BOOK REVIEW: Crash Boom! Rx for Real Estate Wealth

I’M NORMALLY EXTREMELY SUSPICIOUS of financial ‘gurus’ and of people who have their heads swayed by their often-dubious advice. But a new book by Greg Rand, a real estate entrepreneur who contributes to Fox News (maybe that’s why I hadn’t heard of him) and has a radio show on WABC, has come to my attention. Crash Boom! Make a Fortune in Today’s Volatile Real Estate Market speaks to me. Naturally I like what Rand has to say: he validates my own experience and makes me think I’ve been on the right track by investing in rental property and clinging to it for dear life.

I’ve bought six properties, but never sold one. I’m an accidental real-estate investor. It started in 1979 with a Brooklyn row house that has three units, then a re-finance and the purchase of another Brooklyn townhouse in the mid-’80s, with two units. Both were bought primarily as homes; they just happened to have these extra apartments, which we rented out. We then let years go by — years when we could have swept up brownstones for a song — without investing in any other NYC property. But let’s not go there; my blood pressure numbers have been good lately.

It wasn’t until 2005, when my son went to college in Philly, that my attention turned purposefully toward investing in rental real estate, and I bought two early 19th century Philadelphia row houses with a total of five rental units. One is in a solidly upscale area (Queen Village), the other in a fringe neighborhood (Old Kensington) that nevertheless seems to be improving at breakneck speed. Both buildings have had positive cash flow from the beginning — not hugely so, but most definitely in the black, while I build equity month by month. Perhaps most important, I enjoy owning them. For me, it’s like collecting antiques — very large ones.

Buy, Improve, Hold is Rand’s prescription for building real estate wealth. Of all types of investment properties, he’s most partial to two-to-four family homes. “An incredibly appealing property type,” he says, and I concur. More tenants paying rent. And desirable: people want a backyard, Rand points out (most of my tenants have them, either shared or private). Though Rand doesn’t specifically mention vintage properties, many of the examples he gives, including a Victorian mansion in Tarrytown, N.Y., with commercial space on the ground floor and residential units above, resonate with me much more than if he was solely discussing condos or suburban homes.

Almost everything Rand says rings true to my ears. Here are some of his main points:

• It’s a great time to be a landlord. The current economic climate is providing investors with the opportunity to get a ‘deeply corrected’ price, and it also comes with a wave of new renters (800,000 new rental households in 2009 alone).
• The ‘technical drivers’ of real estate wealth — appreciation, leverage, amortization and income — do not exist together in any other form of investment. He likens these elements to a mixing board in a sound studio, calling them ‘the four dials.’ “As you push each of them up a little bit, the volume gets exponentially louder. You don’t need any of them to perform off the charts to get off-the-charts results.”
• Re appreciation, Rand points out that home prices are still above where they were ten years ago and the market is almost done ‘correcting.’ “In other words, the entire bubble has been erased. Poof! Gone.” In the long view, the historical upward trajectory is intact.
• Leverage steepens the return as a percentage of investment. Because most people buy real estate by taking out a mortgage, the cash invested initially is smaller in real estate than in the financial markets, compared to the eventual return.
• Amortization (paying off a mortgage) lowers the amount you owe as time passes.
• Rental income is icing on the cake.

The book also delves into what, for me, is the most seductive, creative aspect of the whole real-estate game: fixing up an ‘ugly duckling.’ Rand advocates finding properties in need of upgrading, not turn-key ones. He loves long-languishing properties that have become stigmatized, as in “Something must be wrong with it if it’s been on the market so long.” Let others pass it up. That’s where you can often find bargains, he says — something I’ve intuitively understood for a long time, but am still heartened to see in black and white.

Mind you, Rand’s book doesn’t say you’ll get rich quick. “A good buy on a house means you set yourself up for even greater returns as you ride the cycle forward and mature the investment over time.” The biggest mistake people make in real estate, he says, is selling in order to realize the profit, adding “Don’t do that!” He views equity in real estate as liquid, which is refreshing. True, it takes a few months to get to it, but it’s still a good place for your money. Let it stay where it is “until you have another real estate play to make or your objective has been met” (say, when it’s time to send a child to college).

There’s lots more — from how to find a neighborhood on the upswing (“Home Depot and Lowes don’t open stores on a whim”), to owning near where you live and work, to buying distressed and foreclosed property. And there are quite a few surprises (Rand thinks Florida is still a great place to invest, for instance).

My one disappointment is that Rand is not terribly helpful when it comes to how to get the money for a down payment in the first place. I hope that’s the subject of his next book.

To see my archive of blog posts on Rental Property Management, go here.

Garden Realities

SO, FROM THE FLORAL EXTRAVAGANZA OF RANCHO LA PUERTA to the bare dirt of my own garden-to-be in Springs, N.Y., above. It’s a tough transition, but I’m doing my best.

I spent yesterday afternoon moving things around. Early spring is the best time of year to do that for most perennials, before things get too far along and you’re dealing with floppy greenery.

My focus is on creating some curb appeal, so when I drive up to my house, I say “Wow!” instead of “Oy!” I’m slowly filling in the planting beds I carved out from the former driveway. Last fall, I sculpted the shapes I wanted with piles of oak leaves. In late winter, I had a truckload of topsoil (and a bit of compost – not nearly enough) delivered and spread by Whitmore’s Nursery. More recently, I schlepped and spread  an additional twenty-two 40-lb. bags of purchased compost myself.

Getting there…

I’m trying to create viable planting areas out of  completely useless, compacted soil. What’s alarming is I’ve seen exactly one worm so far this spring (worms being a sign of soil fertility). But when I dig down to plant, the soil looks reasonably rich and properly crumbly, at least on the surface and a few inches below. There are a still a lot of un-decomposed oak leaves, but I leave them in place to continue their cycle of decay.

This being tax month, I am trying to do what I can without spending a cent. That means, first of all, moving green things from the rear of the property to the front, and over the next few weeks, begging perennial divisions from gardening friends and relatives.

Here’s what I transplanted yesterday from back to front:

• 5 Korean boxwoods bought last spring at Home Depot. I adore boxwoods – they’re tidy, evergreen, and deer-proof. These are small — just 1′ tall and 1′ wide, eventually to double in size. Can never have enough boxwoods.
• In addition to a wonderful glade of foot-tall ferns in the backyard, there were two existing clumps of another, taller type. I dug up one longstanding clump of these three-footers — easier said than done, as the clump was a couple feet across, with several starting-to-unfurl fronds and a thick mass of roots — and sawed it into five sections. I transplated them around my small front deck and watered them in well with a fish emulsion fertilizer — for no particular reason, except that’s what I had in the cupboard.
• Six astilbes that had been stuck in the back for temporary holding

Along with the half-price perennials I bought at Spielberg’s in East Hampton (I can’t say they’ve taken off yet, but they’re settling in) — including five each of lady’s mantle, blue ‘May Night’ salvia, an ornamental grass, some white creeping phlox, three ligularia — well, there’s still a whole lot of bare dirt, below. But I remember how quickly my garden at Dean Street in Boerum Hill, Brooklyn, came together once things got growing (“from nil to abundance in two seasons,” as my own blog post put it), and that gives me hope.

…but still quite a ways to go

My color scheme? Blue, purple, yellow, white, for the most part. This partly of necessity, as orange and red flowers seem to be mainly sun-lovers, and while it’s pretty bright around here at the moment, I expect things to become considerably shadier once the surrounding trees leaf out.

Note: I’ve been contributing blog posts to Garden Design magazine’s website. They mostly link back to this blog, so it’s all rather circular, but if you’d like to take a look, go here (there’s other stuff on the site besides my blog posts).

Philadelphia Garden Clean-Up

YOU CAN TELL JUST BY LOOKING at this 20’x25′ backyard with its battered brick wall, which is attached to the rear unit of the double-trinity house I own in the Old Kensington section of Philadelphia, that the garden is a source of great pleasure for the person who lives there.

It wasn’t me who put in the colorful annuals or hung the wind chimes; it was a tenant who enjoys the garden to the fullest.

This is how the garden looked when I bought the house in 2007:

And here’s how it looked during clean-up:

It took me just a couple of days to clean up this neglected disaster area shortly after I bought the building. Here’s what I did:

• Pulled and bagged up weeds, which were three feet high and everywhere
• Gathered and disposed of broken chairs and other garbage
• Created a simple framework of planting beds, outlined in salvaged brick and terracotta tile, all found in the backyard, on three sides of a squarish patio
• Laid down landscape fabric in the patio area to prevent the weeds from coming back
• Ordered a load of pea gravel delivered. It was dumped on the sidewalk in front and then carted by wheelbarrow through the alley to the backyard (that was the largest expense, about $120)
• Provided some planters with hostas and the French blue chairs
• Brought in few bags of compost to get the beds started
  

A pink-flowering hibiscus tree in a far corner was the sole existing plant; the tenant filled in the beds with  marigolds and coleus. Voila! A garden at its most basic, but no less enjoyed for that.

View looking down from top floor

Rent This Quirky, Adorable Philadelphia Trinity House

IT WORKED BEFORE, SO I’M TRYING IT AGAIN. I rented my townhouse in Cobble Hill, Brooklyn, last month through this blog when six real estate brokers and Craigslist couldn’t do it. Now another of my rental properties is becoming available as of Oct. 1, 2009: a whole, albeit small, 1840s “trinity” house (3 floors – 1 room on each – plus basement and garden) in the South Kensington area of Philly, a few blocks from the trendiest of trendy neighborhoods, Northern Liberties, and not far from Fishtown.

The house is diminutive, like many old Philadelphia houses – about 200 square feet per floor, joined by narrow twisting stairs. (People with vertigo or bad knees need not apply.) It works for a single individual, a loving couple at most.

It gets great light, has a large-for-Philly backyard, original doors and proportions throughout. It’s totally charming, and the space feels good to be in. For an aficionado of old houses and vintage lifestyles, it’s a chance to live like a working-class family of the mid-19th century, but with more amenities (heat, indoor plumbing, electricity, etc.)

Kensington was once called “Little England” for the number of English immigrants who worked in the neighborhood’s behemoth textile and carpet factories, many of which have been converted to living lofts or artists’ studios.

The house is on N. Palethorp between Jefferson and Oxford, a nearly traffic-free alley around the corner from the magnificent St. Michael church. It’s actually the rear half of two back-to-back trinities under one roof (they’re entirely separate, each with its own entrance). It was renovated (re-wired, new kitchen, new paint job) in 2007. Here’s how the layout stacks up:

• Ground floor: kitchen/dining. Opens to garden.
• 2nd floor: bedroom/bathroom with pedestal sink, claw-foot tub
• 3rd (top) floor: open loft-like space. Could be a living room, studio, or large bedroom (with the smaller room on the floor below used as a living/sitting room).
• Basement: washer/dryer, storage

The rent is $850/month, plus utilities (gas for heat, hot water, and cooking, and electricity).

You were thinking of moving to Philly anyway, weren’t you? Email me at caramia447@gmail.com for more info or pics, with a few details about your situation and a phone number.

My Rented Garden: Nil to Abundance in 2 Seasons

WELL, THAT WASN’T SO BAD, WAS IT? Unless we get some late snowstorms (which have been known to happen), spring is just weeks away. My thoughts are turning to my backyard in Boerum Hill, going into its third season.

I’m a renter here, which means:

• I don’t want to spend much money
• I can’t do anything too invasive (my landlady doesn’t like it, and I’m scared of her)

But as my pictures show, you can do a lot with a little, and fast.

 

 

When I arrived in November 2006, I found a scraggly rectangle of lawn about 22’x40′. Along the back was a raised bed held back by a stacked stone wall. All totally devoid of plants, except for one glorious dogwood tree in a far corner. (The photo below shows the garden in April of ’07, by which time I had dug perimeter beds and stuck a few things in them.)

The grass was bordered on one side by some phenomenal hydrangea bushes that belong to my next-door neighbors but topple into my yard, and on the other side, by a hideous, depressing, 7-foot-tall chain-link fence.

My first thought was to disguise the prison fence by lashing rolled twig fencing (useful stuff; you can buy it online) to it with cable ties.  That didn’t fool anyone, plus it blocked light.

Then I asked my next-door neighbor on the chain-link side whether he’d ever thought of removing the fence. I went out for a few hours, and when I returned, the hideous, depressing fence was GONE! My dear neighbor (who also mows my lawn of his own volition) had done a masterful job of fence-removal in a single afternoon.

That first tentative, unimaginative step in the spring of ’07  — digging three-foot-wide planting beds around the perimeter of the rectangle — was followed by outreach to friends and neighbors. I filled the beds with with catch-as-catch-can plants from a variety of sources.

These included buttercups, irises, lilies from garden-mad neighbors in Boerum Hill who were dividing their excess, as well as:

• plants imported from my own country casa (including catmint and lady’s mantle, my favorite combination, and ferns transplanted from the woods)
• Lowes and Home Depot specials: gallon pots of euonymous, juniper, and other small shrubs for a few bucks
• annuals from the neighborhood plant sales – the Hoyt Street Association and Cobble Hill Tree Fund both have great ones in early May
• birthday gifts (I had the nerve to send party invitations reading “No gifts – unless it’s a plant!”)
• vegetable starters from the Borough Hall Greenmarket

The first season was good; by the second season, I had color that lasted from early spring through October (someone gave me asters!) You know what they say about perennials: “The first year they sleep, the second year they creep, the third year they leap.” These seemed to be leaping pretty good by Year 2.

Summer 08

The color show is aided by containers of coleus and other annuals, and I cheat by placing large containers of annuals right in the beds. By mid-summer you don’t even see the pots.

It’s a north-facing garden, so it has challenges, but the sky is open. This past summer, I decided to try tomatoes for the first time. I bought two simple 4’x8′ raised-bed kits from a company in Massachusetts that makes them Colonial-style (they’re planks of cedar attached at the corners with pegs).

Then I made the classic newbie error of planting too much — 16 tomato plants, when four would have been sufficient. By August, it was out of control and an eyesore. I kept trimming and staking, trimming and staking; more trouble than it was worth. This year I’ll leave one raised bed in the sunnier position with herbs, lettuce, and a few tomatoes, and probably dismantle the other.

I’m raring to go with spring garden-cleaning. The next warmish weekend, I’m on it!