Wednesday, April 12, 2006

Judith Levine's: Not Buying It, Part I

I was recently approached by an industry insider who sent me a copy of the book, Not Buying It: My Year without Shopping, by Judith Levine. I just started reading the book and I will write a full review to come in Part II. This woman conducted, by choice, a social experiment of buying nothing for an entire year beyond necessities such as food, basic toiletries and pre 1980 utilities, no wI-FI baby! This is interesting, considering that so many Personal Financial Blogs serve to teach people how to either save money, make money, show off the many they have made and even still what they intend to do with the money they plan to make.

Could I go an entire year without purchasing consumer products such as my iPod, cell phone or custom made English spread collar shirts! Of course I could. I have friends that cant go a day without a cell phone, let alone a year. Its all about mentality, but it is also an extreme luxury to be able to do so. But even more importantly, this goes against my Hummer sized consumerism which I would use to become even more efficient. Below you will find a list of my Hummer Size Wish List.

My Consumerism Wish List:

1. $7.00 gasoline. I did an entire post on this one.
2. Increased sales tax: Money to go to schools and police only
3. More organic/natural foods: Government to subsidize production. Less chemicals and preservatives in the food. Better Food equals less medical cost in the long run. Better health at the root of the problem not maintenance at the end.
4. More public space fees: Parks, Beaches, Lakes, Forrest? That will be $9 please! At least they will be cleaner and less crowded. Unless you have special pass
5. Driver License Minimum Age: 19. Sorry that's the rules, but hey you cant afford the gas anyway!
6. Cell phone rates, double. Too many cell phones being used for to little productive reasons. Lets raise the rates!
7. Movie Makeover: More features at the movie. Two for Mission Impossible 3: $25, 2 shrimp pastas $40: , and a foot massage $90, getting it all done in 2 hours, priceless!

What a world!

Monday, April 10, 2006

Online Fashion Consulting

The web has offered the consumer masses so many wonderful advancements to use such as email, e-commerce, databases, information, VOIP phones and the like but there are so many areas, where it still comes up short. Suppose your business if prepared perishable food. How and why would someone buy your cookies online when they can't see, taste or touch them? There are always early adapters and those that like to try new things, but getting the flood gates open to masses for such specialized businesses are difficult to do on the web. And the list does not stop with just perishable foods, what about service related businesses like landscaping, plumbing, legal and tutoring? The web has a cruel way of making the smallest 2 person outfit look like a legitimate deal, and who is to say that is a bad thing, except when my basement gets flooded and I need someone with real experience that wont turn a $200 problem into a $3500 headache.

This brings me to the world of online fashion. Its not hard to drop $25 on a Guess t-shirt, because we all know that an XL will turn into a L over time and we dont expect more than 3 high fashion wearings of any one t-shirt anyway. But when attempting to buy a 2 piece business suit without first trying it on, there in lies a problem. A picture of a model in the suit just wont lead me to spending $400 because I like the color.

Yet, this presents an opportunity to use the web for a service that is information rich and needs live pictures to be really beneficial. Imagine trying to learn how to play basketball with just words and graphics, no video of live players. I have a consultant that is in the fashion industry. Even moved from L.A. to NYC to be closer to the action. I am in talks with him to start his own website that is full of content such as tying ties, fashion trends, color selection, every modern man's basic needs and updated fashion tips. He currently blogs but has little time or motivation to take it too seriously. And no knock to the Queer Eye, but not every guy dressed fashionably has an allergy to women. The guy knows fashion well. However, what we have proposed is making sure that we can exploit the web for all it is currently capable of. For this reason the site will be rich with video content, not just diagrams and text of tying a tie, for example.

The only issue we are having is the one of considering how the site will generate revenue. Should it come from advertising such as Google Adsense? This may take away from the image he is going after. Should the site get money from referrals to request service? This may help but there is not much one on one help he can do for people in Wyoming as he lives in NYC. The most lucrative opportunity which I would like to strive for is the intellectual property/celebrity play. Give quality information away for free, in an effort to get a following and sign a deal for professional distribution/exposure. Why not package a quarterly fashion consulting DVD for a big name retailer, or a regional luxury car dealer, or as an online sales promotion. Do you have any ideas?

Tuesday, April 04, 2006

Apartment Buildings: Big Boy Investing!

RE for the Big Boys
For anyone interested in making real money, you must consider buying apartment buildings in great cities. All day everyday, if you are reading this blog, you have probably heard all the scary news of how the housing market will burst. Bust or boom the greatest investment in real estate has to be commercial real estate. Commercial apartment buildings (5+ units) to be exact. These investments are ones I consider to be bubble proof but not fool proof. Remember the two most important rules of buying real estate.

Investment Rules
1. You make money when you purchase, not when you sell!
2. The greater the barrier to entry(inventory, location, price), the greater opportunity for making money. That's why Los Angeles, San Diego, New York and Boston are so expensive. Anyone can buy in Texas, but that means that anyone can also develop there too. More competition means less scarcity. Less land means greater demand. Simple econ 101!

Personal Case Study
I found a great little 5 unit apartment building in Los Angeles. The cost is $865,000 for 5 one bedroom units that all come with a loft. When purchasing an apartment building the barrier to entry is gigantic for the average person. Think of it, in order to purchase you need at least 20% down payment. There has to be a reason why getting admission to this party is so difficult. The answer has to be, because of just how very lucrative it is. I recommend these high barrier to entry markets only because home prices may or may not go down, but one thing nearly every investor can agree on is that rents are very, very low! Nearly 2.5 to 1 when compared to mortgages of like kind properties.

The Math
This apartment building is great because it presents a condo conversion opportunity. The market will stand selling these units for $300K when you can purchase each unit for $173K. You add about $30K to each unit for upgrades and conversion costs and you can do the math. A nearly $500K payday. I am searching for a lender that is willing to give better finance terms on the LTV, but I'll end this posting by saying the big boys own commercial real estate in tough to get into areas.

Tips (use
  • Commercial Real Estate is difficult to get into, but also lucrative. Consider partnering up. It is better to make 25% of $100, then 100% of $10.
  • In high barrier markets, remember to negotiate. Make money on the buy not the sell, this will sustain a price correction.
  • Consider your exit strategy before you enter. Income, condo conversion, flip.
Work the math on a deal I know very well. Address: 7120 S. La Cienega, Inglewood CA 90302. Use, (does not work), price paid was $535K about 9 months ago. Use $54K for fix up and holding cost, while rents more than cover the new note. See current listing price on here. Not bad huh?