Investing Strategies for a Struggling Real Estate Market: Sunday Morning Thoughts 09 December 2012

What subprime crisis? Affordable houses are everywhere. (Photo credit: woodleywonderworks)

It should not matter if the glass is half empty or half full, it has something in it.

So in a flat real estate market, how can you make money?

Having control over a property and not owning the property can prove to be a fast way to improving your bottom line, but what about another option?

Becoming the bank, becoming a private lender; some of the benefits:

• You don’t own the property

• You don’t have to pay the property tax

•  You don’t do maintenance and repairs

•  No dealing with tenants

Private lending is a way to be involved with the real estate recovery, but without the risk that a property owner would have.

As a private lender you can invest a sum of money for a specified period of time, at a nice rate of interest.  You do not spend time mowing the lawn, or fixing the minor or major problems, you lend money secured by real estate and collect either a monthly payment or a lump sum after a specified holding period.

Being a private lender is a viable option in a buyer or seller’s market.  A private lender can lend money to buyers and refinance sellers, so it would not matter the type of market, your investment could appreciate.

In our current financial economy, the buyers are looking for money sources since many lending institutions are having trouble with lending.  Sellers are looking for private lending sources to refinance or sell their property.

No matter what type of real estate market, your investment can still earn.

For more thoughts on lending read our other articles.

Private Lending Retirement Investing Part I

Private Lending Retirement Investing Part II

Name(required)

Email(required)

Have You ever invested in real estate

What type of property investments interest you?(required)

Submit

Δ

Related articles

• Spotlight on REITs: American Real Estate Investment Corp (moneymanager.com)
• Money360 the kick in the ass that banking needs (banklesstimes.com)

Re-Emerging Investment Opportunities: Sunday Morning Thoughts 20 March 2011

Image via Wikipedia

Recently Hewlett-Packard signed an industrial lease on a distribution center in the San Bernardino County California more specifically Cajon.  The property is 1.4 million square feet which makes it one of the largest industrial leases in southern California.  The lease period is seven years.

 

It is anticipated that the region will become highly sot after by other Fortune 500 Companies for mega box space.  There have been other deals in the area in the past few months, Living Spaces, Harbor Freight Tools, and American Building Supply Inc., have recently inked deals in the Cajon area.

 

What does this mean to a commercial real estate Investor?

 

The area maybe experiencing growth, again; buying homes and other rental property would be a possible start, in addition to office and large industrial space.  No one can work there if they do not live near there.

 

Once there is a migration of people to an area, house values will increase, as will the need for retail such as, fast food, grocery stores, and general shopping in the immediate as well as in the outlying areas.

 

On another note transaction in cash are on the increase.  Earlier in 2010 the percentage of real property purchased in cash was at about 23% that has now risen to 32% and is anticipated to increase throughout the coming years.

 

Does this surge in cash buyers mean people have huge stacks of cash lying around?

 

Not necessarily, it could mean private lenders, and lending groups have been funding deals and realizing a profit.

 

To contact us Investor@ImmaculateEnterprisesllc.biz

 

When Bad News is Good News: Sunday Morning Thoughts 26 September 2010

What do these stocks have in common?

The Washington Post, Coca-Cola, and Geico.

In two words, Warren Buffett.

The aforementioned stocks, their price once fell on the heels of bad news.  One person’s sell is another person’s buy.  As for these stocks, Warren Buffett was able to purchase them on the heels of bad news, when their prices fell.

These once producing stocks, turned into an undervalued bonanza due to bad news, turned and became highly producing once again.

Warren Buffett uses specific criteria to indicate whether a stock will perform well or not.  One of his criteria is specific to how businesses run and if they are monopolies in the consumer market.  They either have to have a specific service or product geared towards consumers.

Profitable real estate investing in undervalued properties is very similar to how Warren Buffett picks his undervalued stocks.

In real estate investing, there is more to it than mere location.  There are a number of factors when picking a profitable investment property.

The location for rental property is best in a lower middle to mid- middle class area.  This type of area will always have rental properties and rental communities which tend to have lower vacancies.

A note on vacancies, if a property is mismanaged in a profitable area, the vacancy for that particular property would be high for the area.  Most people regardless of socioeconomic class like living in a nice place.

No one wants to live in an apartment community or a rental house if things never seem to be in working order.  If the kitchen sink leaks and it takes the management 3 months to fix it, then that would be a poorly managed rental.

If the bath tub does not drain properly, well the tenants will probably move because people expect things for personal hygiene and food preparation to be in working order.

Delayed fixing and a do not care attitude can take a once profitable investment and turn it into a money pit.

The Bad News is your investment is tanking.

The Good News for a savvier investor is the investment is not turning a profit but with better management can become very profitable.

Picking a once profitable rental investment which has now become another person’s money pit, can prove to be lucrative if you have a plan to change it from mismanaged to renter/ people friendly.

There will always be diligence on the part of the investor regardless of type of investment.  When a person invests with Immaculate Enterprises, we ensure an investment property will be properly managed for our renters.

Our Turtle Economy

As our American economy is turtling along, the European’s are experiencing an economy of marked growth, albeit small, as our stock market has seen its third bad day in a row the European’s are experiencing positive trade.

For France the growth for the second quarter was from consumerism, for Germany the rise is from exports.  The United Kingdom is also seeing an improving economy.  But most of the economists of said countries seem to be surprised by the improvement in their economies.  Russia’s second quarter finish is also showing growth, so what is happening to the good ole’ USA?

The short answer, lack of consumerism, credit, and jobs our countries biggest economy drivers.

On the horizon, the Federal Government will be making it easier for businesses to have credit lines and tax breaks which trips into hiring and thereby moves into a more robust consumerism economy.

With the new changes in banking and credit lending the economy will continue to experience ups and downs, mainly due to our basic nature as humans, we resist change but change does happen then we adapt.

In the future we will see housing demand being more robust and possibly experience a housing shortage, a shortage which may cause many areas to appreciate considerably.

So now would be the time to invest in real estate, residential and commercial.  The sidelines are full of those that will never take action, but action is required in this economy.  Don’t let it pass you by invest now although things may look bleak a new horizon of improved change is on its way.

http://www.backedbyrealestate.com/getstartednow.php

Our Topsy Turvy Economy

With the stepping down of Obama’s lead financial advisor Christina Romer one would begin to wonder who will take her place.   According to Reuters there are three candidates Austan Goolsbee, Jared Berstein, and Laura Tyson.

This news of a prominent member of Obama’s financial advisory will possibly impact the stock markets, causing foreign investors to be more apprehensive of America’s economic recovery.

This new change in the presidential financial advisory, mixed with higher unemployment and stagnant growth in many sectors, the stock market for Friday will likely end down.

But the cycle for this month of August is a negative ending of the DOW.  This prediction is based on previous cycles.  When looking at the previous cycles of the month of August plus lagging unemployment, sluggish consumerism, and the dollar losing more value it is not hard to predict that the month of August for the DOW will be a non gaining month.

Conversely, tangible assets are going up at a steady pace.  Gold and silver are gaining more on a daily basis.

Real estate is not too far behind with some markets seeing some slight increase in price.  Although another wave of foreclosures in residential and commercial will soon be coming.

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

Now is the time to invest in real estate.  Take advantage of the market being low and having an abundance of real estate that is due to appreciate.  For more information on how to take advantage of our current real estate market http://www.BackedByRealEstate.com

Realistic Investing vs Speculative: Sunday Morning Thoughts 01 August 2010

Warren Buffett defined the difference between investing and speculation in this famous passage from his book, The Intelligent Investor:

The most realistic distinction between the investor and the speculator is found in their attitude toward stock-market movements. The speculator’s primary interest lies in anticipating and profiting from market fluctuations. The investor’s primary interest lies in acquiring and holding suitable securities at suitable prices. Market movements are important to him in a practical sense, because they alternately create low price levels, at which he would be wise to buy, and high price levels, at which he certainly should refrain from buying and probably would be wise to sell.

This statement can apply to the new wave in investing, binary options.  This is a loose example of how binary options work; the premises is to state whether or not a stock or commodity will go up or down in the next ten minutes.  Although this is a rather pedestrian look at the inner workings of binary options, this is basically the way you play the hand.

If you picked up on the poker, or card game reference, this is what binary options sum up to be, yet another casino game.

Currently on the trading floor a lot of speculation has been transpiring.  Many investor newsletters are giving their predictions for stocks, commodities, etc. to have in their portfolios.

When choosing to invest you will have to have a proven earning strategy to see a return on investment.   Not matter how you look at investing you will always be speculating or projecting on a number of factors.

Studying the cycles is also a proven strategy to help increase a return on investment.

Everything in nature has a cycle.  To better understand the cycle of things is to watch and make note of changes.

The changes could be obvious or very subtle.  Noting the changes in the cycle we can then project what will likely happen next.

The housing and commercial housing market also have a cycle, when the prices go up drastically in any given area that same area have a hard bottom.  Examples would be Stockton, CA and the Inland Empire.

The house prices in those areas where going up up up almost everyday by leaps and bounds.  Then suddenly the market in those same areas fell down just as hard.

The Inland Empire was a growth area in the late eighties then became a declining area a short time later.  Fast forward to the late nineties, the same area was growing past its highest peak.  Then with all things fell as sharply as it went up.

If you were to invest now in the Inland Empire the starting strategy would be to hold the property knowing it will appreciate as in times before, and then sell the property right at the peak or slightly before the peak.

The stock market also has a pattern because all things in nature follow a cycle.  This is one of those rare times when all really does exist.  But also note within a cycle are also more cycles contributing to the larger cycle.

In real estate the job market fell in the early nineties with companies cutting back to purchase stocks back from their investors.  For our current housing market the down turn initiated from the sub prime lending and over extension of credit; similar to the late eighties early nineties.

So with all cycles now is the low time in the market, the time to buy and hold.  Appreciation is waiting.

A Closer Look at Using a Self Directed IRA to invest in Real Estate

For many investors using a self directed IRA to invest in real estate seems a little scary.  People may think to themselves what about my retirement?  What if the deal goes south?  If the deal goes south how can I get my money back?

Those questions are perfectly normal to ask, especially since the stock market beat up many IRAs, 401ks, annuities, and other investments.  In addition to the stock market taking a negative toll on investments in general, people wonder if real estate is a viable option for their nest egg; since many once thriving markets and sub markets are presently plagued with upside down mortgages, causing negative equity, and resales selling for a considerable amount less than the once high asking price.

One thing most new investors learn quickly is buy low sell high.  Or maybe if you buy high you can short the stock.  Well the same type of thought can be applied to real estate.

When the market was high many free and clear owners sold their properties for the highest possible price.  Just when they thought the price had gone much higher than they expected, the purchase price went a little higher.  Sub prime lending was also a factor, people were able to buy more house than they could afford in the future reset to principal and interest payments.

The then buyers and lenders did not think the bubble would rupture, but it did.

Now with a housing glut in many prime areas, plus commercial real estate to soon take a tumble due to stricter lending practices, this would be the time to implement the strategy of buying low and hold for appreciation.

Shorting is an option as well in real estate; this practice is known as a short sale.  Although you did not purchase the property when it was a high price or market peak, some one else did.

In a short sale the lender would accept less than owed provided the property is sold to an uninvolved third party.

Meaning the seller may not keep the property nor have a relative or friend purchase the property for them.  The original purchaser must server all ties to the property.  Many lenders are now coming to the negotiation table of short sale a little easier now this could be due to being overwhelmed with foreclosures and more foreclosures on the horizon.

In a real estate buyers market the strategy of holding for appreciation is a very good option.  So if you lend on a current income producing property now then in 3-5years the property would be worth more than now, provided the area is a stable, or stable and emerging area.  A property is considered income producing if after all debt service and maintenance is subtract from the gross income does the property have a brisk cash flow.

So if the deal goes south the property is your collateral.  You have the option to sell the note, sell the property or hold the investment.  Remember you need to receive detailed information on any venture if you decide to invest.

Please subscribe so you many receive the eBook about cycles (it’s only 6pages but is packed with a lot of information) it may help you in your understanding of events to come.

The Consumers and Investors are Not at the Gates:Sunday Morning Thoughts 18 July 2010

The DOW, NASDAQ, and the S & P all ended the week in the red.  Friday’s down turn of the stock market hinged on a few factors, one being the banks such as Bank of America, Wells Fargo, JP Morgan Chase all reported less than anticipated second quarter revenues.  This falling short of expectations for the banks coupled with sub par consumerism mixed with the New Reform bill to soon take place has made many investors nervous.

The new rumor, we may slip back into another recession, but at this point even with the skepticism we are poised to maintain a slow and steady recovery.  The strides we are making now are small little hops, which when we look back a year from now, when all totaled will equal a big leap.

For some investors, government securities have become the new safe haven, but with so much interest in the government bonds the prices rose as the yield went down, paying more to earn less is not a great strategy.

America is not the only country at this point feeling the struggle of growth out of a bad economy.  United Kingdom announced it is the equivalent to 5 billion dollars in debt.  The Nikkei this Friday was much like the DOWJIA closing down by over two hundred and fifty points.

When we look at all the factors for our recovery, the stalling is mostly due to the reaction banks had to the outcome of the sub prime lending.  They tightened the reigns of credit with only a 30 day notice of severely increasing consumer’s interest rates.  Some consumers became bad credit risks due to the banks drastically cutting their credit limit to just above the amount owed.

Basically, if a person had a credit card for $12,000 and owed $3,000 towards the balance, this would only be 25% usage of the credit.  In our current economic times, the banks have been cutting those higher limits down to just above what is owed.  So what was once a $12,000 credit limit with $3,000 owing, it becomes $4,000 credit limit still with $3,000 owing.  This radical decrease causes the credit usage to shoot up overnight to 75%, this would make the person appear as though they were irresponsible with credit.

There should not be a wondering why consumers have fallen off of purchasing.  With credit dwindling and interest rates sky rocketing, buying anything above the necessities would be a frivolity.  Many consumers have moved towards making purchases with cash or debt cards instead of with credit cards.  People feel more in control with keeping themselves and their transactions liquid.  All things tangible are driving the stock market while all things cash will help keep consumers from sinking into deeper debt.

Senior Investing: Sunday Morning Thoughts 13 June 2010

How Seniors can use Their Home for Investing

With the downs and up swings of the DOW many investors are having increased leeriness of investing in the stock market. With the recent Goldman Sachs issues one would find it difficult to feel fairly comfortable investing in the DOW. Let’s face it; if you do not have a knowledgeable stock broker acting for your benefit, and you are not Warren Buffet should you really invest in the stock market?

Well, as we have all seen in the past few months and weeks the stock market has it’s good days as well as it’s horrifying ones. No matter your age, no one really has money to loose in the stock market, seniors especially. For a retired senior having earned income is not necessarily an option.

Most seniors live on the investments made from when they were younger, pensions, and/or social security. Seniors are the group that may not be able to make up for the recent losses in the stock market. With that in mind what are some ways to create a nest egg without having to reenter the work force?

Many would tell seniors who own their home to do a reverse mortgage, others would tell them to sell their home and downsize to something smaller such as a condo in a senior community.

A reverse mortgage works when you do not have heirs or the residence will not benefit your heirs. But, keep in mind the bank is not offering you the total value of your home; it will be a considerable amount less.

If you are a senior and you decide to sell your home and live in a condo community, you may miss your home. Home for many has the memories of family, friends, and life’s accomplishments, although you will make new memories and new friends in a condo community.

In today’s investing world looking at things slightly differently may make a big difference. But, remember all investments have risks. What if you use a home equity line of credit to make investments?

Your home serves as collateral for the line of credit. The amount of the credit will depend on any outstanding mortgages on your home. For most seniors the home is free of any outstanding mortgages, you stand a better chance at receiving a home equity line of credit. In general the banks look at ability to repay, your debts, etc. Each lender is different so if you consider a home equity line of credit, shop around for the best rates and lenders that will not charge a multitude of fees.

Once you have decided between home equity line of credit, reverse mortgage, or second mortgage then you will need to place that money into an investment that will give you a better return than the money you are borrowing.

When investing please consider investing in real estate with Immaculate Enterprises. Lenders are paid eight percent to twelve percent on their money. When investing you may opt for quarterly payments or you may choose to wait till the real estate venture is sold.

The better profit is when you wait till the venture is sold but some private lenders choose to have quarterly payments. Either way it will be the choice of the lender.

Market Predictions: Sunday Morning Thoughts 30 May 2010

The Dow fell 7.9% during this not so merry month of May, at least not for some stock investors; others may have made money if they had the right position.  The NASDAQ also performed poorly hitting new lows not seen since November 2008.  The S and P were equally as bad with losses comparable to February 2009.

On a different note the price of gasoline is down on a holiday weekend.  Traditionally, or pre-conditionally, Memorial weekend is the beginning of the higher gas prices due to less oxygenation and higher oil prices.  This month has seen what most people are wondering how something so good could even remotely be bad, lower gas prices on a get-away weekend.

What does all this mean to the investor or anyone in the market?  Well it means right now the mutual funds, annuities, and money market accounts are not going to show too much appreciation.  Depending on how the money is invested it may show a loss.  But at the moment the reports for cars, retail, housing, et al are not due until after Memorial Day.  The first reports will be Tuesday the rest to follow throughout the remainder of the week.

The new construction report should come in low for homes, commercial, and multifamily.  This is actually a good thing.  With less being constructed and many going into foreclosure that makes now the optimal time to invest in housing and commercial real estate.  With less being constructed, with an ever expanding surplus driving prices on commercial property down, home prices will depend more on the demand in a specific area.

All in all, this is now the time to purchase real estate.  Currently, many prime and emerging markets are at an all time low.  Just think of the appreciation, many properties are being purchased at half and in some case less than half of its value.  Some were just plainly mismanaged, but have vastly improved with the change of management.

Commercial properties such apartment complexes and business centers are being foreclosed at an increasing rate.  On the flip side, these foreclosure properties are generating income to sustain a mortgage and also have positive cash flow.