I’m almost half way through a book that my sister told me about.  Outliers, The Story of Success by Malcolm Gladwell.  He also wrote Blink and The Tipping Point.  Outliers gives a different perspective on how people become extremely successful.  It’s a fascinating read.  How did the best athletes get where they are today?  How about heavyweights in the business world?  What is the meaning of 10,000 hours?  What does any of this have to do with you?  Read Outliers to learn more.  If you could develop mastery in one area, what would you choose?

Want more good books to read?  Check out our Recommended Reading List.

There’s a new real estate community that just launched today - epicketfence.  It started in Colorado and I had the opportunity to be the first Featured Realtor for the Colorado Springs market.  When you click on the link above, it takes you directly to the article I wrote for epicketfence.com.  Check it out if you want to learn more about what’s happening in the Colorado Springs real estate market.  If you want to learn more about the statistical details of our market, don’t miss PikesPeakFacts.com.  It’s updated every month.

I am a book fanatic.  I never read just one book.  I usually have at least a half dozen on my bedside table tabbed where I left off when I was in the mood for that topic.  When I check books out at the library I have to make sure I read them straight through or I end up renewing them or paying fines for being overdue.  So lately, I’ve been buying books more trying to keep the bookstores in business and help the economy.

I learned about a book on being a Realtor in the changing real estate market while at the CRS Sellabration in San Francisco last month.  Shift by Gary Keller.  Gary has a lot of great ideas that I rip off and duplicate - the greatest form of flattery - in my business at RE/MAX.  The other book I learned about today from Margaret Kelly as she spoke to the RE/MAX Convention attendees.  (I watched her on the web.)  The Energy Bus by Jon Gordon.  I think I’ll check that one out.  It sounds like it has a story I would enjoy and I can probably read it in one sitting.

Did you know a very small percentage of the US population reads books?  We have a wealth of knowledge from people sharing what has and hasn’t worked in their lives and businesses on the shelves of libraries,  bookstores, and online bookstores all over the country.  I learn so many things that help me in business and in my creative pursuits that I can’t imagine not taking time to sit down with a book each day.

Are you familiar with leverage?  Have you used leverage?  If you’ve purchased a home, chances are you have.  When you made that purchase did you make a down payment of 3, 5, 10% or more?  How long ago did you purchase your real estate?  Depending on that answer you have either leveraged up or down.  It’s also dependent on where you live.  Florida?  California?  Phoenix?  Las Vegas?  Michigan?  If you bought in one of those places between 2004 and 2007, you most likely leveraged down.  If you didn’t make a down payment, you may now be in foreclosure or on your way unless you locked in a fixed rate that you could afford.  If you used creative financing, you used another type of leverage and the combination can be deadly to your finances.

Leverage according to Daniel Webster is “1) the action of a lever or the mechanical advantage gained by it, 2) effectiveness, power”.  A Lever is “an inducing or compelling force”.  I like that word, compelling.  The effect of leverage is compelling.  It creates power.  It creates the power to gain or lose.  Leverage is what caused the Great Depression.  Leverage is what you use when you buy a home using a down payment or no down payment and financing.  It is neither good or bad by itself.  It all depends on the context in which it is used.

Here’s an example.  You are buying a $250,000 home and buy it with a conventional loan in the current market.  You provide a down payment of 20% or $50,000.  Now we know it isn’t going to appreciate anytime soon, but when it does, we’ll assume the average appreciation rate for the next 7 years (the average real estate ownership period) is 5% per year.  That means that in 2016 your property is now worth $351,775.  You have a gain in simple terms of $101,775.  When you divide that number by your down payment your money is now worth a little over triple what you invested.  You have made a 204% return or an average of 29.14% per year on your cash investment.  Your investment was not the purchase price of the home, it was the amount you invested as a down payment.  That’s leverage.  Is that better than a CD?  Better than the average return of stocks over the past 80 years?  Not bad.  And you get to live in the house, use it, make it your own, not have a landlord, and get tax breaks to boot.

What if you bought that same home in 2006 for $350,000 and not soon after it nosedived and when you needed to sell in 2008 you could only get $250,000.  The $50,000 you risked now is a loss of $100,000 or a 200% loss.  Again, you used leverage, but this time it didn’t benefit you.  That is why real estate, like stocks, should be considered a long term investment.  That’s why it is important to buy wisely and make sure the mortgage you get is one you can handle under most circumstances.  That’s why it is important to have additional reserves to get you through the hard times before purchasing real estate.  We just don’t know when those hard times will hit.  We don’t know when the balloon will pop or when the balloon will rise again.  Buying real estate is a lifestyle and investment choice that has to be carefully considered.  Sometimes circumstances are out of our control, but most of the time you will be able to control your circumstances by the choices you make before buying.  It does pay to be prepared.  Leverage is why the rich get richer.  That’s why paying interest on credit cards is a bad idea.  You are leveraging your debt to the benefit of the credit card company.  This market is making people think about frugality differently.  Being frugal is smart and allows you to leverage the money you have to your benefit.  Compounding is the eighth wonder of the world.  Be a winner!

So consider your current situation and how you might use leverage.  Is it a wise choice for you?  Check out the Recommended Reading List Page to find resources that will help you learn when it is and how to control more of your own circumstances.

The private banking system has done it’s job since the Great Depression, but the international potential for bank dominoes to keep falling prompted the federal government to take an ownership stake in 9 large banks as part of the bailout.  That means you and I will own a stake in these banks as citizens of the USA.  The banks involved initially are Bank of America, Merrill Lynch, Bank of New York Mellon, Citigroup, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, State Street and Wells Fargo.  These banks have agreed to limit top executive compensation and golden parachutes as part of their participation.  The federal government will also guarantee loans between banks to help create more liquidity.  This is turn should free up money to allow businesses to continue to borrow, help home purchasers secure loans, and inject credit where needed in our economy.  This action won’t create a quick fix, but should help keep the financial sector stable as we plow our way through a recession in coming months and hopefully help keep it from becoming a deep recession. 

Are you familiar with BNI? You can learn more at bni.com. Or check out the great site we have in Colorado - bnicolorado.com. I have been a member since late 2005 and was president of the Rocky Mountain Business Builders chapter from October 2006 through September 2007. Our chapter received the BNI Founders Award in 2007 and we have a great group of business people. I am happy to get up at 0 dark 30 to meet with them every Wednesday morning at 7am. If you would like to belong to an organization where everyone shows up once a week just to give you referrals :-), then check out this organization. Make a commitment to grow your business by connections with other business people that you get to know, like, and trust.

If you happen to be a BNI member and Realtor in another state or country, I’d love to hear from you.

Have you heard of The Dip? I just picked up a CD from Barnes & Noble with a one hour program from Seth Godin (Purple Cow) called The Dip. Being a true entrepreneur, I have a tendency to try to reinvent myself every 3-5 years, but am proud to say that I am making it through the Dip in my real estate business and will celebrate 5 years in business in April, 2008. Not only that - but I have risen to the top tiers of the Colorado Springs real estate market because in 2007, almost 100% of my business is from referrals. Without all my great clients, this wouldn’t have been possible. So I thank them for their referrals and business.

Seth Godin provides things to think about as you decide whether to push your current business or job to greater heights or whether is is better to “quit”. Yes, quit. Seth advocates strategic quitting and also points out when it isn’t a good idea to quit. So, if you want to learn how to be the “Best in the World” at whatever you do, pickup Seth’s $5 audio CD and put it in your car CD player to listen to the next time you are stuck in traffic. Then let me know what you think!