Investor or Gambler?

I got a phone call from an investor a few days ago, who wanted to know if I was interested in partnering on a deal with her…

I got a phone call from an investor a few days ago, who wanted to know if I was interested in partnering on a deal with her. I asked her to explain the deal to me. She said it was a duplex in Plymouth and that she was paying $257,000 for it. The sellers had it rented to handicapped people that were going to be leaving when it was sold. The owners were taking their tenants to a new building. I asked her what the rents were, and she said that the owners would not disclose because of the type of tenants. I asked her what the property was worth and she said that the comparable sales showed it was worth about $257,000. I asked her if it was going to have a positive cash flow according to projected rents. The numbers that she shared with

me told that with NO vacancies ever, NO property management costs, NO maintenance issues, an interest rate that she HOPED she would get and 20% down, it would have a small positive cash flow.  Then she spoke of what a good location it was and other positive factors, attempting to convince me (and herself) that in a declining real estate market, this was a good investment.  The first thing I want you to know is that this investor could have been ME. Everyone runs into a deal now & then that for any variety of reasons they feel the need to make it work.


I nicely (I hope) reminded her that there are 3 reasons to buy real estate;


1. Positive cash flowYou MUST take into account;

  • a minimum of 10% vacancy rate (higher if the area calls for it),
  • at least 10% of collected rents for maintenance,
  • 10% for property management (even if you manage it yourself)
  • interest rate 1% higher than you expect to get for your mortgage
  • lower rent than you expect – unless the tenants already exists
  • taxes
  • insurance


2. Significant discount – Minimum 20% if you are not going to have a

positive cash flow


3. Higher and better use – This one is only for experienced investors


If you are not getting at least one of the above 3  – – – – –

Then ask yourself one more question; 

‘Do I want to be an investor or a gambler?’


If the answer is gambler, then go ahead, it may possibly pay off for you,

but stop attending Investment meetings and go to G.A.
(Gamblers Anonymous)


If the answer is investor, then

W A L K  



Fortunately, she did! (walk away that is)

Understanding the new homebuyer tax credit for first-time buyers

If you have recently purchased your first home, or are considering doing so in the next year, here is good news for you . . .

If you have recently purchased your first home, or are considering doing so in the next year, here is good news for you!

One of the programs included in the new housing bill signed by President Bush recenlty is a $7,500 homebuyer tax credit.  While this tax credit has benefits, it is important to understand that this “tax credit” is actually an interest-free loan which will be repaid over a period of 15 years. 

Below is a Q&A that summarizes the program’s features that was put together by the National Association of REALTORS®.

Q: What is the Amount of Credit?
A: 10 percent of the cost of home, not to exceed $7,500

Q: What properties are eligible?
A: Any single-family residence (including condos, co-ops) that will be used as a principal residence.

Q: Is the tax credit refundable?
A: Yes.  It reduces income tax liability for the year of purchase.  Claimed on tax return for that tax year.

Q: Is there an income limit?
A: Yes.  The full amount of credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  The benefit of the credit phases out above those caps ($95,000 and $170,000, respectively).

Q: Is this program for first-time homebuyers only?
A: Yes.  A portion (6.67 % of credit) has to be repaid each year for 15 years.  If the home sold before 15 years, then the remainder of credit recaptured on sale.

Q: What is the effective date of the program?
A: The credit is good on home purchases on or after April 9, 2008

Q: When does the program conclude?
A: July 1, 2009

Q: What is the tax credit’s interaction with Alternative Minimum Tax?
A: The credit can be used against AMT, so credit will not throw individual into AMT.

Shut up and listen!

Visit to see how to live on the ocean cheap and easy in Marshfield Massachusetts

OK, now that I have your attention, check this out. I have been investing in real estate for awhile now, and I have to tell you, last summer, I found the greatest little beach house in the Brant Rock area of Marshfield, Massachusetts! Most beach front property in the Marshfiled/Duxbury area will cost you more than $500 per square foot of living space. Why? Simple! When you buy a home on the beach, you pay more for the land than the house. If you have a lot of land and a little house, you’re going to pay plenty. If you have less land, and more house then you get more for your money. Who wants a big yard to care for when you live on the ocean anyway?  Why spend more time doing yard work and less time on the beach? This house has a small lot, and therefore costs less!

So, why am I telling you this? Because this great Marshfield beach house has been renovated, and it’s now for sale. The best part?  You don’t need good credit to qualify to purchase it. You could live in the great little community of Brant Rock (right next to Duxbury). Not looking to move? This is a great investment property which gets up to $2,600 per week as a summer vacation rental. For more information visit