Archive for the ‘Real Estate’ Category

No Easy Way Out

September 19, 2009

I love Doctor Housing bubble! The data he compiles is great!

-$1 Trillion in CA mortgages are underwater & swimming in the Pacific Ocean.

-42% have Negative Equity.

-$3Trillion total in US

-$1Trillion in Alt-A (Interest Only etc.)

-$182Billion in Option Arms

*50%+ are in Cali

*$20Billion~ BOA (CW)

*$42Billion~ Wells (World)

*$40Billion~ Chase (WAMU)

Short Sale a home you can’t afford and buy one for a deal that you can afford

Even though there were mortgage brokers that sold the option arm correctly by providing the proper education and disclosures most borrowers abused the product and did not save or invest the difference. If you haven’t been doing this start doing it NOW so you are prepared for your recast and if you can’t, get ahead of the game and do a short sale now.

While 88% have not yet recasted most borrowers are enjoying a 1% payment and a current interest rate of around 4%~ most commonly (MTA+Margin) or (LIBOR+Margin) Margin is fixed and usually ranges between 2-4%. (Review your loan docs or mortgage statement to obtain this information)

The problem lies when the option arm recasts and homeowners no longer have the OPTION of the minimum payment.

Well, I guess that wont be that big of a deal if the payment quadruples to 4%, right? 4% is a pretty low interest rate!

Oh, but wait! What about China? One would have to believe they want to start getting paid back their money by 2012, 2013 and that the LIBOR followed by the MTA will hit at least 4%.

Meaning (4%MTA+3%Margin) =7% septuple – octuple the payment!

Here is the ALT-A recasting schedule:

2009-2010 $6 Billion~/mo

2010-2011 $8 Billion~/mo

2011 $33 Billion~ /mo

“There’s No Easy Way Out There’s No Short Cut Home…”

…only a short sale

or will Lex Luthor – The Great Evil Mastermind of our time, be right?

Will someone nuke the San Andreas fault or will we have a big earthquake making California fall into the sea suddenly creating valuable beach-front property of the once barren desert? [shouting] “Miss Teschmaacher”

I don’t know which chart below is more scary…either way we are going to need superman

mortgage rate resets waves

September 29th 2008 Bailout

September 29, 2008

I am sure some astrologer will find some correlation between October 29th, 1929 and September 29th, 2008.

Although the DOW only dove 777 points -6.98% compared to the -12% in 1929 this is still horrifyingly close. NasDaq fell -9.14% and the S&P 500 fell -8.79% (so much for those that were selling the IULs)

Leadcritic has a good article that came out this morning on their blog however the best bailout article I have seen yet is on the Los Angeles Times website. Check out the graphic of the comparision with other federal programs:

Foreign Investors buying Real Estate for Pennies

June 29, 2008

I wish I still had some Euros, Swiss Francs, Singapore Dollars, or even some New Zealand Dollars…not only would you benefit from the purchasing power of the currency but the down real estate market. The two combined guarantee at least 50 cents on the dollar (or maybe even free in some cases) and exponential future returns.

I think Robert Prechter has a currency fund.

We have officially hit bottom – it’s time to buy!

February 22, 2008

Just kidding. We are only in a buyers market for REOs and some isolated high end markets. We are in a “wait and see” market for any other property. BUT we will be in a buyers market once a major news organization breaks a story with the above headline.

“By Ilaina Jonas and Ben Klayman NEW YORK (Reuters) – Hovnanian Enterprises Inc’s (HOV.N: Quote, Profile, Research) chief executive said on Thursday he sees a challenging U.S. housing market for the next two years, but weak demand should bottom out…”

read more | digg story

Stimulus package!

January 24, 2008

The fundamental problem with our economy is that we are a bunch of consumers.

We are rewarded to consume and penalized to produce.

All we have to do to fix the economy is tax gas and make it $5+/gallon, tax ciggys and charge $10/pack…and reward, reward, reward the producers. (That is the land of opportunity!)

Giving everyone $600 bucks so they can go spend it; is ABSOLUTELY ridiculous! You might as well give the top 150,000 Entrepreneurs $1MM each! That would create opportunity! Hopefully that would get the stack of unemployment claims off of everyones desk.

Well at least they did one thing right by raising the mortgage loan limits…

read more | digg story

Time to buy real estate?

January 21, 2008

Well it is officially a “buyers market” for REO/Bank owned foreclosures. We are seeing 10-20+ qualified buyers a weekend that are looking for “a deal.”

By no means is it a buyers market across the board but at least it is a start. Once we hit an “official bottom” (May 2012?) that will occur. It is always said that when there is “blood in the streets” make sure you have cash and when the market is going up like gangbusters make sure you have inventory…

Why retirees are fleeing the U.S.

November 30, 2007

This is a good article on MSN regarding retirees moving south of the border.

The article mentions that there is no medicare in Mexico. I hear that might change…

I guess retirees are flocking to countries that have both tax and US dollar benefits. I don’t think anyone will be retiring in Europe from the US anytime soon (unless they have some serious dough) 

Is Panama still the #1 retirement destination in the world?

Can most people still refinance? The Good, The Bad and The Ugly!

November 25, 2007

The Good news is that there are plenty of good professional loan officers and plenty of good borrowers to help, contrary to what is depicted in yesterdays Wall Street Journal Article titled “Refinancing May Be Harder to Enjoy- While Rates are Down, Lenders Tighten Rules; Savings Prove Slender” and other doom and gloom articles that are bombarding us all.

Sure! Of course the pendulum always swings too far but not far enough for the good borrower…well maybe, it depends. Is it on the way back to the middle? Will there be stability or normalcy for the good borrower?

The conundrum is a good borrower, avoiding a bad loan officer and a good loan officer managing (not avoiding) a bad borrower.

More good news is there are not many products left out there for the bad loan officer to slam people into what they can’t afford. Don’t get me wrong; unfortunately, we have had our fair share of bad loan officers! Fortunately, most will never find a way to make a living as a professional loan officer and have resorted to their roots. Regretfully, it didn’t happen sooner.

Professional (derived from the word to “profess.” As one would “profess” their faith or in this case as one would profess to a career) Loan Officers sell what is in the best interests of their client period! The correct mortgage market finds a balance or price for their knowledge and professionalism between their supply and demand as long as it is still a win-win.

I know that we have been talking energy here on the last few posts but without energy we won’t be able to do what we are about to do!

Success is real simple:

If the right group of Loan Officers, in the right model, market effectively and efficiently in order to get in front of the right group of borrowers and at the same time manage the bad borrowers through short sale and debt settlement then viability is achieved.

If you know anything at all about the mortgage business…the only viable way to operate as a borrower, professional loan officer, broker, or small mortgage banker is as a federally chartered bank.

  • Financial Security – Your loan will fund
  • National Charter in all 50 states – Ability to help borrowers all across the country.
  • Regulation – The OTS or OCC eliminates most “bad loan officers” and provides for uniform compliance
  • Competitive pricing – In-house product line with flexibility to broker.

The minute most mortgage bankers fund a loan on their warehouse line, at a cost of LIBOR plus 2 or 2.5, they are in most cases losing arbitrage. If they can’t sell the loan they are stuck with nothing to do other then to sell it at a loss on the scratch and dent market or write a check for it.

As a federal depository bank with a FHLB [fla-ub] line cost of funds are usually at fed funds rate plus a .25. Currently 4.75. The FHLB system was developed as a stable source of funds for residential mortgages during The Great Depression. Will it be IF The Next Great Depression occurs?

AND if you are a Realtor and know anything about the Real Estate business…the only viable way to operate is to focus in on high-end0 homebuyers and investors. I love the way fear and scarcity work, its almost as if people eat themselves. Everyone wants to unload and no one wants to buy…and if you think about it isn’t that is the perfect time to invest? (When there is blood in the streets!) I recently saw an interview with Donald Trump and he talked about that very thing. I think it was on Larry King.

The bad is that while housing may seem grim, I would guess that around 25% of the total mortgages made are Subprime and ALT-A.

The trillion dollar question is out of that 25% that eventually reset, how many have enough cash, equity, knowledge or income to be able to refinance or hang on for the ride? AND will that number carry over to the 75%? Will the job market be our savor or is it just a crazy eight between the two?

The ugly news is maybe it will end up looking like the scene from Back to the future II.

“Great Scott!” Will all of the “bad loan officers” be like Biff and work at Biffco?

Robert Prechter and Harry Dent Jr have been talking about the next great depression for years. Will this be it? Listen to Mr. Harry Dent. I would highly recommend signing up for his monthly newsletter or reading his most recent book The Next Great Bubble Boom: How to Profit from the Greatest Boom in History: 2006-2010 Mr. HS Dent has successfully predicted the late 1980’s and 2000 and puts them all together scientifically through historic cycles.

No matter the market, depression or not, there will always be folks out there raising their hands for help.

I truly believe, the one who will have all the success, is the one who can find them the best and has the right model to deliver the best! Will you focus on the 75% and manage the 25%?

Happy Thanksgiving 2007!

November 22, 2007

To say that it has been a challenging year would be an under statement.

The ones with integrity, professionalism, unwavering faith, leadership and a deep sense of team will always find a way!

Some have learned from the recent challenges most have not and never will.

Most will still believe they deserve instead of being grateful for what they have.

A few have learned to have a higher tolerance threshold, to deal with adversity differently and elegantly, and yes some even accepted tests from above that helped us grow WAY beyond our limits.

Reflect on what we have been through, be grateful for it as it was priceless, grab it with a fist and put it away deep in your core because it will always be there for you as your fire within. It is now time to move on.

We are no longer in “recovery mode” we are in “rebuild mode” with more strength then ever before.

Love those around you today and express the utmost gratitude for who you are and what you have become.

If you are not who you are, live by your own design, starting today.

Live without limits!


PS “Wrong Bet!” -Lionheart

Why should you purchase real estate investment property? -Especially now.

September 26, 2007

If you were to investment $50,000 in the stock market today and somehow, someway you were to make a 10% return per year, every year, for 7 years you would end up with $97,435.

You would pretty much double your investment!

However if you were to invest $50,000 in a $200,000 single family residence (SFR) investment property you could create some Velocity.

Last thing I want to do here is another plan A or plan B example or worse… “Brother A invested in the stock market while broker B invested in real estate”

-20% down ($40,000) + $10,000 for closing costs and reserves. (It’s always good to have 3-6 months in reserves set aside in a “wealth coordination account”)

-$160,000 loan amount @ 5.5% fixed for 5years interest only (i/o) = $733/mo i/o


T -Taxes
I -Insurance (plus HOA if applicable)
M -Management (Get a good property manager, last thing you want to do is have a new part time job! It usually runs about 8% of the gross rental income)
M -Maintenance
U -Utilities (I would recommend the tenant pay)
R -Repairs (A great trick I learned long ago is make the tenant pay the first $100 of any repair. That way they take care of the property and you are not dealing with the bs)

*Make sure the monthly rent at least covers the monthly payment. We are looking for break-even or positive Cashflow. Remember all we need is “OPM” (other peoples money) paying for our appreciating assets.

*Make sure you find a motivated seller that will give you the ideal deal.

Inside our primary residence one could argue that our dollar does only one job (benefit) and that is Mortgage Interest Deduction.

One could also argue that the equity is not safe in the home…and that it needs to be separated into a safe, secure, liquid environment that can do more jobs.

What if a Hurricane Katrina happens in your area?

Earthquake, Flood, Tsunami, Terrorist attack, or you are unable to make your payments or restructure your debt?

(Remember the banks love to lend you money when you don’t need it and hate to when you do)

Your insurance doesn’t pay? You seek refuge in Houston and your equity line checkbook is frozen?

You and your neighbor both go into foreclosure…you have little equity (but a tons of cash in a credit-proof environment) and your neighbor has his home almost paid off…who is the lender going to more willing to work with?

By the way…you don’t ever want to cash-out your house on a payment you can’t afford or up to high. It is always good to leave some wiggle room in case you need to sell.

The best place online to run your value is Zillow (was inaccurate but getting much better).

Outside your home your dollar can do many different jobs all at once. Called “The multiplier effect”

The idea here is to identify under performing or under utilized assets and get them into production. Called “The Velocity Of Money”

You must get your individual MACRO economy moving!

The first benefit or job we can get out of our dollar by investing in real estate is APPRECIATION.

I have included a few historical graphs for your viewing pleasure…

Second benefit or job is DEPRECIATION which could be the most powerful tax advantage of all.

Third benefit or job is the additional tax advantages or expenses you can WRITE OFF.

(I am certainly NOT nor claim to be a tax professional so please consult your own.)

Then what if you were to turbo charge your dollar and borrow back out your initial down payment or investment and buy another property?

Maybe it takes 2yrs, maybe it takes 4?

Is it possible to build a real estate portfolio of $4MM+ within 7-10yrs with a one time investment of $50,000?

Is it possible to create equity of $500,000+ within 7-10yrs with a once time investment of $50,000?

Is the end game a 1031 exchange into a triple NET or something much greater?

Create a technology become Bill Gates, create a real estate portfolio become Donald Trump, create a life insurance portfolio become Warren Buffett, do 2 of the 3 have virtually limitless leverage and abundance!

Disclaimer: Real Estate is an investment and can go up or down. These illustrations are for example purposes only and are not forward looking statements


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