Burst This!: Frank McKinney's Bubble Proof Real Estate Strategies

Burst This!: Frank McKinney's Bubble Proof Real Estate Strategies

by Frank McKinney
     
 

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Frank McKinney continues his international bestseller tradition of delivering contrarian perspectives and strategies for generational success in real estate.


During his twenty-five-year career, this 'real estate rock czar' (The Wall Street Journal) and undisputed 'king of ready-made dream homes' (USA Today) has not only survived but

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Overview

Frank McKinney continues his international bestseller tradition of delivering contrarian perspectives and strategies for generational success in real estate.


During his twenty-five-year career, this 'real estate rock czar' (The Wall Street Journal) and undisputed 'king of ready-made dream homes' (USA Today) has not only survived but thrived through all economic conditions by taking the contrarian position and making his own markets.
Burst This! presents a resounding counter-opinion to the doomsayers and the get-rich-quick schemers, helping you guard against falling into their traps. In it, McKinney reveals . . .
• Six distinct real-estate cycles in the last thirty-five years, sifting out critical, recurring trends that highlight significant opportunities while signaling where history might repeat itself.
• The evidentiary truth, not the fear-mongering or the sugar-coating, on real estate's ups and downs. See exactly how McKinney has successfully handled the predictable cycles with timeless financial and investment strategies.
• Which real-estate investments—and the proven approach to marketing them—that have consistently shown immunity to the market's volatile fluctuations.
• How you can aspire not just to survival, but also to what McKinney calls 'thrival,' developing your ability to capitalize on all market conditions.
• Why the positive and negative excitement (a.k.a. greed and fear) associated with boom and bust times are your worst enemies, brought on by nothing more than recurring market cycles.


Frank McKinney is a five-time international bestselling author, philanthropist, and extreme risk-taker best known for his unprecedented success as a real estate 'artist' and visionary. McKinney began with a modest $50,000 fixer-upper in 1986 and completed his first $2.2 million spec home on the ocean in 1992. Since then, he has created and sold 36 oceanfront properties with an average selling price over $15 million, some upwards of $135 million! The world's wealthiest clamor for his masterpieces, each inspired by exotic locales and infused with vivid imagination. McKinney was recently recognized as one of the ten most influential people in luxury real estate and is the creator of two of the largest and most opulent, certified-'green' spec homes in the world at $29 and $30 million. He lives with his wife, Nilsa, and their daughter, Laura, in Delray Beach, Florida.


Proceeds from book sales benefit the good works of McKinney's Caring House Project Foundation.


Frank-McKinney.com
Burst-This.com


Book jacket design by Robert Mott, RobertMottDesigns.com
Cover photos by Robin Roslund


Published by HCI Books, Inc.
Deerfield Beach, Florida
hcibooks.com
Printed in the U.S.A.

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Product Details

ISBN-13:
9780757397622
Publisher:
Health Communications, Incorporated
Publication date:
01/01/2010
Sold by:
Barnes & Noble
Format:
NOOK Book
Pages:
372
File size:
2 MB

Read an Excerpt

Part One


The Confident Contrarian

When everyone else is racing for the exits,
that's when you should be calmly walking through the entrance.

Although I'm most often referred to as the world's first real estate 'artist,' I'm also considered a realist and an optimist, yet always an opportunist. (That's quite a few 'ists.')

To succeed in real estate, it's unwise to approach your craft as only a flipper, wholesaler, retailer, builder, renovator, contractor, short seller, or any of the other labels you might stick on yourself. You must consider yourself a real estate opportunist who is educated and ready to profit in any market, using many applications, under any condition.

Burst This! is designed to help you understand all the roles you must play as an opportunist.

As I write this from my tree-house office, I'm carving out a new niche as the 'green giant,' the guy who creates oceanfront masterpieces that combine opulent luxury and environmental responsibility, and in Chapter 1, you'll see how this is just as much a part of the American Dream as the charming three-bedroom, two-bath with the nice lawn and picket fence. More important, you'll see how the American Dream safeguards two crucial market segments and how you can profit from them.

In Chapter 2, I share with you how you can boost your own risk tolerance—how you can gain the confidence you'll need to take prudent risks in any kind of market. This is the realist talking. Yet to do what I do, I have to live in my own reality, not the media's or anyone else's. That's the optimistic and opportunistic side—something you'll read more about in Chapter 3—which will keep you ahead of the curve, not looking at its backside.

In Chapter 4, we examine six historical cycles of the real estate market in detail. Don't worry: I won't bury you in charts and graphs and numbers, but I will give you the unvarnished truth about recurring ups and downs. I will use real estate's past to help you predict your real estate future.

Let's start with a simple analogy, which you should keep in mind as you read the next few chapters: Think of certain segments of the real estate market as blue-chip investments. 'Blue chip' stocks are those offered by companies that are considered safe places to put your money—leaders in their class that are in healthy financial shape. Much real estate is a Pfizer, a Coca-Cola, a Cisco. It's a Dow Chemical, Apple, Microsoft, General Electric, Bank of America, or Google.

What defines a blue chip is that it makes steady money for investors over time. In a single month, or even a single year, prices may dip and investors may sustain short-term losses, but if that happens, it reflects undervaluation, not depreciation. There's a big difference in the definition here. In other words, for a period of time, a blue chip can be sold for less than it's been worth historically: it's a bargain because the investment is backed by a still-strong entity that remains profitable and the best of breed in its class.

For the confident contrarian, recognizing the aberration represents a significant opportunity.

As one example, consider Microsoft's antitrust issues of 2000–2001. Imagine that someone you knew well, someone with a sharp financial mind and your best interests at heart, had come to you in December of 2000 and told you Microsoft had dropped to twenty dollars a share, and that it historically had been more than double that. This person said that although it might not get up to fifty dollars again, it surely was undervalued now. This low price was counter to its historical performance. Wouldn't you have wanted to buy some shares? Maybe a lot of them? Using your backward-looking crystal ball, I bet you would.

You could have bought that stock, closed your eyes and gone Rip Van Winkle, then woken up a little less than three years later (not even the twenty years old Rip spent snoozing under his tree), and your stock would have been worth more than thirty dollars a share.

A more recent example would be Warren Buffett, the richest man in the world at this writing, taking a large stake in General Electric and Goldman Sachs—once again taking a contrarian's approach, investing in best of breed while they were suffering from declining share price in the face of much fear. Buffett follows and profits from a simple rule of buying: 'Be fearful when others are greedy, and be greedy when others are fearful.'

'Be fearful when others are greedy' refers to occasions of overvaluation, which occur even among the blue chips. Who can forget the dot-com bubble, when many investors' excitement got them so jacked up that they were willing to pay obscene prices for anything even remotely related to the Internet? The blue chips that were developing products and services for the World Wide Web got a price bump from that run-up, too. And when the correction occurred, when investors realized the emperor wasn't wearing any clothes and started unloading the stocks that were overvalued, the blue chips' prices normalized, too. However, those prices didn't bottom out and go to zero like so many of the dot-com stocks (the ones that had no earnings but once boasted a high-share price just because of the '.com' in the company name). Those investors who got out before the bubble burst—who sold before the market could no longer sustain inflated prices and share prices dropped like a stone—made out like bandits. The same held true during the recent market correction. So many quality companies were devalued just as a matter of course, not based on any real depreciation. Contrarians like Buffett stepped in to feast.

Throughout this book, when I talk about a 'bubble,' I'm referring to any market condition where people are excited about a commodity and therefore paying more for it than what it's worth. Of course, that 'worth' can be hard to figure. In a bull market, demand (and greed) keeps driving prices up, up, up. In a bear market, flagging demand (and mostly fear) drives prices down. It takes a cool head, a commitment to making your own markets, a realistic review of historical values, and an ability to shut out the noisemakers (the pundits and panderers) to avoid getting caught in the greed and fear cycles of the masses.

Yes, you need to protect yourself against market bubbles, and I'll be helping you do that in this first part of the book. Yet there's something incredibly important you need to realize right now: The bubble you most need to protect against is the one you might create on your own by overpaying, overextending, overleveraging, overimproving, underimproving, getting overexcited, or not marketing properly. Burst This! will definitely help you pay the right price for the appropriate number of properties, using responsible debt without introducing damaging emotion, while insuring you improve for maximum appeal. Most important, it will help you market like nobody else. Although there's plenty to be learned by studying the trends generated by the emotional reactions of the majority of investors (in general, what not to do), the most important trend for you to follow is your ability to make markets while making the most of any situation.

©2009. Frank McKinney. All rights reserved. Reprinted from Burst This!. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, without the written permission of the publisher. Publisher: Health Communications, Inc., 3201 SW 15th Street, Deerfield Beach, FL 33442

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What People are saying about this

From the Publisher
'Dismiss what the so-called experts tell you to do and listen to Frank McKinney, who has taken more risk and has made it big regardless of market conditions for nearly twenty-five years. McKinney has the goods to help any real estate investor thrive anytime, anywhere. Read Burst This! now and stop the naysayers cold in their tracks.'
John Assaraf, Bestselling author of The Answer and former RE/MAX of Indiana CEO

'A true real estate artist, Frank McKinney continues to make markets where others don't dare to tread. Now this visionary contrarian shows you how to prosper in any real estate environment.'
Rich DeVos, Co-founder of Amway, owner of the Orlando Magic, and author of Ten Powerful Phrases for Positive People

'A true real estate artist, Frank McKinney continues to make markets where others don't dare to tread. Now this visionary contrarian shows you how to prosper in any real estate environment.'
Rich DeVos, Co-founder of Amway, owner of the Orlando Magic, and author of Ten Powerful Phrases for Positive People

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