One Thing & Another

 

Notes From My Journal: , the “boy wonder” who once rocked the academic world

I get an email from someone named Dr. Mardy once a week. He provides brief biographies of interesting people along with clever or insightful things they were quoted as saying.

Some of them are downright inspiring. Here’s a good example:

When Robert M. Hutchins died in 1977 at the age of 78, he was one of higher education’s most influential (and provocative) figures. He was also one of America’s great defenders of democratic institutions.

In 1928, at the age of 29, Hutchins made headlines when he became Dean of the Yale University Law School. A year later, the “boy wonder” became president of the University of Chicago. He served as president until 1945 and chancellor until 1951. During his tenure, he established many controversial reforms, including abandoning intercollegiate football, attempting to ban fraternities, and using comprehensive exams rather than classroom time to measure academic progress.

He made few friends with alumni and students when he announced:

“Football, fraternities, and fun have no place in the university. They were introduced only to entertain those who shouldn’t be in the university.”

Hutchins was a fervent believer in Classical Education and, along with philosopher Mortimer J. Adler, believed a college curriculum could be built around great books. Their efforts ultimately resulted in the Great Books of the Western World, published by Encyclopedia Britannica in 1952.

During the McCarthy era, Hutchins aroused the ire of many by opposing loyalty oaths and vigorously defending academic freedom. At a news conference in 1951, a combative journalist asked with disdain, “Is Communism still being taught at the University?” Hutchins, who was used to dealing with loaded questions, replied calmly: “Yes, and cancer at the medical school.”

He authored a number of other observations that have made it into my personal quotation collection. Here’s a sampling:

* “Whenever I get the urge to exercise, I lie down until the urge passes.”

 

* “It is not so important to be serious as it is to be serious about the important things.”

 

* “My idea of education is to unsettle the minds of the young and inflame their intellects.”

 

* “The college graduate is presented with a sheepskin to cover his intellectual nakedness.”

 

* “Great books are great teachers… showing us every day what ordinary people are capable of.”

 

* “We can put television in its proper light by supposing that Gutenberg’s great invention had been directed at printing only comic books.”

 

* “This is a do-it-yourself test for paranoia: You know you’ve got it when you can’t think of anything that’s your fault.”

 

* “The death of democracy is not likely to be an assassination from ambush. It will be a slow extinction from apathy, indifference, and undernourishment.”

 

Sometimes it takes an entire biography to feel you understand someone. Reading just these few facts about Hutchins’s life and, more importantly, these quotations, makes me feel not only that I know him but admire him.

 

 

Today’s Word: exegesis (noun)

An exegesis (ek-sih-JEE-sis) is a critical explanation of a text, especially the Bible or a literary work. As used by Robert Hillyer in A Letter to Robert Frost, a poem making fun of the academic reverence for doctoral dissertations: “Blest be thy name, O Vogue, that canst embalm / A minor poet with a potted palm; / Make me immortal, in thy exegesis – / or failing that, at least a Doctor’s thesis.”

 

Fun Fact

A duck can’t walk without bobbing his head.

 

From My “Work-in-Progress” Basket

Good, Better, Best: My Strategy for Buying and Selling Real Estate

 

It was a good deal with the potential to get better: A new warehouse in a good location. About a mile from my office on the corner of Atlantic and Congress Avenues.

They were asking $295,000. Research on comparable properties in the area indicated we could rent it for $3,000 a month – i.e., $36,000 a year. Using my brother Justin’s eight-times-gross-rent formula, I figured we could safely pay up to about $288,000. ($36,000 x 8 = $288,000)

Our initial offer was $275,000. We got it for $282,000. A week after closing, we had a tenant paying the $36,000 a year. The first year’s net operating income was $21,300 – a return of about 7.6%.

Good. Not great.

Sometimes – not always – you can get a better return on rental real estate through leverage. This was such a case. By taking a loan against the property, we were able to free up about two hundred grand and more than double our ROI.

Here’s how it worked: The loan brought down our capital investment to $94,000. The mortgage cost  (principal and interest) was $14,424 a year. That reduced our net operating income to $9,327. Nine grand is less than $21,300. But as a percentage of $94,000, it brought our ROI up to 10%. Add in the amortization on the loan, about $6,600 a year, and our total ROI actually increased to 17%.

(Note: This strategy made sense only because we knew we could earn at least 7.6% on the two hundred grand we freed up by taking out the loan.)

As I said, this was a good deal for us. The ROI was good and our tenant was even better. They (it was a business) paid their rent on time, kept the building in pristine condition, complained about nothing, and did most of the repair and maintenance themselves.

Recently the tenant asked Peter, our managing partner, if we would be interested in selling. My first reaction was, “No way. We’re making 17% without problems. I’m not going to give that up.”

But Patrick, Number Two Son who supervises the family’s real estate investing, suggested we assess the building’s current value.

When we did that, we discovered that the property’s market value had more than doubled (in about six years) from $282,000 to at least $600,000. And by selling, we’d come away with $392,000 (after closing costs and paying back our debt to the bank).

So although we already have a good deal based on our current investment ($94,000), when we considered the $16,000 a year we were getting against its current value ($392,000), the ROI was only 4%. Not good. From an ROI perspective, then, it makes sense to sell. But once again, that is true only if we can get a return on the $392,000 of more than 4%.

(Note: This situation is not normal. We are talking about my hometown of Delray Beach, one of the hottest micro-markets in Florida. And I want to emphasize the fact that we have been considering selling this property not because of its inflated value but because our ROI is out of proportion to that inflated value. If the rental market here in Delray Beach had kept pace with the selling market, the question of selling probably wouldn’t have come up. Our buying and selling principles are always guided by income, not by speculation about the market.)

It’s not easy to find properties that will give us a 17% return these days. But it will be easy to find new deals where we can make more than 2.5%.

So this is the plan: Sell the property for as close to $600,000 as we can and invest the $392,000 elsewhere.

What will our return be? If we sell at six hundred grand, our profit would be $298,000 ($392,000 minus $94,000) plus about $90,000 that we’ve collected in net income over the years.

That’s a total return of 312%, with an annualized return of 26%.

Good. Better. Great.

 

Watch This…

In inducting Dusty Springfield into the Rock & Roll Hall of Fame a short time after her death, Elton John called her the greatest blue eyed singer of the blues ever.

https://www.youtube.com/watch?v=QR4vE9xL3yk&feature=youtu.be