When we see Donald Trump on TV, we see a guy who appears to
be living the high life. Money, women and fame - all thanks to real
estate. By media standards it appears that "The Donald" is a rich,
successful real estate mogul. He also appears to spend lots of money.
My guess is, he may be making more "real money" on his TV show
than he is in real estate.

Whether you want a nice positive cash flow each month, or
a cash profit on a quick resale, the only way to get there is
with EQUITY.

You may think that an investor who owns say, 50 houses is
probably very well set financially. He he might well be...but
if this investor has refinanced his properties to take all the
cash out that he can, he may find himself on the brink of
foreclosure and bankruptcy if vacancy rates climb.

One the biggest dangers I see today is the incredible pace
at which home owners and investors are pulling equity
out of their properties.

Many investors are buying properties without even
understanding how crucial equity is to their profitability.
And homeowners who get 125% loans on their homes
are asking for a foreclosure.

Regular readers know that I harp on the idea of keeping
a minimum of 20% equity in every property you own. The
best reason to take lots of cash out of a property is
for the purpose of paying down debt on other real property.

Every week I get calls from investors who are desperate to
get a fix on why they are losing money on a deal. The number
one reason I see over and over, is a definite tendency to
take too much cash out of a property, which will kill your
positive cash flow.

It 's not flashy, it doesn't sell as well as telling someone they
can get $10,000 by next week, but buying, holding
and accumulating equity is the absolute bottom line rule for
success if you are a small investor. I don't want to burst
any guru bubbles, but the facts are the facts.

Let's take my mom for example, who happens to be one
of my favorite investors and also by far, the most conservative one
I know. She owns 5 houses all paid for free and clear.
All are rented for an average of $525 per month.
Her personal residence is paid for too.

Mom is bringing in $2,625 per month in rent. Taxes and Insurance
will get about $600 of it, leaving $2025. Over 12 months that
is $24,300. Not too bad. Added to other income and investments
this makes for a comfortable, reliable retirement income.

On top of that, her passive income will increase over time as her rent
goes up. And, she is earning a solid 5% per year appreciation in the
value of each property. Some of her houses have doubled in value
over the past 12 years. In terms of equity, mom is worth a pretty
good chunk. In a good market, I'd guess about $700,000 just
for those 5 houses and her residence.

She took about 15 years to do it. Nothing fancy, just classic
real estate investing. Anyone could do the same thing easily in
10 years or less.

Mom represents the vast majority of the conservative,
 "never-been-to-a-seminar-in-my-life", types who make up the bulk
of the real investors out there.
Some have 5 houses, and some have 75. I once worked
for a guy who had about 150 income properties. He was debt
free and had great wealth in his equity. He had spent 30 years
building this portfolio, buying good deals as he came across them.
Equity gives you breathing room when the unexpected strikes.

You have a tenant that skips out on you, or a tree falls on the roof and
your deductible is $1000. Practical real estate investing requires
equity for long term safety and security.

In contrast, many of the best known real estate gurus have been
broke and even filed bankruptcy due to their real estate dealings.

Many people don't know that Robert Allen, the writer of
"Nothing Down" and "Creating Wealth", went bankrupt in July of 1996.
It appears that his no money down deals loaded him with too much debt.
When interest rates went down and the rental market got soft,
there was not enough equity there to pay the bills.

In fact, the head of his Atlanta chapter of the "Nothing Down
Club" went to federal prison because of "nothing down" deals
that were structured illegally.

Remember the guru Robert Huff? Well known in the 1980's,
he wound up in bankruptcy too.

Even "The Donald" has been broke. His restructuring of
debt on his New York City properties was the basis
for his "comeback" to real estate glory. He got into a hole
about 100 feet deep and then managed to get himself out.

Mom would probably caution Mr. Trump against too much debt.
She will probably never be as famous as "The Donald"
but whatcha wanna bet she has more equity... ;- )

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I could not believe my eyes. (June 2, 2004)

My husband and I had a surprise visit from a friend of ours. This
friend happens to also be a top level computer engineer for
Home Depot. He regularly checks executive PC's and laptops for
things like viruses, spyware and adware.

He asked me if I had checked my system lately for spyware.
I told him I was pretty ignorant of spyware and as far as I knew, I
had never seen any.

He checked my PC out for me and found that I had 64 different
pieces of software that were "spying" on my computer, and
possibly stealing my personal information. I was shocked.

I watched in disbelief as the spyware program he used listed one
suspicious program after another. Most of them were little "bugs"
that were transmitting my personal data to someone I don't even
know. I felt like my office had been broken into.

I was shocked at how much of this stuff was on my system.
I do not consider myself to be a big web surfer.
Generally I use sites that pertain to real estate, the daily
news and things like that. But, this spyware and adware stuff
is embedded in all kinds of programs and websites.

I even discovered today that one of the popular tax software
programs every one uses has spyware buried in it that is designed
to install on your system when you are installing the tax software.

How sneaky! This caused a big uproar and now the tax software
people have agreed to leave out the spyware next year.
Still, this one episode will allow these people to collect data on
possibly millions of taxpayers. This is starting to get a little scary.
I am wondering just how widespread it really is.

I recently had another close friend who had to reformat his
hard drive after an adware program invaded his computer and
kept causing his browser to open to one pornographic site
after another. Every time he booted up, he got bombarded
with all kinds of pornography. He did not know how the
adware got on his system. It was nearly impossible to remove.

If you want to scan your PC for spyware and adware, you can
do it for free with "No AdWare". This is a top selling product for
getting rid of all these little critters that are running around in
our PC's undetected. "No AdWare" will scan your system for
free to see if you have any little demons stealing your data.
Click the link below to access their page:

Last weeks article about the foreclosure market being
overblown and saturated with investors touched a nerve. I got emails
and calls from a number of readers who said they were seeing the
same thing. I appreciate all your feedback and comments!

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I am looking for your questions. If you have a topic that has been burning in your mind, and you would like an answer, just email me and I will try to address your question in the newsletter. As long as time permits, I always try to answer all of your email questions.

send them to mailto:drobinson@reihelp.com

Donna Robinson is also available for consulting and deal evaluation.

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Reprints and Quotes are permitted as long as this link is included: http://www.reihelp.comCopyright Donna Robinson 2004 All rights reserved.

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