE story. If you read this blog you'll learn what happens but not enough to make it work for you, sort of like reading the Cliffs Notes version of the Million Dollar Challege. That doesn't sound bad to you, right? Well, think of it this way. Would you want the doctor doing brain surgery on your head to have learned how to crack a skull reading the full medical textbook or the Cliffs Notes version?

I want you to learn what I do so you can do it yourself. Not see me do it and applaud from the sidelines. You need a playbook to follow the game and my magazine is your guide.

For subscription information, please go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com. You'll find FREE articles on real estate there and lots of other stuff that should keep you interested until it's bedtime. Nighty-night.

Finding Money to Invest : Day 56, April 19, 2005

2005-04-19T14:40:00.000-07:00

I've gotten nearly 1,000 emails since this blog on The Real Estate Investor Monthly Million Dollar Challenge started and by far the most common comment is:

"I'd like to do what you are doing too but I don't have the money."

Well, I say, then get the money. For many people the sums of $10,000 in cash and an income of $100 per week may sound like a small fortune but it doesn't have to for you. Both sums are easily attainable and I'll show you two ways of many here.

First, eliminate ALL your current credit card debt. Think how much money each month you are paying to VISA, MasterCard, American Express, Sears, JC Penney, and all the rest. If you don't have any high interest consumer debt, congratulations! You are on the road to financial prosperity. If you do, ELIMINATE IT AS SOON AS YOU CAN. Obviously you might not be able to pay it off all in one month but pay it off as quickly as you can. Start paying off your debt by NOT ADDING MORE DEBT TO YOUR CARDS!

In a past blog posting I mentioned the excellent book THE AUTOMATIC MILLIONAIRE, by author David Bach and his now famous "Latte Factor" method of finding money to pay off debts. His method works. Cut out unnecessary personal spending, like my beloved soy lattes I will admit, and save $5 or $10 per day and put it towards your debts. Quick, relatively painless, and easy.

Let me also recommend another excellent book on how you can quickly eliminate your own personal debt. LIFE OR DEBT by Stacy Johnson (ISBN 0-345-45213-5) can show you how to pay off your entire personal debt with a one week crash program to get you started. I like the comprehensive approach of this book, offering 205 ways to save money on just about everything, to understanding that once that extra income has paid off your debts in full you can apply that money to making investments that will make you rich over time. For the record, I do not know Mr. Johnson and have no financial stake in his products. I recommend his book because it offers excellent advice. That is one reason Real Estate Investor Magazine exists. To spotlight the works of great authors and separate them from the not-so-great.

The second quick method to pay off your debts is even simpler to implement than Mr. Bach's Latte Factor. This post is made just around April 15th, Tax Day. If you filed your taxes and are getting a refund from the government, Federal, state, or city, realize what you have done is give Uncle Sam and his local cousins AN INTEREST FREE LOAN ON YOUR MONEY WHILE YOU ARE PAYING DOUBLE DIGIT INTEREST RATES ON WHAT YOU OWE OTHERS. Put another way, the Federal government borrows money from you and pays you ZERO PERCENT INTEREST while that same money could have been paid to your creditors and earned you 12%, 15%, 22% or more in interest savings. Does this make sense to you?

Structure your taxes each year so you OWE the government a few hundred dollars every April. You don't pay interest or penalties if you pay by April 15th. And take all the extra money you were OVERPAYING IN TAXES to the Feds and the states and pay off your credit card bills.

Remember one key point I stress in the pages of Real Estate Investor Magazine again and again. You should think about making real estate part of your investment portfolio but you don't have to buy some NOW. Real estate is not going anywhere. Get yourself financially ready before you start making offers on properties. The better your credit, the less debt you have, the greater your chances of success as a real estate investor. You will qualify for better mortgages at lower interest rates. The cash flow on your properties will be higher. You will be able to improve and modernize properties easier and make even more money on them. You don't risk default when you don't have lots of unnecessary debt to carry. The advantages go on and on.

Pay off your high interest consumer debt. Start now even if it will take a year, two years, or more. Then buy some real estate. You will find saving for down payments much easier when VISA is not a monkey on your back demanding your hard earned money. When you work without debt you work for yourself and not your creditors.

Real Estate Investor Magazine offers practical and proven methods to build wealth and cash flow through real estate investment, develoment, and ownership. No get-rich-quick schemes or ideas that sound great in theory but never work in practice.

For subscription information, please visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com. You will find many FREE articles to read there and the ability to sign up for our FREE email newsletter.

Micro Market Management : Day 50, April 13, 2005

2005-04-13T17:04:00.000-07:00

I haven't had much time for blogging lately literally because I've had no time. I haven't put working on the Million Dollar Challenge down, I only stopped writing about it for a week. To be a wee bit bawdy about it, I would compare my busy schedule the last few days to my attitude about sex. I'd rather do it than write about having done it.

First, let's handle the weekly housekeeping. After getting my $100 "paycheck" this week under the rules of the Million Dollar Challenge, I released an additional $775 from my cash reserve of $9,250 to buy more stock. Valuations are getting increasingly sweet and I wanted to take advantage of some buying opportunities for the long run.

So I invested $250 each in ANH, BUD, and IMH. I kept my investment in IP at last week's $125.

Here's today's purchases:

26.709 shares of ANH at $9.36 per share
5.380 shares of BUD at $46.46 per share
14.245 shares of IMH at $17.55 per share
3.440 shares of IP at $36.33 per share

My total holdings so far under the Million Dollar Challenge:

76.233 shares of ANH
15.473 shares of BUD
29.647 shares of IMH
9.555 shares of IP

And $8,475 in cash

With that out of the way, let me talk about what I've been up to lately.

All real estate markets are local and all local markets are made up of very small micromarkets like boroughs, neighborhoods, subdivisions, even city blocks. In any given market some micromarkets are hot, some are less so, and some are downright cold. Even in an area where real estate sales are booming with evidence like low housing inventories and rising sales prices, there are many pockets of sluggish growth, even negative returns. In local real estate markets, a rising tide does not lift all properties equally.

What I've been doing the last week is studying the micromarkets of my hometown, Seattle, Washington, because that's where I'm going to be buying some real estate soon.

For those of you who think of Seattle as the city that only gave the world grunge music, the Space Needle, Boeing, and Microsoft, realize you are quite mistaken. If I can take on the role of the Chamber of Commerce for a moment, it's a beautiful city made up of a wide variety of neighborhoods. The West Seattle neighborhood of Alki looks like the beaches of Southern California circa 1965 complete with bonfires, volleyball nets, and pretty girls in even prettier bikinis. Ballard with its many marinas, fishing boats, and pleasure craft looks like Cape Cod. Freemont is an artist community celebrating its ideological independence from the rest of the United States with a huge bronze statue of Soviet dictator and mass murderer Vladimir Ilyich Lenin in the town square. Belltown has many night clubs and bars and is where Seattle goes to party on Friday night. Capital Hill is a bizarre neighborhood where you can see a fellow in a top hat walking a naked man on a dog's leash down a busy street and no one thinks twice about it because something equally weird is just around the corner.

But you get the point. To talk about "Seattle real estate" is an oversimplifcation. Seattle is a soup of dozens of various neighborhoods and each has numerous micromarkets that ultimately comprise the whole. Real estate prices can literally skyrocket on one block but remain flat just a few dozen yards away. That's micromarket economics in action.

What I've been doing lately is studying various micromarkets in Seattle to see which are hot and which are not. As a whole, Seattle real estate prices are white hot and showing very little sign of cooling off anytime soon. Like I said earlier, it's a great place to live and work. But not every micromarket in Seattle is rising at the same rate. Some are actually FALLING in price. And I'm not talking about warzone ghetto neighborhoods where gang violence and drug activity makes some places look like Berlin in 1945.

As I've written before here and in many other places, investing is BORING. It is a profitable activity to be sure but it takes lots of mind numbing work pouring over sales records, statistics, demographic information, MLS records, and the like. I'd rather be sailing or riding a horse than investing except when it comes to paying my bills. Then spending the proceeds of investing is fun. Investing pays for that sailboat and horse.

So how do you find and examine local real estate micromarkets?

Subscribers of Real Estate Investor Magazine know how. Only subscribers get the complete story behind The Million Dollar Challenge and all the knowledge and analysis that will allow me to turn $10,000 and an income of $100 per week into $1 million. Subscribers get to read and follow my progress step-by-step as an example for themselves.

To Subscribe to Real Estate Investor Magazine, please go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com. There you will find many FREE articles on real estate investing and other information on how to build wealth and cash flow using real estate.

With Apologies to David Bowie : Day 43, April 6, 2005

2005-04-06T16:27:00.000-07:00

Some more ch-ch-ch-ch-changes today, so I turn to face the strain. Ch-ch-changes. But David, I do want to be a richer man. So time may change me, but I CAN trace time.

Now that all the silliness is over, I have made real changes in my stock purchasing schedule.

I've increased my stock buying each Wednesday to $125 per issue, up from $100. This means I'm digging into my capital reserve at the rate of $400 per week and also applying my $100 weekly payday for stock purchases.

By the end of April I will be buying some hard asset real estate and I don't need $9,000+ to do it so I'll deploy some more capital to scoop up what I consider some bargains in the market. AND REMEMBER FOLKS, like I explained in great depth last week, I CONSIDER THESE STOCKS BARGAINS. Do not buy them because I say they are bargain. You could easily look at the same facts I do and conclude differently.

Today's purchases:

13.24 shares of ANH at $9.44/share
2.723 shares of BUD at $45.90/share
7.002 shares of IMH at $17.85/share
3.365 shares of IP at $37.14/share

Total Million Dollar Challenge Holdings as of today are:

49.524 shares of ANH
10.093 shares of BUD
15.402 shares of IMH
6.115 shares of IP

And $9,250 in cash held in reserve.

People have been emailing me with many questions on the Million Dollar Challenge so I'll answer two of them now.

First, how long do I intend to accumulate or own these stocks? I hope forever but who knows? You should only buy stocks with the intention of holding them until their fundamentals deteriorate. Put another way, stocks are LONG TERM investments. They are very effective at making people money slowly over time. So as long as I have confidence in the management of these companies (and I currently do) I'll hold them.

Second, what good is owning such small numbers of stocks? Who cares about 15 or 50 shares of a company? That's not where the big money is made. You need to own thousands or tens of thousands of shares, right? WRONG. Money is money. Buy all the decent stocks you can afford and ALWAYS REINVEST YOUR DIVIDENDS IN THEM. If your holdings are small, just a few shares here and there, you won't need those tiny quarterly dividend checks in the mail but over time, over years, over decades, the reinvestment of dividends will make even small stock holdings grow quite large. Of course you can make money faster owning millions of shares of stock. But you can make the same percentage gains owning just a few. The guy owning a million shares and the gal owning one single share own the same interest in any given company. If one share rises 5% in value, the value of a million shares will also rise 5%. So don't be frustrated if all you can afford is five shares of XYZ Corp or ten shares of ABC. Buy what you can afford, always reinvest your dividends, and let your holdings grow over time. Never forget the old axiom:

"From tiny acorns grow mighty oaks."

The Million Dollar Challenge is clearly an investment program designed for "the little guy" and not some hedge fund manager sitting on $50 million in cash. I'm trying to demonstrate here that you can build wealth over time using real estate assets like certain real estate stocks and owning hard real estate assets too. So invest the maximum amount of money you can by living as far belong your means as possible and put your savings in the largest number of appreciating assets you can afford. Stocks are great vehicle since most cost a few bucks each and with dividends they grow over time.

Let me leave you today with two pieces of advice.

Warren Buffett's partner at Berkshire Hathaway is a clever fellow named Charlie Munger, a brilliant man with a dry wit. He's an investment genius in his own right, perhaps even better than Warren in many ways. I especially admire Charlie because he was a lawyer (like me), a real estate developer (like me) and a hedge fund operator (like me, soon) before hooking up with Warren on a stock deal and discovering his ideological twin.

Charlie Munger once said this and I couldn't agree more:

"The most difficult part of building wealth is accumulating the first $100,000 from a standing start with no seed money. Making the first million is the next hurdle."

So get moving NOW, one share of stock at a time.

One truly awesome book that can help you is COMMON STOCKS AND UNCOMMON PROFITS by legendary investor Philip A. Fisher. Books do not get much better than this. Truly a masterpiece that every person who owns stocks NEEDS to read.

If you enjoy this blog, you'll also enjoy the pages of Real Estate Investor Magazine. Learn how to build wealth and cash flow by investing, developing, improving, and managing real estate. Common sense advice that works in the real world. No hype or get-rich-quick schemes. No theory. Just money making ideas that you can use today.

For subscription information please go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com. You'll find FREE articles on real estate investing there and other goodies that will make you smile.

Pro Forma Blues : Day 41, April 4, 2005

2005-04-04T17:07:00.000-07:00

I looked at my first piece of physical property today for the Million Dollar Challenge. It was a four unit apartment building in a part of my hometown of Seattle, WA called West Seattle, or more specifically Alki.

Alki Beach is the closest thing Seattle has to Southern California. Sand, or at least a few feet of it, along Puget Sound, volleyball courts, girls in bikinis (although not this time of year), and bonfires in the summer that light up the midnight air. It's a beautiful place, the view of downtown Seattle in the distance is amazing.

Anyway, this property wasn't. It was an overpriced dump. I received a financial statement by fax from the owner, this is a FSBO. I expected verified numbers since, after all, this is the legal owner selling the property. He doesn't need to fudge the past operating numbers like a broker or sales agent would. He knows the expenses since he pays them. Instead, after wasting my time driving over the West Seattle Bridge (no small feat, it is a mechanical one that opens for ships) I learn it is a pro forma.

For the record, a "pro forma" (sometimes it has a hyphen, pro-forma) is a financial statement explaining WHAT IS EXPECTED TO HAPPEN at a given property. It is NOT an actual history of the property's income and expenses. The term comes from the Latin "pro forma" meaning "according to form." Well, rental propeties are nice to own but they never perform according to form. Income is always less than you expect, expenses are always higher. A pro forma may predict one thing but the property will likely deliver another. To put it bluntly, a pro forma is essentially a useless document. It gives some information, like how many units there are in a building, but without knowing the actual income and expenses in the past, how can you predict them into the future?

Real estate agents and brokers prepare pro formas not because they want to deceive potential buyers, at least not all the time. They create them because they do not have all of a building's facts at their fingertips so they estimate things like average rents and routine expenses. Since I was dealing with the owner, a man who has held the property he claims for sixteen years, I expected REAL numbers. Instead, I got estimates. Sounds fishy, doesn't it?

STRIKE ONE.

The property was in a great location but poorly maintained despite an obvious quick cleanup. The building had a new paint job and the paint scrapings from the old coat could still be seen in the hedges near the foundation. I saw five problems with the property the owner never mentioned on the phone before I started looking. Trust me, I asked. I don't drive anywhere through downtown Seattle traffic during the business day unless I have a pretty good idea of what I'm looking at and a good reason to see it.

STRIKE TWO.

The property was priced way too high. Even using a conventional mortgage the negative cash flow would have been at least $1,200 a month or $300 per unit. But I couldn't really tell because all I had was, you guessed it, a pro forma.

STRIKE THREE. IT'S OUT.

I'll keep you posted on my progress in the pages of Real Estate Investor Magazine. For subscription information, to learn more about this publication, and to read some FREE articles on real estate investing, go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com.

Too Many Bargains : Day 36, March 30,2005

2005-03-30T17:29:00.000-08:00

In addition to my usual $100 Wednesday "pay check" I decided to deploy some of the $10,000 in cash I have been keeping in reserve and buy some real estate related stocks. I did this for two reasons. First, there are just too many stock bargains out there for me to ignore. Valuations on a number of issues appear to be very sweet to me. And second, I am not going to be able to actually physically start looking at properties, physical ones that is, for at least three weeks due to my work travel schedule and necessary family obligations so I wanted to get started on the Challenge in a more meaningful way than buying a couple shares a week.

Anyway, no great splurges here today. Aside from my usual $100 purchases, I dipped into the kitty for an additional $350. That leaves $9,650 in cash.

Today's purchases include the usual ANH and BUD but I upped the ante on both from $50 each to $100. This means 10.395 new shares of ANH at $9.62 per share and 2.109 shares of BUD at $47.41 per share. My holdings of each now stand at 36.283 shares of ANH and 7.370 shares of BUD.

The new purchases are Impac Mortgage Holdings (IMH) and International Paper (IP). I bought $150 of IMH and $100 of IP. Why $150 of IMH and not the normal $100? It was a typo when I entered the order. I can't type while talking on the phone, or not talking on one for that matter.

Today's purchase includes 8.4 shares of IMH at $18.32 per share and 2.750 shares of IP at $36.36 per share.

I will continue to drain off $300 from my remaining $9,650 in cash each week along with my usual $100 income to make stock purchases. I figure I don't need more than $5,000 to begin buying real properties anyway.

Why am I buying these stocks? That information is available only for subscribers to Real Estate Investor Magazine. My analysis is reprinted in the pages of the magazine and you can read it all yourself.

What I can say is that some real estate is physical and some derivative. All of these stocks are real estate stocks and that means owning real estate, however removed.

What I can also say is that YOU BETTER NOT COPY MY STOCK PICKS! I am NOT a registered investment advisor and I am not recommending ANY of these stocks to you. I'm merely telling you what I am buying. Spending real money because you heard (or read) a stock pick somewhere is a STUPID strategy and you will lose money doing it. You need to do your own research and analysis. You could look at the very same facts I did and come to the opposite conclusion. But for the sake of full disclosure here under the Million Dollar Challenge I have to disclose my stock buys. Simply saying "Hey people, I bought $450 of stocks today" is not good enough. I think people who teach others through books and home study courses how to make money need to prove that they themselves make money, and not by selling books and courses, but by actually using the very same techniques they teach others to use.

My challenge to the real estate information industry and the various gurus and writers out there is simple. PUT UP OR SHUT UP. Prove the investment techniques you teach and write about work in the real world by submitting your proof to certified public accountants and have them use Generally Accepted Accounting Principles (or "GAAP") on them. Give them copies of brokerage statements, settlement checks, deeds, HUD-1s, and all the rest. Let the CPAs do their job using GAAP. No more phony evidence like copies of settlement checks which look great to real estate newbies but mean nothing to us old professionals. You've seen them on TV infomercials, some guy or gal holding a copy of a check for $25,493 or some amount. Looks like a lot of money. Well, it can be. But that's not necessarily an investor's PROFIT on a deal. Out of that settlement check contractors may need to be paid. What about all the holding costs before settlement that were paid out of pocket? Improvements costs like paint, carpet, landscaping, appliances, mortgage payments and interest, and all the rest? Maybe that sum is merely borrowed money that needs to be repaid. That's not profit. Certainly any earnest money put down on a property needs to be recouped at settlement. Settlement checks are great to get but they represent the END of a transaction and there are lots of costs and expenses that come BEFORE settlement. I've seen people sell properties at a loss and still receive large settlement checks. They spent $40,000 fixing up a place and carrying a property and then received $38,000 at closing. A check for $38,000 is a lot of money to be sure but sorry, that's still a loss under GAAP.

This is just one example of the type of flim-flam the real estate information industry is notorious for using. So when I mention specific stocks I'm buying it's not so you can copy me, but know I'm telling you the truth. Eventually a CPA firm using GAAP will confirm my holdings and their value and my gains (hopefully) and you can read their report. But until then, I tell you what I'm buying because honesty compels it. Full disclosure requires it. And I want you to think of real estate investing beyond just buying houses or buildings. You can look at the REIMAGUS stock index we created on the official Real Estate Investor Magazine website at www.reinvestormagazine.com and see how you can invest in real estate without buying physical properties. These are just some examples but good ones, nevertheless.

Anyway, Wednesday is turning out to be stock buying day and that's fine.

To learn more about real estate securities, please subscribe to Real Estate Investor Magazine. Full details on subscriptions and other FREE goodies like article on real estate investing can be found at www.reinvestormagazine.com.

Avoid Pre-Construction Flipping : Day 35, March 29, 2005

2005-03-29T18:58:00.000-08:00

I've been getting lots of emails on what investing strategy I will use under the Million Dollar Challenge to turn $10,000 in cash into $1 million without using any personal credit.

One of them commonly mentioned is pre-construction flipping, a practice where people put down deposits on homes or condos yet to be built and then flip them to buyers before closing.

I can say without any reservation I will NOT be using this approach. It is dangerous, risky, and just plain dumb.

Yes, people make money doing it. People also lose lots of money doing it too. You haven't read or heard too much about those unfortunate souls until lately when both the New York Times and the Los Angeles Times ran front page news stories on the dangers of pre-construction flipping. They stressed that the strategy worked, but not so much anymore as markets get overheated and investors finally take a break from the bidding frenzies surrounding rental properties.

What these articles didn't mention is that this technique only works: (A) In VERY VERY VERY hot markets, and there just aren't many of them across the United States; (B) Where housing inventories have traditionally been tight, in other words, where there has been a long gap between affordable housing and potential homebuyers; and (C) Where developers haven't placed limits on flipping profits by imposing resale barriers. Most developers aren't dumb, notice I said most. Developers are catching on and limiting or restricting flipping sales because they do not want to compete against themselves when selling new units coming online in subsquent offerings.

Investing means buying properties below their economic net worth or intrinsic value. It's the core message of my Investing in Land Home Study Course and pretty much everything I have ever written, especially nearly all of the FREE articles on my website at www.investinginland.com. It is the center of my own personal investing philosophy.

Speculating, on the other hand, means betting on ever rising prices. It's the Greater Fool Theory. No matter what you pay for an asset, however high or absurd the price, a greater fool will come along and buy it from you. Ask the owners of NASDAQ stocks around 1999 if prices rise forever.

Avoid pre-construction flipping. It looks attractive and people brag they make money doing it. Many have. Many haven't. It's not worth the risk and there is plenty of danger in this approach. If prices fall between the time of your deposit and the closing, which can be many months into the future, you will either forfeit your deposit or be stuck buying a property already underwater, or below its new lower market value. So you either lose your earnest money or buy a property now selling elsewhere for $250,000 for $300,000. Not smart.

What is the investing technique I will use under the Million Dollar Challenge to turn $10,000 into $1 million without using any personal credit?

The answer can be found in the pages of Real Estate Investor Magazine. And it won't be pre-construction flipping.

For subscription information and to read a bunch of FREE articles on real estate investing, please visit the official website at www.reinvestormagazine.com.

Writing Elsewhere Today : Day 30, March 24, 2005

2005-03-24T18:55:00.000-08:00

I've been in meetings all day long. Lawyers to the left of me, accountants to the right of me, lots of volleys and thunder, so your noble orator is left hungry and tired with a loud ringing in his head.

But I did have time today to post a new FREE article on the official Real Estate Investor Magazine website at www.reinvestormagazine.com on the subject of paying off your mortgages early.

Is it a good idea to pay off a mortgage early, either with a lump sum or by sending in a little extra cash each month to reduce the number of payments due under an amortization schedule? The answer, despite many books and articles advocating this idea, is NO. In fact, in most cases it is a pretty dumb and dangerous idea.

You can read the complete article for FREE, in other words it doesn't cost you a nickel, by going to www.reinvestormagazine.com/paying_off_your_mortgage.htm.

Tomorrow I should have more time to blog, in other words, a minute or two of spare time.

This all just proves my point. We all have real lives first, real estate investors second.

For more information on Real Estate Investor Magazine, please go to www.reinvestormagazine.com.

The Latte Factor : Day 29, March 23, 2005

2005-03-23T17:50:00.000-08:00

I'm back blogging today from my exhausting round-the-clock real estate schedule of last week, a full day of sleep (I'm not kidding), a tour of timberland in Western Washington state, a teleconference with the Georgia Real Estate Investors Association yesterday, and a full day of meetings with lawyers and accountants on my upcoming REIT public offering. WHEW!

Anyway, back to the Million Dollar Challenge. Another $100 payday today and another round of the usual stock buys. 5.324 shares of ANH at $9.39 per share and 1.059 shares of BUD at $47.20 per share. $50 per issue.

My total holdings since starting the Million Dollar Challenge are:

25.888 shares of ANH
5.261 shares of BUD
$10,008.35 in cash (My original $10,000 plus $8.35 in interest)

I'm very pleased with how my plan is proceeding although I sure wish I had more than $100 per week to invest under the Million Dollar Challenge. But $100 was reasonable under the circumstances. I wanted to show that "average" (I still really really hate that word) people could also do what I'm doing on about $14.28 in savings per day. That's $100 per week in real savings cut from my own personal spending and household budget.

I recently had the pleasure of meeting and speaking to author David Bach. He's world famous for his books like THE AUTOMATIC MILLIONAIRE and START LATE, FINISH RICH and his TV appearances on OPRAH. I saw him at a seminar conference recently in Seattle and he took a few minutes to talk to me and I'm grateful to him for sparing some time. He's a nice guy in person just like he is on television.

I find most financial planning books fairly lame and repetitive. Everyone knows that credit card debt is bad and home ownership good. What I really enjoy about David's books are his common sense approaches to getting rich SLOWLY by making SMALL but DRAMATIC commitments to yourself. These are easy-to-implement ideas anyone can do on their own. And I do mean ANYONE.

David stresses savings and investing by first calculating what he calls your "Latte Factor" or really how much money a person wastes each day in unnecessary spending. People may like $5.00 cups of coffee yet how many of us really NEED them? But it is more than merely not frequenting Starbucks for a cup of Joe. We all waste money in our daily lives. We pay too much for this, or are too lazy about cancelling a subscription or membership to that. All those small drags on our personal finances might not amount to large sums of money in a given week but over time, like YEARS or DECADES, the numbers are astronomical.

My Million Dollar Challenge is literally financed in part with my own Latte Factor. I'm a coffee addict. I drink soy lattes like they were water. I had to cut out just one per day to finance the Million Dollar Challenge. Do I miss that one? No, not really. I like owning 25 shares of ANH and 5 shares of BUD more than another jolt of caffeine. I don't miss the other stuff I had to give up either, like buying other people lunch or paying a health club for a membership I used, at most, once or twice per month. (I still have two others I use all the time.....)

I highly recommend David's books. He lays out a simple personal finance plan anyone can follow. Save money. Buy your own home. Pay off your debts as soon as possible so you can work for yourself and not your creditors. Stop wasting money on taxes. Give to charities. If you ever get a chance to see David live, and you can often for FREE like I did, do it. You can go to his website at www.davidbach.com to learn more about him and his books, products, and seminars.

In the meantime, I'm taking my Latte Factor and buying $1 million of real estate assets with mine. So can you. And I'll show you how I do it in the pages of Real Estate Investor Magazine.

For more information about Real Estate Investor Magazine, including how to subscribe, please go to www.reinvestormagazine.com. You'll find FREE articles at the website on real estate investing and much more.

Like a Headless Chicken : Day 28, March 22, 2005

2005-03-22T14:57:00.000-08:00

It's been a few days and it will be at least one more before I really get a chance to "blog" again. (Is that the correct verb???)

After a weekend of frantic work and very needed restful sleep, I'm back doing what I normally do. More frantic work.

I have a teleconference this afternoon with the Note Subgroup of the Georgia Real Estate Investors Association so I'm talking to them instead of writing to you.

I actually want to write about the time demands of real estate investing but actually have no time. I guess I'm proving my own point. Real estate investing is a Black Hole for your time. If you have spare time now, you won't when you start seriously investing.

I'll write tomorrow, I promise.

To learn more about Real Estate Investor Magazine, please go to the official website at www.reinvestormagazine.com

Time Ticking Away : Days 23 and 24 : March 17-18, 2005

2005-03-18T11:43:00.000-08:00

I'll be very brief.

I've made the point a million times in my website articles at www.investinginland.com and in my Investing in Land Home Study Course that real estate investing is a capital intensive business. That is, you need a lot of money to do it right.

It is also a time intensive business. Yes, that means you need a lot of time to do it right too.

Right now I'm involved in a non-Million Dollar Challenge real estate transaction that has taken up nearly two full days of work, literally around the clock. I'm living in a hotel because I have no time to go home. My normal daily routine has been forgotten. I really miss my daily workouts at my club, the best stress releaser I know next to Grey Goose vodka which pales a distant second. I'm so tired right now my eyelids are so heavy they feel like lead. But the work needs to get done and there will be time to sleep when the deal is done and when I'm dead, whichever comes first I guess.

I'm writing this over a cup of coffee and a turkey and swiss sandwich, my first food since 10PM last night. It's 11:47AM Pacific Time right now. I'm back into a meeting at 12 Noon.

I'll elaborate more later but don't think you can invest in real estate part time and do it successfully. IT IS HARD WORK. If you only have thirty minutes a week to spare take up stamp collecting or buy a canoe. Rental properties are not for you.

Hopefully I'll write more tomorrow if someone remembers to wake me up.

Subscribe to Real Estate Investor Magazine. The official website is at www.reinvestormagazine.com.

Broken Record Investing : Day 22, March 16, 2005

2005-03-16T16:18:00.000-08:00

I invested my weekly $100 "income" into the usual two stocks, Anworth Mortgage Asset Corp. (ticker symbol ANH) and Anheuser-Busch (BUD). $50 per stock. This bought me 5.170 shares of ANH at $9.67/share and 1.054 shares of BUD at $47.408/share today. My total portfolio since the Million Dollar Challenge began is 20.564 shares of ANH and 4.202 shares of BUD.

It might be small but it's progress. And that's the point. $100 a week is not a lot of money to invest over three weeks, or the amount of time since the Million Dollar Challenge started, but over ten or twenty years it's a small fortune. $100 per week is $5,200 per year, not counting interest, dividends, or capital gains on the invested money.

So my little but growing portfolio under the Million Dollar Challenge is worth about $400. Bill Gates won't be envious of my wealth here. But this $400 stock portfolio was "earned" by me making just tiny, eeney-weeny changes in my life. I detail the very "sacrifices" if you want to call them that on the Million Dollar Challenge webpage at www.reinvestormagazine.com. Cutting out a soy latte a day. Cancelling some cable TV stations I never watched anyway. Cancelling one gym membership I hardly ever used. And so on. What's worth more to me, anyway? Financial prosperity and retirement security or a soy latte?

I've gotten many emails from people reading this blog saying "I'd like to invest too just like you but I don't have the money." Yes, you do. If you have a job, you have an income. If you spend your money on things, you can likely spend less to buy the same things. Think of all the products and services you buy. Food, utilities, rent, mortgage, cars, entertainment, clothes, and all the rest. There are very few people in this world who live on such tight budgets that not an ounce of fat exists. Trim it, save the money, invest it instead. All investing programs, including real estate investing, are based on SAVING MONEY FIRST. If you don't have the financial discipline to save the very money you yourself earn, how can you achieve success as a real estate entrepreneur? It's much easier to cut $20 a week from a grocery bill than rehab a property and get the contractor's work done on time and on budget.

The Real Estate Investor Magazine website at www.reinvestormagazine.com will be filled with techniques on how to save money so you can take those funds and invest them instead. There is a FREE article on that website now on this very subject and more will follow.

Let me make one point to you very clear. Many authors sell real estate investing as a way of solving your financial problems like VISA card bills you can't pay or taking you away from a job you hate and a boss who hates you even more. There is the hook that gets you to buy their books and courses. If you are broke and hate your life, your solution is just one purchase away. But it's not true. Real estate investing can make you rich, in fact, it's probably the best way for the average person to build a fortune starting with next to nothing. But it is also a capital intensive business that takes cash and good credit to succeed. You need money to make money. If not to buy properties, to manage, repair, and maintain them. The idea you can succeed as a real estate investor without the proverbial pot to you-know-what in or a window to throw it out of is silly. Desperate people with bills they can't pay or lives mired in a paycheck-to-paycheck existence where hard earned income goes to pay creditors and not build security are easy marks for this message. It's sad and I complain about this point often. It's the equivalent of selling quack medicines to cancer victims. Despicable conduct from people who know better. Ethical writers tell the truth about real estate investing and not prey on the Walter Mitty-like fantasies of instant wealth the financially destitute naturally have.

Start your own Million Dollar Challenge with your own life. Think financial discipline. Pay your bills on time NO MATTER WHAT. Most sacrifice is painful but cutting small amounts from each of your household budget items does not have to be. Start saving money by paying down high interest credit cards. Don't eat out. Do you really need two cars? Turn off the lights when you leave a room because electricity is expensive. This stuff is common sense but most people don't do it. I'm also not talking to welfare mothers or cashiers at Dairy Queen here. I recently met a man, an experienced real estate investor, who was carrying $90,000 in credit card debt. Why didn't he sell a property or two to pay down his debt? He loved his rentals too much to sell them. Me? I don't love things, only people who love me back. He was paying literally thousands of dollars a month in high interest payments so he could pretend to be financially secure.

Try to save $100 per week. That's a little bit more than $14.00 a day. Not much. Take that sum and pay off your credit card and other bills. Then start saving it like I am here under the Million Dollar Challenge, investing a little at a time in stocks or other assets you think are undervalued. In a short time you will have the financial muscle to really succeed as a real estate investor. Real estate is not going anywhere, you can invest successfully two years from now too. But if you don't build a firm foundation, you will fail and likely lose everything you have. Real estate is not a forgiving business and most investors who try to make money at it fail miserably. That's what you should start right NOW. Look at me. $400 in stocks saved from not drinking soy lattes in just three weeks. Not bad, eh? You can do it too.

Real Estate Investor Magazine is a publication designed for new and experienced investors alike. Learn how to build wealth and cash flows buying, selling, improving, developing, and managing rental properties. We teach only legal, ethical, and proven methods of making money. No useless theory, no get-rich-quick hype.

For subscription information, visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com.

And for more information on how some (not all) real estate authors snag you hook, line, and sinker with promises of instant wealth instead of giving you the straight dope on the realities of real estate investing, read some of the FREE articles on the Real Estate Investor Magazine site as well as my Investing in Land website at www.investinginland.com.

Learning from a Master : Day 21, March 15, 2005

2005-03-15T17:55:00.000-08:00

I've been spending way too much time on airplanes lately. Nearly 20,000 miles in the last two months. Thank God for MP3 players and new books.

I just finished a great new read this morning so I'm recommending this book to all of you here and in an article I'm going to write for the Real Estate Investor Magazine website at www.reinvestormagazine.com.

TRUMP STRATEGIES FOR REAL ESTATE is not another book by the master of self-promotion, Donald "The Donald" Trump, but instead by George H. Ross, a very famous real estate lawyer in New York City circles. He's known for working with Trump these days but he's had a very distinguished career working with real estate developers for more than fifty years.

I'm not a big fan of Donald Trump's recent books like TRUMP: THINK LIKE A BILLIONAIRE or HOW TO GET RICH. These books offer little substantive advice for investors and his inclusion of those name dropping daily schedules really leave me feeling flustered. I wish I could have breakfast with supermodels and lunch with prime ministers too. Instead of dining with the likes of Heidi Klum, Bono, and Tony Blair, I pick up my drycleaning and wait in line at the post office, or the bank, or when I'm really lucky, both.

But Trump's early books like THE ART OF THE DEAL and SURVIVING AT THE TOP are excellent narratives on how big time real estate development really gets done. REALLY good reads. So I was willing to take a chance on another book with the name TRUMP in the title and especially since George Ross was the author. Since I've thanked God already for MP3 players and new books, let me also bless those small newsstands at airports and the members-only airline lounges where reading far away from screaming kids and overstressed parents is a joy. That's where I bought this book and where I read most of it.

This is by far one of the best real estate books I've read in a while. Did I learn a whole lot from it? Not really, but I know that other investors sure will, newbies and old pros alike. This book actually does show how to apply the successful techniques of The Donald to average real estate projects like duplex or single family home ownership. I already have my game plan in my head for the Million Dollar Challenge and how I'm going to start buying and building value toward my $1 million goal so, for the record, this book didn't give me any new ideas. But it sure convinced me that I'm on the right track.

I routinely warn people on my websites at www.investinginland.com and www.reinvestormagazine.com not to waste their money on worthless real estate books that teach outdated, unethical, or just plain silly advice. There are a great many of them out there and my most recent FREE website article at www.reinvestormagazine.com addresses this very subject. This book by George H. Ross is NOT such a book. I paid full price for it ($24.95 plus tax, airport newsstands are monopolies after all) and it is worth every penny. I'm sure you can get it cheaper elsewhere BUT GET IT.

For the record, I have no financial stake in this book of any kind. I don't know George H. Ross although I did meet him once years ago.

The book is called TRUMP STRATEGIES FOR REAL ESTATE, ISBN 0-471-71835-1, published by John Wiley & Sons, Copyright 2005.

What strategies from this book will I use during The Million Dollar Challenge?

The answer to that question is available to subscribers of Real Estate Investor Magazine only.

For subscription information, please go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com. It's a fun site with lots to do and see, especially if you like reading FREE things that can teach you much about real estate investing.

No Post Today : Day 20 : March 14, 2005

2005-03-14T17:13:00.000-08:00

Due to a medical emergency in my family I will not be posting today. I suspect I will need to get my mind off things so I will likely be posting tomorrow.

Thanks to all of you who read this and have subscribed to Real Estate Investor Magazine. Your support means a lot to me, especially at this time.

Traveling to Denver : Day 16: March 10, 2005

2005-03-10T16:11:00.000-08:00

I'm flying to Denver later today for an Investing in Land Live Seminar to be held in The Mile High City this weekend. So once again, the Million Dollar Challenge is put on the back burner until Monday, March 14.

But items on the back burner still cook, they simmer quite nicely on low heat.

People have been emailing me about the Challenge asking me "When are you going to start making offers on properties?" Good question, I guess, but too premature. I honestly think around the end of April at the earliest. My Spring 2005 Investing in Land Live Seminar tour ends on April 24th so after that I'll have some real time to look at properties and start making offers. Until then, I prepare, and that work surely needs to get done too. I'm not losing time by waiting, not at all, I'm building a very firm foundation to guarantee the success of the Challenge.

There is no open ended question today encouraging you to subscribe to Real Estate InvestorMagazine as is usually the case. I'll skip the cheap melodrama today and try an emotional appeal from my heart instead. I hope you do subscribe and support our publication. We are trying to revolutionize the real estate information industry and take it back from the get-rich-quick fast buck artists who sell mostly worthless information to new investors. They make money selling books and courses. We make ours in real estate. Their packaging and message may be slicker and more polished, after all, they make a living selling books. We don't. We make ours hopefully doing what you want to do, buying, selling, improving, developing, and managing real estate. We want to spotlight and recommend other great real estate writers, courses, seminars, products, and publications even if they compete against ours and we don't make a dime for doing so. Our goal is to promote honest and ethical real estate investment and part of that is letting people know that we don't have all the answers on every subject but someone else just might.

I hope you do subscribe. You can get a lot for your money. Please take the time to visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com. Look around, read some of the FREE articles, our mission statement, and get a feel for what we are trying to do. Spread the word, buy an ad, but please subscribe. The more people on our subscription list, the easier it will be to get our publication into bookstores and magazine racks and that is where the power of our message will really be felt.

To those of you still reading, thanks!

See you again on Monday, March 14, 2005.

More Stock, More Information : Day 15, March 9, 2005

2005-03-09T17:34:00.000-08:00

I got my $100 weekly paycheck today so I made another purchase of ANH and BUD stock to match the two previous Wednesdays. Bought $50 of ANH, or 5.112 shares at $9.78 and $50 of BUD, or 1.046 shares at $47.78. All my buys have been within a few pennies of each other. That's fine, it means I'm buying on the cheap (I hope!) since both these stocks appear stuck in the doldrums for now.

Again, I don't expect either of these holdings to make me rich on their own. 3 shares of BUD and 15 of ANH (so far) do not a fortune make. But over time such small stock purchases can amount to large holdings. If I did nothing but buy ANH and BUD for an entire year I would own nearly 60 shares of BUD and 260 shares of ANH. Again, not anything to write Warren Buffett about but for having just $100 to invest each week, not bad. This stock portfolio alone would be worth more than $5,000 even if the share price went nowhere and the dividend stream would be nice and growing.

The real reason I'm investing the $100 per week right now is that I don't need it yet. Maybe I will, maybe I won't. We'll see. But $300 in stock is more important to me today than $300 in cash in a money market account earning nearly nothing in interest. Plus I want to show you the power of compounding. Small sums invested consistently over time yield huge results.

IN OTHER NEWS.......

As I said yesterday I live in King County, Washington. That's where Seattle and the imaginary Dr. Frasier Crane live and where the Mariners and the Seahawks play.

The county directly to the south of King County is called Pierce County and today they held an open house at the Pierce County Planning and Land Services Agency to discuss their new Mid-County Communities Plan. This meeting was called to discuss things like zoning changes, transportation issues, reserving open spaces for parks, and other economic development issues.

I attended the meeting and found it quite informative and especially useful for the Million Dollar Challenge.

One crucial fact you should know about Pierce County. It's growing RAPIDLY while King County is SHRINKING. Not in size, silly. In population. Pierce County has gained 40,000 new residents in the last ten years while King County has lost nearly 50,000. Why? Most communities are not made up of the very rich and very poor, those groups exist on the fringes. The vast majority of communities live in the middle class, those people like nurses, teachers, truck drivers, cable TV installers, auto mechanics, receptionists, mailmen, and all the rest. The bottom line is that the price of housing has risen too far and too fast in King County over the last ten years and the middle class has fled to Pierce County, essentially following the old Southern California axiom about buying a home and getting a mortgage:

"Drive until you qualify."

This situation really raises a profound social question that a fair nation must answer at some point. The notion of racial segregation is offensive to Americans. Requiring people to live in certain areas based on the color of their skin or what nation their grandparents came from is degrading and un-American. But what about the idea of economic segregation? King County and especially Seattle are being abandoned to the rich because only they have the financial means to afford the housing prices there while Pierce County is becoming a haven for "average" (boy, do I hate that word!) people struggling for the American dream, their own home. The rich get to live a stone's throw away from their offices while others not so fortunate, at least yet, have to drive three hours a day on congested roads in bumper-to-bumper traffic to earn a living. Is this fair? Or just the price we pay for living in a capitalist society? Perhaps easy mortgage money in one county while tight restrictions in another have "red lined" the big bulk of American society to a less desirable geographic area? Do we want to live in a nation where the rich and the not-so-rich only mingle at the office and then go home to separate areas walled off by the amount of green in one's wallet? These are all questions to think about as a real estate investor and developer. I hope you consider them along with all the money you can make when you plan your investing goals. As I say in my Investing in Land Home Study Course and in many FREE article on my website at www.investinginland.com when you own and develop pieces of a community, you leave your fingerprints all over it. You shape its history, for better or worse. Better to think now and leave conditions better than you found them than fail to act due to sloth or negligence and let others make those decisions for you-----and the property you own.

Anyway, let me step off my soap box and get back to the Million Dollar Challenge.

With all the rapid population surges, Pierce County is experiencing lots of growing pains. The old corn fields are now new subdivisions. The roads are packed with cars, the schools crowded, and property taxes are rising fast to pay for all the new infrastructure improvements that are needed to accomodate 50,000 new faces. You can still see majestic Mount Ranier in the distance everywhere in Pierce County, looming like a beautiful snowcaped giant even in the heat of summer, but for how much longer? Big buildings and smog are on the way, it is feared by many and they are probably right, and even a 500,000 year old active volcano 14,410 feet tall doesn't stand a chance against developers eager to make money and homeowners desperate for a place to live and work without traffic eating up their daily lives.

So how does Pierce County's growth and King County's loss make it so much easier for me to meet the $1 million goal of, you guessed it, The Million Dollar Challenge?

The answer to that question is available for Subscribers of Real Estate Investor Magazine only.

For subscription information to Real Estate Investor Magazine, please visit the official website at www.reinvestormagazine.com. It's a good publication devoted to helping people build wealth and cash flow through the ethical investment in real estate. No get-rich-quick schemes or "nothing down" nonsense. Honest advice from professional investors only.

If your community offers these Open Houses on zoning and development issues, you should absolutely attend. I learned more about my local area in two hours than I would have in two months of reading the newspaper.

Real Estate Prices are HOT : Day 14, March 8, 2005

2005-03-08T16:00:00.000-08:00

It's called a "seller's market" for a reason. You don't want to be a buyer.

I live in King County, Washington State. That's where Seattle is. The real estate market here is not just hot, not just white hot, but the Seattle Times newspaper recently described it as "madness."

You can read the article from the March 5, 2005 Seattle Times yourself by going here:

http://snipurl.com/dbb5

So this is my operating environment for the Million Dollar Challenge. Finding real estate bargains in a market where anything real estate is selling not just for top dollar but multiples of it. Prices are so nosebleed high around here that I don't own my home, I rent. It's cheaper. The flip side of the frenzied real estate sales market is that the rental market is still in the doldrums. All those new homeowners taking advantage of low interest rates and buying new homes are leaving vacant apartments behind when they move. Or they are renting out their old homes while moving into larger ones, meaning more rental units hitting the market at the same time there a fewer tenants. It's not a great time to be a landlord. Tenant concessions are very common, even two months free rent on a one year lease. Vacancy rates are high, although stable. This all leads to the obvious question. Why buy now? Why pay $3,500 a month in mortgage payments after investing $100,000 in cash and signing a 30-year mortgage to buy an overpriced condominium when you can rent the same unit in the same building for $2,500 a month and can move in for just $490 up front and not pay rent for two months? Get my logic?

But this is the Million Dollar Challege so I have to find real estate bargains. I won't be alone searching for them but I know I'll find quite a few. All markets, including local real estate markets, are EFFICIENT but NOT PERFECT. There are mispricings due to inadequate information everywhere. Simply put, sellers make mistakes that shrewd buyers (like me) can take advantage of when we see them.

Would it be easier to do the Million Dollar Challenge in a buyer's market? NO WAY. Prices would be low and going nowhere. It's easier to sell real estate in a seller's market. The trick is finding properties to buy, the obvious prerequisite of selling.

What techniques will I use to exploit market imperfections and find real estate bargains?

The answer to this question is available only to subscribers of Real Estate Investor Magazine.

To subscribe to Real Estate Investor Magazine, please visit the official website at www.reinvestormagazine.com. You'll find lots of other FREE information there from articles on real estate investing to advice for new investors.

Time to Hire a Lawyer : Day 13, March 7, 2005

2005-03-07T14:15:00.000-08:00

Good to be back home, even if it is only for three days. I've got another Investing in Land Live Seminar on Saturday and Sunday. This week I have to find and hire an accounting and law firm for the Million Dollar Challenge.

A good law firm is essential to the success of a real estate investor. Notice I say good "law firm" and not good "lawyer." Let me make the distinction very clear in my case so you can understand the difference in yours. If you are just involved in one or two limited areas of real estate investment, like buying houses and fixing them up for resale, a good lawyer in solo practice or in a law firm of any size will suit you fine. You really do not have a need for a wide variety of legal services other than closings, title checks, drafting leases and contracts, and the like. Any competent lawyer at any size firm can do that stuff just fine.

But for the Million Dollar Challenge I'm going to operating in a wide variety of real estate areas, everything from land development to syndications to rezoning properties to major building transfers. It is easier to hire a larger firm with lots of real estate lawyers who can all talk to each other and meet all my needs at the same time. I could hire six small firms to accomplish the same thing but why?

I have nothing against small law firms or lawyers in solo practice. I ran a small law firm for years. There are some magnifcent lawyers putting out their own shingles and building law firms from the ground up. But sometimes you need a large firm and the Million Dollar Challenge is such a case.

So I'll be interviewing law firms later this week. You'll learn what I decide moments after I do.

What do I look for in hiring a real estate lawyer or law firm?

Answers to that question and many others are for subscribers of Real Estate Investor Magazine only.

For Subscription information, visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com. You'll find lots of other goodies there too, from FREE articles on real estate investing to advice for new investors wanting to get started.

Working This Weekend : Day 10, March 4, 2005

2005-03-04T17:00:00.000-08:00

I'm in Las Vegas for one of my Investing in Land Live Seminars. It's round-the-clock work teaching, meeting people, handling this or that detail. No doubt it's a lot of fun but twice as much work too. The Million Dollar Challenge is on the back burner for the next 72 hours.

I'm thinking about it, just not all that much. No time. I'll make up for the delays next week. There is no rest for the weary, I guess.

For Subscription Information to Real Estate Investor Magazine please visit the official website at www.reinvestormagazine.com

For More Information on my Investing in Land Live Seminars and other Investing in Land publications on how to build wealth and cash flow buying, selling, subdividing, rezoning, and developing land, please visit my website at www.investinginland.com.

Hiring an Accountant : Day 9, March 3, 2005

2005-03-03T18:07:00.000-08:00

I'm on the road today but looking at the ads and resumes of a CPA firm I will hire for the Million Dollar Challenge. I've narrowed it down to three and I'll meet with the players at each firm when I get back home.

Lots of math work needs to be done when buying real estate. Plus it really pays to have an independent review of the numbers. You will trust your own instincts more and investors will trust you if a CPA says everything is A-O-GAAP. (That's A-O-K with some Generally Accepted Accounting Principles on the end.)

What should you look for in a real estate accountant? What do I look for in mine?

That information is available only to Real Estate Investor Magazine subscribers.

For Subscription information, please go to the official Real Estate Investor Magazine website at www.reinvestormagazine.com.

Another Stock Purchase : Day 8, March 2, 2005

2005-03-02T17:53:00.000-08:00

Since I got "paid" my weekly $100 income this morning, I put it to quick use.

Another purchase of BUD and ANH stock at almost the same prices as last week.

With my $100, I bought 5.096 shares of Anworth Mortgage Asset Corp (ticker symbol ANH) at $9.81 per share and 1.050 shares of Anheuser-Busch (BUD) at $47.59 or roughly $50 of each.

As I said last week, these purchases are not going to make me rich tomorrow but over time they will be decent investments (I hope) that will contribute to the success of the Million Dollar Challenge.

The yield on both investments sure beats sticking $100 into a money market account. ANH yields 11.10% and BUD a still respectable 2.09%.

This is a travel day for me so no new action to report.

If you are curious why I'm buying BUD (a beer company, right?) and ANH and how I'm doing it, you need to subscribe to Real Estate Investor Magazine.

Subscribers receive FULL and COMPLETE information on all aspects of the Million Dollar Challenge. You see the actual documents I use, photographs of real properties, and a much more analysis than appears here. Real Estate Investor Magazine is the official archive of the Million Dollar Challenge. If I see it, use it, or need it, you'll read about it there.

Complete Subscription information for Real Estate Investor Magazine can be found on the official website at www.reinvestormagazine.com.

Day 7: March 1, 2005

2005-03-01T15:27:00.000-08:00

Before you start actively searching for propeties to buy you need certain things. I mean you REALLY need them. The good news is that most people already have all these items and if you don't they are generally pretty inexpensive to get.

First, you need business cards. I don't believe in getting fancy here. Cheap is best. You need to print LOTS of them so look for keeping the price low over fancy paper or gimmicks like your smiling photograph on them. Your minimum order should be 1,000 cards and if you can afford more, good for you.

Second, you need a cell phone. You will spend LOTS of time on it so call your provider and check your contract. It is better to spend a little now to buy a larger number of minutes than get snagged with an overuse charge.

Third, you need a computer with a laser printer. If you don't have one at home, try to use the one at work. You will need to print documents, letters, contracts, and the like. Plus you need to access the Internet. The good news is that if you are reading this you probably already have this computer issue covered.

Fourth, subscribe to ALL your local daily and weekly newspapers and magazines. I live in a big metro area (Seattle, Washington) and there aren't but four magazines and two magazines. Total cost for me was less than $100 and I had already done this long before the Million Dollar Challenge began. In your area you might only have one paper and no magazines. That's fine too. You need to read and place ads and LEARN LEARN LEARN about your home community. Do not skip this step. ESSENTIAL.

Fifth, you need a car or access to one. Yes, you can buy real estate without one but a car is a great time saver and you do not want to waste precious minutes finding a auto rental office, waiting for a bus, or trying to hail a cab.

Sixth, you need a telephone line other than your cell phone. This is the phone number you put on your business card, not your cell phone. Why? Because you do not want people calling you on your cell day-and-night and they will. What good is carrying around a cell phone if you have to switch it off to avoid unwanted callers? A separate land line into your home or a cheap voicemail line rented from a telecommunications provider works just fine. The logic behind this decision will be explained in future posts (it really is important) but you DO NOT want to use your personal phone number at home or your cell phone number in advertisements or on your business card. The bottom line is you want people to call you but not personally reach you unless you want to be reached.

There are a few other things you will need and I'll mention them in future posts. But I'm sure most of you already have them or can get them pretty fast.

Want to see my own business card and how I worded it? Want to learn how I saved money buying most of items described above, as much as 50% off the retail price?

This information is available only to Subscribers of Real Estate Investor Magazine.

For Subscription information please visit the official website of Real Estate Investor Magazine at www.reinvestormagazine.com.

You will also find a number of FREE articles there on real estate investing and other advice for new investors.

Day 6: February 28, 2005

2005-02-28T17:39:00.000-08:00

The last day of this month brings a major task for the next. This is where the rubber meets the road for the Million Dollar Challenge. It's no longer preparing. It's actually doing.

I have always relied upon a two-pronged process to find real estate properties for sale. First, I respond to sellers who know they want to sell. Second, I convince other property owners that haven't previously thought of selling that it is in their financial interest to do so.

The first class of seller is easy to find. These are your FSBOs (For Sale By Owner, pronounced FIZZ-BOES) , owners of listed properties through MLS, and otherwise sellers who are making it clear to the world that they want to sell. They place ads in newspapers, put signs on their properties, hire brokers and sales agents to market their holdings, and do all the usual in spreading the word to the streets that "Hey, I own a property and it is for sale. Make me offers."

The second class of seller, Type #2 I guess, is hidden but also not to hard to find. These are the owners of properties that really don't want to be. Some are under financial hardship from vacancies, poor tenants, bad locations, or just plain mismanagement or incompetence. The dentist who buys an apartment building and quickly learns he knows more about teeth than tenants comes to mind. Or they are accidential owners of real estate due to distributions under a will or trust, business failures, or other situations where they didn't plan to own real estate but now find themselves with some on their hands. This class of sellers may not actually have made the decision to sell but a light breeze is all it takes to push them over the brink.

Over the next month, or the entire month of March 2005, I will target both classes of sellers. I will respond to ads and signs I see and let it be known I'm looking for properties to buy. I will also try to tap into the hidden market, play detective if you will, and seek out owners of properties with a simple message:

"You own property. You don't want to own your property. I'm here to help you."

My goal is to solicit all the Type #1 sellers I can find and at least TEN of Type #2, or those that don't know they want to sell yet.

How will I find both types of sellers? What will I say to them when I meet them? And what am I really looking for in a property?

Answers to these questions are available only to Subscribers of Real Estate Investor Magazine.

For Subscription Information please visit the official Real Estate Investor Magazine website at www.reinvestormagazine.com. There is plenty more there too, such as many FREE article on real estate investing and comprehensive advice for new investors.

Subscribers to Real Estate Investor Magazine will get to see EACH AND EVERY property I look at and learn what I like about each and what I don't. This includes actual photographs, income statements, sales descriptions, and more.

Day 5: February 27, 2005

2005-02-27T17:08:00.000-08:00

I worked on my financial statements today. No matter what strategy I take under the Million Dollar Challenge to buy $1 million in real estate assets I will need an updated balance sheet, income statement, and list of references.

The same is true for you. People are going to want to know who you are, what your finances look like, and if you can afford to involve yourself in their projects. This is common sense. Would you trust your $100,000 house or $500,000 income property with a stranger you just met through a newspaper ad?

Any good book on personal finance will help you put together your own balance sheet and income statement. There are so many good ones available I don't know which to really recommend. I really like RICH DAD POOR DAD by Robert Kiyosaki and the books by David Bach like THE ARMCHAIR MILLIONAIRE and START LATE, FINISH RICH but for this simple task any personal finance book will do. The easy way to approach this task is that your balance sheet lists your assets and liablities, in other words, what you own and your debts, and your income statement lists how you make your money and how it goes out to creditors. If you get the annual report of any publicly traded company you can see how they handle balance sheets and income statements and you should mirror yours the same way.

As to references, just list who knows you. Who can attest to your good character. And especially your real estate experience, if any. This can include everyone from the pastor of your church to your employer to your best friend. Include any creditors which can personally affirm you pay your bills on time.

What do you do if you have a lousy credit history, no real references to speak of (you are new in town, for example), and have more debts than assets, in other words, you're broke?

The answer to this question is available to Subscribers of Real Estate Investors Magazine only.

For subscription information, please visit the official Real Estate Investors Magazine website at www.reinvestormagazine.com.

Day 4: February 26, 2005

2005-02-26T23:59:00.000-08:00

Today I worked on creating my Investment Filing System today for the Million Dollar Challenge.

If you are going to invest in real estate, you need a filing system. A place to keep notes, contacts, phone numbers, advertisements you read, ads you run, promotional material you gather, forms and contracts you need, and all the rest which will be substantial, trust me here.

If you are not organized, you will waste time, lose necessary information, and otherwise be inefficient at a time where speed and dexterity are a must. There is nothing more frustrating than needing a phone number and not being able to find it or someone wanting to sign a contract on a deal you just clinched and you can't locate the right form.

If you want to snatch defeat from the jaws of victory in real estate, be messy. Don't create a filing system.

How did I create my Investment Filing System for the Million Dollar Challenge?

That information is available only to subscribers of Real Estate Investor Magazine.

To Subscribe to Real Estate Investor Magazine, go to the official website at www.reinvestormagazine.com.

Day 3: February 25, 2005

2005-02-25T18:00:00.000-08:00

Yesterday I discussed HOW I would invest.

Today I will discuss WHERE.

Here there is no mystery for you and me. Million Dollar Challenge for Real Estate Investor Magazine or not. Wherever you are, you should invest in your own backyard. That is where you live and work. PERIOD.

No long drives into the countryside. No airplane flights to distant locales looking for real estate deals. People who live in Boise, Idaho should invest in Boise, Idaho.

I once had a friend who would rarely invest in U.S. stocks. He put all his money into international stocks and would rant with glee about all the possibilities in Hungarian utility stocks, Taiwanese trading companies, and Turkish real estate firms to name a few. Did he make money putting his cash into these companies far from where he lived in Washington, DC? Sure, sometimes big money, sometimes not. But think of it this way. There are more than 2,800 companies trading on the New York Stock Exchange alone with a market capitalization of more than $9 trillion. That's NINE TRILLION DOLLARS. just for the NYSE. Then there's the NASDAQ, the ASE, and so on. If you as an investor can't find a way to make money in the United States of America, the world's largest stock market, greater than all the other markets in the world COMBINED, then you have a bias against where you live towards where you don't.

The same is true with real estate. Why invest your money far away from home when you pass literally BILLIONS OF DOLLARS of properties every day on the drive to work, to the shopping mall, to your mother-in-law's house, to visit your girlfriend, on the way to the golf course, or wherever you go by car, train, bicycle, bus, or on foot? These are the properties you see everyday, back and forth, again and again. They are near to you, easy to look after, you know the neighborhoods, who lives there, what's close by, where the nearest shopping, school, hospital, library, or park is. You know the old expression about knowing something "like the back of your hand"? What does that really mean? You know best what is closest to you, what you see everyday until it becomes ordinary. See how this logic applies to real estate too?

People want to invest far from where they live because they think there are bargains to be had there. Perhaps there are, but where are you likely to find bargains? In an area close to your home or office where you can take the time to search day-in and day-out, where you follow local events that affect real estate prices in the newspaper you read everyday anyway, where you literally see new changes like construction projects or road building occur before your eyes while stuck in traffic or driving Junior to Little League? Or will you see hidden values and market trends in real estate properties located dozens or hundreds or thousands of miles away from your home in an area you rarely visit, seldom see, or even know very little about? Groucho Marx once said in a famous movie scene when he was caught romancing a gorgeous blonde in his hotel room by his "fiancee" Margaret Dumont "Who are you going to believe, me or your own eyes?" So who are you going to believe? A real estate broker hungry for a commission or your brother-in-law who is trying to sell you on some Florida real estate when you live in Chicago or your own eyes, everyday, on the way to work or school or play?

Look around you everyday with your eyes OPEN for real estate opportunites. Driving in a car at even at 30PMH is fast. Get out and walk. See which properties around you have vacancies or poor tenant mixes. Do you see abandoned properties? What about buildings in poor repair with peeling paint or commercial signs that are supposed to read JOE'S PIZZA but instead scream _OE'S PIZ_A? It doesn't matter if you live in downtown Manhattan or East Mulecreek, real estate value opportunities are all around you and you don't have to travel very far to find them. A good rule of thumb is never shop for real estate at a distance longer than you have to drive to work.

So where am I looking for real estate for the Million Dollar Challenge?

That answer is reserved for Subscribers of Real Estate Investor Magazine only.

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Day 2: February 24, 2005

2005-02-24T16:10:00.000-08:00

The first step in beginning any real estate investment program is decide what strategy you will use to meet your financial goals using the resources you currently have at your disposal. This is very much like plotting directions on a map before a road trip. If you are driving from New York to Los Angeles you just don't get into your car and head for the nearest Interstate highway figuring any freeway pointing west will get you closer to your destination. Instead, you plan your trip before you put the key in the ignition. This includes everything from knowing which roads you will take, what motels you will sleep at along the way, and even gassing up your car and buying some snacks and soda for the long journey ahead.

The same is true of real estate investing. You plan before you start. There are a number of excellent ways to make money in real estate and a huge number of truly spectacular books and courses out there on how to do just that, everything from buying junker homes and rehabbing them, flipping foreclosures, finding probate sale properties, using lease/options, or even my Investing in Land Home Study Course on building wealth with land sales, subdivision, and development and many many others too. But each strategy is unique and has different requirements and needs to guarantee success within it. Some require lots of capital and credit. Others like rehabbing houses mandate special home improvement and construction skills. Many like foreclosure investing require lots of time during the business day, something the average working person with a normal job doesn't have. Some like pre-foreclosure investing insist on having very good interpersonal skills and being understanding towards people in distress. The bottom line is that there are many paths to real estate investment success but each strategy is not for every person. The strategy needs to wrap itself around the needs and assets of an individual, not necessarily the other way around. Foreclosure investing, for example, may be great for one person and terrible for the next since one may have the assets and skills required to pull it off while the other does not.

Under the Million Dollar Challenge, my options as to which real estate strategies to employ are extremely limited. I can't use ANY personal credit so borrowing to buy any kind of real estate is out of the question. I only have $10,000 in cash so I can't pay all-cash on deals unless I'm looking at some very cheap properties. And flipping those won't get me to a million dollars any time soon. Plus $100 a week is great working capital for newspaper advertisements, business cards, and other minor requirements of a real estate business but not a whole lot more than that. Again, I can't think "I'll do foreclosures" or "Let me find a junker house that needs a rehab." That's putting the cart before the horse or selecting the strategy before evaluating my current resources. I'm starting the Challenge by first looking at my assets, as slim as they are, and then picking the PERFECT strategy to turn those assets into $1 million as fast and as ethically as possible.

I have the ideal strategy in mind.

What is it? And how will it work?

Only subscribers to Real Estate Investor Magazine will learn my thinking here in great depth.

To Subscribe to Real Estate Investor Magazine, go to www.reinvestormagazine.com.

Day 1: February 23, 2005

2005-02-23T17:41:00.000-08:00

Today is the first day of the Million Dollar Challenge. I have $10,000 in the bank and my first $100 weekly income check to spend. Since my goal is $1 million I am $989,900 away as of right now. Put another way, I start a little over 1% of the way already there.

While I formulate a strategy to get me to $1 million in real estate as quickly and as ethically as possible, I'm going to use the $100 per week to make some small equity investments in real estate securities. No point in letting each of these $100 checks pile up in my money market account each week earning next to nothing in interest. I don't need the cash right now, although I may need it soon enough. In the meantime, I'll search for easy bargains, the low hanging fruit of the real estate world that doesn't take much time or effort to buy. I don't expect these minor purchases to make me rich but over time they can add up to some substantial equity and that philosophy is at the core of the Million Dollar Challenge. When building wealth put time on your side rather than have it work against you.

Today I spent my $100 buying stock in two companies, Anheuser-Busch (ticker BUD) and Anworth Mortgage Asset Corp. (ANH). Obviously I bought $50 of each or 1.052 shares of BUD at $47.46 and 5.186 shares of ANH at $9.52.

Why BUD and ANH? And isn't BUD a beer company anyway? Plus how did I do this?

Answers to these questions are available for Real Estate Investor Magazine Subscribers only.

For subscription information go to the Real Estate Investor Magazine website at www.reinvestormagazine.com.