Monday, February 25, 2008

Tax time reprint - Do we understand our system?

Our Tax System Explained: Bar Stool Economics
(I like a parable to explain bigger ideas So I will rerun this. I do not know for sure where it started or if it is still true. But it explains a lot. Keith)

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by $20.' Drinks for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free.

But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?' They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a dollar out of the $20,'declared the sixth man. He pointed to the tenth man,' but he got $10!'

'Yeah, that's right,” exclaimed the fifth man. 'I only saved a dollar, too. It's unfair that he got ten times more than I got'

'That's true!!' shouted the seventh man. 'Why should he get $10 back when I got
only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

( So can you see any analogy's to this? Post your thoughts... )

Friday, February 15, 2008

forclosures or market - prices are softer

Had a recent conversation with an investor that likes that he can get small 3 and 4 unit properties on foreclosure actions. But he wants someone else to deal with the management. Prices are softer for regular listings and you can get a good deal there too.

Keep it in mind that you are in the home provider business from the moment you close escrow. If it is a foreclosure you have little to back up the security deposits and the tenants may be a big pain in the back side. What did they contract for? What deposit are they claiming?

In a regular sale there is an "Estoppel" to review the amounts and services that the tenants think is theirs. This is an important document. Both foreclosures or market properties will make you money. With soft prices on listed properties it is worth it to have an agent on your side. I can help save on headaches and make it a smoother business to run after the purchase.

Let a professional like me help you buy an investment property that does not have a snake den full of problems.

Sincerely Keith Lambert

Wednesday, February 06, 2008

Should we Rate Landlords?

Those of us in the hosing provider business are still getting a bad shrift from the old "Landlord" label.

But what if there were a way for those of us good landlords to stand out and be differentiated from a bad landlord? Would that work?

In a free market the customer (tenant) would go to the good businessman (housing provider) and pay higher rents for better services. More satisfied customers mean more profits.

You recall Econ 101 right. Is our market ready for an educated tenant base?

Do we want our potential tenants to know about the building or the fellow tenants in your building? What if the problem is not an item the housing provider can regulate or protect against. Really hard to bite that one as a owner who just happens to have one tenant that has strong cooking smells or a screaming child. But if may be good for the potential tenant to be forewarned.

Therefore there is a good possibility that this new service will make it.

Tell me what you think of that idea!

Give it plenty of time to do the Overlay of the dots onto the map. Lots of Data and such. And it is in Beta mode too. I think it should be used to rate good things too.

So I tried to place a Dot (green) for Santa Monica Bar & Grille to say "Good Music Here" Can you find it?

Keith <"><