Real Estate Agent with Century 21

I'm not sure exactly how or why this happens, but I'm laying, lieing, lying (my apologies to all my past English teachers) curled up in bed at 5AM thinking about the Bear Stearns Investment Bank meltdown.

I'm kidding, right? Nope...just thinking about some poor schmuck like myself, let's say a middle aged (I hate the thought) guy named Melvin (what kind of parents would actually name someone Melvin?).  Melvin has been with Bear Stearns for 25 years, worked his way up the ladder and is some kind of Assistant (to the) Regional Manager (thanks to Dwight Schrute).  He's making about $175K a year (OK, that's where the comparison with me goes bad) which is above average for a long term investment banker...but hey, it's Bear Stearns, once the 5th largest investment bank in the country. 

Melvin has been living the high life recently. Driving the Beemer, fishing vacations in Cabo, splurging on diamond earrings for the wife.  He's thinking about early retirement.  He's done a wonderful job of loading up his 401k with Bear Stearns stocks and options...of course the company has been generous with matching contributions and doling out generous bonuses for mid-level managers.  Melvin is tickled pink when he checks the balance in his retirement account in January of '07...Bear Stearns has hit an all time high of $164.85 per share....wow.

Let's fast forward about 14 months...ouch. Melvin shows up to work and hears the horrible news.  JP Morgan Chase (with aid from the Fed...don't get me started) is buying out BS for..."Melvin, are you sitting down?"...2 bucks a share. Hot flashes, knees buckling, light-headed, feeling sick to his stomach.  Poof....gone!  Gone is the 401k, IRA?..history, Beemer? Traded for a Dodge Neon, family vacations? Gone...even the grandkids educational savings...whoooosh (that's the sound of a vacuum, in case you're wondering).  Melvin doesn't know whether to sit and sob or head for the top of the high rise and jump.

Time to reel this story in...remember, this is a real estate blog.  I just wanted to put a face on a headline we've all read, but don't really care about.  Doesn't affect us (yet)...so what's the dealio?  Well, you know each of those BS employees are in the process of what we all know as a "major life change".

My point is...why do people fail to see the security of real estate in comparison to the stock market?  Stocks are so volatile, based on what somebody "thinks" they're worth. Even in the midst of the worst real estate market in the last 25 years, a saavy investor, using the services of a real estate professional, can locate several properties in many different locations over diverse sectors that offer excellent returns and an ultra safe place to grow your retirement. 

By taking advantage of either a self-directed IRA or the new self 401k (better yet, both) investors can purchase real estate, let it grow and take TAX FREE distributions of all the growth (in a Roth) when they retire. Why let the stock market determine your lifestyle in retirement?  There are many options available, even for those who don't like the "landlord lifestyle".  How about a totally "hands off" investment in an investment grade property?  Using a TIC (tenant in common) group, many times you can reduce your risk and management headaches while yielding a very nice return.

I want to make it perfectly clear...this is something I DO PERSONALLY...not something I talk about to generate sales. It's what I believe in enough to have my own personal retirement invested in.  Using a custodian I believe in (www.PenscoTrust.com) I have most of my retirement in real estate.  I don't believe real estate can ever completly "vanish" like paper value in stocks.  You're always left with the hard asset..the house, the land and a place for someone to live. Let me know if I can help with any questions regarding this concept.  On my website (www.SiskiyouHomes.com) there is additional information regarding these ideas.  Feel free to check it out....and if you happen to see Melvin...buy him lunch.

Comments (5)

Kelley Rae-Voyles Bass
HomeQuest Realty/Managing Broker - Virginia Beach, VA
Guess there are many of us in that boat, these days.........
Mar 21, 2008 05:12 AM
Chris Horton
Horton's Lawn Care L.L.C. - Burton, MI
So true, I mean has no one ever heard of the Great Depression, eventhough real estate values have gone way down in many of the parts of the country it is nothing like what the stock market can, more than likely will, and has done in the past and the whole bottom falls out. In the last 20+ years my parents have had over 50 houses (rentals,flippers, and what not) there have only been 2 that I know of that there wasn't a profit of $20,000 to put on another home when it was all said and done. And of those 2 one was about a $6,000 profit and the other was a wash no profit but still no loss. You really can't go wrong in real estate with a little knowledge and/or someone to help guide you along the way.
Mar 21, 2008 05:22 AM
David Ernst
Beach Bum Properties of Florida, LLC - Palm Harbor, FL

You make a great point Ken but in my market (Palm Beach County Florida) people will say that the real estate industry has no room to talk about poof...gone.

I do really like the possibilities the self directed retirement plans offer. If you have a customer with retirement assets at their disposal they could actually pull off the buy low , rent and hold at a tax free profit, sell high scenario. When there is not a mortgage involved with a self directed IRA/K owned property the rent has more of a chance of covering the carrying costs (Tax, Insurance, HOA, Etc.) so you can be very competitive, keep high occupancy and turn your investment into an annuity. If only Bear Stearns had seen this light, who knows how things might be different for them?

Mar 21, 2008 05:30 AM
Johnny Huang
Pleasant Hill, CA
Insurance and Real Estate Broker
I went poof-gone in that Pensco website...Thanks for the link, so much information!
Mar 21, 2008 05:32 AM
Renae Bolton
Marketing 4 Realtors - Garfield Heights, OH
I'm your Professional Real Estate Marketing VA!

I feel really sorry for Melvin.  (Yes, I realize he's a figment of your imagination.)  And all the other Melvin's out there.  BS isn't the only company in this situation.  Lots of little companies have done the same thing - been bought out or taken over and had all traces of their 401K and other retirement programs totally disbanded.  It's just really sad.


Mar 21, 2008 08:09 AM