Below is an article from my friend Brandon…..again.  He writes such great stuff….that….for obvious reason….I like to post it!  Enjoy…until next time….rob

The Führer Principle

In grade school, I remember asking myself how could the German people elect someone as evil as Adolf Hitler. How could they allow such a monster to become supreme chancellor? Understanding how it happened is very important, mainly so it does not happened again. The significance of this newsletter will only make sense by looking through the lens of today’s events. Many of the main ingredients that led to the Nazi take over are present today. Recognizing the circumstances is the solution to history not repeating itself.

The beginning of the end for the Weimar Republic began with the Treaty of Versailles in 1919. For the German people, the treaty was humiliating. The treaty placed heavy restrictions on Germany much of which were embarrassing for the once proud nation. The German army was reduced to one hundred thousand solders and arms for citizens became non-existent.  The initial German economic fatalities due to the treaty were shocking. Germany’s territories vanished overnight. Germany lost approximately 13.5% of its total land mass, 13% of its industrial productivity, and more than 10% of its population. Additionally, the loss of important mining regions such as the Saar and Upper Silesia resulted in a loss of some 74% of iron ore and approximately 25% of its coal reserves. Historians and economists have long deliberated the real effects of the treaty but one thing is for certain it lead to “deprivations that shattered their faith in the democratic process and left them cynical and alienated.” –G.A. Craig

Germany’s economic situation never improved. To keep up with the stringent demands of the treaty, the Weimar Republic faced hyperinflation never seen before in history. The German Mark ratio to the U.S. dollar was 4 to 1 near the end of the WWI. It was 8 to 1 in 1919, 250 to 1 in 1921, and 2000 to 1 in 1923. The Weimar government, at various times, faced food shortages, massive unemployment, and an unprecedented economic depression. By 1932, some 6 million Germans were unemployed. Millions of them were homeless living on the streets relying on soup kitchens and charity organizations. “Men standing hopelessly on street corners of every industrial town in Germany; houses without food or warmth; young people without the chance of a job. All these things explain the bitterness which burned in the minds of millions of ordinary Germans.”

The escalation of political violence in Weimar Germany must certainly be factored in as a contributory reason for the country’s political volatility. Beginning with the emergence of the Freikorps, which later became the brutal SS, formed units immediately after the declaration of the Republic. The tendency toward violence became entrenched in Weimar politics after the 1919 assassinations of Karl Liebknecht and Rosa Luxemburg. Large protests and riots became an all too familiar sight for the citizens of Germany.

Among the widespread disarray and frustration, the basic notion of a government was being questioned. What type of government could lead and govern the will of the people? This ongoing debate became known as the Führer Principle. The Führer Principle is established on the acknowledgment that the true will of the people cannot be revealed through plebiscites but that the will of the people in its natural and virtuous state can only be articulated through the Führer. Therefore, a difference must be drawn between the theoretical will of the people in a parliamentary democracy, which simply echoes the discord of diverse social perspectives, and the true will of the people in the Führer-state. Hitler took the Führer Principle and redefined it as himself…he was the Führer. Redefining the Führer was nothing short of audacious. It was captivating and alluring to many who were famished for change.

Many of the governing members in the Reichstag (congress) struggled to tame and communicate effectively to the youth of Germany. The Reichstag members continually doubted the youth’s ability to recognize a just government. Keep in mind most of Germany’s youth grew up in this chaotic state. Their view towards the government was distorted to say the least. The Weimar Republic only lasted 14 years but before that Germany spent the last 5 years in battle. A huge cohort of individuals only knew suffering and turmoil. Disconnect between the defenders of the former Kaiser rule and much more progressive governments were mounting daily. During the short lived Weimar Republic, Communism, Socialism, and a whirl of leaders/dictators were fighting for control.

Hitler knew very well that the youth’s mind were especially susceptible. This is exactly why he began with them. In the beginning, his messages were engineered for the youth. He knew the youth would be prone to messages of change and optimism. Joseph Goebbels (Hitler’s Minister of Propaganda) used propaganda methods to manipulate the masses. It was this desolate desire for change that gave Hitler his power.

The straw that broke the camels back for the Weimar Republic was the American Great Depression. The stock market crash of 1929 sent shock waves across Europe. The crash knocked Germany into the gallows. It was Hitler’s time to move. On September 14th, 1930, the Reichstag elections were held. The results were shocking. The Nazis had entered the register as the ninth and smallest of Germany’s political parties. The German people voted. The Nazis controlled 107 seats after that election. In November 1932, Hitler was defeated in the presidential election to WWI veteran Paul von Hindenburg. He received 42% of the votes. Hitler decided to enter a coalition government as chancellor in January 1933. Upon the death of Hindenburg in August 1934, Hitler become successor by popular vote.

Today, we are suffering the ongoing effects of the worst recession since the Great Depression. We are facing a global economic contraction. Greece is on the verge of insolvency and the US is limping along. Worldwide riots and protests have plagued the streets invoking for revolution. Frustration levels are swelling. This is the formula for calamity. However, it begins with the youth. Vladimir Lenin famously referred to youth uprisings as “useful idiots”. With the exception of the American Revolution, most revolutions in history conclude with a radical party seizing opportunity out of the political madness. People such as Hitler, Mao, and Lenin took advantage of a chaotic situation. I do not foresee a Weimar revolution of this magnitude anytime in the near future. Nevertheless, if we are not careful and mindful of the situation it becomes an unquestionable possibility. Education and knowledge of the truth is the only thing that will prevent history from repeating itself.

Have a great weekend my friends!

Brandon Saylor
-Associate

Partners for life?

Greetings from the metropolis of Cedar Crest, NM.

Today, I was on a conference call via Skype.  The meeting was in Sacramento and I was attending via video on Skype.  How cool is that?  I also meet with my mentor or “life coach,” Wes Roberts, over Skype video a few times a month.  Just too cool….but I digress.

Anyway….

Today’s post is based on my conference call today.  The call had a lot of different aspects to it but one of the topics we discussed was partnerships.  Now….if you are an entrepreneur, you probably have had some experience with partnerships.  Chances are, most of your experiences have not been that great.  I have had some great ones and some not so great.  I have heard all the horror stories….but honestly, when done right, partnerships can put you on the fast track to success.  The question is how do you do it right?

We do have a free white paper available to you on just that topic.  The white paper on partnerships was written by my business partner, Steve Maxwell.

So….

To give you some insight into our discussion on partnerships, I got some key points from the discussion. I will share with you three of them:

1) Build partnerships around projects:  More specifically, put partnerships together to accomplish a specific project.  If things go well, do another project together.  At first, you may want to do a short-term project first to get a feel for your partner. Then grow from there. Imagine being in a partnership five months down the road….with no end in sight.  Some of you may be in relationships like that….outside of business

Odds are against you if u put a partnership together to exist for the long haul.  People change, situations change, etc.  Plus….the idea of being in something for a long period of time may be exciting at first…but as time goes on…..and as things change….the thought of being in a partnership for a long time becomes a heavy load.

2) Expectations:   Having everyone on the team with the same expectations is VITAL.  When it comes to finances….projects….roles and responsibilities….if the partners are not on the same page…which means do not have the same expectations, bad feelings and animosity are soon to follow.

3) Experience: I think the key here is “entrepreneurial experience.”  If the experience is not there…if the aptitude is not there then someone will end up leading where they did not expect to lead and doing work they did not expect to do.  And in my experience, fighting battles that should not be fought.  In other words, taking a non-entrepreneur to think like an entrepreneur is an exhaustive exercise.  Now…I am not saying not to work with someone who is not an entrepreneur.  But usually, if someone has value but does not think like an entrepreneur, you are better off hiring someone with that skill set.  Which leads me to a bonus key point….

Bonus) Don’t partner with someone that you can hire.  If you want to partner with your best friend ….then just hire he or she.    If the reason your are partnering with someone is because he or she can do your taxes for free or is they can build your website for cheap…think again.

well…back to the conference call…break is almost over…..

Until next time……rob

The Vulture Investor

Greetings from Sacramento, CA!

I am up here visiting my friends for a mastermind with a very distinguished crowd.  I am not sure why I was invited but…I am glad I was and I hope they invite me again.  Needless to say, I learned a lot and realized I have a lot more to learn.

That is the beauty of meeting people who are doing things on a much grander scale.  Your mind starts to stretch and you get different perspectives.  Although the members of the group may be doing business differently, our value system and our deep convictions are the same….which makes this mastermind go beyond the term “mastermind”…..but I have not figured out a term for this type of “mastermind” yet….but I will    ….but I digress.

Anyway…..

Vulture Investing

I am not sure who came up with the term “vulture investing” but I am confident I did not.  But I think the term is very appropriate for the investing that I am doing…or…rather…trying to do.

You have heard or read that “The other shoe is about to drop for commercial real estate”  right?  This is so true, on a broad scale…but I wish the media could get creative and maybe do more research on what is really happening.  Yes…commercial real estate is sinking.  Yes….investors are going belly up.  Yes….financing commercial real estate is difficult if not impossible.  BUT….all these issues equate to amazing opportunity.  But…one must focus on the opportunity.

Like I have said in the past, a lot of money will be made in this season by savvy investors.  These savvy investors are “cherry picking” the surplus of assets sitting on the market waiting for a buyer.  Folks….the surplus is getting larger.  As the “average” investor runs to the hills, the shrewd investor is circling the skies waiting to softly land to take it’s share of “road kill.”

The “vulture investor” is looking for motivated sellers.  Sellers that have balloon loans coming up and cannot refinance.  Developers who go caught in a surplus of residential homes and need to liquidate their “other” assets to stay afloat.  Sellers who are losing tenants and cannot compete with lower lease rates because they bought at the top of the market.  An on and on…..

But I need to make something clear.  I have been on the other side of the vulture….needing to sell.  Thank God for the vulture investor.  Yes…I lost money….but I could have lost a lot more if I was not rescued.

Time for you to learn how to be a vulture investor?

1) get educated.  The window is small…so the time is now

2) hang out with other “successful” commercial real estate investors.  The key word here is “successful”

3) Stop thinking you can’t do it

If you are looking for a mentor to help you get started in commercial real estate investing, contact us and let us show you how you can do it too!

Until next time……rob

Industrial Space? That is like big buildings and stuff right?

“Down in the West Texas’ town of El Paso….I fell in love with a Mexican girl…..” – Marty Robbins.

Greeting from the great city of El Paso, Texas.  I grew up in El Paso….and have family here….so I come back a least a couple times a year.  It is good to be here.  I am here to visit family and friends as well as check up on my commercial real estate investments.  A good size of my portfolio is in El Paso…not only because I am familiar this multi-cultural city…but because it is growing like crazy!  Fort Bliss is benefiting from the base closures so the consolidation is making Fort Bliss a “mega” military base with over thirty thousand additional troops funneling in (not including their families) and government money to boot!  But I digress.

So….today’s post is on the basics of industrial space.  As most of us know, industrial real estate is getting “kicked in the teeth” as the market continues to drown in it’s own blood.  This means we are seeing industrial prices at historic lows in some areas across the USA.  A time to buy?  Yes…but with strong caution.  I my opinion….we have not seen anything yet….forget the “shoe falling off”….the whole foot is infected.  I hope I am wrong…but it is going to get a lot uglier before we see some light.

Anyway…..

This is the fourth post in a series that will highlight the different types of properties available to investors. The posts are an overview of general information. As with all investments, you should properly research the opportunities to determine whether they fit your portfolio.

What are Industrial Spaces?
Industrial spaces are properties rented to tenants for the purposes of manufacturing, distribution, warehousing inventory ore research and development. The spaces can be either within an “industrial park” or a freestanding building. Like most commercial property, industrial spaces can be leased to a single tenant or multiple companies.

What Do I Need to Know About Investing In Industrial Spaces?
Industrial spaces can be a very efficient way to build your wealth, but you need to do your research to find the right opportunity for you.

• Many investors were snatching up industrial real estate as late as 2005, but like all sectors, this too has decreased. According to allbusiness.com, the industrial real estate sector has not experienced nearly the decline that other sectors have. It does point to the “credit crunch” as putting a hold on industrial space expansion.

• Industrial real estate usually is rented as “shell” space without walls or further cosmetic uses that are necessary for office space. This results in lower initial investments.

• Industrial buildings are generally located in an industrial-zoned section of the city. This generally means less insurance (expense).

• Most industrial tenants are long-term tenants that would prefer to stay in the same location because they may have large, costly equipment that is logistically difficult to move. This means that you have locked in tenants who will not move just based on a better rent structure four blocks down, which translates to continuous steady income.

What are the cons of industrial spaces?
Again, with any property, location is important. If the market is oversaturated or does not have the demand to support industrial property, it is not a wise investment. Financing can be difficult to obtain for certain investors, which means you may have to work harder to find creative ways to finance your acquisition.

In Conclusion
Industrial spaces are a common addition to many investment portfolios. If you are considering investing in an industrial space, take the time to tour other properties in the market and look at each building’s performance. And, as always, if you have questions, contact the experts at The Real Wealth Company.

Until next time……..rob

Anyway…..

The bet of week is how many banks will close (FDIC takeover) this month….I say two more by the end of the month. What say you? I think that is a safe bet. I say we see two major banks close by the end of the year.

Bill Shopoff said (and I am paraphrasing and possibly misquoting) “Investors that need to refinance their assets in the next eighteen months will be in big trouble as credit will be harder to find. Investors will have to sell at deep discounts to get from underneath properties. Cash is king!”

So….here is the lastest and greatest from the commercial real estate blog sphere…..

Which way do the numbers point now

big, big bust in the real estate market. Van has been investing in real estate for years. He’s no Donald Trump, but he has made a nice living investing in houses, apartments and small commercial prope…

CMBS Issuance Plummets To ’96 Levels: Moody’s

The issuance of bonds backed by commercial real estate loans in the first half of this year has plummeted to levels not seen since 1996, according to Moody’s, which reported on Tuesday that issuance of commercial mortgage bonds has …

Arizona Lender Mortgages Ltd. Faces Securities Inquiry

Federal and state regulators have opened investigations into the dealings of Mortgages Ltd., Arizona’s biggest private commercial real-estate lender, and the firm called Radical Bunny that lent it almost $200 million. …

Boom boom boom boom boom!

But the real bad news was embedded in the earnings release; their mortgage insurance group, which primarily writes “prime” PMI policies, has a 4.9% 60-day late rate at present, almost a double from a year ago. …

Credit crunch spreads in auto, CRE sectors

Just look at the news on the commercial real estate front that mega-brokers CB Richard Ellis Group and Jones Lang LaSalle released this week. Here’s an excerpt from a Bloomberg story, with my emphasis added: …

2008: Commercial Real Estate Financing tightens

Commercial real estate projects in Denver, Phoenix, New York and even Donnelly, Idaho, have run into similar snags, while developers in housing-bust markets like Florida and Southern California have axed smaller projects. …

Until next time….rob