Weekly Update

-- not that I've been making good periodically posting weekly updates, but anyhow:

It seems like I made a friend for life when M.T. and I worked together for a total of *almost* 6 months. We truly came from similar upbringings and backgrounds, and shared similar visions and objectives. He was the first person to inspire me to explore real estate as an investment vehicle. And, based on the wise ol' teachings of M.T., my first big splash investing in real estate netted me largest tax refund checks I've ever seen by far-- nearly $14K worth!

Unfortunately, as it usually happens with anyone with any comparably significant sum of cash coming in, I may not have much of an opportunity to enjoy it.

First of all, as of two weeks ago, I finally accomplished what I'd set out to do as somewhat of an informal New Year's Resolution: to pay off nearly $30,000 of short-term debt. Nearly all of this were balances on various credit lines and accounts under my consulting S-corporation. So, I am officially SHORT-TERM DEBT FREE! (except for my auto loans)

However, I paid it off using the S-corp's gross receipts. What this means is, unfortunately, that $30K of money the S-corp earned and was ultimately used to pay off those credit cards need to have taxes paid on them. Keep in mind this isn't a W-2 situation, so no tax withholdings happened.

I'm guesstimating that the S-corp owes maybe somewhere around $10K in taxes up to this point in time, and likely no more than that. Why?

Since the end of March, all S-corp business has been terminated. Now, my source of income was through a W-2 job (but it's even questionable whether I actually do have this job-- long story...) that I accepted with which I'm taking a significant paycut of anywhere between 25% to 33%.

The amount I currently have in my S-corp bank account is something around $4K. Being conservative in guesstimating that I owe $10K in S-corp taxes, I'll need to grab $6K *somewhere* to cover the tax gap, which means I may end up covering it from my own personal assets.

Oh, well.

So, yeah, I got a new job. Paycut is big, yes. Was I nuts making this decision to take such a huge paycut? We'll see. I'm actually *slightly* changing my career path, somewhat, getting out of one industry hemorrhaging from stiff low-wage competition, leveraging my existing skillset and corporate experience, and getting into something else that, for all intents and purposes, can be regarded as in a growth state.

I'm still working on selling off my used '98 BMW M3 sedan (demand isn't as great as my previous BMW cars were when I sold them), and replacing it with something hopefully more reliable (e.g. Japanese), definitely more modern-- and yet still provide some edge in performance that I'll now permanently need to experience during daily driving, thanks to my race-track excursions.

My new boss and I talked about the prestige cars bring to their owners and remarked how generally people treated him nicer, with more respect, after he started scooting around in his new BMW. I agreed with him regarding my experiences when I had my own brand new BMW as well. But, I think I'm not so concerned with displays of vanity now. I just want something to reliably and cost-effectively transport me around, has ample pick-up, and above-average handling.

Regarding the Retiree Portfolio, it's not doing bad at all. Unfortunately, I scoped out the asset location only after the markets were well on their path to recovery from the February 2007 downturn, so I feel like I missed the boat on finalizing the equity portion of the portfolio. Even so, with the equity portion partway implemented, the retiree did capture gains as the market climbed back up to pre-downturn levels, if not higher.

The fixed-income portion of the portfolio was already implemented; to date, they've returned 0%.

I really need to figure out a way to automatically send portfolio updates in the form of charts or itemized breakdowns, or something similarly pretty, onto this blog.

A second retiree has expressed interest in the financial ways I've been helping out with the current retiree. Both have wondered if I'm interested in pursuing a career path in doing stuff like this for others. Unfortunately, I think there's more than plenty of "financial planners" and "financial advisors" out there, marketing their improperly allocated, unnecessarily risky portfolio offerings, making my method that I've adopted from others sound simply "second-rate" in comparison. Everyone wants to finish like a rockstar; no one cares for second-rate. Unfortunately, the majority of the people, including me before, don't realize we might unknowingly finish nowhere even near top- or even third-rate. Even so, their marketing muscle far outflexes mine. Who'd want to hire lil ol' me, especially with my unproven track record? Just because I've read more financial books than the average Joe doesn't make me a suitable advisor.

Back to the topic of me:

ETF's have been performing nicely. I believe Europe is up a whopping 10% since Feb. '07. The black sheep is the REIT, which black-eyes with -4%. All were purchased in late January '07. (Once again, a dynamically, real-time portfolio link here would would suit my lazy self right about now.) The following spreadsheet that I manually prepared will do for now:




MT and I discussed a possible scenario of me purchasing an equal-partner equity share in one of his other properties, on Pearblossom Ave. I think it's either in Euless or Denton. I don't remember-- we visited it very quickly when we were both in Dallas / Ft. Worth, months ago.

I think MT is pushing me to take more management duties for Winder Court and playing a more active liaison role with the management company. MT and I agreed to analyze rental rate increase feasibility for our Winder Court property. I feel as if he's leaving it up to me to be the decision-maker on rental rate increases, tenant feedback and concerns, and cash-flow planning and vacancy costs. Winder Court is MT's diamond in the rough: it's the only 100%-occupied property in his portfolio ever since he 1031-exchanged out to Dallas.

Winder Court rents have been well below comparable rental rates in the area, by as much as $100-$200 / unit, since purchased. Initially, we were interested in increasing rents upon purchasing it, but were concerned about not understanding renter's rights in TX. Well, it's been a year now. I plan on contacting the management company tomorrow to discuss courses of action.

I might either buy half of Pearblossom or completely buy out Winder Court pending further analysis. MT's lured into some property flipping activities and may wind up wanting to becoming liquid enough to have the capability to seize opportunities at a moment's notice. Between our joint efforts and his capital, along with the assistance of 2 attorneys and an assistant in Dallas, we're pilot-testing this scheme with one property whose outcome in June will define the feasibility, cost-effectiveness, and profitability potential of the plan.