I’m a Jack Nicholson fan and that is one of my favorite lines from the movie A Few Good Men. It is the perfect title for this month’s Escapeartist article.
What I mean is this – If the American people really understood the potential ramifications from the stimulus money that has been printed and the true cost of social programs, they would crap their pants. I can hear Uncle Sam now, “You can’t handle the truth.”
The fiscal irresponsibility of the federal and state governments will rob most Americans of the lifestyle they hoped for in retirement.
Our federal, state, and local deficits are so out of whack that all facets of government will take extreme measures to cut back services and you can bet on higher taxes. We’re not just talking about income taxes. Try sales taxes, licensing fees, impact fees, gasoline tax, real estate taxes, highway tolls, communications charges, and virtually everything you can think of. Have you gotten a speeding ticket lately? Wait until you see what that will cost you.
The impact of recent government interference will be far reaching into the pocketbooks of every segment of our society and could rob you of your retirement. Just wait until states start laying off teachers across the board due to a lack of money. Ooops…that’s already going on – just Google “teacher cutbacks”.
According to the United States government, the average American who has worked 40 years and retired at age 65 falls into one of the following categories:
- 1% are wealthy
- 4% are independent (not needing support from the government)
- 5% are deceased
- 36% are still working
- 54% are completely broke
When you take into consideration that our social security system is having its first shortfall in 2011, when less than a year ago they claimed that wouldn’t happen for five more years, and that state legislatures are attempting to file bankruptcy to avoid or change state pensions, it’s scary out there.
The consequence of decades of debt piling up, and now surging upward nearly a third in the past several years isn’t good. We can expect it will stagnate growth in many parts of the country as people who can leave for lower tax areas will to try and stretch their dollars.
This means that with a little planning we can have a good shot of benefiting from this movement. We need to identify: a) who will be moving, and b) where will they be moving to.
The Baby Boomers are the largest group who, as they start retiring, will be able to move to more tax friendly areas…interestingly most of them indicate they’d like to live some place warmer, and there are states that have both lower taxes and warmer weather. And businesses are moving to more friendly tax states. People follow jobs! This increases the likelihood migration will concentrate to these areas.
There are now 10,000 Baby Boomers a day retiring for the next 19 years. This will certainly kill the local economies from which they leave and benefit the local economies to which they retire. Local economies are just that – local. State and city economies are vastly different.
What’s a person to do?
For starters, think for yourself. Don’t just swallow what the media wants to deliver to your TV. Don’t take anything as the gospel truth without doing your due diligence.
For sure, the global economy is in uncharted waters, but you know what: It’s easier to make money in bad times than good times. You read that right! All this garbage that fills your head from your wide-screen TV is simply that – garbage. It’s time people took responsibility for their lives and their financial future and quit thinking that it’s your government’s responsibility to take care of you. Look, I’m not Glen Beck or Rush Limbaugh, but I have a lot of common sense and the wisdom that comes from being an experienced entrepreneur and, above all things, a capitalist. I’ll sum it up in four words:
There’s no free lunch!
Have you read Atlas Shrugged, by Ayn Rand lately? It should be mandatory reading in our school systems. She wrote an incredible novel about big government and how it destroys the fabric on which this county was created – free enterprise. We have a government that wants to control our every move and passes legislation to regulate and control everything we do except go to the bathroom.
If you’ve never read that book – read it. And, as long as I’m recommending books, I suggest, Action: Nothing Happens Until Something Moves, by Robert Ringer.
What about you? What does it take to make you move? Many EscapeArtist readers have already left America for their own reasons, but that’s not what I’m writing about.
What will you do to safeguard your retirement?
Think about your current allocation of assets, including retirement accounts, and ask yourself the following questions:
Are you protected from a stock market disaster?
What if terrorists strike again on US soil?
What happens when social security goes broke?
What about hyper-inflation?
More than ever, you need to protect what you’ve accumulated and multiply it in safe asset allocations.
We are living in a ‘new economy’ and the old rules simply don’t apply and won’t protect you in times of volatility and uncertainty. Fear has gripped many Americans to the point of inaction. Heck, our government rewards people on unemployment with no incentive to look for a job because they keep extending their benefits. What a circus. While more people become complacent, the rest of us are paying into a system that rewards non-producers. It should be just the opposite. Entrepreneurs and business start-ups are the spokes in the wheel that make the economy turn.
Entrepreneurs operate without a net. No one is there to catch them when they fall and most of us will dust ourselves off and start over again. That’s what made America great.
Look, you may not be able to save the world, but you can save yourself!
It’s no secret, Social Security is broke and only God knows where the money is coming from to pay the workers who paid into the system. But, heck, let’s give health care to everyone, so people live longer and employers are forced to contribute to the point where they may not be able to stay in business. Not to mention quality we can expect to receive from such a centralized system…the upside is people now have all the incentive they need to take their vitamins and start jogging.
Hyper-inflation? Bet on it. The cost of goods continues to go up and the oil supply greatly impacts the economy, including housing. In fact, it is the cost of goods and the oppression from dictators that led up to the current crisis in the Middle East. And this crisis will effect Americans in ways we’re not so sure of.
In today’s ‘New Economy’, it’s time to think outside the box. What used to work and be a safe bet, like municipal bonds, are now disastrous. It’s time to think about preservation, safety, and income with appreciation.
There is a major paradigm shift, creating an opportunity of epic proportions that we most likely will not see again in our lifetimes.
I’m writing about well-located single family houses (SHFs) that are properly managed in states that will gain population – not lose it.
Before the real estate bubble, home values were artificially inflated by the financial markets which led to massive speculation. Now the pendulum has swung the other way as credit has dried up for mortgage finance.
When you combine the facts above with lenders and government agencies that must liquidate portfolios of houses in order to stay solvent it creates an extraordinary opportunity for investors that have CASH.
Forget all the gurus and self-serving companies that try to lure you into buying houses using leverage. The improper use of leverage is what destroyed investors and was part of the reason for the housing bubble. This is a cash economy, and used wisely it will offer safety to your portfolio.
The primary reasons to buy houses are…
- Monthly income
- Hedge against inflation
- Upside potential
Never buy a house for tax purposes or a ridiculous promised rate of return. Super high rates of return translate into cheap houses in bad areas which is something you should avoid like the plague.
Here’s a perfect example: There is no shortage of hucksters selling properties in Detroit. The cash-on-cash rate of return is high and the purchase prices are extremely low. But, guess what? You are buying property that will be illiquid because there will be no buyers for it. It will never go up in value (at least not in your lifetime) because Detroit is losing population, jobs, closing schools, and raising taxes.
Don’t ever buy into the government subsidized rents of Section #8 or you’ll be marching to a different set of rules – theirs! I’m not done yet. Michigan has some of the highest property taxes in the country.
Learn from my example: I foolishly bought a house there a couple years back for below $17,000. Seems like a good deal, right? The property taxes on my cash “calf” are $4,200 a year and the homeowner’s insurance is $1,000 per year! The house is over 80 years old. Let me tell you – old houses mean new problems.
We couldn’t tell when we bought it that the sewer line was collapsed ($2,400) and that the water line to the house was broken ($1,600). Did I mention lead-based paint? Do you know that every house built before 1978 has lead-based paint? Do you know you can be sued for it? You can. I’ve been. After having this experience more than once (money attracts flies) a rule for our practice is to never buy a house built before 1978. Do yourself a huge favor; learn from our experience and stick with newer homes. You’ll be glad you did.
And don’t think for a minute you can just sell the house to your tenant and collect on a mortgage. I mean, you can, but when they don’t pay you, your foreclosure could take 2-3 years in the very liberal court system of Michigan. Oh yeah, in most of the surrounding suburbs you have to license your property to have a rental. Whenever you see a licensing requirement to rent houses, you’re in the wrong area and probably the wrong state.
To all that I say: Muck Fichigan!
Don’t Buy Detroit !
The house looks nice enough, but it will not produce the cash flow that is possible in today’s market nor will there be a huge demand in this area, thus appreciation is not possible.
If you want safety, if you want above average cash on cash returns, and if you want a potential huge upside, then you must consider location, location, location. Let me give you a better translation – state, city, and neighborhood.
Cash-on-cash returns are higher in states with low property taxes and homeowners insurance. Those fixed expenses can rob you of your cash flow. Forced appreciation is when you buy under value, while regular appreciation comes from buying in an emerging market which is in the path of progress for jobs. People follow jobs and that’s why we like areas that drive the Baby Boomers, jobs, and business.
The houses we buy are newer and in the path of progress just like the two below in growth areas!
I paid $61,000, plus $2,000 to rehab the above house. Would you like to get in at my price? It’s rented for $1,200 a month and property taxes are $2,200 a year with a lease-option tenant in place with an option price of $150,000. The house is only four years old and has over 2,000 square feet.
The house right next door is similar and just sold for $105,000.
Is this a good deal or a great deal?
The above house was built in 2006 and sold for $160,000 in 2007. It has 2,666 square feet and is rented for $1,200 per month with an option price of $150,000.
Newer houses don’t have hidden deferred maintenance so you don’t get surprised.
That’s what we buy. That’s what you should buy to avoid surprises and get a predictable monthly income stream.
BuyCashFlowProperties.com offers properties like these in price ranges of $50,000 to $150,000 in what we believe is that the safest market in the United States. Values will come back due to location. It’s not in Florida, where taxes and insurance destroy cash flow. The next real estate boom will happen in specific areas of the USA. The fallout will continue indefinitely in the wrong areas.
Does any of this sound like you…?
- Are you an inexperienced real estate investor?
- Are you a business professional with money to invest, but no time to research where to invest in?
- Do you want great returns with minimal risk?
- Do you wan to avoid property management?
- Does your retirement account force you into the stock market or low yielding investments?
- Would you like your retirement accounts to invest in houses for cash flow and growth?
- We select excellent value opportunities with above average cash flow.
- We cherry-pick every house – we avoid poor quality areas and properties.
- Our due diligence on every house includes running crime reports, education levels, median income, and percentage of homeowners vs renters in an area, and then personal inspection of the house and neighborhood.
- We refurbish to a “like new” standard if a property requires any repair.
- We buy newer houses.
- We offer complete “turnkey” management with an exit plan. That is, we recommend a specific management company that oversees all of your personal holdings. The management company uses a lease with an option price built in for the tenant along with credit restoration services so the tenant will likely get a mortgage and buy within 3 years (if that is your desired course of action).
- All collections and reporting are done monthly and investors have their own personal web portal to view their accounts online 24/7.
For more information on how you can buy quality houses at bargain prices with the opportunity for management, or on how to use your IRA or a 401(k) to purchase houses, or to simply buy houses with management in place, fill in the form below.
You can also ask me about my webinar and get access to my videos. You can also also download a free PDF copy of Buy Right Retire Rich by James Case, the CEO of
Buy Cash Flow Properties.
Or contact me directly by filling in your information below.