The Golden Goose Must Never Die: Sunday Morning Thoughts 24 March 2013

1 in 3 Americans cannot retire comfortably.  With that in consideration, when you retire you no longer have the same income as when you worked, so saving for your retirement is crucial while you are still working.  But, once you retire, you no longer have an earned income.  You will be living off of your investments, and if you are not adding to your investments while living on the investments then you are hoping to not out live your money.

Most people out live their money, and if you do a reverse mortgage you may out live that as well.

So what can you do to protect your retirement future?

The simple answer, the goose must never die.

So how do you live off of what you set aside for the future and still increase or at the least replenish your investment.

One way is to become a private lender and live off of the interest payments you receive.  This way you still have a retirement investment which will still grow, and wantfully you will not outlive.

Related articles

• The American Retirement Asset Crisis Is Upon Us (247wallst.com)
• America Isn’t Ready For Its Future (businessinsider.com)
• Why Americans Can’t Afford The Future: Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI) (etfdailynews.com)
• 6 Lies We Tell Ourselves About Retirement (huffingtonpost.com)

Are You Gambling with Your Retirement?: Sunday Morning Thoughts 04 November 2012

Gambling while in retirement is not the same as gambling with your retirement.  

When you enter the field of stock market investing, i.e. with a 401k, Keough, IRA, etc. the first person placed in front of you is an adviser.  They help you create a retirement model that may or may not work.  Most models look at the upside of saving and not the down side of the economy.

If you only know that your retirement will be a certain amount of money by the time you retire, and the estimated probability of having a comfortable retirement is at least 95% then you may want to ask more questions.

Occasionally the retirement models only tell of the shiny side of the coin.

But taking charge of your retirement and investing it ‘willy- nilly’, is not any better.  A balanced portfolio may prove to be better than having one in all aggressive investments, or on the flip side, in too conservative of investments.

Too aggressive opens your investment to high risk, and too conservative may not yield decent returns.

Finding the right balance for you tolerance level and growth strategy may prove to be what will get you to your retirement safely and comfortably, without the thought of outliving your money.

A few things to consider:

• How much do you want to live off of yearly? $70,000+-
• How long do you think you will live?   Many people are making it over the 100 mark these days, just ask Willard Scott.
• What type of savings do you currently have?
• Do you have an IRA, 401k Keogh, if not will you begin to save and open one and when will you open it?
• How much will/are you putting away currently?

Here’s a retirement calculator to get you started.

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

Keeping these tips in mind may aid in the reaping of the rewards on your investment. 

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Increase in interest for Commercial Real Estate: Sunday Morning Thoughts 30 January 2011

If you input ‘commercial backed securities’ in a search engine you will see approximately 12.3 million results, give or take a few, and depending on which search engine you prefer to use.  Among the plethora of results- ‘Cantor prepares to debut commercial mortgage backed bonds.’

Many other institutions already have commercial backed bonds.

The commercial real estate market and SFR (single family residence) market are at most times opposing one another.  When the interest for one is up the interest for the other is down.  As everyone is running to the nearest, next and best SFR foreclosure, there also exists over valued over bloated commercial foreclosures in abundance just like houses.

Also like houses, commercial real estate is many and varied- From 5 unit multi-family, mixed use, retail commercial, business commercial, and apartments.  When home foreclosures increase, so does the demand for apartments; displaced home owners need some place to live.  The choice is either family or find a rental.

During the housing boom vacancy rates for rentals increased.  Now that so many people are becoming non homeowners, there is a shift from ownership back to renter.  This shift contributes to an increase in value for apartments.  Increasing the net operating income by $1 increases the value of the property by $100.

At this time with more foreclosures on the horizon apartments and other types of rentals will be in an increasing demand for at least another 8-10 years.  As a private lender having a note on these types of properties which normally have a maturity of 5 years is a low risk investment with a very nice yield.

Is the U.S. Housing Market Bottoming out?

Image via Wikipedia

According to Mark Zandi, Moody’s economist the current data is showing that the housing market has not hit bottom yet.  As stated in our last post, the housing market in the more desirable areas will experience leveling out after hitting the bottom, then a gradual increase which will pick up momentum.

We have not hit bottom yet but we are a little closer.  New construction of homes dropped in December, coupled with the existing homes sales rising and eminent foreclosures stalling, all this can equal home prices increasing moderately.  This is actually a false positive of a housing market recovery.

The more stable recovery is to come.

Once all the foreclosure robo-signing is sorted out and no longer favoring lender nor homeowner then the market will finally be back on track for a recovery.  Remember we spiraled into our current real estate slump with the subprime lending now it’s time to right the wrongs. 

If you are thinking about investing in the real estate market visit our website.

The Robo-Foreclosure mess and the effects on Private Lending: Sunday Morning Thoughts 16 January 2011

If you read last Sunday’s post then you will understand that the robo signing scandal has become the bane of most Banks.  Judicial foreclosures have been thrown out by Judges.  The reason, there was not enough proof on the lender’s part of owning the note; seems as though the process of foreclosure is going to take even longer.

With all the shoddy paperwork, what type of impact will this have on the real estate market?

A slowing effect on foreclosures, so basically property values should see an increase in markets that are considered desirable and a leveling in values for harder hit areas where every other house is a lender owned vacancy.  The future, the harder hit areas will become popular again as home values begin improving in the desirable areas, against the lower priced harder hit areas.  New inventory will also begin to pick up but not just yet that’s on the horizon.

How will this effect private lending?

Well not the same as it is affecting large banks.  Aside [If you buy paper from any institution then you better scrutinize the paperwork to make sure they are the current note holders among a myriad of other important things.]

The upside to the robo-signing  scandal, banks maybe a little easier to work with for short sales and loan modifications.

Private lenders will find themselves in a better investment in a shorter period of time, due to the slowing of foreclosures and the appreciation of various types of property. Even the DOW is showing appreciation in the REIT’s being offered.  In the coming months and years private lending will prove it self to be a very lucrative investment strategy in this weak yet improving real estate market.

Take advantage of the wave of our near future.

Welcome to 2011: Sunday Morning Thoughts 2 January 2011

Image via Wikipedia

With the New Year underway we are all looking more hopeful towards the immediate future.  This past holiday season showed signs of the return of consumer confidence.

All signs indicate we are still slowly emerging from our deep recession.  It is a slow process, but nonetheless we are emerging.  Consumerism from the holiday numbers looks like it is making a comeback, with a usage of cash instead of plastic.

Although the DOW almost made it to 12,000, it is now going into another cycle.

As for the housing market, even with the recent interest rate hike, will remain a flat line, then a sudden down turn and on to leveling out and slowly appreciating.  In the coming weeks you will hear and read more from many analyst about the impending double dip in the housing market.  Actually a good thing for investors; there’s always a silver/platinum lining to all clouds, buying now for homes, office space, and apartments deserves more than a light consideration.

Leveraging your money as a private lender can earn a nice return without the headaches of ownership, so if you don’t feel like owning an income property then make an income with being a private lender.

Retrospectively Looking Forward: Sunday Morning Thoughts 26 December 2010

The end of the year makes you think of what happened to time?  Didn’t we just do a New Year?  Almost 365 days have gone by and a lot has happened in this year which affects many of us.

We have witnessed healthcare, banking and Wall St Reform to lenders re-assessing foreclosure paperwork.  We have seen the real estate market go from a dive bomber decline to a flat line.

As far as investing goes, well the stock market has been surprising for some, investors have been realizing returns, and consumers are returning to consumerism.  All things look like we are returning to normal, but things are a little different.  Investors are not using all the traditional models of investing and consumers are not using the plastic money as much as they use to, paper takes precedence.

Interest rates are at an all time low.  Making it affordable to pick up housing deals but lenders have been so tight with credit that even a 750 credit score may not get a mortgage with favorable rates.

This has been the year of restructuring, rethinking, and basically a redo. Wow in school they always warned, that in life there aren’t any do-over’s, well, in some cases, yes.

We are living through a recession depression, not equal to the Great Depression, but still we are affected.  Unemployment, but a new job outlook is on the horizon; Employers are starting to hire again and set to do so even more in the coming New Year.

All in all, the New Year of 2011 shows promise, an increase in prosperity, and challenge.

Neutral Arbitrage and the Effect on ROR: Sunday Morning Thoughts 19 December 2010

Quick recap, positive arbitrage is when your investment return increases with financing.  Negative arbitrage, your investment return decreases with financing.  Neutral arbitrage, your return on investment does not change with financing.

So how can an investor have positive or neutral arbitrage, picking the right loan is key to having a better rate of return.  When considering commercial property, such as multi-unit apartments, a low to no interest loan is best.

Interest only loans were only meant to have a life of no more than five years, after five years the loan could become upside down.  In today’s credit climate having a no interest loan would be difficult.  Lenders were admonished by the government for offering what is known as an investor’s loan to the average American.  This offering to the average person caused many to be in over their head at the time of the loan reset, contributing to our current foreclosure crisis.

All three arbitrage can be present when private lending, of course not at the same time; it just depends on the deal.

Related Articles:

http://backedbyrealestate.com/2010/11/14/arbitrage-and-real-estate-sunday-morning-thoughts-14-november-2010/

Negative Arbitrage and the Effect on ROR:  Sunday Morning Thoughts 12 December 2010

Negative Arbitrage and the Effect on ROR: Sunday Morning Thoughts 12 December 2010

Different risk and return of investment for the different investors (Photo credit: Wikipedia)

Negative arbitrage does not mean you will lose on the investment, negative arbitrage is when your investment return decreases with debt financing.  This is not to say that you are losing in your investment.  It means that you could have had a higher return with cheaper money.

Although the term negative arbitrage conjures images and feelings of loss, but that does not have to be the case.  With lending practices being tougher and the cost of money being higher, negative arbitrage will become more and more of a factor with investors.

What this means, the investment needs to have greater cash flow and/or appreciation to make up for the loss in arbitrage.

Related articles

• Millionaire Calculator (creditloan.com)
• http://backedbyrealestate.com/2010/11/14/arbitrage-and-real-estate-sunday-morning-thoughts-14-november-2010/