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For anyone interested in a unified social graph, here is an interesting article by Brad Fitzpatrick (or bradfitz), founder of very powerful blogging site LiveJournal.com.

http://bradfitz.com/social-graph-problem/

It provides an incredible proposal to consolidate social networks and create a open social graph.  Sixapart.com is doing some interesting work with the social graph, but I predict for the social graph to be whole, it will require the participation of one company…Facebook.

I want to touch on people who are very intuitive and have early success. I got my first real entrepreneurial venture in 2002 with a good friend Ryan Johnson. It was nothing spectacular, well researched, or world changing; we simply bought real estate that cash flowed.  I can recall multiple conversations involving these phrases:

“Let’s buy every house 1 mile north of campus.”

Or “Let’s do a bunch of 0% down loans so we are fully leveraged.”

This was coming from a couple of 19 year olds with no real capital or research. Before we graduate college, we had haphazardly purchased over 15 rental properties.

Did this require some type of higher level intelligence, superior intuition, or hours of research and planning?  Absolutely not.  Anyone could have produced higher returns and tons of people did.  Real estate agents, brokers, developers, and lenders made millions.

After each successful transaction, I trusted my intuition more and more.  I began to think I could not make a mistake as long as I trusted my intuition.

This is the problem with early success; you begin to rely on your intuition, are rewarded for incorrect business decisions, and develop bad habits.

So how is this a bad thing?  First, I accredited my success to my intuition, not external factors and luck.   Second, I know may have the propensity to make uninformed decisions and assume higher risk without completing the necessary due diligence.  This may compound the problem until a miscalculation results in the loss of all previous gains.

There are people who are brilliant and very intuitive, able to succeed almost effortlessly in their decision-making.  However, superior intuition cannot compensate for advance planning, due diligence, and great execution.  Though you may be able to make great decisions trusting your intuition, imagine if you coupled brilliant decision-making with thorough research and information.

So what is the point?  The point is that I have seen multiple articles stating to always trust your intuition.  I have relied on my intuition, trusted my whimsical decision making, and seen success.  However, I look back after making thousands of mistakes and think what could have been if I were well-researched and had a larger knowledge base.  So I say trust your intuition, but make sure you have all the facts and information necessary to be in the position to make a correct decision.

As for Ryan and I, the true test of our real estate prowess is whether we can flourish under the current market conditions. In 2002, we would just pick out a house, enjoy the color of the exterior, buy it, and turn a huge profit. Now, we have to analyze the rental market, where development is going, what city laws are being enacted, and where all the economic factors are heading. I miss the good ole days.

I pulled this article off of Ramit’s website, but I think it makes numerous incorrect arguments.

view articlet>>

1) You have to live somewhere. So paying your PITI (principle, interest, taxes, and insurance) should not be calculated as a cost.  Rather, you should calculate the marginal cost or the difference between your PITI and your expected rent payment. Furthermore, unless you are living at your parent’s house, there are unexpected costs for renting.   You are still making repairs to your rental property and if not, the cost of repairs are accrued at the end by the loss of your deposit.

2) The article mentioned that you have not calculated the costs of remodeling, updating, or capital improvements to your property.   These are investments that improve the value of your property and yield a return on investment in sweat equity when the property is sold.

3) Tax benefits.  Unless you are paid under the table, you are able to write off your interest and a variety of expenses for your primary residence.  This often amounts to a couple thousand a year in tax savings.

The article does reiterate an important point that buying in a bad market can result in significant finance losses.  Buyer beware.