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Entropy

2010-02-10T00:42:00.003-05:00

The concept of entropy is one of the most useful terms for understanding just about everything. While it has its origins in natural law – thermodynamics, specifically – the concept holds true pretty much across all closed systems.

In the simplest of terms, every closed system will ultimately degrade toward a state of maximum entropy. I’ll use the current political system of the U.S. as a convenient example. When American democracy was first shoved out of the nest by the founding fathers, it was new, fresh, and energetic. It took the world’s breath away at its boldness and unlimited promise, and set the wheels turning on tangible change across much of the world.

Before the ink dried on the Constitution, however, the degradation began. From the beginning, the country’s political operations fell into the hands of a strictly limited number of parties, which quickly coalesced into just two. Since then, they have essentially shared power, with only minor differences in policies between the two. Simply, absent a disruptive external force, the closed political system quickly matured into an institutionalized “sameness” that all but assures no serious challenges – leading, ultimately, to the certainty it will degrade to only a shell of its former self.

It was, perhaps, because of his own understanding of natural law that Thomas Jefferson was heard to remark, “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure.”

That doesn’t mean I am advocating revolution, dear reader – just pointing out the fact that any closed system, no matter how well constructed, will degrade. To expect the United States of America to avoid this fate is to expect the impossible. Switching to a corporate example, I used to be a regular buyer of Toyota cars. They were well made, innovative, and suited my changing needs over the years. And I wasn’t alone – in 2007 they became the world’s largest automobile maker, with a global manufacturing and distribution system that made them appear dominant. Behind the scenes, though, entropy was at work.

In 2008, when the time had come to lease a new car, I reflexively headed over to the local dealer fully expecting to drive off with yet another Toyota, just as I had done several times over the previous decade or more. But as I walked around the showroom, it was impossible not to notice that the company had lost its edge. The cars on offer were not only more expensive than the competition, but even the newest models had that “so yesterday” look about them.

As I said at the onset, you can see entropy at work in virtually every closed system. Consider the U.S. dollar, which became the world’s de facto reserve currency as a result of Bretton Woods. What an amazing advantage for the United States – this unique ability to provide the world’s central banks with their primary reserve component! And to have all the world’s commodities dealt in dollars. In short, the dollar became the centerpiece of the global economic system.

It was, of course, damned to entropy, with Nixon’s ending the dollar’s gold backing just being part of the natural progression. And if he hadn’t done it, one of his successors would have – due to some “emergency” or as a “temporary” measure, or some other flimsy political cover. Regardless, the degradation of the currency gained speed and, systematically, it’s been all downhill since.

We the people are no longer content with a free-market system that embraces periodically burning down the house in order to rebuild stronger and better – a system which has been proven to create wealth, and lots of it. Instead, we are hell bent on adopting the closed economic system of a socialist model where everything and everyone is tightly controlled.

On that point, an article in today’s edition of the Wall Street Journal titled “No Exit in Sight for U.S. as Fannie, Freddie Flail” sheds light on the continuing degradation in the free market that used to underpin the nation’s hugely important housing sector… Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble. After prices collapsed, sending shock waves around the world, the federal government put America's housing-finance system on life support. It has yet to decide how that troubled system should be rebuilt.

On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion.

The government is willing to tolerate such open-ended exposure for two reasons. First, it sees the companies as essential cogs in the fragile housing market. Fannie and Freddie buy mortgages originated by others, holding some as investments and repackaging others for sale to investors as securities. Together with the Federal Housing Administration, they fund nine in 10 American mortgages. Worries about potential insolvency would cripple their ability to fund home loans, which would hamstring the market.

Second, the companies are a convenient tool for the administration to use in its campaign to clean up the housing mess. "We're making decisions on [loan modifications] and other issues, without being guided solely by profitability, that no purely private bank ever could," Mr. Haldeman said in late January in a speech to the Detroit Economic Club.

Besides playing a key role in the loan-modification program, Fannie and Freddie have jump-started lending by state and local housing-finance agencies by helping to guarantee $24 billion in debt. They also are lending support to the apartment sector by becoming the main funders of loans to builders and buyers of apartment buildings.
By using Fannie and Freddie for such initiatives, the White House doesn't have to go to Congress for funding. The Treasury and White House can simply issue instructions to Fannie and Freddie via their federal regulator, the Federal Housing Finance Agency, or FHFA.

The government is "running Fannie and Freddie as an instrument of national economic policy, not as a business," says Daniel Mudd, who was forced out as Fannie Mae's chief executive in September 2008 when the government took control.
(Full story here.)

Can’t you just smell the entropy? The results are not just predictable, they are evident – just look around.

As investors, it is, I would contend, important to understand the notion of entropy – and to watch for it in your portfolio companies, in your bureaucracies, and, on a more personal level, your relationships and your health. On that last point, the human body is very much a closed system and so, as we all are too painfully aware, will degrade until it ceases to exist.

You can slow the degradation by taking care of yourself. But it’s also worth remembering that it’s a one-way slope, so enjoy yourself while you are fit and able to.

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Provided by Casey's Daily Dispatch

CBO Warns of Never-Ending Budget Woes...

2010-02-05T07:47:00.003-05:00

Just a few short days ago, the Congressional Budget Office (CBO) became the first official D.C. source to open its bomb bay doors and let loose on all of us. The CBO's projections: Instead of falling substantially from $1.4 trillion in 2009 (9.9 percent of GDP), the 2010 deficit would essentially hold steady at $1.35 trillion (9.2 percent of GDP).

The massive 2010 deficit would be followed by another $980 billion deficit in 2011 ... $650 billion in 2012 ... and $539 billion in 2013. Total red ink through 2020: $7,400,000,000,000!

As stunning as those figures are, long-term projections usually UNDERESTIMATE the deficit. Roughly 80 percent of the four-year deficit forecasts issued in the past three decades ultimately proved too optimistic, according to The New York Times.

Politicians love spending what isn't theirs. Why? Those forecasts rely on growth, revenue, and spending projections that don't pass the test of time. Politicians just can't help themselves — pandering, over-borrowing, and overspending is in their nature.

Just consider this: Two years ago, the CBO forecast the 2010 deficit would be $241 billion. Now the CBO is throwing that projection out the window and saying it'll be more than FIVE AND A HALF TIMES AS BIG!

Obama Unleashes Carpet-Bombing Campaign of Red Ink ...
But if you thought the CBO numbers were bad, you should read through the Obama administration's latest budget. It forecasts a whopping $1.6 trillion deficit this year — more than $200 billion above and beyond the CBO's numbers. That would come to 10.6 percent of GDP, the worst in modern time.

What about 2011? Another $1.3 trillion. And the years after that? More of the same. The White House Office of Management and Budget (OMB) is now expecting $8.5 trillion in red ink over the next decade, with the annual deficit NEVER falling below the 3 percent-of-GDP threshold considered fiscally responsible.

It gets worse ... Those projections assume relatively rosy growth — 3.8 percent next year, and more than 4 percent over the following three years. We've only seen a string of 4 percent+ growth readings twice in the past three decades. The projections also include assumptions about taxes and spending discipline that won't pass the test of time. One example: The OMB projects $250 billion in savings from a proposed three-year freeze on a significant chunk of domestic spending. Increases thereafter would be limited to the inflation rate.

I don't know about you, but I think the chance of that happening is somewhere between slim and none! Neither the Democrats nor the Republicans have shown any real spending discipline. There's no reason to assume they'll have a "Eureka!" moment in the middle of the decade. And I'm not even getting into the Social Security- and Medicare-related problems. We've promised trillions in benefits over the coming years that also threaten to blow our nation's balance sheet to smithereens.

Debt, Debt, Debt. And Did I Mention Debt?
U.S. public debt is expected to double in 10 years. Bottom line: A never-ending wave of budget bombs is headed our way in the coming years. That will drive the total U.S. public debt load inexorably higher — from about $9.3 trillion in 2010 to $18.6 trillion by 2020. And the cost of servicing all that debt? It's projected to more than QUADRUPLE from $188 billion to $840 billion!

I'm at a loss for words, folks. These figures are horrendous ... outrageous ... infuriating ... and terrifying all in one.

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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Bond Market Bubble - Just a Matter of Time

2010-02-04T19:15:00.005-05:00

If there was ever a time to have a growth portfolio that gives you BOTH a powerful offense AND an impenetrable defense ... THIS IS IT!

Mere days after Obama released his 2011 budget estimates calling for the largest deficits of all time ...

Even as Washington is busy gearing up for its next record-shattering spending, borrowing and printing binge ...

The newest unemployment reports show an increase in job losses ... the Dow has plunged by over 200 points ... and the Nasdaq is down nearly 50 points. And adding to the frenzy, Moody’s Investors Services has warned that the greatest debt juggernaut in history is about to have some very serious, unintended consequences.

According to Moody’s, if Washington doesn’t slash these deficits — and fast — America’s triple-A credit rating is in grave jeopardy!This does not threaten short-term Treasuries maturing soon. But it does raise serious doubts about long-term bonds. Moreover, if the credit rating of the U.S. government bonds are suspect, imagine the disaster possible in junk bonds!

Last year, Wall Street pitchmen pawned off an all-time record of $147.7 billion-worth of junk bonds to investors ... and already this year, they’ve dumped $11.7 billion in more junk on investors in a single week. That’s another all-time record high — mostly in companies that were so close to death a few months ago.

The handwriting is clearly on the wall:
This bond market bubble is destined to burst just like the tech and housing bubbles before it. And when THIS bubble bursts, it will automatically drive long-term interest rates sky-high — pure poison for an economy in as delicate a condition as ours is now.

THIS, is the most important fundamental economic shift looming in the United States today.

The big question that remains — the one that economists can never seem to answer — is “WHEN will this fundamental shift hit the fan?

Article by Steven Weiss

Banks Can No Longer Sing "What a Friend We Have in Washington"

2010-01-29T09:14:00.004-05:00

These days, the financial industry's locus of power can't be found in London. It's not in New York City. Frankfurt? Tokyo? Davos, Switzerland? Nope, nope, and nope.

The real decisions that impact the capital markets are being made in Washington. And they're sometimes being made by politicians who don't really have a clue about how the industry works, or what unintended consequences their actions may have. If that doesn't scare you, I don't know what will.

Look no further than last week's market carnage for proof of who's in charge. The market was continuing on its merry way — until Washington lobbed several curve balls at Wall Street.

The reaction was swift and severe: The overall market suffered its biggest hit in months, with financial stocks getting hammered particularly hard. Moreover, the "VIX" index of volatility surged 55 percent in a span of three days. We haven't seen a move that large, that quickly since 2007.

It's clear to me that the political tides are shifting for the financial industry — and not in a good way. This could have widespread implications for the markets I follow most closely, so I want to expand on some key points.

Bankers No Longer Free to Run Wild?
President Obama shocked the markets last week with a new plan designed to rein in the nation's banks. It would specifically bar banks from holding or investing in private equity and hedge funds that aren't related to customers they're serving. Banks also would have to shed so-called "proprietary trading" units that use their own capital to place bets on the market.

Combined, these moves could impact companies like JPMorgan. It runs a OneEquity Partners PE unit that makes $8 billion in investments. It could also hammer prop trading houses like Goldman Sachs and Morgan Stanley, which generate billions of dollars in revenue from such activities.

President Obama has shocked the markets with a plan to rein in the nation's banks.
In the bigger picture, as Martin noted earlier, this signals that the "Bailout Brigade" of Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke may be losing influence. The outrageous behavior of Wall Street firms and the banking industry — and Washington's coddling of them — have finally pushed average Americans over the edge.

They're sick of watching companies make stupid loans, arrange stupid deals, blow themselves up, take billions of dollars in taxpayer money, and then — in a move that defies all logic, morality, and sensitivity — turn around and pay themselves billions and billions in bonuses! So they're rising up in anger and trying to "vote the bums out."

Result: The policymakers in Washington are finally being forced to listen to the masses — and the bankers and their lobbyists are running scared. So are bank investors, who have grown accustomed to a steady diet of D.C. handouts.
FHA Tightening the Screws?

Change is also afoot in the housing and mortgage arenas. The Federal Housing Administration, or FHA, has been making overly lax loans for several quarters now — even as house prices fall and defaults rise. Its credit reserves are running at the lowest level in modern history, raising the risk of yet another massive bailout.
But in an about-face from the recent trend toward blindly marching off a cliff, this federally-backed mortgage lender is tightening the screws. It plans to soon implement higher down payment requirements for borrowers with lousy credit.
It's also jacking up the upfront premium borrowers have to pay into the program from 1.75 percent to 2.25 percent of the loan balance. Those premiums fund insurance that protects lenders for losses on FHA loans. Finally, FHA will ask Congress for authority to raise the monthly premiums that borrowers have to shell out along with their regular payments.

A few years ago, when the FHA program was a seldom-used option for mortgage borrowers, something like this would hardly matter. But FHA now guarantees roughly 3-in-10 of all mortgages being made. So its move could be significant.

At the same time, the administration isn't entirely cutting off the housing and mortgage industries — or borrowers, for that matter. Reports are now circulating that the Obama team will soon revamp either its $300 billion Hope for Homeowners (H4H) program or the larger Home Affordable Modification Program (HAMP). We may even see changes in both.

These programs are designed to reduce foreclosures through the use of loan modifications, or "mods." But they've failed to significantly — and permanently — stem the flood of home repossessions because they don't aggressively attack the "negative equity" problem.

Efforts are underway to reduce foreclosures through the use of loan modifications.
What do I mean? These days, borrowers who go to their lenders or the government for help typically get their interest rates cut, their loan terms extended, and/or their monthly payments lowered. But their lenders don't cut the amount of principal they owe.

That leaves borrowers owing, say, $450,000 on a house that was once worth $500,000 but now is worth just $300,000. The question isn't "Why WOULD you just mail the keys back to your lender?" in that situation. It's "Why WOULDN'T you?" Even if home prices immediately turn around and start rising at their historical rate of a few percentage points a year, it would take ages for you to build positive equity again.
I highlighted this as a critical flaw of the Obama plan almost a year ago in Money and Markets when I wrote: "Higher loan-to-value ratio mortgages have ALWAYS had higher default rates than lower LTV ones. Why? When borrowers have none of their money at risk — skin in the game, if you will — they have no vested interest in sticking with the property. They're giving up nothing by walking away.

"Sure, they'll take the lower payments they're going to be offered as part of the Obama modification plan. Sure, they'll stick around for a while. But if anything ... anything ... throws their financial situation off balance, a high percentage of them will resort to "jingle mail" — meaning, they'll pop their keys in an envelope and send it off to their lender"

Because neither H4H nor HAMP has lived up to expectations, the political pressure on the administration is reaching a tipping point. And if the administration responds by fixing that crucial "principal reduction" flaw, it would be a big deal. It would be a significant step toward lowering the foreclosure rate and helping out the housing market.

The Impact on You
So what does this all mean for you, especially if you're investing in financial stocks or bonds and related industries? You simply can't be as bullish on them as you were when Washington was their best friend.

Policy is no longer being written by a bunch of bank lobbyists, then rubberstamped by the Wall Street cronies in Congress and on the Obama administration's financial team. That's good news for the long-term health of the country ... but a potential chink in the armor for the markets, especially financial stocks.

At the same time, the nasty knee-jerk market reaction last week could scare policymakers right back into bailout mode. If stocks roll over ... if home sales continue to slow (as opposed to just suffer a post-tax-cut hangover for a month or two) ... and if mortgage credit tightens anew, the Bailout Brigade might be rolled right back out again.

What is certain is that volatility and confusion levels among investors will rise. So while it's not exactly time to go all-in short here, or dump all your "longs," it IS time to pare back your exposure, take some gains off the table, and let positions that get stopped out stay that way. Then we'll see how this all shakes out.

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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

The Price of Construction Materials Is About to Soar

2010-01-05T11:03:00.002-05:00

Here is a great article I came across by Tom Dyson

If you want to know what's going on in the economy, you need to watch the price of lumber...

Housing is the most important asset class in America. When house prices fall, banks fail, consumers cut back, unemployment rises, and the economy collapses. But when house prices are strong, the economy rebounds.

In other words, the U.S. real estate market is the main pivot in the whole economic mess we're in right now. If you can figure out what's happening in real estate, you can figure out everything else.

Lumber and building materials are the best leading indicators of real estate.

Take the timeline of the current crisis as an example... The lumber price reacted before any other market: Lumber prices peaked in May 2004. The Bloomberg Homebuilders Index peaked in July 2005. The Case-Shiller U.S. Home Price Index peaked in July 2006. The credit crunch started in February 2007, when New Century Financial collapsed. And finally, the S&P 500 peaked in October 2007.

When the recovery comes, I expect it'll show up first in building materials, too...

So what's happening right now in the building materials markets?

Ro-Mac is a $100 million lumberyard near Orlando, Florida. Ro-Mac supplies central Florida's homebuilders and contractors with building materials like 2x4s, rebar concrete, and gypsum wallboards.

I received an e-mail from Ro-Mac's general manager, Don Magruder, last week. Don says several suppliers announced price hikes in December and he expects "a caravan" of further price increases in January.

"My feeling is that the month of December is the calm before the price storm of 2010," he writes. Don advises contractors and builders to be "wary" of entering long-term contracts.

He says supply is the reason prices are going to rise. Manufacturers of building materials have closed plants, fired workers, and sold their inventories. Many have gone out of business altogether. Don calls it "supply destruction." He says the moment demand picks up, there's going to be an instant shortage of materials.

My wife and I are taking advantage of the situation by doing extensive renovations to our home. We don't need new kitchen cabinets, but my wife and I have found such a good deal, we're thinking about having our entire kitchen remodeled. We're also considering a new roof and an upgrade for our air conditioning system. Last month, we had our yard landscaped front and back.

It's hard to say exactly how much we're saving. But given the low price of labor and materials, I bet we're getting at least a 30% discount.

If you're looking to get some work done on your house, now's a great time. But the easiest way to take advantage of this situation is to buy stock in forest-products companies like Weyerhaeuser and Rayonier. They benefit when building material prices rise.

Good investing,

Tom

Credit Losses Rising Anywhere and Everywhere

2009-07-10T09:25:00.002-04:00

Remember when policymakers at the Federal Reserve told us in 2007 and 2008 that the credit problems were "contained" to the subprime mortgage sector? Or when then-Treasury Secretary Henry Paulson spouted the same line? Oops.

We've already established how those guys were dead wrong about home loans. Indeed, the delinquency rate on U.S. mortgages surged to a record 9.12 percent in the first quarter of this year. Late payments rose in ALL categories, including prime fixed-rate loans, the absolute "cream of the crop" in the mortgage world.
Now, it's clear they were dead wrong about the entire credit market! Credit losses and delinquencies are rising anywhere and everywhere, and I've got the numbers to prove it.

In the first quarter of this year, the credit card delinquency rate shot up to 6.6 percent ... a record high. RVs ... HELOCs ... Personal Loans — Borrowers Can't Pay Back Anything! Get a load of these hot-off-the-press figures from the American Bankers Association (ABA). In the first quarter of 2009 ...

•Home equity loan delinquencies increased from 3.03 percent in the fourth quarter of 2008 to 3.52 percent.
•Home equity line of credit delinquencies rose from 1.46 percent to 1.89 percent.
•Credit card delinquencies rose from 5.52 percent to 6.6 percent (measured on a "percentage of dollars outstanding" basis).
•Direct auto loan delinquencies increased from 2.03 percent to 3.01 percent.
•RV loan delinquencies increased from 1.38 percent to 1.52 percent.
•Mobile home loan delinquencies increased from 2.96 percent to 3.70 percent.
•Personal loan delinquencies increased from 2.88 percent to 3.47 percent.

The home equity loan delinquency rate is a record high. The home equity line of credit rate is a record high. The credit card delinquency rate is a record high. And so is the level of the aggregate consumer credit delinquency index that the ABA has been putting together since 1974!

What about CORPORATE credit quality? Any "green shoots" there? Nope.
-The default rate on junk bonds has almost quadrupled to 9.5 percent from 2.4 percent a year earlier, according to Fitch Ratings.
-A University of California economist just predicted that a whopping 20 percent of hotel development loans made in the U.S. may default over the next year and a half.
-Standard & Poor's just said it's planning to slash ratings on more than $235 billion worth of commercial mortgage-backed-securities. Loose underwriting, falling asset prices, slumping rents and rising vacancy rates are wreaking havoc on the entire commercial real estate sector.

What's the Problem? We Had the Biggest Credit Bubble of All Time, That's What!

Slumping rents and rising vacancy rates are wreaking havoc on the entire commercial real estate sector. Americans simply borrowed and spent way too much during the halcyon days of the early-to-mid 2000s. They were counting on ever-rising home values to bail them out from high-risk loans.

The lending industry actively egged them on, as did policymakers at the Fed, who kept interest rates too low for too long. The insanity spread to commercial real estate ... to corporate buyout loans ... to virtually every corner of the credit market!

Now, we're all dealing with the hugely negative consequences of this massive credit bubble. What a shame! I can only hope that borrowers, lenders, policymakers, and regulators behave more responsibly in the future.

In the meantime, I continue to suggest the following: Stay away from sectors vulnerable to deteriorating credit quality, tighter lending standards, falling home values, and falling commercial property prices. That includes banks, insurers, home builders, and REITs.

And what about all the talk out of Washington on how these companies are just fine, how the economy is recovering strongly, and how happy times are here again?
Plug your ears and lash yourself to the mast! These guys didn't get the mortgage crisis right. They didn't get the credit crisis right. And they sure as blazes aren't getting the economy right, either. Consider: Just a few weeks ago, politicians on Capitol Hill and policymakers at the Federal Reserve were tripping all over themselves to discuss the "green shoots" in the economy. Now, they're openly admitting they screwed it up.

Joe Biden spilled the beans when he announced that the administration had "misread the economy." Vice President Joe Biden said last weekend that the administration "misread the economy." Their hopelessly optimistic projection that unemployment would peak at 8 percent — has been thrown in the trash. The unemployment rate has instead climbed to 9.5 percent ... and double-digit levels are right around the corner.

Heck, you now have key officials, like Obama adviser Laura Tyson and House Democratic leader Steny Hoyer, talking about the possibility of a SECOND economic stimulus package. That's a tacit admission that the $787-billion package enacted in February is failing to get the job done.

Again, this should come as no surprise to you. Unlike the ivory tower economists in Washington, we live in the real world. We know how bad things are, and how serious the risk is that they'll get worse — MUCH worse. So we've been warning you constantly to avoid risk, and batten down the hatches for a worsening economic storm.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

What the Dramatic Turn in the U.S. Saving Rate Could Mean to You

2009-06-10T09:34:00.002-04:00

During the past few weeks of exciting "green shoot" news, a very important economic statistic has been ignored: The U.S. saving rate.

U.S. citizens have been saving less and less since the early 1980s. And the saving rate even turned negative during the height of the real estate bubble. But in April, the personal saving rate in the U.S. surged to 5.7 percent, a 15-year high. That represents a massive trend change and has important consequences for the future. But before I address them, I want to remind you of ...

The Formula for Prosperity
Let's start with an example of a very basic economic thought ...

By following the simple formula of "save and invest" over long periods, individuals —and nations — grow wealthy.

You can use the results of working at your job in two distinct ways: Either you consume, or you save. If you consume all the results of your work, the whole story ends immediately, no wealth is generated.

However, if you sock away some money, the savings are invested — either directly or indirectly by using an agent such as a bank. In other words, as long as you don't hide your savings in your mattress, the money is being put to work someplace else.

The goal of investing is to have more money in the future than you have now, so that you are able to consume more in the future than you can in the present. This is the very definition of wealth generation. And by following the simple formula of "save and invest" over long periods, even over generations, individuals — and nations — grow wealthy.

Bottom line: Saving is the precondition to wealth generation. There is no way to short cut or fade this economic law. And this formula does not work backwards, meaning that it is impossible to consume or to borrow one's way to prosperity.

Wealth Personal Saving Rate Plunges ...
During the second half of the 1990s, the U.S. saving rate started breaking down. That's because Alan Greenspan's stock market bubble kicked in, and people had the illusion of wealth generation without the need to continue saving.

In 2001 the saving rate hit the zero mark for the first time, and then got even worse! Reason: Greenspan's monetary policy started the biggest real estate bubble of all time, and people were further lured away from the concept of saving. They took on debt like never before. They relied upon rising stock and real estate prices to take care of their future prosperity.

To make matters worse, this absurd idea was massively promoted by the central bankers who never called the bubble for what it was. They even tried to rationalize it instead of issuing appropriate warnings.

The rest is history: The bubble burst and together with it the dreams of millions of people. And the worst financial and economic crisis since the 1930s started to evolve.

Thanks to the Current Crisis, It Seems as if Americans Have Finally Come to Their Senses!
Over the past few months the situation has changed dramatically. The wealth illusion, which was fostered by the Fed-induced dual bubbles, is finally gone.
The Baby Boomer Generation, some 78 million strong, has realized that planning on rising stock and real estate prices to meet their future needs has led to huge losses.

This wealth destruction has unveiled a massive gap in retirement provisions. All of a sudden many Baby Boomers have started to worry about how to finance their old age. They've suddenly realized that consumption and indebtedness are not the way to prosperity. Consequently, they've started to cut back spending and save more.
In fact, shortly after the recession started in late 2007, the personal saving rate surged from zero to 5 percent. A short pullback followed. But then what looks like a new and healthy uptrend developed.

The U.S., world capitol of the "buy now, pay later" attitude, is undergoing a huge shift. Saving is making a real comeback.

This change in attitude is in all likelihood just the beginning of a long-term trend that will be with us for many years to come. In fact, I expect a lasting return to the country's former saving rate of roughly 10 percent.

The Consequences, Both Good and Bad ...
To close the gap between their current assets and their retirement needs, Baby Boomers will have to save more and spend less. Saving is the precondition for a better future. And finally Americans are abandoning the track of more and more indebtedness, which unquestionably leads to decline and poverty.

So long term, a rising saving rate is very positive. It's laying the foundation for future growth and prosperity. In the shorter term though, this trend has rather unpleasant implications, particularly in the area of consumer demand for goods and services.

As I already mentioned, Baby Boomers are now facing retirement and don't have much time left to close the gap between their current assets and their retirement needs. So they will have to cut back their spending, which does not bode well for the economy or the stock market.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Home Foreclosures are Souring

2009-05-14T09:24:00.001-04:00

Just out...

Home foreclosures are soaring: RealtyTrac reported that home foreclosure filings skyrocketed 32 percent to a new all-time record high in April, making the March-April period the worst two-month surge in foreclosures ever with a record 682,000 homeowners receiving notices.

And as if that news isn’t disturbing enough, they’re also warning that the greatest surge in foreclosures of this crisis is still ahead.

Conclusion: The housing bust that lit the fuse on this economic crisis is nowhere near ending.

Obama: A Major Step in Making Homes Affordable!

2009-04-30T07:46:00.003-04:00

Yesterday we saw additional positive steps in making homes more affordable for all homeowners that need assistance. The US Treasury Department has now addressed second mortgages. You may have noticed from previous postings on our blog or newsletters that we believe second mortgages are a key to making this tremendous impact on today’s economy. For over two years, we have focused our attention on this niche market and became a buyer of bulk purchases in this space directly from banks. Everyone can finger point as to who to blame, but at the end of the day we need solutions. Yesterday’s announcement will make it easier for borrowers to modify or refinance their loans, and the owner and servicers are now given more flexibility than ever to work with homeowners.

We do recognize that unfortunately, it is the investor who put money into a growing market that is not getting a single reprieve. There is no assistance to refinance, to modify or to even limit some of the tax implications if debt is forgiven. Hopefully you were hedged and are not being impacted. While we continue to speak out for investors when we can, we will continue to bring you pertinent information like government programs or changes in legislation.

For now, we are happy to see positive steps taken in adjusting mortgages and reducing foreclosures, specifically in the second mortgage world. Please see the announcement below:

U.S. Treasury Department
Office of Public Affairs

FOR IMMEDIATE RELEASE: April 28, 2009
CONTACT: Treasury Public Affairs (202) 622-2960
http://www.financialstability.gov/latest/pr04_28.html

Obama Administration Announces New Details on Making Home Affordable Program Parallel Second Lien Program to Help Homeowners Achieve Greater Affordability Integration of Hope for Homeowners to Help Underwater Borrowers Regain Equity in their Homes

WASHINGTON - The Obama Administration today announced details of new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program, including an effort to achieve greater affordability for homeowners by lowering payments on their second mortgages as well as a set of measures to help underwater borrowers stay in their homes.

"With these latest program details, we're offering even more opportunities for borrowers to make their homes more affordable under the Administration's housing plan," said Treasury Secretary Tim Geithner. "Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind."

"Today's announcements will make it easier for borrowers to modify or refinance their loans under FHA's Hope for Homeowners program," said HUD Secretary Shaun Donovan. "We encourage Congress to enact the necessary legislative changes to make the Hope for Homeowners program an integral part of the Making Home Affordable Program."

The Second Lien Program announced today will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers.
Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50 percent of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien. Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol. Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate.

Separately, the Administration has also announced steps to incorporate the Federal Housing Administration's (FHA) Hope for Homeowners into Making Home Affordable. Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan. Refinancing into a new loan below the home's market value takes a borrower from a position of being underwater to having equity in their home. By increasing a homeowner's equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify.

Under the changes announced today and, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower. To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancing similar to those offered for Home Affordable Modifications. These additional supports are designed to work in tandem and take effect with the improved and expanded program under consideration by Congress. The Administration supports legislation to strengthen Hope for Homeowners so that it can function effectively as an integral part of the Making Home Affordable Program.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18. The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners. Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately. Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program. Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more
than 75 percent of all loans in the country are now covered by the Making Home Affordable Program.

Continuing to bolster its outreach around the program, the Administration also announced today a new effort to engage directly with homeowners via MakingHomeAffordable.gov. Starting today, homeowners will have the ability to submit individual questions through the website to the Administration's housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov. To submit a question, homeowners can visit www.MakingHomeAffordable.gov/feedback.html. Selected questions from homeowners across the country and responses from the Administration will be available at www.MakingHomeAffordable.gov/asked-and-answered.html.

About PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and accredited real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio and taking advantage of niche markets.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include private lending options; preconstruction syndication; and bulk purchases of foreclosed properties and mortgage notes. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.
For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk.

Economy Booming Again? Seriously?

2009-04-17T10:32:00.002-04:00

It's hard to find anyone who's still bearish on the economy or the market these days. Listen to the average pundit on CNBC and this is what you'll hear:

-The credit crisis? It's over! Quit worrying.
-The real estate mess? Fixed! No problem.
-The economy? Rebounding. The worst is behind us.
-The markets? They're headed to infinity and beyond! Better get on board.

I've talked about the credit crisis a few times. And no less an authority than the International Monetary Fund (IMF) believes we've only acknowledged $1.29 trillion of the $4 trillion in total global credit losses to date. That means we're not even a THIRD of the way through the process.
In the real estate arena, we're seeing tentative signs of life in some hard-hit markets. But it's the distressed, "fire sale" stuff that's moving. Inventory levels remain high, and foreclosures show no sign of abating. In fact, foreclosure filings hit a new record high of 341,000 in March — a gain driven by rising unemployment, falling home prices, and the expiration of several, temporary state and industry moratoriums.

And that's just on the RESIDENTIAL front!

The COMMERCIAL real estate business is in full-scale meltdown mode. Prices are plunging, vacancies are soaring, and rents are dropping. Office tenants recently vacated a whopping 24.9 million square feet of space, the most since the 9/11 attacks. And General Growth Properties, the second-biggest mall operator in the U.S., just filed for Chapter 11 bankruptcy protection. The company is buried under $27 billion in debt, and its bankruptcy is the largest EVER seen in the commercial real estate industry.

It's (still) the Economy, Stupid!
But it's the economy that could be the weakest link here. Several companies have come out and said that business isn't getting any worse. Some of the earnings reports I've read talk about how conditions are now simply horrendous, rather than Armageddon-like.

But does that mean things are getting better? Is the economy really ramping up? Is the worst really behind us? I find that hard to believe. Just consider what we learned this week ...

The consumer is still on the ropes! Retail sales plunged 1.1 percent in March. That was a huge swing from the 0.3 percent gain in February, and much worse than forecast.

No matter how you slice and dice the numbers (exclude autos, exclude gas, etc.), you still come to the same conclusion: The consumer is on the ropes and not in the mood to blow his dwindling paycheck at the mall. That's unlikely to change anytime soon, not with the level of continuing jobless claims now running at more than 6 MILLION — the highest in U.S. history.

Factories are sitting idle! Industrial production dropped 1.5 percent in March. That was far worse than the 0.9 percent dip that was expected and the 14th decline in the past 15 months. Capacity utilization — the amount of available space that's actually being used — fell to 69.3 percent. That's the lowest level in the 42 years the government has been keeping track!

Deflation is far from dead! The Federal Reserve has been pumping money into the economy like mad to offset deflation. But so far, it doesn't seem to be working out that well. The Producer Price Index (PPI) dropped 1.2 percent last month, much worse than the forecast for a flat reading.

On a year-over-year basis, wholesale prices are now falling at a 3.5 percent rate. That's the deepest rate of deflation recorded in this country since January 1950! In addition, consumer-level deflation came in at 0.4 percent, the most since 1955.

Garden Variety Recession ... Or Something Else?
Many Wall Street investors are operating under the assumption that this is a garden variety recession. They're saying that the modicum of "less worse" news we've seen is a harbinger of "recovery." They expect consumer spending to resume its normal pace, factories to ramp production back up, and everything to be hunky dory by year end.

But if this is a much deeper economic decline ... one driven by the biggest bout of debt destruction and deleveraging this country has seen since the Great Depression ... that's a different story. In that case, the Fed's reflation efforts will fail. At best, the economy will muddle along. At worst, it will slip even further down the rabbit hole. And stocks will ultimately head lower.

I don't have a perfect crystal ball. But I believe the risk of a Japan-style economic stagnation is much higher than the traditional Wall Street pundit thinks it is. And I believe this recent rally smells more like the bear market variety — very sharp, relatively short-lived, and ultimately, doomed to fail. So I most certainly wouldn't be chasing it.

Until next time…

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

All the King’s Horses and All the King’s Men

2009-03-31T09:41:00.000-04:00

World history is bursting with real life examples that are metaphorical parallels of the nursery rhyme detailing an egg falling off a wall.

Humpty Dumpty sat on a wall.
Humpty Dumpty had a great fall.
All the king's horses and all the king's men
Couldn't put Humpty together again.

The clear lesson gleaned from this rhyme is that once a fragile organism is shattered, the pieces cannot be glued back together to recreate the original organism. This lesson holds true to all varieties of organisms; eggs, eco-systems, dinosaurs, polar bears, armies, societies, empires, and one especially pertinent in today’s world, economies.

As the world changes, we are forced to change with it. We can try to be conscious of the changes and attempt to work with the forces creating the change, or we can use all of our might to resist the change. There is a lot to be said for the pride and determination it takes to stand up for what you believe in; however, there is a fine line between strong pride and determination and stubbornness. At some point the forces of change may overpower the resistance, and being able to recognize this “tipping point” is the first step in conserving resources and maximizing the opportunities created by the impending changes.

Are there parallels between Humpty Dumpty and the world economies? It is not clear whether anyone has the answer to this question, but what is becoming clearer everyday is the strength and breath of the recession, which is on the brink of being classified as a depression (even though economists have no clear definition of a depression), is growing, and the economic experts of the world cannot reach any consensus on how to slow the growth or ultimately solve the wide variety of economic problems. The most recent developments seem to carry significant impacts, but those impacts do not seem capable of alleviating the intense pressures building on the world economies. It is clear that the forces of change still have the upper hand in the power struggle with our resistance. However, the developments, specifically the new public/private toxic asset plan outlined by the government and the Fed injecting more than $1.25 trillion into the US economy, do seem to have implications for investors even if they do not have the might to wrestle control of the economy.

Treasury Secretary Timothy Geithner recently announced the government’s plan to team with a handpicked group of private funds to purchase $1 trillion worth of toxic assets, much of it mortgage backed securities (MBS) deteriorating from the real estate bust, from struggling banks, the same banks the government has dubbed “too large to fail.” The details of this plan helped to create the rally we are seeing on Wall St. If the plans can successfully transition from paper to practice, the banks will be able to exchange the deteriorating assets for lendable money, loans will be more achievable for small businesses and the general public, fund managers will have new product to sell, pension funds will be able to satisfy their long-term obligations with a new product, and the government can pat themselves on the back for resisting the continued downturn.

However, paper is not practice. The next six to eight weeks should be a honeymoon period seen through rose-colored glasses, but the reality of practice carrying out like the plans on paper seems unlikely. This plan will be in full swing within six to eight weeks, and until the plan can be tested in practice, no bad news will be counted against the bank stocks. Until the plan is in place, we will continue to assume that the outcome on paper will mirror the outcome in practice. This is one opportunity to consider from an investing perspective. The Wall St. rally may continue for a few weeks; the low set on March 6th may endure until we can determine if this plan has any traction. If you are an active and sophisticated investor in the stock market, this could present an opportunity; however, this is one of the most economically volatile periods in history, there are no sure bets.

The Geitner plan has obstacles to its success. Foremost, as presented the plan is attempting to inject $1 trillion into the banking system by purchasing toxic assets, but there are $5 trillion worth of MBS and derivatives outstanding. This crisis is growing larger every day, and the $1 trillion provided in this plan is only a small piece of the funds being committed by the government and the Fed, much of which is coming from the taxpayers or being printed; i.e. “Monopoly” money. We should not expect this public/private plan to have any major impacts, and in reality there is a good chance we could see this plan fall apart before it takes off.

While this plan may seem far-reaching because the government is reaching out to private entities to help motivate the market to act on these toxic assets, the reality is that the Treasury has created the requirements for participating in the program in a way that only a small number of large funds can qualify. The funds need to have raised at least $500 million in the past, command a large sales force, and already own at least $10 billion in distressed loans. Only five to ten companies have such experience, and one or two rise to the top. In effect, the government is choosing the company(s) they want to team with. While this limiting factor seems typical of government actions, the ultimate unhinging is a result of the experience these private companies bring with them.

In the Geitner plan, the private companies are tasked with valuing the deteriorating assets. There are sophisticated mathematical models that are employed to determine the value of assets, the problem is that these assets are unprecedented; there are no historical models to work from so the private firms are tasked with valuing assets that are free-falling. This puts the private fund firms at odds with the banks. The banks are being devalued at a lightning pace, and they want as much as they can get for the toxic assets because every penny will help save them from complete collapse. But the private funds are gambling with any price they set; no one knows where the bottom will be. Clearly the funds want to purchase the assets as low as possible.

These assets have value; many of them are attached to tangible property like real estate. The problem is that the market is falling and no one knows how low the values will go. Underlying every one of those tangible assets are homeowners who could lose their jobs next month and stop paying the mortgage. However, Wall St. has the same underlying principles as Las Vegas, and there are always people willing to gamble. The current market value for these assets is approximately $25 - $35 on $100. However, this value is far too low for banks. The “too big to fail” banks took major gambles (along with everyone else in the U.S. and the world) and overleveraged themselves with these toxic assets. If all the assets were sold for $35 most banks would be forced to take losses large enough to send them into bankruptcy.

Ultimately, there is a strong chance the Geitner plan will not work in practice. If and when appropriate prices are not reached for these assets, the auctions will lock up and the markets will hammer the banks; it is highly likely the current rally will turn bearish in the not-too-distant future. If this theory turns into reality the next step seems to be nationalization. In the end, the best solution could be the path of least resistance, which many times is also the path less traveled.

The second development that has risen to the forefront of the economic mêlée is the recent announcement that the Federal Reserve will increase its purchases of Fannie Mae and Freddie Mac MBS from $500 billion to $1.25 trillion, double its purchases of Fannie, Freddie, and Federal Home Loan Bank bonds to $200 billion, and finally, the Fed will buy as much as $300 billion in longer-term U.S. Treasury securities. (The Federal Reserve, aka the Fed, by name appears to be a governmental agency, but in reality it is a quasi-public banking system, i.e. a government entity with private components, with the power to print money! If you haven’t taken the time to consider what the role of the Fed is in our economy it is worth the research. This announcement by the Fed is somewhat shocking. In poker terms, this could be viewed as “going all in.” These strategies will have far-reaching effects, but whether they are the desired effects is questionable at best.

In effect, the Fed is printing money to turn around and buy debt securities issued by the Treasury. These are strategies usually implemented in third-world countries trying to get off the ground or in countries like Germany prior to World War II that are willing to try anything to stay out of a deep depression. As a reminder of history, the German attempt did not fare well; the strategy created hyperinflation and intensified a dangerous and far-reaching depression. This strategy has the direct effect of severely devaluing the U.S. dollar and crippling U.S. foreign creditors; this is dangerous considering we are a heavy debtor nation asking for tens of billions of dollars per month from foreign sources to fund our massive “bailouts” and deficits. However, there is no persuading the Fed. They have made their decision, and we will have to deal with the consequences of these decisions…perhaps for generations to come.

On the positive side, these strategies continue to create opportunity. Mortgage rates are hovering around all-time lows. Real estate is sinking, and deals can be found for those willing to look. The Fed’s moves are creating a great opportunity to get financing for new projects at amazing rates, or simply refinance into lower rates. As of last week, the average 30-year mortgage rate was at 4.89% and is expected to sink to 4.5% in the near future. As a historical comparison, the lowest annual average mortgage rate seen in the 20th and 21st centuries was 4.7%, set right after World War II. In essence, this is the cheapest mortgage money has ever been! The Feds moves are clearly having a major impact on interest rates, and this creates a great opportunity to leverage the bank’s money for your gain. These rates may help to make real estate projects more attractive, and if you already have a mortgage now may be the time to refinance; a typical rule of thumb is that if you can save 1% on your interest rate it is probably worth refinancing. But keep in mind that refinancing carries with it costs; so you need to stay in the new mortgage long enough to recoup the costs.

Whether Humpty Dumpty can be saved is still a question worth asking, but it’s not clear whether any of the King’s Men have any idea how to answer such a difficult question. However, as they continue to create new strategies to glue the pieces back together, opportunities will arise and fortunes will be made…and lost.

The Opportunity in Real Estate
The key to investing in real estate is to educate yourself on the current market conditions, find quality investment opportunities, and act before the conditions change. PropertyVestors is here to help you accomplish these goals. In this edition of our monthly newsletter, we have highlighted three separate partners/projects that approach investing in the current market from different creative angles. Each of these strategies is designed to capitalize on the current market conditions, and because the strategies use different approaches to investing and utilize various locations, diversification of your investments remains a high priority.

Purchasing Rehabs for Rentals:Blue Moon Capital
A $5,000 down payment is all it takes to transfer ownership while Blue Moon Capital completes the rehab of your rental property for you. BMC will facilitate, manage, complete & pay up-front for property rehab of an average $35,000 Scope of Work. You will get 20% Equity in the property as a head start, based on your lender's final appraisal, along with a 12-month home warranty. Current focus is Pittsburg, Atlanta, Baltimore, Cleveland, Kansas City, and Philadelphia. Property Management companies are ready to fill your rental property. Great cash flow opportunity!

The mortgage crunch has created the perfect investor opportunity....Experts say "BUY NOW" in modest markets such as Cleveland, OH. Foreclosures are high, prices are low and the rental market is strong. Yet, high down payment requirements and tight lending standards still prevent investors from taking advantage of one of the best buying periods seen thus far. Blue Moon Capital offers a $0 down financing, turn-key investment model not seen anywhere else. Learn how Blue Moon Capital is a great source for taking advantage of the BUYERS MARKET with a creative in-house financing model that requires $0 down and only a $5,000 Investment. Please contact PropertyVestors for more information.

Select Private Lending Investments: American Homes
Due to the strict guidelines and "red tape" associated with bank financing these days, many real estate investors with great projects are turning to Private Lenders to obtain financing. The investors are able to obtain the financing quicker and easier, and the Private Lenders are able to have a great return with a secure investment. We have strong relationships with successful and established real estate businesses with strong track records. Our Spotlight for this month's newsletter is on our partner American Homes (AH). In December, a PropertyVestors member funded one of AH's projects, and you will notice a very positive quote from them in the newsletter. We currently have Private Lending opportunities open in Richmond, VA with AH, and the opportunities range from $10k-$1.2m, offer 7-12% annual return backed by real estate, and have solid execution plans and security. Earn 5-8 times CD Rates secured by real estate” (Current 6 month CD is 1.52%)

Preconstruction Syndicate Investments:BridgePoint
A preconstruction syndicate is our most exciting, cutting edge strategy. PropertyVestors works closely with BridgePoint on our "Preconstruction Syndicate" deals as they are the leader in this market space. BridgePoint has created an amazingly creative strategy to capitalize on today's market conditions, with possible returns beginning at 40%. Their strategy includes protective addendums that are key to promoting profits and minimizing risk. Markets that we are currently focused on are Panama and Dominican Republic. Immediate opportunities available.
BridgePoint has developed a proprietary strategy that grants them the unique privilege of providing developers with the means to fulfill their requirements and, in exchange, negotiate terms that transfer much of the market risk from their purchasers to the developer.
Please contact us to learn more about these strategies and upcoming projects at invest@propertyvestors.com.

PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include private lending options; preconstruction syndication; and opportunties in emerging markets, coastal regions and waterfront properties. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About the Author
Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk.

Alarming News: Bank Losses Spreading

2009-03-30T09:48:00.002-04:00

For the first time in history, U.S. banks have suffered large, ominous losses in a giant sector that, until now, they thought was solid: bets on interest rates.

In a moment, I'll explain what this means for your savings and your stocks. But first, here's the alarming news: According to the fourth quarter report just released this past Friday by the Comptroller of the Currency (OCC), commercial banks lost a record $3.4 billion in interest rate derivatives, or more than seven times their worst previous quarterly loss in that category.1

And here's why the losses are so ominous:
Until the third quarter of last year, the banks' losses in derivatives were almost entirely confined to credit default swaps — bets on failing companies and sinking investments.
But credit default swaps are actually a much smaller sector, representing only 7.8 percent of the total derivatives market.

Now, with these new losses in interest rate derivatives, the disease has begun to infect a sector that encompasses a whopping 82 percent of the derivatives market.2

Thus, considering their far larger volume, any threat to interest rate derivatives could be far more serious than anything we've seen so far.

Meanwhile, time bombs continue to explode in the credit default swaps as well, delivering another massive loss of nearly $9 billion in the fourth quarter. And remember: These represent the aggregate total for the entire banking industry, after netting out the results of banks with profitable trading.

Why This Crisis Could Be Nearly as Bad as the Banking Crisis of 1929-31
Yes, I know the standard argument: In 1929, bank regulation and depositor protection was primarily run by state governments. Now, with the FDIC, the OCC, and more direct Federal Reserve intervention, it's far more centralized.

But offsetting that strength are serious weaknesses in the banking system that did not exist in the 1930s:
• In 1929, there were fewer giant banks. They controlled a smaller share of the total market. And they were generally stronger than the thousands of community banks around the country. Today, by contrast, the nation's high-roller megabanks dominate the market.
• In 1929, derivatives were virtually nonexistent. Not today! U.S. banks alone control $200.4 trillion; and it's precisely in this dangerous sector that the megabanks dominate the most.
According to the OCC's Q4 2008 report, America's top five commercial banks control 96 percent of the industry's total derivatives, while the top 25 control 99.78 percent. In other words, for every $100 dollar of derivatives, the big banks have $99.78 ... while the rest of the nation's 7,000-plus banking institutions control a meager 22 cents!3
This is a massively dangerous concentration of risk.

The large banks are exposed to the danger that buyers will vanish, markets will suddenly become illiquid, and they'll be unable to unload their positions without accepting wipe-out losses. Has this ever happened? Unfortunately, yes. In fact, it's the primary reason they lost a record
$3.4 billion in the last three months of 2008.

The large banks are exposed to the danger that, with exploding federal deficits and new fears of inflation, interest rates will suddenly surge, delivering a whole new round of even bigger losses in the months ahead.

Worst of all, the five biggest banks are exposed to breathtaking default risk — the danger that their trading partners could fail to make good on their gambling debts, transforming even the best winning trades into some of the worst losers.

Specifically, at year-end 2008,
-Bank of America's total credit exposure to derivatives was 179 percent of its risk-based capital;
-Citibank's was 278 percent;
-JPMorgan Chase's, 382 percent; and
-HSBC America's, 550 percent.

What's excessive? The banking regulators won't tell us. But as a rule, exposure of more than 25 percent in any one major risk area is too much, in my view.

And if you think these four banks are overexposed, wait till you see the super-high roller that the OCC has just added to its quarterly reports: Goldman Sachs.

According to the OCC, Goldman Sachs' total credit exposure at year-end was 1,056 percent, or over ten times more than its capital.

The folks at Goldman think they're smart, and they are. They say they can handle large risks, and usually they can. But not in a sinking global economy! And not when the exposure reaches such stratospheric extremes!

Major Impact on the Stock Market
In the 1930s, the banking crisis helped drive the economy into depression and the stock market into its worst decline of the century.

The same is happening today. Whether the nation's big banks are bailed out by the federal government or not, the fact remains that they're jacking up credit standards, squeezing off credit lines, and even shutting down major segments of their lending operations.

And regardless of how much lawmakers try to arm-twist banks to lend more, it's rarely happening. With scant exceptions, bank capital has been reduced, sometimes decimated. The risk of lending has gone through the roof. And many of the more prudent borrowers don't even want bank loans to begin with.

Those credit shortages, both acute and chronic, have a big impact on the economy and the stock market. Moreover, unlike the 1930s, banks themselves are publicly traded companies whose shares make up a substantial portion of the S&P 500.

The big lesson to be learned: Don't pooh-pooh comparisons between today's bear market and the deep bear market of 1929-32. From its peak in 1929, the Dow Jones Industrials Average fell 89 percent. Compared to the Dow's peak in 2007, that would be tantamount to a plunge of more than 12,600 points — to a low of approximately 1500, or an additional 81 percent decline from the Friday's 7776.

Even a decline of half that magnitude would still leave the Dow well below the 5000 level, which remains our current target. Does this preclude sharp rallies? Absolutely not! From its recent March 6 bottom to last week's peak, the Dow has already jumped a resounding 21 percent in just 20 short days. And the rally may still not be over.

But this is nothing unusual. In the 1929-32 period, the Dow enjoyed even sharper rallies, and those rallies did nothing to end the great bear market. My father, who made a fortune shorting stocks in that period, explains it this way:

"In the 1930s, at each step down the slippery slope of the market's decline, Washington would periodically announce some new initiative to turn things around.
"President Hoover would give a new pep talk promising ‘prosperity around the corner.' And often, the Dow staged dramatic rallies — up 30 percent on the first round, 48 percent on the second, 23 percent on the third, and more.
"Each time, I sought to use the rallies as selling opportunities. I persuaded more of my clients to get rid of their stocks and pile up cash. I even told them to take their money out of shaky banks."
Your approach today should be similar.

Specifically,
Step 1. Keep as much as 90 percent of your money SAFE, as follows:
For your banking needs, seek to use only institutions with a Financial Strength Rating of B+ or better. For a list, click here. Then, in the index, scroll down to item 13, "Strongest Banks and Thrifts in the U.S."

Make sure your deposits remain comfortably under the old FDIC insurance coverage limits of $100,000. The new $250,000 per account limit is temporary and, in my view, not something to rely on long term.

Move the bulk of your money to Treasury bills or equivalent. You can buy them (a) directly from the U.S. Treasury Department by opening an account at TreasuryDirect, (b) through your broker, or (c) via a Treasury-only money market fund. For further instructions, click here and review sections 1 through 3 — "How to Buy Treasury Bills or Equivalent," "How to Use Your Treasury-Only Money Fund as a Bank," and "How to Set Up a Single, Safe Account for Nearly All Your Savings and Checking."

Important: You may have seen some commentary from experts that "Treasuries are not safe." But when you review their comments more carefully, you'll probably see they're not referring to Treasury bills, which have virtually zero price risk. They're talking strictly about Treasury notes or bonds, which can — and probably will — suffer serious declines in their market value.

Step 2. If you missed the opportunity to greatly reduce your exposure to the stock market in 2007 or 2008, you now have another chance. And the more the market rises from here, the more you should sell.

Step 3. If you are still exposed to stock market declines, seriously consider inverse ETFs, ideal for helping you hedge against that risk. (For more background information, see my 2007 report, How to Protect Your Stock Portfolio From the Spreading Credit Crunch.)

Step 4. If you have funds you can afford to risk, seriously consider two major profit opportunities in the months ahead:

To profit handsomely from the market's next decline. The best time to start: When Wall Street pundits begin declaring "the bear is dead." They'll be wrong. But their enthusiasm can be one of the telltale signs that the latest rally is probably ending.

To profit even more when the market hits rock bottom and you can buy some of the nation's best companies for pennies on the dollar. The ideal time to buy: When Wall Street is convinced the world is virtually "coming to an end." They will be wrong, again. But that kind of extreme pessimism could be one of your signals that a real recovery is about to begin.

1 For the banks' $3.42 billion loss in interest rate derivatives, see OCC's Quarterly Report on Bank Trading and Derivatives Activities Fourth Quarter 2008, table at the bottom of pdf page 17, "Cash & Derivative Revenue," line 1. As you can see, that was 7.2 times larger than the previous record — the fourth quarter of 2004, when the nation's banks lost $472 million in interest rate derivatives.
2 See OCC table at the bottom of pdf page 11, "Derivative Contracts by Type." In it, the OCC reports total U.S. bank-held derivatives of $200,382 billion at year-end 2008. Among these, the single largest category is interest rate derivatives, representing $164,404 billion, or 82 percent of the total. In contrast, credit derivatives are only $15,897 billion, or 7.93 percent of the total. Within the credit derivative category, the OCC reports (page 1, fourth bullet) that nearly all — 98 percent — are credit default swaps, which have proven to be the most toxic and damaging category of derivatives so far. But they represent only 7.77 percent of all derivatives (7.93 percent x 98 percent).
3 OCC. In Table 1, pdf page 22, "Notional Amount of Derivatives Contracts."
4 OCC, table at bottom of pdf page 13.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Shifting Tides

2009-02-28T08:26:00.000-05:00

Sir Isaac Newton’s third law of motion: For every action, there is an equal and opposite reaction.

This law, discerned by Newton in 1687, applies to the laws of physics, but it could just as easily apply to every aspect of life, including the current economic crisis sweeping the Globe. Eastern philosophy refers to this idea as Ying and Yang. Everything is a product of two fundamentally opposite forces: cold, hot; light, dark; feminine, masculine; bull market, bear market.

The simplicity of this concept is somewhat overwhelming. Do we really need Newton or ancient philosophers to tell us that everything has an opposite? Intuitively, this is an easy concept to understand; of course everything has an opposite and overtime a balance is reached between the opposite poles of any situation. If this is an intuitively basic concept, how do we succumb to such drastic extremes? How do we lose ourselves in the euphoria of the highs or the doldrums of the lows? We listen to our minds rather than our intuition; we follow the herd rather than thinking for ourselves.

The economic bubble, built from the tech boom of the 1990’s into the housing boom of the 2000’s, is a clear example of being caught in a euphoric state and misunderstanding the intuitively simple concept of balance. The amazing growth the World experienced was unsustainable, and the economic crisis we are experiencing is the market exacting an equal and opposite reaction to that unsustainable growth. The crisis is clear, and it is spreading at an unprecedented pace. 2008 was one of the worst years on record; any number of gruesome statistics can be used to support this claim, but I’ll choose one near and dear to most gainfully employed Americans: on average 401K’s fell 27% in 2008! Retirement may have to wait; especially for Baby Boomers. To add insult to injury, 2009 is on pace to be much worse: jobless rates have climbed to 7.6%, 600K jobs were lost in January alone, it is estimated that the crisis has caused more than $13 TRILLION of lost assets and climbing!

It is difficult to speak about this crisis in terms that do not seem shocking, but just as the Eastern philosophers would point out, EVERY aspect of life has Ying and Yang. On a macro level we are experiencing the Ying to the Bull Market’s Yang, but on an individual, micro level, there is always positivity to be found. “For every buyer, there’s a seller;” one investor’s panic can be another’s profit opportunity. The “market” is not closed for business; we just need to be exceptionally careful with our investment decisions.

The economic crisis is in its initial growth phase, and the growing pains are sure to be with us for an extended time, but with great uncertainty and change comes great opportunity. The daily news has become a soap opera for investors, with as much rumor and in-fighting as the worst cliques in high school. The silver lining to this constant change is that patterns are forming and agendas are beginning to take hold. No question these patterns and agendas will continue to develop, but as patterns form and grow, investment opportunities will grow along with them.

The Obama administration is only one month old and the markets are already showing an increasing lack of confidence in the administration’s plans, but is that lack of confidence well founded? What is the focus of the administration, and how will this focus create investment opportunities?

Considering the severity of this crisis, any lack of confidence is well founded, however, the Obama administration is beginning to show signs that their plan will deviate from the course laid by the preceding administration. While this deviation may not be a cure-all, the current strategies are gathering increased disdain from citizens and demonstrating no discernable improvements; so, a new course is a welcomed change, and with a new course comes new opportunity. It may not be a “change we can believe in,” but it is a change and the patterns that develop will create investment opportunities.

Fed’s focus shifting from Wall St. to Main St.?

Treasury Secretary Tim Geithner’s plan to end the financial crisis was vague and lacking key details, and Wall St. responded accordingly with a 382 point drop in the Dow Jones Industrial Average which began while Geithner was still making his speech. While the lack of clarity of the plan raised questions on Wall St., it is understandable when we consider that the Geithner Plan began as a back-up plan that was moved to the forefront when it became clear that other plans for stability fell drastically short. In addition, as the Geithner Plan begins to unfold it is clear that the Obama administration is up against major political obstacles.

Originally, the discussion to come up with a plan to stabilize the financial system focused on two ideas: 1. Creating a “bad bank” to buy distressed financial assets to get them off the banks’ balance sheets, and 2. The government would extend guarantees to banks against catastrophic losses; similar to guarantees already made to Bank of America and Citigroup. However, these two ideas had major drawbacks that eventually led the Treasury Department to conclude that they were not feasible solutions.

•The tremendous expense would force the administration to ask Congress for additional money to put towards banks/Wall St., and it is clear that public sentiment (anger really) will not support any further “bail outs” to Wall St. Without at least lukewarm public approval it would be very difficult to get Congress’ approval.

•The government would be left in a weak position with the banks. Banks would have a position of control over the government if it was clear the government felt the banks were “too big to fail.” Leaving the banks with control would create further public and Congressional resistance.

•The government would be forced to determine the value of the banks’ assets, most of which are not even trading now.

The Geithner plan attempts to find solutions to these drawbacks. The plan shifts the Fed’s focus from saving the troubled banks at all costs to exposing the reality of the situation, and exposing reality is not always politically popular. The Geithner plan addresses the political impasse of offering further “bail outs” to banks. Instead of offering additional funds to banks based on information the banks provide, the Fed is now sending government regulators to apply a “stress test” to 20 of the country’s largest banks. These “stress tests” are likely to expose some brand name banks as insolvent. The general population expects this insolvency to some degree, but up to this point the potential for insolvency has been ignored, or at least pushed “under the rug” while offering more and more funds to the banks. Bringing the insolvency to light is key. We need to understand the true implications of this crisis. We need to know what we are up against in order to create a realistic plan. The hope is that when the true seriousness of the situation is revealed, it will be easier to create political support to enact drastic measures.

In addition to forcing the banks’ hands, Geithner’s plan shifts the balance of power in favor of the government. The current plan has allowed banks to hoard massive amounts of money in the hopes that eventually their assets would regain their value; in the mean time the banks are using their hoards of cash to slowly write off their assets rather than selling them off. The “stress tests” will expose the balance sheets for what they are.

A third step in deviating from the current plan is to allow the government to guarantee private investors from losses when they buy the troubled assets from banks. Private investors are sitting on the sidelines because no one knows how much the troubled assets are worth, and the banks are not pricing them attractively because they are sitting on government money trying to buy time. Geithner has proposed that the government buy the downside risk in these assets. This converts the high degree of uncertainty from a liability to an asset. A private investor can feel confident that if they invest 40 cents on the dollar they won’t lose that 40 cents and if the asset is worth more they could find a profit. Uncertainty and volatility adjust from a negative to a positive. This approach does mean the government (i.e. the taxpayer) could lose money, but it could also mean that if the market improves or the regulators are great at setting the guarantee prices, the taxpayer could actually profit. Either way, it’s a much more creative method of spending the “bail out” money currently flowing to banks.

If and when major banks are declared insolvent, the government will be forced to invoke the dreaded “N” word…Nationalization. At this point Nationalization is a feared term, but it is becoming clear that it is inevitable to some degree. Even free market advocates like former Fed Chief Alan Greenspan are beginning to discuss the inevitability. However, the Obama administration cannot discuss this step yet. From a political stand point, the only way Nationalization can be discussed is once there is clear evidence that it is the only option. The “stress tests” will create this evidence. Until that evidence is found the Geithner plan will continue to lack key details. Announcing plans to Nationalize would send Wall St. into a downward spiral greater than we are already experiencing.

If the government is shifting their focus away from artificially boosting up the banks, where is their focus turning? Obama’s recent speech in Arizona outlining a plan to reduce foreclosures shows a strong step towards supporting Main St. rather than Wall St. The Obama mortgage plan is designed to encourage a procedure that has been taking place through the financial crisis, but has yet to make a large impact; loan modifications. The Obama plan offers subsidies and payments to loan servicers, mortgage investors and borrowers encouraging all parties to take part in loan modifications to create affordable payment plans. The idea is to encourage more servicers and investors to allow modifications, rather than move straight to foreclosure out of fear home prices will continue to drop.

In addition to loan modifications, the Obama mortgage plan permits Fannie and Freddie to refinance mortgages they already hold up to limits of 105% of loan to value rather than the current limit of 80% loan to value. Lastly, the plan is pushing legislative efforts to allow bankruptcy judges to cram down mortgage balances. The goal is to allow judges to treat the portion of a mortgage exceeding the current value of a home as unsecured debt, thus allowing the judge to reduce the unsecured debt.

These are significant changes, but much development is needed to increase the plan’s impact. First, the modification plan only applies to owner occupied homes; this leaves a large population of second homes and investors without assistance. It is estimated by the National Association of Realtors that 40% of existing homes sold during the peak of the bubble, 2005, were purchased as second homes or investments. While helping these individuals isn’t politically popular, it is an absolute imperative if the intended purpose of the plan is to at stability to the real estate market. In addition, increasing the limits on refinances, while generous, will not impact many homeowners whose loan to value ratios are hovering as high 150%. Lastly, the plan does not address the main issue in the housing crisis; houses are greatly overvalued. In order for a mortgage plan to have any traction, loan principals need to be reduced. The general population is not willing to commit their dwindling cash flow to homes worth far less than the loans attached to them. However, principal reductions are exceptionally unpopular with lending institutions…perhaps another political chasm that may be crossed once the “stress tests” indicate the true nature of the banking crisis.

The Obama mortgage plan has clear drawbacks, but the shift is being made towards supporting Main St. The plan will help some borrowers and some lenders avoid some foreclosures, but it’s not a cure-all. Significant improvements to the plan are needed to create a larger impact, but a pattern supporting individual tax payers rather than large banks is a major deviation from the current plan, and this deviation has the potential to have large implications to personal lives and investments. The Obama plan could help you if you are a borrower at risk of defaulting on your loan or if you are already heading towards foreclosure. As the crisis and the plans to stabilize the crisis continue to develop, investment opportunities will continue to materialize. It is the task of every investor to make only well informed decisions, and understand that every investment carries inherent risks, especially in such a volatile investing climate.

The Opportunity in Real Estate

The key to investing in real estate is to educate yourself on the current market conditions, find quality investment opportunities, and act before the conditions change. PropertyVestors is here to help you accomplish these goals. In this edition of our monthly newsletter, we have highlighted three separate partners/projects that approach investing in the current market from different creative angles. Each of these strategies is designed to capitalize on the current market conditions, and because the strategies use different approaches to investing and utilize various locations, diversification of your investments remains a high priority. For institutions that are looking for additional strategies, please visit our asset management company website at www.PhoenixGAC.com.

Purchasing Rehabs for Rentals:
Blue Moon Capital

A $5,000 down payment is all it takes to transfer ownership while Blue Moon Capital completes the rehab of your rental property for you. BMC will facilitate, manage, complete & pay up-front for property rehab of an average $35,000 Scope of Work. You will get 20% Equity in the property as a head start, based on your lender's final appraisal, along with a 12-month home warranty. Current focus is Pittsburg, Atlanta, Baltimore, Cleveland, Kansas City, and Philadelphia. Property Management companies are ready to fill your rental property. Great cash flow opportunity!

The mortgage crunch has created the perfect investor opportunity....Experts say "BUY NOW" in modest markets such as Cleveland, OH. Foreclosures are high, prices are low and the rental market is strong. Yet, high down payment requirements and tight lending standards still prevent investors from taking advantage of one of the best buying periods seen thus far. Blue Moon Capital offers a $0 down financing, turn-key investment model not seen anywhere else. Learn how Blue Moon Capital is a great source for taking advantage of the BUYERS MARKET with a creative in-house financing model that requires $0 down and only a $5,000 Investment. Please contact PropertyVestors for more information.

Select Private Lending Investments:
American Homes

Due to the strict guidelines and "red tape" associated with bank financing these days, many real estate investors with great projects are turning to Private Lenders to obtain financing. The investors are able to obtain the financing quicker and easier, and the Private Lenders are able to have a great return with a secure investment. We have strong relationships with successful and established real estate businesses with strong track records. Our Spotlight for this month's newsletter is on our partner American Homes (AH). In December, a PropertyVestors member funded one of AH's projects, and you will notice a very positive quote from them in the newsletter. We currently have Private Lending opportunities open in Richmond, VA with AH, and the opportunities range from $15-$45k, offer 12% annual return, and have solid execution plans and security. Get more return than CDs, Bonds and Mutual Funds!

Preconstruction Syndicate Investments:
BridgePoint

A preconstruction syndicate is our most exciting, cutting edge strategy. PropertyVestors works closely with BridgePoint on our "Preconstruction Syndicate" deals as they are the leader in this market space. BridgePoint has created an amazingly creative strategy to capitalize on today's market conditions, with possible returns beginning at 40%. Their strategy includes protective addendums that are key to promoting profits and minimizing risk. Markets that we are currently focused on are Panama and Dominican Republic. Immediate opportunities available.

BridgePoint has developed a proprietary strategy that grants them the unique privilege of providing developers with the means to fulfill their requirements and, in exchange, negotiate terms that transfer much of the market risk from their purchasers to the developer.

Please contact us to learn more about these strategies and upcoming projects at invest@propertyvestors.com.

PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with partner deals in emerging markets, coastal regions and waterfront properties. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About the Author
Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk.

Another Bank Crisis on the Way

2009-01-16T13:08:00.000-05:00

We are closely monitoring the activity of many sources to determine the forecast for our investments and strategies in 2009. When have witnessed a number of historical events that have taken place in the last three months, but I wanted you to be aware of the latest updated that came out just today that you’ll be hearing more of. Thank you to Money and Markets for sending us the following information.

*Bank of America posts massive $1.79 billion loss in last three months of 2008, slashes dividends, accepts $138 billion emergency lifeline ...
*Citigroup reports total losses of $18.7 billion in 2008 — $8.29 billion in the fourth quarter ALONE ...
*New phase of bank crisis beginning ... soaring unemployment, plunging stocks, canceled dividends, and sinking investment income ahead

Just when everyone thought we’d seen the worst of the carnage in the U.S. banking system ...
Despite the $350 billion in TARP funds Washington already spent to save the big banks ...
Despite Treasury Secretary Paulson’s emphatic assurance to CNBC’s Maria Bartiromo that the banks are no longer in danger just a few days ago ...
And regardless of the $138 billion ADDITIONAL lifeline he’s just been forced to throw Bank of America yesterday ...

A new, more virulent strain of the bank panic contagion is now hitting Wall Street! Just this morning, Bank of America posted its first loss in 17 years — a whopping $1.7 billion in October, November and December — and cut the dividend it pays to stockholders.

Plus, Citigroup, which had already received $45 billion in government handouts, posted its fifth straight multi-billion dollar quarterly loss — $8.3 billion in the last three months of 2008, bringing its total losses for the year to a staggering $18.7 billion!

No wonder Obama’s advisers have freely admitted that they see an increasingly grave banking crisis beginning to unfold! No wonder they have scrambled to gain control over the second $350 billion in bailout funds! And no wonder ...

The Great Financial Famine of 2009
After the prior phase of this great banking crisis struck last fall, U.S. job losses surged, bringing the total number of paychecks lost by U.S. families to 2.6 million for 2008.

The stock market had a nervous breakdown — with stocks plunging as much as 1,000 points in a single trading session and the Dow crashing by nearly a third in less than 30 days. Reeling from the carnage, many companies delayed, postponed or even cancelled dividend payments to investors — and the Fed slashed interest rates, cutting yields on other income investments.

But now, it’s looking like last year’s disaster was little more than a dress rehearsal for the new phase of the banking crisis that’s beginning now!

Please take a moment to subscribe to our free newsletter at www.PropertyVestors.com to learn more about the importance of a diversified real estate portfolio and receive our monthly newsletter that outlines strong strategies for survival.

About the Author
Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

The Money and Market's portion was provided by Martin Weiss. This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Now is a Good Time to Assess Your Retirement Accounts

2008-12-30T01:29:00.000-05:00

I am passionate about Self-Directed Retirement Accounts. Combine the time of year with the current market conditions and it is a good time to assess your retirement accounts and plans to get you where you want to be.

A Self-Directed Retirement Account allows you to truly diversify your retirement investments. If you stick to the standard market stocks, bonds and mutual funds as one goes up or down they all eventually follow. The investments are correlated investments. Current market conditions are a perfect example. They will move together - not identical - but together. A Self-Directed Retirement Account allows you to go outside of that market restrictions and invest in uncorrelated investments for true diversification. Real estate or commodities, fishing rights or private loans; you get to choose what your Self-Directed Retirement Account invests in.

A Self-Directed Retirement Account can be a Traditional IRA or a Roth IRA. A Traditional Self-Directed Retirement Account is funded with pre-tax money. That is, you put money into the account prior to taxes being taken out. The result is that you have more initial money to invest. Over time this grows, and when you want to take it out, the idea is that you will be in a lower tax bracket than when you put the money in. A Roth Self Directed Retirement Account is funded with post tax money. That is, you pay taxes on your money and then put it into the account. The money in your account grows tax free. When you take a normal distribution, there is no tax consequence.

Now Is a Good Time to Convert a Regular IRA to a Self Directed IRA

The economy is dismal and additional economic hardship is on the horizon with the auto industry, a second wave of defaulting mortgages, increased unemployment, businesses collapsing, and the market feeling the pain. Don't be stuck in a bad market. Think about alternative investments, investments that are not correlated. Use your team of accountant, financial planner, attorney and PropertyVestors to determine your best approach. Don't lose any more in the market.

Now Is also a Good Time to Convert a Regular IRA to a Roth IRA

While writing this article, a daily e-newsletter came into my inbox from Money and Markets. I have been following this source for economic information for over a year and appreciate the perspective it brings. So, as the e-newsletter happened to be about Roth IRAs and converting from the Traditional to the Roth, let me share the information directly from them. Remember while you read that a Self-Directed Account can be either a Traditional or Roth; it is your choice.

"Yes, I'm always talking about Roth IRAs. I can't help it ... I think they're one of the best deals going. As I've told you before, they offer you many basic advantages over other retirement plans AND they can be a great way for you to pass along wealth to heirs.

However, they've only been around for ten years. So even if you've been maxing out a Roth since the beginning, it's unlikely that you've been able to build a huge amount of money in your account.

No problem. You can always convert your traditional IRAs into Roth IRAs. And given the market's recent slump, now is a great time to consider doing so!

That's because when you do the conversion, you will be forced to pay taxes on pre-tax contributions and earnings made in the account.

So if the account's value is down substantially on paper, you will pay taxes on a much smaller chunk of change ... and from then on, the money will be able to grow tax-free for you and your heirs.

Before you rush out and convert your regular IRAs, there are a few things you need to know.

First, you currently must fall within a certain income threshold to convert a traditional IRA to a Roth ($100,000 in modified adjusted gross income for both single and joint filers). As of right now, that limitation is set to expire in 2010. Conversions that occur in 2010 will be allowed to have half of the taxable converted amount taxed in 2011 and the other half taxed in 2012.

Second, you will need to have enough money set aside to pay for the taxes on the conversion. Unless you're 59 1/2 or older, the money will have to come from a source outside the account or you'll pay the 10% early withdrawal penalty, too. And even if you're of retirement age, I wouldn't want to see you diminish the value of your account's future earnings power by using funds from within the account.

Third, the conversion could move you into a higher tax bracket and prevent you from getting other tax benefits like dependent child and college tuition credits.

Still, for many investors - especially younger folks and those looking to leave their accounts to heirs - now is a very good time to consider a Roth IRA conversion.

As always, you should do your homework before making your final decision, and a quick chat with a financial planner or accountant might be worth your while.

But the bottom line is that even though the daily market action is beyond our control, there are always smart proactive decisions that we can make to keep our financial lives as efficient and profitable as possible."

So, schedule the appropriate meetings with "Your Team" of professionals to consider and move appropriately with your Self-Directed Retirement Account. There is still time to make 2007 roll-overs and deposits.

Have a safe and happy holiday season. While we need to have a secure financial plan and provide for ourselves, the most important thing in the world is people. Enjoy these times with your family and friends.

To learn more about Self-Directed Retirement Accounts, visit www.propertyvestors.com, email invest@propertyvestors.com or call PropertyVestors directly at 804-874-0141.

Three Big Questions to Ponder this Holiday Weekend: Commentary from Money and Markets

2008-11-28T10:50:00.001-05:00

It's a beautiful, long holiday weekend. I've been celebrating Thanksgiving with my family, and I'm sure many of you are also busy with relatives and friends. So I'm going to keep this week's column short.

Specifically, I'm going to highlight three big questions we should all be thinking about — and offer up my best answers. I feel these are the most important three questions to ask right now because the answers will determine the next big moves in the market and the U.S. economy.

First, is the Citigroup rescue the end of the financial crisis?
We gained 494 points in the Dow Jones Industrials a week ago and another 397 points on Monday. The dollar also gave back some of its recent gains, and the large rally in Treasury bonds petered out. Clearly, Wall Street greeted the bailout of Citigroup with a big sigh of relief.

Will the rally stick? I hate to sound jaded. But haven't we heard after EVERY SINGLE ONE of these bailouts: "This is it. This will put the floor under the financials. Now is the time to buy, buy, buy?"

We heard it after Bear Stearns was rescued.
We heard it after Fannie Mae and Freddie Mac were taken under the government's wing.
We heard it after AIG was bailed out.

And we heard it when the TARP plan was originally rolled out. In fact, this rally so far looks A LOT like the one we got on September 18 and September 19. The Dow surged 410 points on the eighteenth and another 369 points on the nineteenth after news of the government's TARP plan first leaked.

But just like every other short-term rally before it, that rally quickly failed — and the market soon set new lows. So forgive me if I sound skeptical about this being the "end" of the financial crisis. It's more likely just another way station on the road to lower stock prices.

Second, will an economic stimulus plan work?
President-Elect Barack Obama's revised stimulus plan looks a lot more aggressive than what had been talked about previously. It's also much larger than the tax refund plan that was put into place in the spring. So it's definitely worth paying attention to exactly how the plan — and the prospects for its passage — evolves.
But is the stimulus plan a reason in and of itself to get bullish on the market? I don't think so.

Several hundred billion dollars is a lot of money. But the economic challenges we face as a country are extremely large. And the losses our financial institutions are piling up — both here and abroad — are much larger.

This plan could buy the economy some time, keeping it stronger than it would otherwise be. Still, if the underlying economy can't heal ... if the credit market problems don't get better ... then we'll be right back to square one when the impact of the stimulus wears off.

Indeed, the very real risk is that NO amount of stimulus can prevent the de-leveraging process from running its course.

Japan's experience in the 1990s is instructive. The government there passed repeated "bridge to nowhere"-type infrastructure plans, and the central bank slashed interest rates to zero in an attempt to help the economy recover from twin busts in the stock and real estate markets. End result: The economy struggled through a "Lost Decade" anyway.

Third, how in the holy heck are we going to pay for it all?
My daughters are three and six. They wouldn't know Treasury Secretary Henry Paulson or Fed Chairman Ben Bernanke if they ran into them at the grocery store.
But the decisions that Paulson and Bernanke are making today are going to bury them ... and maybe even THEIR children ... under a mountain of debt the likes of which the world has never seen.

Do you know how much we have committed as a country to rescue the financial system and credit markets? How does the number $7.8 TRILLION ... half the country's GDP ... sound to you? That's the price tag The New York Times put on all the bailouts and credit plans recently.

Included in its tally:
• The Fed's $2.4 billion program to buy commercial paper,
• The $1.4 trillion commitment from the FDIC to backstop interbank lending,
• The $29 billion bailout of Bear Stearns,
• The $306 billion in guarantees of Citigroup assets,
• The Term Auction Facility,
• The Money Market Investor Funding Facility, and
• All the other programs the Fed and Treasury have implemented.

It also includes yet another pair of programs just announced this week. The Fed has agreed to buy up to $800 billion in Fannie Mae and Freddie Mac bonds, mortgage-backed securities and securities backed by credit cards, auto loans, and small business debt.

I simply cannot figure out how we're going to pay for it all without borrowing an astronomical amount of money — and sticking future generations of American citizens with the bill.

For now, flight to safety buying is bolstering Treasury bond prices. But that effect will fade at some point. And when it does, you will likely see the price of Treasuries tank — and interest rates surge — due to the nation's profligacy.

So be sure to keep your head when investors around you are losing theirs. I do NOT think the answers to these key questions are as clear-cut as the bulls would have you believe. And I DO think focusing on safety remains the best course of action.

The Credit Virus Spreads Worldwide: Commentary from Money and Markets

2008-10-24T09:11:00.002-04:00

Back in 1997, a minor currency crisis in Thailand rattled a few regional market players. But the rest of the world ignored it ... at first. They said it wouldn't matter to the U.S. and would be just a blip on the radar screen.

But soon the decline in Thailand's currency, the baht, accelerated. It went from a gentle slide to a full-scale rout. Before long, currencies in the Philippines, Indonesia, and South Korea began to fall out of bed.

Then regional stock indices later crashed. Our Dow suffered what was then one of the largest point declines on record. And the International Monetary Fund was forced to step in and bail out several economies — to the tune of tens of billions of dollars.

It was a scary time. But compared to what is happening now, the 1997 crisis looks like a day at the beach. Right now ... in far-flung corners of the world as diverse as Iceland, Hungary, Argentina, India, and elsewhere ...

Currencies aren't just declining. They're crashing.

Stock markets aren't just falling. They're collapsing.

Foreign investors aren't just walking for the exits. They're running ... and trampling anyone in their paths.

You may not keep a chart of the Hungarian florint, that nation's currency, on your screen. You probably don't look at Argentina's Merval Index very often, if ever. And you may have never touched an Icelandic krona in your life.

But if you could look at charts of all of these obscure indicators, like I have, or if you studied the fundamental behind the moves, as I have, you would conclude the same thing that I did a while ago: The virulent credit virus has spread worldwide. And that has serious implications for you and your portfolio. Here's more ...

Crisis in Hungary, Argentina, Iceland, oh my!
In Hungary, the currency has been plunging for weeks on end as global investors pare risk and withdraw funds from higher-risk emerging markets. The forint recently traded at 214 against the dollar, a huge decline from the 143 level back in July. In other words, one U.S. dollar buys many more forints than it did a few months ago.

That prompted a serious reaction from the Magyar Nemzeti Bank, Hungary's central bank this week. It jacked up the nation's benchmark rate to 11.5% — an increase of a full three percentage points — to defend the currency and stem the flight of capital.

Meanwhile, in Argentina, the country said it plans to seize $29 billion of private pension funds. This caused bond yields in the country to surge. The Merval stock index plunged 11% on Tuesday, then another 10% on Wednesday. It is down more than 55%on the year.

The government last raided pension fund investments to service its debt in 2001. But it didn't help. Argentina then defaulted in a move that sent shockwaves throughout the global capital markets.

As for Iceland, the market has all but collapsed. The country's three biggest banks have been nationalized. Its currency has lost more than half its value in the past two years. It's being forced to pursue a multi-billion dollar bailout from its Scandinavian neighbors and the IMF.

The most shocking of all: Its benchmark stock market gauge, the OMX ICEX 15 index, has plunged 89% year to date! To put that in perspective, if our Dow did the same thing this year, it would be trading around 1,460.

Even bigger countries, like India, are running into trouble. Overseas funds dumped a record $12 billion of Indian shares so far this year. Foreign exchange reserves have dwindled by $42 billion as the Indian rupee has imploded. It recently slumped from 39.20 against the dollar to 49.50 — a record low.
Bottom line: The credit virus is now spreading its sickness to the four corners of the world.

What it means back home
Some pundits have made a big deal about the recent improvement in certain domestic and developed market credit indicators. The gains stem from the Federal Reserve's and Treasury's largesse, as well as the banking bailouts being put into effect in continental Europe, the U.K. and Canada, among other places.

But the improvements have been minor when compared to the hundreds of billions of dollars in aid that has been thrown at the markets. There are also disturbing signs that the aid isn't getting at the core of the problem — the housing market.

One indicator of ongoing weakness there: The latest Mortgage Bankers Association figures on home loan applications. The group's index, which tracks demand for home purchase and refinance loans, plunged 17% in the most recent week. The purchase application sub-index is now plumbing depths not seen since October 2001, a sign that housing demand remains anemic.

All of these problems are now coming home to roost — again — in the U.S. stock market. The Dow plunged 232 points on Tuesday and another 514 points on Wednesday. Despite yesterday's bounce, it appears to be headed much lower over time.
I hope this underscores the message Martin and I have been preaching for months on end ...

Stop listening to the happy talk out of Washington.

Understand this is a dangerous, treacherous economy — and a market with many potholes, time bombs, and hazards ahead. You have to come at it with a clear head and a realistic approach.

Stay the heck away from vulnerable stocks. Maintain high levels of cash in safe investments like short-term Treasuries or Treasury only money funds. Or, if you're a more aggressive investor who's willing to go on the offensive, consider shooting for big profits using vehicles like inverse ETFs and put options. They're making some investors a killing in this market.

The Market, Keeping Your Money Safe, and Investment Options

2008-09-28T09:24:00.000-04:00

It would be extremely difficult to miss the tumultuous activity in the financial markets these days. Everyone is talking about the financial industry, the debt market, failing systems, corporate collapses, bailouts…it goes on and on. The financial landscape is changing by the hour, if the not the minute. This is a historic time in the United States - one that we have not seen for many years and hopefully will never see again. In this article I will discuss the Government's Backstop Plan and the effects it could have on you and the real estate market. I will also touch on the fundamentals you need to focus on in a volatile market.

Friday morning (9.26.08), President Bush came out with a brief statement using very decisive words to stress that a plan will be put together. There is no disagreement in the need for aiding the market, but there is great disagreement in how. Regardless of your political perspective or stance, the country must come together to ensure that the financial markets are stabilized and limit the detrimental effects of this tremendous downturn.

Today it seems that the market and the economy are in a holding pattern, waiting for details on the government's backstop plan. These details will add light and life to the financial market and add liquidity to the market so that credit will be granted again. The details will also add light to the real estate market. We are not at the bottom of prices. We are not done with foreclosures. However, the Plan could help to minimize the foreclosures by adjusting mortgages that are hurting people. This in turn reduces the number of low comparables entering the market to slow, and hopefully stop, sinking real estate prices. In addition, with liquidity in the market, community businesses and individuals will be able to get the credit and cash they need to continue business, send children to college, and buy that house that is currently sinking in value.

From a real estate and investing perspective, there are some fundamentals and attractive strategies to consider to help keep your money safe and even create a healthy return. At the very base of keeping your money safe you need to think about the failing banks and brokerage institutions; you need to think about deposit insurance and the amount of money you have in your accounts.

The Federal Deposit Insurance Corporation (FDIC) insures bank deposits. You should visit the website www.fdic.gov and review your accounts to ensure that you are covered and what you need to do if anything should happen to your bank. Here is some of the important information taken from the FDIC website:

What Does the FDIC Insure?
The Federal Deposit Insurance Corporation (FDIC) is a government corporation that insures all deposits at insured banks, including checking and savings accounts, money market deposit accounts, and certificates of deposit (CDs), up to the insurance limit. Use this form to find out if your bank is insured.

How Much Does It Cover?
The basic insurance amount is $100,000 per depositor per insured bank. Certain retirement accounts, such as Individual Retirement Accounts, are insured up to $250,000 per depositor per insured bank.

Ways To Increase Your Coverage
Since accounts at different banks are insured separately, the easiest way to increase your coverage is to simply keep less than $100,000 at any one bank. You could have $100,000 each at 500 different banks, and be insured for $50 million in total.

You may also qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different ownership categories. For example, here is a way that a husband and wife could qualify for $600,000 in total insurance all at one bank:

The Securities Investor Protector Corporation (SIPC) helps to recover losses for investors if a SIPC member broker/dealer is closed due to bankruptcy or other financial hardship. If you have brokerage accounts you should visit the website at www.sipc.org to ensure you are working with an SIPC member and that you understand what you would need to do if something should happen to your brokerage firm.

Once you have peace of mind about your money in banks and institutions, you can turn your focus to the money you have invested in real estate. You know that the best strategy is to buy low and sell high, but how do you do that and where do you do that today? You don't want to buy a second home or vacation property to hold for a short time and look for appreciation. Those days are gone. We are not yet close enough to the bottom of prices and you will need a lot of cash to hold these properties to eventually see the return. Here is what you can do:

Do Nothing: Put your money in a safe account and wait until you see the market cycle start to climb again. The advantage is that you won't lose. The disadvantage is that you won't gain.

Private Lending: Credit markets are dry and the legalities around them are stricter. That means there is more demand for private lending and more return to be obtained. Look to established channels to lend through, and do plenty of due diligence before jumping in. The advantage to this is you don't need to utilize your credit or purchase anything. You gain a return for lending your own money.

Rental Property: Buy a cash flow positive rental property. Look for a market that has seen slow and steady growth, has increasing population and employment, or a market that has a housing shortage due to that growth or due to high foreclosures. As I have written about before, if people cannot or are not buying homes, people will rent. The rental market is climbing as the home buying market is falling. You do need to be able to obtain an attractive mortgage. The upside is that your money is working for you, there are no out of pocket costs, and the market will eventually turn up again.

Look Internationally: The international market offers many advantages. Off shore investing offers diversification, foreign exchange advantages, tax and legal benefits, and many times higher returns. No investment is without risk, so there is due diligence to be done. You need to look for credible and experienced companies to work with if you don't want to go at it alone. You will share some of the return, but you will also gain by their involvement in due diligence, legal, tax and negotiation activities.

Distressed Assets: If you are an accredited investor, please contact us for more information about purchasing distressed mortgage assets.
The financial, credit/debt, and real estate markets are in turmoil. Politics has been interjected as well. It is a tough time for everyone, but you can be sure that just as the cycle is down today, it will be up again in the future. Take care of your cash today! And if you can, continue to invest. There are always the right investment vehicles in any market cycle.

Article Link: http://www.propertyvestors.com/article_i22-08.php

Financial Markets on the Edge of Panic: Commentary from Money and Markets

2008-07-15T08:52:00.001-04:00

Attention: Pay close attention to Freddie and Fannie Mae in the coming months. Monumental events are on the way! Additional targets to watch include WAMU, Lehman Brothers and Wachovia Bank.

Commentary:
Our nation may be on the cusp of economic catastrophe — call it a panic, a meltdown, an implosion; I don't care what you call it. But it's bad. And it's coming straight at you like a runaway bus.

In times of crisis, people naturally gravitate toward gold, because it's the one investment that can hold its value when the fertilizer hits the fan.
As for silver, well, any trader will tell you that silver is gold on steroids. When gold jumps, silver can leap twice as far, percentage-wise.

What if I'm wrong — what if there is no economic catastrophe? What if the government is able to stop the crises that are lining up from turning into full-blown disasters? Well, gold and silver are STILL good bets to ride the economic tides that are surging now.

Today, I want to explore a reason why I think our country is in real trouble ...

Financial Markets on the Edge of Panic:

I don't have to tell you the news in financial markets is bad ... the problem is it's going to get much, much worse. We are seeing financial institutions collapse like slow dominoes: Countrywide Financial and New Century Financial last year ... Bear Stearns earlier this year ... IndyMac last week. Meanwhile, Fannie Mae and Freddie Mac are on federally mandated life support. Since Fannie and Freddie own or guarantee about half of the $12 trillion of U.S. mortgages, they might be too big to fail. But their shareholders are getting clobbered. And big regional banks are small enough to fail ... which is why National City and Washington Mutual both saw their stocks get 25% haircuts on Monday as terrified investors stampeded for the exits.

These are all just stocks on the leading edge of a much larger problem. The mortgage crisis has become the Andromeda Strain of financial markets, devouring everything it comes in contact with. According to a Bridgewater study, total financial losses from the current credit crisis will hit $1.6-trillion — and that estimate was made BEFORE last week's bad news. It's not just the losses on banks' books. A recent Bank of America study said that the meltdown in the U.S. subprime real estate market had led to a global loss of $7.7 TRILLION dollars in stock market values just since October.

Now we're seeing the damage spread into the "prime" mortgage market. Signs of devastation are everywhere. Two million homes are vacant across America even as tent cities of the dispossessed spring up in urban areas. RealtyTrac, the leading online marketplace for foreclosure properties, said that in June, U.S. foreclosure filings jumped 53% year over year. In fact, one in every 501 U.S. households received a foreclosure filing during the month.

Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. And there are more shoes to drop. In fact, there could be many more shoes to drop. More than 300 banks could fail in the next three years, according to RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150 banks were in trouble!

Bottom line: Your money could be at risk. The percentage of uninsured deposits has doubled since 1992, climbing to about 37% of the nation's $7.07 trillion in deposits at the end of the first quarter, according to an analysis of data reported to the FDIC.So, more than a third of America's deposits are at risk. Now would be a good time to check and see if the balance in any of your accounts has climbed over the insured limit of $100,000.

Vacation Homes turn into Primary Residencies

2008-06-01T08:40:00.000-04:00

Summer is here! As vacationing comes into full swing, so have the questions about opportunities, investments and discounts in vacation areas.

We will have a number of opportunities to choose from including Myrtle Beach and the Dominican Republic - pay special attention to our special alerts in the next 30 days.

In the mean time, though, as you are driving on the shores of the Outer Banks, or laying on the beach in Key West, don't stop yourself from dreaming about the possibility of making your vacation spot your home.

How can buying a vacation home not only be profitable for you, but perhaps your home in the future? Anna Gregory Wagoner, Esq is with Investors Title Exchange Corporation, and explains some new changes in 1031 Exchange. Read on to learn from an expert, how these changes can benefit you...

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The IRS Issues a Safe-Harbor for Vacation Homes
By Anna Gregory Wagoner, Esq.

Until recently, there has been no specific guidance from the IRS as to whether or not vacation homes qualify for 1031 exchange treatment. In May, 2007, the Tax Court issued a ruling in the case of Barry E. Moore et ux v. Commissioner that provided the most comprehensive discussion of vacation homes to date. In that case, the taxpayers had owned a lake house for 12 years. During the first few years the taxpayers used the house frequently but then moved away and did not use the house very often for several years. The taxpayers exchanged the lake house for another lake house that they also used personally, but argued that both houses were held for investment. The tax court found that the primary use of the property should control the "held for investment" test and that in this case the primary use was personal, and therefore; the property did not qualify for 1031 treatment. In the Moore case, the court considered the following factors in making their determination:

The primary use of the property was for personal use;
The taxpayers never rented or tried to rent the house;
The taxpayers did not keep the house well-maintained after moving away;
The taxpayers did not deduct maintenance expenses or depreciation on their tax returns;
The taxpayers treated all mortgage deductions as a 2nd home mortgage on their tax returns;
The mere hope of appreciation does not show investment intent.
This case was the only guidance issued on the treatment of vacation homes until the IRS issued Revenue Procedure 2008-16, which goes into effect on March 10, 2008. This Revenue Procedure set forth a safe-harbor under which the qualification of a dwelling unit for 1031 exchange treatment will not be challenged by the IRS. Under this procedure a dwelling unit will qualify as exchangeable property even though it is used periodically for personal enjoyment if the following standards are met:

The relinquished property must have been owned by the taxpayer for at least 2 years preceding the exchange; and
Within those 2 years, the taxpayer must have rented the property out at fair market rental for at least 14 days each year; and
The taxpayer's personal use must not have exceeded the greater of 14 days or 10% of the number of days rented each year.
The same rules apply to the replacement property, which must be owned by the taxpayer for at least 2 years following the exchange. If the taxpayer's use of the replacement property does not comply with the safe-harbor, the taxpayer must go back and file an amended tax return and treat the transaction as taxable sale rather than an exchange.

Taxpayers should note that this Revenue Procedure broadly defines "personal use". Use by any of the following people will be held to be personal use by the taxpayer: the taxpayer or any other person who has an interest in the unit (such as a co-owner); any family member of the taxpayer or such other person; any individual who uses the unit under an arrangement which enables the taxpayer to use some other dwelling unit (whether or not a rental is charged for the use of such other unit); or any person if the unit is rented for less than fair market rental. A taxpayer may rent the unit to a family member to be used as that person's principal residence so long as fair market rent is paid, and the rental will not be considered personal use by the taxpayer. The taxpayer is also allowed to use the unit while making repairs or doing maintenance to the unit, but he must be able to prove that he actually did work on the unit.

While this revenue procedure is being referred to as the vacation home safe-harbor, it actually applies to the conversion of any property from personal use to eligible exchange use. This presents an excellent planning opportunity for those who currently own personal use property (even a principal residence) and want to convert it to eligible exchange property. All a taxpayer would need to do is own the personal use property for at least two years, rent it out at fair market value for 14 days each year, limit their own personal use of the property to 14 days a year or 10% of the rental period, and then sell it in an exchange, with no questions asked. A taxpayer could do the same with replacement property for two years following the exchange. If the taxpayer wanted to use the unit as his personal residence in the future and eventually take the Section 121 personal residence exemption, he must own the property for at least 5 years and live in the property for at least two out of the 5 years preceding the sale to exclude gain recognition under Section 121. So, he could rent the property out for the first two years following the purchase, per terms of the safe-harbor, and then live it in for the next 3 years as his primary residence, and then sell it, excluding gain recognition under Section 121.

Some in the industry have stated that this safe-harbor is a gift to the taxpayer, as it provides him with specific guidance as to how he can convert his vacation home to eligible exchange property. Use of this safe-harbor will require proper planning, especially in light of the two-year period of qualified use required under the safe-harbor. It is also important to recognize that a safe-harbor is simply a specified structure, which when followed, results in IRS not challenging the transaction's eligibility. It is conceivable that a taxpayer might still do an exchange of property, outside of the safe-harbor, on property that is converted from personal use to investment use, if facts and circumstances demonstrate that it truly has been held for investment. However, in many areas of tax, if a safe-harbor exists and is not followed, neither the IRS nor the courts have been sympathetic to the taxpayer. In attempting a non-safe harbor conversion of personal use property to investment property, or vice versa, a taxpayer may be subject to a higher level of scrutiny by the IRS, and should seek competent tax advice from an attorney or CPA before attempting a non-safe harbor conversion of personal use property to be used in an exchange.

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PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory. PropertyVestors enables investors to capitalize on different market conditions. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

To learn more about 1031 Exchange, to be introduced to Investors Title Exchange Corporation or for general information about PropertyVestors and its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

Thank you for reading, and I hope that found value!

About the Author

Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

Anna Gregory Wagoner, Esq.

Anna grew up in Salisbury, North Carolina. She graduated from Wake Forest University in 1994 with a Bachelor of Arts in Psychology. Anna Gregory continued her education at Wake Forest, receiving her Juris Doctor from the School of Law in 1999. Prior to joining Investors Title, Anna Gregory worked as a real estate associate with Isaacson, Isaacson, & Sheridan, LLP for four years. She has also worked on real estate issues for a large corporation and has experience as a title attorney. Anna Gregory is a member of the North Carolina Bar Association. She is also a member of the Raleigh Jaycees. Anna Gregory joined ITEC in February, 2006.

Loan Servicing in the Housing Industry - A Solution

2008-05-01T08:37:00.000-04:00

For the next three to five years (approximately 2008 through 2012) the residential housing industry will struggle to maintain profitability. The industry faces an oversupply of homes purchased by borrowers who are unable to service their purchase-money loans, refinance loans, or home equity credit lines. Lenders must reconcile depressed real estate values with sometimes questionable underlying debt instruments. New buyers must be found for properties vacated by foreclosure or the threat thereof.

Many profit making opportunities will emerge in the course of solving these problems. You hear about how the ultra affluent and Wall Street is profiting from the credit crisis. This article focuses on the select acquisition of distressed notes secured by single-family residences, and how you can profit too.

Link to Executive Summary: http://www.propertyvestors.com/article_i20-08.pdf

Real Estate and the Credit Crunch Update 2008

2008-04-01T08:35:00.000-04:00

The Current Affairs of the Real Estate & Capital Markets

by Rob E. Lee

All trees aspire to grow to the sky; likewise during a boom market the human spirit cannot believe that there will be an ultimate bust. As last year drew to a close the investment environment transitioned from cautious optimism to a heightened level of realization that there was a global credit crisis brewing in the financial markets.

Today, the commercial real estate market has entered a period of declining values, or as any would say "correcting values" in an effort to adjust the risk basis. Many properties are overleveraged or encountering financial difficulty. The collapse of the housing market coupled with fuel and food price inflation are putting tremendous strain on the American consumer, the ultimate driver of our economy.

Hidden behind the creative genius and financially engineered products that drove much of the aggressive view that the economy could do no wrong during the last decade, Wall Street and Main Street have been oversold, especially with respect to securitized single-family residential debt products, or subprime loans. In fact, the housing market was overleveraged more than anyone realized, or even suspected, relative to the fundamental values of the underlying residential assets.

According to Jack Cohen, CEO of Cohen Financial, a leading commercial real estate investment bank, a massive real estate resetting and de-leveraging is occurring during this first quarter of 2008. Some say it is due directly to sub-prime and single family housing troubles. Mr. Cohen says this is not entirely true. The commercial and residential markets are not linked but for three items: 1) space demand is linked by the health of the economy; 2) lending is linked through the capital markets; and, 3) bond pricing is linked through the investor base (supporting the capital markets). Otherwise, no other links exist. Commercial and residential issues are not at all intertwined. "None of the flaws in the sub-prime business model are remotely present in the commercial real estate lending business. To the contrary, the strengths of the commercial real estate lending business model were not present in the sub-prime business model," stated Cohen.

As the residential market's weakness increased in 2007, the commercial real estate market reached its pinnacle to date, with mega multi-billion portfolio deals such as the Blackstone Group and Equity Office Properties (EOP) Trust transaction. When the cracks in the foundation of the credit markets appeared as a result of the subprime mortgage market meltdown, the commercial real estate market took notice and quickly inventoried its own aggressive dealings and pricing during the past five years. Risk aversion quaked throughout the world's credit markets, resulting in the Federal Reserve pumping liquidity into the financial markets and dropping the federal funds rate. The world and domestic commercial real estate investors prepared for new terrain.

The Federal Reserve created the perfect environment and many lenders detached risk from reward in a market where more money was made securitizing the loans rather than holding them. Demand for securitized loans forced lenders to sacrifice underwriting standards and reengineer loan products such as interest-only loans and low or no debt-service coverage requirements. Financing at all levels of the capital stack created more asset demand. Cap-rate compression happened quickly, falling from 11% in 1995 on average to 6.29% in June 2007. Without leverage, investors would demand a higher return.

In the wider marketplace, the subprime debacle has ensnared some of the biggest institutions on Wall Street. Write-downs at Merrill Lynch totaled $22 billion by mid-January, and Citigroup wrote off $20 billion. Citigroup Chairman Charles Prince and Merrill Lynch CEO Stan O'Neal resigned. Even mortgage financiers Freddie Mac and Fannie Mae, stalwarts of the secondary mortgage market, face potential write-downs of $16 billion for the fourth quarter of 2007 because of flawed subprime loans and other investments.

The threat of recession is also taking a toll on the market, further shaking the confidence of bond buyers and sellers. The Federal Reserve's startling, 75 basis point cut in interest rates on Jan. 22 - the largest reduction in more than two decades - quieted turbulent stock markets momentarily, but raised new questions.

"While it's meant to stabilize things, that to me are going to make people more nervous," says Kim Diamond, managing director at Standard & Poor's, since it signals the Fed's deep concern over the economy. "A 75 basis point cut off-cycle is pretty extreme."

Despite a slowdown in 2007's growth rate, the U.S. economy remains resilient beyond most expectations - but that is what keeps market nerves on edge while providing a much-needed stable market influence. Fortunately the global economy is on solid footing and is expected to grow at a faster pace, helping the U.S. weather this slow domestic economic picture.

For borrowers, the call to action is to proceed cautiously and creatively, rather than sit on the sidelines. Forget about an attempt to convince a lender to be "aggressive" or "creative" when financing your next real estate deal. Banks have gone back to basics - solid fundamentals, and nothing less will do.

Although inflation pressures probably will continue in 2008, the Federal Reserve has shown its willingness to accommodate the markets by lowering interest rates and injecting liquidity into the economy to help avoid a recession. Unemployment remains low, but with the continuing housing slump and high energy prices, consumer spending and job growth may slow. Strong employment will favor commercial real estate, keeping vacancies low and providing the necessary support for investment earnings. However, geographic differences in commercial investment markets will play a pivotal role, as some U.S. regions have seen variations in their local economies.

Unstable financial market realities favor commercial real estate. As the financial markets become riskier and less attractive, commercial real estate - as long as it holds its own - becomes more attractive on a relative basis. It does not mean that prices continue to climb, but commercial real estate does maintain a more attractive position relative to stocks and bonds . With average yield rates on commercial real estate investments still higher than those for many other investment alternatives, commercial real estate likely will continue to be a preferred investment vehicle from a risk-adjusted basis. For example, National apartment fundamentals were strong during 2007, thanks to a great deal of help from the subprime lending fallout in the residential market. However, supply may begin to outpace demand, as unsold houses are rented and units slated for condominium conversion re-enter the market as rental units.

With continuing strength in overall commercial real estate fundamentals, it is no surprise that capital still is flowing into the market. However, the amount of funds has slowed, especially highly leveraged debt, and likely will continue to decrease this year. This trend will continue to affect asset pricing, working to move prices below the record-setting levels of the past year. This slow but steady downward movement should help to calm fears of overpricing in some markets.

Although we view debt capital as tightening the hatch and clearly as more discriminating and volatile, there is still an ample amount of debt capital to support the right level of financial leverage for commercial real estate. Further, there is plenty of equity capital from both domestic and foreign sources that is inclined to invest in commercial real estate.

2008: Markets to Watch

The following list of top 10 markets by property type is based on RERC's price/value analysis, which utilizes RERC's valuation expertise, market knowledge, and financial modeling capabilities to identify these markets.

Office Industrial Retail Multifamily
Salt Lake City Kansas City, KS Los Angeles Portland, OR
Austin, TX Sacramento Baltimore Austin, TX
Sacramento Seattle Minneapolis San Antonio
New York Dallas Cleveland Chicago
Cleveland San Diego Charlotte, NC Washington, DC
San Francisco Houston Philadelphia Norfolk, VA
Los Angeles Cleveland San Antonio Seattle
Seattle St. Louis Las Vegas Charlotte, NC
Denver Minneapolis Miami Denver
Portland, OR Los Angeles Sacramento, CA New York

Despite the psychological drama of the credit crunch - from tightening underwriting standards to the global stock market plunge on Jan. 21 - plenty of capital is still available for deals in the $20 million to $30 million range, the core industry size, brokers say. However, overleveraged property investors undoubtedly will face loan defaults, workouts or foreclosures. This is the downside of overleveraging assets in a cyclical business, which forces property owners to go through a detoxification process so that the lending cycle can begin anew.

Industry confidence can be regained if fear doesn't overtake rational decision-making. "We can talk ourselves into recession. If we continue to terrify ourselves, and let this drag out, then it's going to become a self-fulfilling prophecy," said Randy Reef, senior managing director of Bear Stearns, at the CMSA conference in Miami. The CMBS market was overheated and poised for a reversal, but losses can be kept tolerable, he maintains.

Many echo the thoughts of Jack Cohen, of Cohen Financial in that the industry doesn't need new or more capital. Rather, in 2008 we need old capital confident enough to invest. This is only possible if everyone stops pining for the easy lending days of 2006 and the first half of 2007 and accepts the new world we live in for what it really is-good for business! The dislocation of capital happened for technical reasons; let's not make this worse by eroding commercial real estate fundamentals. Accepting the shift is the fastest path to a new foundation of wealth creation. Capital is still plentiful for deals that make sense and real estate investment banks like Cohen Financial are still able to finance deals and provide capital for those buyers and sellers who realize the market is still full of opportunities.

About the Author
Rob E. Lee, M.B.A., CCIM

Senior Associate of Investment Properties for Colliers International's Private Capital Advisors Group in Los Angeles and is currently serving as the President for the Greater Southern California CCIM Chapter. He can be reached at Robert.Lee@Colliers.com or (310) 787-1000. He is a 2006 alumnus from the Graziadio School of Business and Management.

Leverage the Knowledge of Professionals to Maximize Your Investing Capabilities

2008-03-25T13:52:00.001-04:00

"If I have seen farther than others, it is because I have stood on the shoulders of giants."
- Sir Isaac Newton

Sir Isaac Newton was a physicist, mathematician, astronomer, natural philosopher, alchemist, and theologian. He is probably best known for his work with gravity, but in addition to gravity he described the three laws of motion, invented the reflecting telescope, developed a theory of color, developed a branch of mathematics, calculus, and even invented the ridges on the edges of some coins (reeds) to hinder attempts at counterfeiting. He was clearly a brilliant mind, yet even someone of his caliber recognized the need to leverage the assistance of others. He understood the simple yet profound principle that we can make greater accomplishments with the help of others than we can on our own.

Real estate investing can be a time consuming and laborious task. You need to educate yourself on investing, the markets, contract law, taxation, real estate maintenance and repair, tenant relations, financial planning, lending guidelines...the list is endless. Then you need to find and analyze a number of projects and markets to determine where you should invest and what type of investment you should make. How can a passive investor accomplish all of these tasks while still living their daily life? The only way to be a truly successful investor and still maintain time to lead a normal life is to leverage the assistance of professionals.

If you feel the need to tackle every task yourself in real estate investing, you are destined to be overworked and underpaid, and it is likely that you will become fed up with the investing process before you have the opportunity to meet your goals. You need to surround yourself with successful professionals in specialized areas of expertise...you need a "Dream Team." You need highly trained specialists in a variety of areas, such as legal (possibly multiple attorneys), accounting/taxation, financial planning, insurance, mortgage/lending, self-directed IRA specialist, 1031 specialist, and an investment/project coordinator.

Financial Planning - A financial planner is a great team member because they have the opportunity to understand your full financial picture and your future goals. They look at the "big picture" of your investing capabilities and needs. Some accountants may double as financial planners, but there are many financial planners that specialize strictly with the planning aspect and do not spread their time and abilities between two specialties. Financial planners understand the full scope of your financial capabilities and your goals, and they create a plan to help you accomplish those goals. They do not tell you specifically what to invest in (i.e. Microsoft, a condo in Miami, etc.), but they do lay out a plan for the type of investments you should consider. Ultimately, it is up to you to decide how to utilize your money. There are different types of financial planners to consider as well. Some work for institutions that sell the institution's products as investment tools, and others work independently and have the ability to consider and sell any type of investment tool. Be sure to understand the full capabilities of the financial planner you are working with.

Legal - Aligning yourself with at least one strong attorney is an absolute necessity. There are a tremendous amount of legal issues concerning real estate investing. Every project you are involved with will have detailed contracts, and these contracts can be very difficult to read and fully understand. It is always wise to have a trusted attorney review your contracts. In addition to something as straightforward as contracts, there are business structure concerns, estate planning, title searches, partnerships, closings, tax law, liabilities...the list goes on. Attorneys are a necessity. You may even consider multiple attorneys depending on what their specialties are, but at the very least one attorney you can consult with and trust can add tremendous value to your team and your investments.

Accountant/taxation - The two absolutes are death and taxes. I am not sure how to prepare for death, but I do know that having a trusted accountant that specializes in taxation is a must. The tax code and regulations are obscenely long. Title 26 (the IRS section) is TWENTY VOLUMES! It is clear that taxation is extremely complicated, and when you have multiple investments, perhaps in a number of states, with a variety of business entities, it can become very overwhelming and mistakes can be very costly. Leveraging the expertise of a tax specialist can save you tens of thousands of dollars per year, and help you avoid mistakes that could cost you large sums of money or worse. It is imperative that you have an expert that you can trust and count on to advise you with your investing decisions.

Insurance - Insurance is a must in today's investing climate. Accidents and natural disasters happen, and you must protect yourself, your family, and your assets. Insurance can be a complicated topic. There are a wide variety of types of insurance and multiple insurance strategies to consider. In addition, every investment is unique, and the insurance needs will adjust from investment to investment. You need an insurance specialist that you can consult and trust to point you in the best direction regarding your insurance needs. It could be a national company with representatives across the country, or it could be a local insurance company with the capabilities of consulting on a national basis or at least pointing you in the right direction. You need to ensure that your investments are protected.

Mortgage/Lending - I have spent time in past articles discussing the tumultuous times that the mortgage industry is currently experiencing, and these times should clearly demonstrate how complicated the mortgage industry can be. It is always wise to use other people's money to invest when you have the opportunity...this way you leverage their money to increase your investing capabilities. With that in mind, it is clear that the majority of real estate investments that you undertake will require you to obtain some form of lending, be in private or institutional lending. It is crucial that you have experts you can trust that are advising you on your lending choices. There are an amazing amount of variables to consider with regards to lending. Every investment is unique and every borrower has a unique financial picture. Your lending options can cost or save you thousands of dollars on the life of an investment. It is wise to be sure you are making the best financial decisions, and a trusted mortgage specialist can be a great guide when it is time for you to borrow money.

Self-directed IRA Specialist - Self-directed IRA's are growing in popularity and are a great tool to use to maximize tax benefits with your real estate investments. However, they can be complicated. If you plan on using a self-directed IRA for a real estate investment, it is imperative that you educate yourself on the process and select a company that specializes in self-directed IRA's that can lead you through the complicated process. The PropertyVestors team highly recommends considering the use of a self-directed IRA to maximize your investment, but you need to make sure you follow all of the guidelines for the investment. A self-directed IRA specialist can help you understand if your investment can qualify and guide you through the process.

1031 Specialist - A 1031 Exchange is taxation tool used to defer taxes when purchasing a like-kind property. Similar to utilizing a self-directed IRA, a 1031 specialist is not needed for every investor or every investment, but having a trusted consultant to turn to when you need them can save you time, money, and complications. A 1031 Exchange can be a very powerful tool, but there are strict guidelines that need to be met and the process can be complicated. It is imperative that you have a trusted source of information that you can count on.

Investment/project coordinator - Do you have time to research every real estate market? Once you find a strong market, do you have time to discuss projects with developers in those markets? Do you have the time and know how to analyze those projects? Do you have the contacts to find those projects? PropertyVestors specializes in doing just that. We research markets across the US to find the most promising markets. We leverage our group's buying power and marketing presence to gain contact with developers in the strongest markets with innovative investment strategies to capitalize on today's market trends. We do this so you do not have to. It is our goal to be your trusted source for real estate investment projects and strategies. We want you to leverage our experience and expertise so you can maximize your investing potential.

PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with partner deals in emerging markets, coastal regions and waterfront properties. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About the Author

Real Estate Investment Group

Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

Real Estate Woes & Economic Turmoil Create Great Investment Opportunities

2008-02-27T11:39:00.001-05:00

Great investment opportunities?! How can this be a good time to invest? Housing is in a steep decline...one of the largest declines we have seen since the Great Depression, the mortgage industry is in turmoil with record numbers of loans defaulting and going to foreclosure, the troubles in the mortgage industry are spreading to Wall Street resulting in a declining stock market and underperforming companies, the Dollar is falling, consumer spending (which is a major piece of the US economy) is declining, employment is also on the decline, the Fed seems to be slightly panicked and cutting interest rates to try to spur the economy and stop a recession/inflation, economic analysts cannot agree about the current state of the economy or the proper steps to take to improve it, talk of a recession and inflation are becoming more prevalent. How can this be good news for investing? It is difficult to believe that now is a good time to invest in anything when you focus on all of the negative economic news, but in reality, such drastic changes in such short periods of time are creating one of the best times to invest, and real estate is one of today's best investments. I know it can be difficult to believe, but it is true.

In order to gain a full perspective of the current investment climate, it is necessary to take a step back and analyze the ingredients that have combined to create the current economic and investment position. There are two catalysts that have sparked the current economic situation; the housing market and the credit crisis. For five to ten years, depending on the area of the country and who you talk to, the real estate market was booming. Home appreciation was at an all time high, and consumers (end users and investors) were taking full advantage of the opportunities these high price points offered. Prices were rising quickly, and real estate seemed like a great way to create a quick profit. Profits from home appreciation became added income for most consumers, and this added income brought with it a false sense of security. The great appreciation and large profits in the real estate industry, for consumers and all professions associated with real estate, fueled the US economy. The problem was that this sharp rise could not be sustained. Eventually a correction would be needed to level off the market. At the height of the real estate boom, the median price of a home was 45% higher than the median US income! Home prices exceeded the consumers' ability to purchase. The market was clearly out of line, and what we are witnessing today is the correction that is bringing many economic variables back in line with one another.

It was not only the high cost of housing that created the real estate decline, but also an oversupply of housing on the market. Consumers were not the only segment that saw an opportunity to profit from the housing boom; investors and builders also saw the opportunity to create large profits from the boom. The flood of real estate investors and builders into the market created an oversupply of product. More homes were being built then could be consumed by end users. Investors and builders helped drive prices up because they added to the demand in the market to purchase housing, but again, this growth could not be sustained. Eventually the growth would outpace itself. While home owners (end users) are emotionally and physically tied to their homes because they need a place to live, investors are not. When the correction began and home prices started to level off and decline and the oversupply of homes in various markets became evident, investors were the first ones to walk away from their investments. In addition, builders who had been steadily growing for years were now faced with an oversupply of inventory, and their reaction was to abandon projects or drastically reduce pricing. So as investors and builders aided the growth of the boom, they are also having a negative effect on the decline.

As if the combination of those variables was not enough, the credit environment in the US played a large role in the housing decline and our current economic position. The personal savings rate in the US is very low. The US currently has a per capita savings rate of 4%, which is less than half its average from 1970-1994. And as low as 4% seems, that 4% is up from 0% in the late 1990's! This demonstrates the affect that the increase in housing had on the US consumer. Consumers saw large profits from appreciating housing and adjusted their focus from saving to spending. This led to a period of high consumption, and since consumer spending is a large part of the US economy, the high consumption, and ultimately the appreciating housing market, fueled the economy.

At the same time consumers' focus shifted to spending, the mortgage industry began to adjust to take full advantage of the housing boom, and debt became easily accessible. During this real estate frenzy the mortgage industry saw the opportunity for large profits from a booming market and loosened its guidelines to qualify for mortgages to make home ownership more accessible to consumers, prolong the rise in prices, and ultimately create larger profits. In hindsight, the methods the mortgage industry adopted are very questionable, but hindsight is always 20/20 and very few complaints were heard until it was too late. The mortgage industry began to make heavy use of Adjustable Rate Mortgages (ARM's) and increased lending options to Subprime borrowers. ARM's are dangerous because low initial interest rates are replaced with higher interest rates within a few years. If a borrower is barely making payments at the initial rate, then increased rates will clearly be a problem. In addition, these ARM's were being offered to Subprime borrowers who are by definition less credit worthy and typically less savvy when it comes to finances. As a result of the housing boom and the readily available debt, US citizens felt comfortable taking on debt and spending the money they had. The focus on savings was replaced by a focus on spending and easily attainable debt. In a rising market that cannot be sustained, this is a very dangerous combination.

The combination of all of these variables has led to the economic corrections we are experiencing today. Housing prices rose to unsustainable levels, housing supply outpaced demand in many markets (Las Vegas, Florida, California, etc.), the mortgage industry adopted questionable policies which made debt easily attainable, and consumers shifted from saving to spending. The convergence of these variables has led to difficult times for the US economy. This market downturn has caused repercussions that are rippling through the entire US economy. As the real estate market declined, some investors and end users found themselves in negative equity positions on their homes, and to further aggravate the situation, ARM's began to adjust and home owners realized they could not afford their adjusted interest rates. Delinquencies, and ultimately foreclosures, have increased tremendously. Markets that were oversupplied have become further oversupplied and prices are forced to decline even further. The banking industry has been forced to take back real estate and take tremendous losses. These losses have flowed to Wall Street where hedge funds and mortgage backed securities invest heavily in mortgages, and investment capital has tightened up tremendously. As the lending industry adjusts to the changes, guidelines to qualify for loans have become increasingly strict, limiting the available credit. All of these economic systems are interconnected, and as debt becomes less accessible, consumption declines, which forces declines in earnings for the economy, which drops the value of stocks, and ultimately has an adverse affect on employment. The Federal Government is making attempts to help the situation by cutting interest rates to stimulate the economy, but a recession seems likely...if it has not begun already. I will not cover the topic of a recession here, but I will note that history tends to repeat itself, and taking note of the history of the housing industry demonstrates that when housing starts have declined in the past a recession has followed. Currently, housing starts have declined, so it may be wise to be mentally prepared for a recession.

It is not a pretty picture, but there are always good investments, and drastic changes bring with them great opportunities. The trick is finding those great opportunities. As investors, what are we to do in this turbulent time? A few options are:

* Keep your money in cash...save it in a bank, but make sure it is a bank that is not in trouble due to all of the current problems. This is not the best option because the return is low.,
* Invest in emerging markets around the world...India, China, the Gulf region,
* Invest in commodities such as oil, natural gas, or gold (By the way, gold is sky rocketing right now, but the question is where will it peak?),
* And finally, the investment strategy that I feel capitalizes on the current market conditions the most is real estate.
o Prices are low and still declining...great deals can be found. Areas that may have been too pricey in the past are now affordable.
o Builders/developers and banks have inventory that they must get rid of and are willing to make deep discounts.
o Interest rates are low and the Fed keeps pushing them lower.
o The standards to qualify for a loan are very tight, forcing people to rent instead of buy, which creates higher rental rates and cash flow on rental properties.

The key to investing in real estate in such a hectic time is to educate yourself on the current market conditions, find quality investment opportunities, and act before the conditions change. PropertyVestors is here to help you accomplish these goals. In this edition of our monthly newsletter, we have highlighted four separate partners/projects that approach investing in the current market from different creative angles. Each of these strategies is designed to capitalize on the current market conditions, and because the strategies use different approaches to investing and utilize various locations, diversification of your investments remains a high priority.

Exclusive Partner Deal:
Blue Moon Capital - Turn-key Investment Model

A $5,000 down payment is all it takes to transfer ownership while Blue Moon Capital completes the rehab of your rental property for you. BMC will facilitate, manage, complete & pay up-front for property rehab of an average $35,000 Scope of Work. You will get 20% Equity in the property as a head start, based on your lender's final appraisal, along with a 12-month home warranty. Current focus is Pittsburg, Atlanta, Baltimore, Cleveland, Kansas City, and Philadelphia. Property Management companies are ready to fill your rental property. Great cash flow opportunity!

The mortgage crunch has created the perfect investor opportunity....Experts say "BUY NOW" in modest markets such as Cleveland, OH. Foreclosures are high, prices are low and the rental market is strong. Yet, high down payment requirements and tight lending standards still prevent investors from taking advantage of one of the best buying periods seen thus far. Blue Moon Capital offers a $0 down financing, turn-key investment model not seen anywhere else. Learn how Blue Moon Capital is a great source for taking advantage of the BUYERS MARKET with a creative in-house financing model that requires $0 down and only a $5,000 Investment. Please contact PropertyVestors for more information.

Select Private Lending Investments:
Richmond, VA

Due to the strict guidelines and "red tape" associated with bank financing these days, many real estate investors with great projects are turning to Private Lenders to obtain financing. The investors are able to obtain the financing quicker and easier, and the Private Lenders are able to have a great return with a secure investment. We have strong relationships with successful and established real estate businesses with strong track records. Our Spotlight for this month's newsletter is on our partner American Homes (AH). In December, a PropertyVestors member funded one of AH's projects, and you will notice a very positive quote from them in the newsletter. We currently have Private Lending opportunities open in Richmond, VA with AH, and the opportunities range from $15-$45k, offer 12% annual return, and have solid execution plans and security. Get more return than CDs, Bonds and Mutual Funds!

American Homes

Greg Butler and Brian Rhodes are owners of American Homes, and both live in Richmond, Virginia. They have been in business investing in real estate for 4 years, and they have completed over 100 real estate transactions. Greg and Brian are known for their knowledge of the industry, their expertise in specific transactions, and overall business acumen. They have been invited to speak at several real estate investment clubs, as well as a real estate negotiating class at Virginia Commonwealth University.

On average, AH currently closes 1-2 "Pretty House" deals (typically subject-to transactions, then use a lease-option exit strategy) and 3-5 "Ugly House" deals (typically selling a house that needs repairs to another investor) a month. If you are interested in private lending opportunities, please contact PropertyVestors.

Exclusive Partner Deal:
Lee Mill Heights - Emerging Market - Manhattan, KS

Manhattan, KS, also known as "the Little Apple," is a little known market with great potential. Manhattan's population is going to double in the next four years! We have partnered with a successful and well-established builder in the Manhattan market who is offering 2-4 unit buildings in a new construction development. This is a great opportunity to purchase new construction rental property in an appreciating market with strong rental rates. These properties are sold to our group at a discount creating built-in equity and potential for monthly cash flow. In addition, a management company has already agreed to manage the property for 5% of monthly rents, while the industry standard is 7-10%. The management company is available and ready to fill your property. Please contact us for more information.

Preconstruction Syndicate Investments:
BridgePoint

A preconstruction syndicate is our most exciting, cutting edge strategy. PropertyVestors works closely with BridgePoint on our "Preconstruction Syndicate" deals as they are the leader in this market space. BridgePoint has created an amazingly creative strategy to capitalize on today's market conditions, with possible returns beginning at 40%. Their strategy includes protective addendums that are key to promoting profits and minimizing risk. The addendums even protect you in a softening market!

BridgePoint has developed a proprietary strategy that grants them the unique privilege of providing developers with the means to fulfill their requirements and, in exchange, negotiate terms that transfer much of the market risk from their purchasers to the developer.

Please contact us to learn more about these strategies and upcoming projects at invest@propertyvestors.com.

PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with partner deals in emerging markets, coastal regions and waterfront properties. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About the Author

Real Estate Investment Group

Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

New Year Brings New Opportunities

2008-01-30T15:47:00.001-05:00

Happy New Year. I hope you had a great holiday season and are ready for a profitable and successful 2008. As we move past 2007, it is helpful to take note of all the changes and growth that the real estate industry has witnessed. It is also helpful to begin 2008 on a positive beat…to look to the opportunities that present themselves…to find the areas of silver lining to focus on in this up coming year. So, without further ado, I will take you on a brief recap of 2007 and end with some good areas of investment.

First and foremost, 2007 made it clear to everyone involved in real estate that change is inevitable. In the U.S., Real estate had been a hands-off, safe investment for the past 5-10 years, but 2007 brought with it a tumultuous real estate market. The amazing growth and appreciation we experienced leveled off, and in some locals even declined, new construction began to decline, and one of the biggest stories of the year, in and out of real estate circles, is the mortgage industry.

The mortgage industry began a period of tremendous change in 2007. The entire landscape of the mortgage industry is changing, and we have not reached the end of this change yet. Residential mortgages and foreclosures are in a bad place, and we are beginning to see impacts in the commercial arena. Global markets are predicted to find some similar tough times. In addition, it is a daily struggle to keep up with the analysts calling for recession, inflation, and questions around the Fed’s policies and rate actions. (I have written about these changes on a few occasions; so rather than discussing the changes again, I will point out that if you are interested in learning more about the tumultuous times for the mortgage industry and real estate market during 2007, please refer to my blog at http://propertyvestorsblog.blogspot.com/.)

So now it is 2008. What can we expect? What can we do? Where should we invest? Well, change is going to continue to happen. Just as if we encounter a detour on a drive to our favorite restaurant we would change our path; it is time for real estate investors to examine the detour and change our path. For some, it will mean stopping for a time…and that is okay; just be sure that where you are invested today can hold out for the market to turn around…as it will. For others, it will be finding an even better and faster path. This is exciting because you are able to leverage the silver lining in the gray clouds – to make the lemonade out of the lemons if you will. Now, to where we can find this path.

At PropertyVestors, we continually evaluate our strategy and path. Today we see the best investments to come in a few categories

REOs and Non-Performing Notes

Private Lending

Preconstruction Syndicate

Emerging Markets

REOs and Non-Performing Notes

One of the largest trends that we are working with is the emerging opportunity that REO’s and non-performing notes (loans) bring to the real estate market as a result of the dismay that the sub-prime mortgage industry and large-scale foreclosures are creating. This is a great trend to take notice of, and one that can be very profitable. This opportunity does require more investment than others, and can be either active or passive depending on your exit strategy. (I have touched on this in great detail in previous articles, so please reference my blog at http://propertyvestorsblog.blogspot.com/ for more information.)

Private Lending

As working with Banks becomes increasingly difficult and labor intensive, buyers and investors look to private lending to continue to work in this profitable market. In exchange for less red tape and quicker turn around, investors will pay private lenders higher returns with great security. This has always been an investment strategy for PropertyVestors. In today’s lending environment, it is even stronger! In February’s Newsletter we will spotlight one of our favorite Private Lending Partners and opportunities at hand. (I have touched on this in great detail in previous articles, so please reference my blog at http://propertyvestorsblog.blogspot.com/ for more information.)

Preconstruction Syndicate

To refresh your memory, our Preconstruction Syndicate Strategy allows for investment into luxury developments with preferential contractual addendums to promote return and minimize risk . Our investments aid the Developer in funding. Just as residential market looks to private lending, developers look to the syndicate model as a way to alleviate institutional headaches and are willing to give more away in the form of increased return and more risk mitigation. On February 7^th, our Partner will be holding an educational and project overview webinar that you shouldn’t miss. We will report on the event in our February Newsletter.

Emerging Markets

While the Real Estate industry as a whole across the US has flattened, specific locals have dropped while others have actually shown growth. These growth markets are considered Emerging Markets. They are places where population is increasing, where the number of new jobs is rising , where there are environmental and governmental incentives. These Emerging Markets see appreciation in the wake of the other mess. In addition, the mortgage industry issues and tightening of bank regulations continue to create hurdles for people to buy, so the rental market is growing as well. Appreciation, growing rental market…sounds like a good place to invest!

I want to take this opportunity to point out two markets that prove that there are still strong real estate markets in the U.S., and within these markets there are opportunities being created by the changing investment climate. In an effort to avoid repetitive information, I will keep my explanation of these markets brief, and in place of my detailed explanation I will offer links to various articles and reports that discuss these emerging markets. I want to demonstrate that although the bulk of the media is reporting negative news around real estate these days, there are quality sources of information that can be found if time and effort is put into researching opportunities. In addition, I do not want you to take my word for it; I want you to see additional credible sources discussing the positive opportunities that are still available in real estate.

Charlotte, NC

The first market I will focus on is Charlotte, NC. At first thought, Charlotte may seem like a sleepy southern city to some of you, but this could not be further from reality. Charlotte is a market that is gaining a tremendous amount of attention, and for good reason. First of all, Charlotte is the second largest city for banking in the U.S.; second only to New York City! Both Bank of America and Wachovia tout Charlotte as their headquarters and home city. In addition to such a strong business base, Charlotte is in a key location. It is in the middle of North Carolina, major state/interstate highways pass through Charlotte, it has a very comfortable southern climate, the gorgeous North Carolina mountains are a couple hours to the West, and great North and South Carolina beaches a few hours to the East. The city itself is full of old southern charm, quaint historical homes, and an abundance of tree-lined streets, and flowering bushes and trees that bloom from March through October.

From a real estate perspective, Charlotte avoided the large price increases of the real estate boom that were seen across the country. Charlotte has maintained steady growth for years on end, but it has not seen any large jumps…until now. Over the past couple years, Charlotte has garnered increased national attention, and with that increased attention has come an influx of motivated buyers and investors. Charlotte is now poised for great growth, especially compared to the stagnate or declining markets around the country. The strongest aspect of this continued and impending growth is the fact that the appreciation and growth that Charlotte’s real estate market, and the city as a whole, is experiencing is based on solid job/population growth trends. One of the most, if not the most, important factor to consider about emerging real estate markets is the job/population growth that is taking place in that market. Real estate is subject to supply and demand; so as the demand rises, supply falls, and prices in turn rise. When job growth is strong in any real estate market people and businesses will be attracted to that market and as a result demand and prices will rise. The City of Charlotte is taking the right steps to welcome businesses and develop the city to attract business and the inevitable influx of people that come with those businesses. One example of the quality planning and growth that the city is executing is the new Light Rail system that was opened for the first time in November 2007. Charlotte is one of the strongest real estate markets in the country, but please do not take my word for it. Below are a number of links that support my opinions and offer great information about the Charlotte market.

10/11/2007 – “An Introduction to Charlotte, NC” - http://www.associatedcontent.com/article/410318/an_introduction_to_charlotte_north.html

12/26/2007 – Charlotte Observer - “Charlotte is One of Three Places Where Home Values are Up” - http://www.charlotte.com/109/story/420456.html

11/13/2007 – Forbes – “America’s Undervalued Real Estate Markets” - http://www.forbes.com/lifestyle/2007/11/13/undervalued-markets-housing-forbeslife-cx_mw_1113value.html

6/12/2007 – ABC News (Nightline) – “In a Yearlong Housing Downslide, Charlotte Keeps Getting Better” - http://www.owncharlottehomes.com/wp-content/nightline.html

5/14/2007 – Investment News – “Local Hot Spots Boost Real Estate Market” - http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20070514/FREE/70514012/1015/TOC&ht=local%20hot%20spots%20boos%20real%20estate%20market%20local%20hot%20spots%20boos%20real%20estate%20market%20local%20hot%20spots%20boos%20real%20estate%20market%20charles%20paikert

5/9/2007 – Wall Street Journal – “Where Home Prices are Hot Now” - http://www.owncharlottehomes.com/wp-content/wsjarticle.html

Forbes list of top 10 U.S. real estate markets - http://www.forbes.com/2007/11/21/housing-best-nationwide-forbeslife-cx_mw_1121realestatebest_slide_2.html?thisSpeed=20000

Links to articles about Charlotte’s new Light Rail system - http://www.lightrailnow.org/facts/fa_lrt_cha.htm

11/20/2007 – Real Estate Blog mentioning the positive growth in Charlotte - http://www.zillowblog.com/when-it-rains-it-pours/2007/11/

Charlotte Chamber of Commerce - http://www.charlottechamber.com/

Manhattan, KS

The second market I would like to focus on is one that is off the radar for most investors and national media sources. Unlike Charlotte, which is gaining tremendous national attention, Manhattan, Kansas (“The Little Apple”) is in the beginning stages of its growth and has not warranted large scale attention…yet. There is great growth potential in Manhattan, and locating a strong emerging market before national attention is being paid to it offers great opportunity for a solid, long-term real estate investment. Manhattan may not have all of the amenities and Southern charm that Charlotte offers, but it does offer the most important factor, job/population growth. Manhattan is expected to double its population over the next four years! – from 49,000 to just under 100,000. Fort Riley military base is located in Manhattan, and from now through 1012 the base is experiencing a large expansion. This expansion creates military family housing demand well into 2012, and major economic and job growth over the next four years and beyond. The US Army expects 40,000+ troops/personnel/dependents to arrive in Manhattan from now through 2012.

In addition to this large and expanding military base, Manhattan is a classic college town where Kansas State University is located. The University brings with it a population of 23,000 students from all 50 states, many of which require rental housing. The growth for this market is tremendous, and best of all, the population explosion is well planned by the US government and therefore much more dependable then most emerging markets. Please find related links below.

Manhattan Chamber of Commerce - http://www.manhattan.org/
Manhattan Homepage - http://www.ci.manhattan.ks.us/
CNNMoney.com – “Best Places to Retire Young” - http://money.cnn.com/galleries/2007/moneymag/0703/gallery.bp_retireyoung_new.moneymag/9.html
Strategic Action Plan and Growth Impact Assessment - http://www.manhattaned.org/DocumentView.asp?DID=291
Downtown Redevelopment Project - http://www.fs-bd.com/files/Downtown.pdf
The August edition of the Fort Riley Community Update - http://www.ci.manhattan.ks.us/archives/68/August%2007%20newsletter.pdf - states that 3000 troops will be deployed from the base in the coming month, but that large numbers of troops will return to Fort Riley next summer.

The report goes on to say: 'But our astute observers report - our local schools are still filling up, and all the housing under $140K is being bought up very quickly. What's going on? Well, the truth is that a good portion of Families will remain on Fort Riley even after the soldiers deploy. The last time we checked, about 70% of our Families choose to remain on Fort Riley when their Soldier deploys.

When community and Fort Riley support is perceived being strong, more Families choose to stay right here. Our leaders certainly want that, because we can take better care of Families when they are here.' In his address to Congress on Friday, President Bush announced that reductions in US troop levels in Iraq would start seven months sooner than scheduled, with 5700 forces to be home by Christmas instead of in the spring.

Earlier in the week it was announced that four brigades (at least 21,500 troops) will return by July 2008. These facts support the prediction of a significant increase in the demand for housing in the Fort Riley area next summer.

Profiting from REO's & Discounted Notes

2007-12-07T19:47:00.001-05:00

"A market is the combined behavior of thousands of people responding to information, misinformation and whim." -Kenneth Chang

I think this particular quote fits very well with the current real estate investment climate. The U.S. housing market and mortgage industry are currently undergoing tremendous changes, and these changes are the result of millions (instead of thousands) of people and businesses trying to react to information, misinformation, and whims. Understanding any market, the U.S. real estate market in particular, is not an exact science. It is impossible to make exact predictions. Despite what all of the “experts” want you to believe, no one has all of the answers.

As dedicated real estate investors, we need to do our best to decipher between the true information and the misinformation pouring out of media sources. It is our challenge to gather accurate information and discover the trends that the multitude of change is creating. In order to be successful investors during a time of such great change, we need to cultivate accurate information, avoid misinformation, and do our best to be knowledgeable and well-prepared so we can avoid acting on a whim. The changes in the real estate industry are creating trends, and the successful investors will realize these trends and capitalize while the timing is right. As the mortgage industry continues its tumultuous behavior, secondary markets are evolving. Here is one to keep an eye on.

History/Overview

REO’s
Real estate owned or REO is a class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank (negative equity): the minimum bid in most foreclosure auctions equals the outstanding loan amount, the accrued interest and any fees associated with the foreclosure sale.

After an unsuccessful auction, the bank will go through the process of trying to sell the property on its own. It will remove some of the liens and other expenses on the home and try to resell it to the public, either through future auctions or direct marketing through a realtor. REO properties may be poor shape in terms of repairs and maintenance; however, real estate investors will often go after these properties as banks are not in the business of owning homes and so, in some cases, the low price can more than compensate for the condition of the property. REO’s can be found at local auctions, through realtors, and often banks will group a number of homes together, locally or nationally, and sell an “REO pool” to high net worth investors or groups of investors. Buying in bulk can often create even deeper discounts.

Mortgage Notes
A note is a legal document that obligates a borrower to repay a loan at a specified interest rate during a specified period of time or on demand; sometimes also referred to as promissory notes or mortgages. Notes can be associated with just about anything that can be bought and sold – houses, mobile homes, land, cars, boats, condos, consumer electronics, rare books, coins, stamps, antiques, home improvements…the list is almost endless. For our purposes, we will focus on notes attached to real estate, generally referred to as mortgage notes.

A mortgage note is the promissory note associated with a mortgage loan; it is a written promise to repay a specified sum of money plus interest at a specified rate. While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and makes the borrower who signs the note personally responsible for repayment.

Selling notes is a regular market activity that is not new today but that has increased in this market. Securitization, or selling notes, happens for several reasons, including:
· To raise cash.
· For servicing – some individuals/companies create notes, but do not have servicing capabilities.
· Specialized servicing – some individuals/companies are only set up to service performing notes; when a note is non-performing, the note is sold to mitigate risk; there are specific companies specialized in servicing the non-performing notes, with the specific goal in curing them back to performing.
· To mitigate risk – individual/companies are comfortable with certain mix of loans on their books. When this mix is not representative in the loan portfolio, segments of the portfolio are sold to get the total back within bounds.

Notes have a FACE VALUE (the unpaid principal), an INTEREST RATE at which the note is being paid and a TERM (the amount of time left before it is paid off). Buying, selling and trading notes have become big business, and many investors are creating great wealth with this strategy. Due to the "time value" of money which assumes a dollar today is worth more than a dollar at some future time, notes are sold at discounted rates- usually at 60-75 cents on the dollar. In today’s tumultuous market, though, these discounts are even deeper! Like bonds, mortgage notes offer investors a stream of payments over a period of time. When notes are purchased at a discounted rate due to the time value of money, there is built in equity created immediately, and to improve upon this position even further, every month payments will be made to the owner of that note…creating a monthly cashflow, with no hands-on effort!

REO’s and Mortgage Notes Today
The trauma of foreclosure or impending foreclosure has hit home for nearly 1.4 million homeowners so far this year, maintaining the nearly 91% year to date increase versus the last year. That is according to the latest numbers from California-based Foreclosures.com.

Let me share some more statistics….

For the month of October, nationwide 54,418 REO filings were reported to Foreclosures.com - up nearly 24% over the 43,941 September filings. A total of 128,019 pre-foreclosure filings were reported for October - up nearly 31% over 97,984 September’s filings.

In September both nationwide REO filings (43,941 versus 55,952) and pre-foreclosures filings (97,984 versus 117,694) were down over August (16.75% and 21.47% respectively).
When you average September and October filings, you find that pre-foreclosure filings have actually leveled off (down 4%) since August (113,001 current versus 117,694 August) and REO’s have actually dropped significantly (down 12%) from the high August filings (49,179 current versus 55,952 August).

These types of statistics are the basis of the information and misinformation that we weed through each day. We also hear about fault and blame, CEOs stepping down and companies folding. Bottom line is…these are grim numbers for the hundreds of thousands of homeowners trapped by rising mortgage payments, stagnant home prices, and tightened credit markets. And it is expected to get worse before it gets better.

With that said, the impact of the sub-prime mortgage industry is unclear, and the secondary discounted notes and REO market is evolving. Typical buyers are not buying as they have in the past. The large number of foreclosure filings (i.e. REO’s) taken in conjunction with the instability in the mortgage industry leads to a situation where banks/lenders are overwhelmed with the amount of REO’s and non-performing mortgage notes (i.e. mortgages headed to foreclosure) that they must deal with. When a market goes through such sudden and drastic changes, there are always deals to be found for savvy investors. REO’s and non-performing notes are where many investors are finding great opportunities. Homes and mortgages are being sold for pennies on the dollar. Some are being sold for as low as 30 cents on the dollar, but the average for wholesalers is somewhere between 40 and 65 cents on the dollar. This means that if a home or mortgage is worth $100,000, lenders are selling them for around $50,000…clearly a good deal, even if the market has declined a bit.

Who invests in REO’s and mortgage notes and how do they do it?
REO and Mortgage Note buyers are companies or investors with the experience and capital to purchase product and manage or dispose of that product through established systems and channels. If someone is holding a private mortgage, these investors will give cash and take over receiving the monthly payments that were being paid to the previous owner. A Mortgage Note for these investors are home loans or mortgages that are secured by real estate. Mortgage notes could be anything from $10,000 to millions of dollars. Investors in REO’s purchase foreclosed homes from the bank for 40-65 cents on the dollar, and they can then rehabilate the property and sell it at market value or dispose of the property quicker by passing on savings to a local investor to rehabilitate and sell at market value. Anyone can be a mortgage note or REO buyer, but there are hurdles to overcome.

Barriers to Entry
Notes are not cheap. They cost thousands, often tens of thousands, or even millions of dollars. Most note and REO brokers, companies who sell notes and REO’s, will only offer their product in “bundles”; meaning that in order to have access to the discounts, you must purchase a large group of notes and/or REO’s. Clearly this takes a great deal of capital. Mistakes can be very costly. The problems for a newcomer are obvious. Unless you have piles of cash, how do you start? How do you become experienced without making a mistake that could cost you dearly?

PropertyVestors Approach

Finding discounted notes and REO’s can be quite labor intensive. In many cases, it may be wise to be a part of a group that purchases these products. You then have access to the knowledge of the group, you can get larger discounts because the group can buy in bulk (buying power), your investment is spread across multiple notes or REO’s (diversification), and you will have the assistance of the group to service the notes and sell the REO’s.

PropertyVestors is an international real estate investment group that offers a discounted Notes/REO Program. After researching the various ways to approach note and REO buying PropertyVestors established a partnership with a top performing purchaser and servicing arm in order to minimize risk and maximize returns for our purchasers. We investigated only companies that had been purchasing these bulk orders for over 20 years with a strong track record. Special to our relationship is the focus on curing notes; we want to be part of the sub-prime mortgage solution, and do not sell to those interested in foreclosing as a process. In addition, curing and refinancing is the way to maximize returns. So, it is a win-win proposition. Our depth of buyers and competence in this industry has given our buyers a tremendous opportunity to take advantage of today’s real estate market.

Process
1. Visit http://www.propertvestors.com/ to research our investment group further, get access to our free report “Capitalizing on Real Estate in Today’s Economy”, and join as a Member to get access to profitable opportunities.
2. Investor completes a non-disclosure, non-compete document to gain access to the details of the bulk pool.
3. Once the pool has been reviewed and approved, proof of funds and a letter of intent is signed by the investor.
4. Investor is notified of the next pool in their price range.
5. Investor opens escrow account. (No money is taken from escrow until settlement. If settlement does not occur, escrow is returned)
6. Investor receives pool information (mortgage notes, deeds, etc.) and conducts their own due diligence.
7. Contracts executed, settlement completed and funding occurs.

Build a Discounted Note and REO Fortune with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with partner deals in emerging markets, coastal regions and waterfront properties.
With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. PropertyVestors’ real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (http://www.propertyvestors.com/). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Take Advantage of the Housing & Credit Woes

2007-11-08T15:24:00.000-05:00

Real estate investing is a dynamic practice. Change is inevitable. In the October issue of InvestingSherpa we discussed the myriad of changes that are taking place in the U.S. housing market and mortgage industry right now. It is the challenge of every investor to understand these changes, and adjust their investment strategy to work within the new framework that is being created. We need to recognize trends as they form, and determine how we can leverage these trends to improve our investing strategies.

Be a Part of the Know! – Private Lending

As the U.S. housing market continues to decline, and as credit becomes increasingly difficult to attain, new investment trends are developing. One of the largest and most profitable trends developing today is the concept of Private Lending. This is not a brand new trend, but the participation in Private Lending opportunities is increasing tremendously. Private Lending opportunities are direct loan investments to established, active, hands-on real estate individuals and companies; these opportunities are not offered to the general public. In other words, you need to “be in the know” to have access to these investment opportunities. In the real estate arena, Private Lending is used for just about any type of project - private funds could be raised to conduct activities ranging from land developments, foreclosure purchases, rehabs, rental or retail home construction, discounted notes, to any other type of real estate activity. Private Lending can also be utilized for just about any size project – from a single family rehab and flip to multi-million dollar deals. With this type of investment, you are lending funds to the individual or company that is controlling the project and not investing in the real estate itself. This is a passive approach to real estate investing that can prove to be very lucrative for the investors and the project manager.

One of the first steps with real estate investing is to determine if you desire to be an active participant in your investments, or if you want to take on more of a passive role. Do you want to own the real property, organize repairs and maintenance, deal with tenants, etc., or do you want to help fund projects that others are doing? Both strategies have their pros and cons, and PropertyVestors offers opportunities for both types of investors.

Today’s market is creating good opportunities for active investors using strategies such as:

1. Buying unique, one-of-a-kind properties that makes sense in any market;
2. Picking up properties at very low prices in absolute great markets that are sure to return;
3. Participating with builders in creating model homes or unique rentals in a great area.

However, a growing number of investors are trying to ride out the present real estate decline with their current holdings and are only interested in investing funds in other projects rather than taking on more real property as assets. And, a lot of active investment opportunities fall outside of the capabilities of individual investors. This is an ideal opportunity to become a passive investor and take advantage of the growing number of available Private Lending opportunities. Private Lending is a great way to pool resources with other investors to take advantage of opportunities that may be out of your investment scope. It can be as simple as forming an LLC with other investors and investing in a project as one entity. When the right project becomes available, PropertyVestors can help you organize this process.

Why are Profitable Private Lending Opportunities Available?

Very simple….. Builders, land developers, rehab specialists, foreclosure specialists, etc, all have access to more deals than their capital or credit can handle. In today’s market, there are some very good deals out there for those with capital, credit, and time. One of the major difficulties for those “in the know” is that even though they may be very solid financially, they do not have enough capital to finance every good project they come across, nor will lenders let them do more than a couple projects at a time; especially now that lending qualifications are tightening up. Private Lending allows active investors to find funding for their projects from passive investors, and in most cases interest rates are higher then you can find elsewhere and the investment is secured by the real estate.

For example, PropertyVestors recently funded a development in West Virginia with $2.4 million from a small group of investors. This investment is returning 20% annually over two years and is secured by the land itself and a government bond. The developer did not want to find the funding through traditional lending, and this approach allowed them to avoid all of the bureaucracy and red-tape of the traditional lenders. The developer is paying a slightly higher interest rate, but the ease and flexibility of the transaction more then makes up for that higher rate. For many Private Lending opportunities, investors can even consider using IRA funds for the investment and get tax deferred returns. The difficult part is that you need to have access to these opportunities, and in many of cases, you must qualify to be a part of the investment.

Fundamentals of Private Lending

In most real estate investments, you are purchasing a piece of real estate and will end up holding title to that real property. In the case of a Private Lending, you are providing capital to companies that own the real property. You are providing the capital to purchase and/or make improvements to the real property, but you do not have ownership in the property. Most of the time, the security in these investments is still the real property, but you do not have any ownership rights. The security could also be other assets, monetary vehicle (such as government bonds), or personal guarantees.

Because of this difference, the laws governing the investment are different. In more traditional real estate purchases, you are governed by real estate laws, and for Private Lending, you are governed by securities laws that are under the jurisdiction of the SEC. Because of this difference, the way such investments are marketed is also different. For a traditional real estate investment like a condo on the beach, you might see billboards, glossy flyers, and every broker in town promoting. In the case of Private Lending, you will not see it marketed publicly. Private Lending opportunities are handled privately among individuals having pre-existing relationships (a closed network). Without going into extensive detail about the SEC and their requirements, one of the most stringent requirements to qualify for many Private Lending opportunities is not only to have access to the projects through a closed network of investors, but also have significant investment capital and/or experience. Although not in all cases, many Private Lending opportunities will require you to be an accredited investor.

What is it?: Accredited investor is a term defined by various securities laws that delineates investors permitted to invest in certain types of higher risk investments (including real estate), limited partnerships, hedge funds and angel investor networks. The term generally includes wealthy individuals and organizations such as a corporation, endowment or retirement plans. For our purposes, we will focus on individuals rather then organizations.

In the United States, for an individual to be considered an accredited investor, he must have a net worth of at least one million US dollars or have made at least $200,000 each year for the last two years ($300,000 with his or her spouse if married) and have the expectation to make the same amount this year. This rule came into effect in 1933 by way of the Securities Act of 1933.

The exact definition comes from the federal securities laws, Rule 501 of Regulation D , and is as follows:
1. A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
2. A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

Why?: The SEC has established criteria for preventing people who perhaps need more investing experience from investing in unregistered securities and/or real estate opportunities that are less well known than stocks and bonds. The idea is that the SEC is trying to protect investors that lack the needed investing experience and/or disposable capital to get involved in higher risk investments. There are some assumptions that go along with being an accredited investor. An investor who meets the foregoing standards is considered an accredited investor, and should also meet at least one of the following criteria:

A) The accredited investor or his professional advisor can be reasonably assumed to have the capacity to protect his own interests in connection with the transaction by reason of his business experience or the business or financial experience of his advisor.

B) The accredited investor can reasonably be assumed to be capable of bearing the economic risk and can reasonably be assumed to not require immediate liquidity pursuant to his investment in the project.

C) The accredited investor can reasonably be assumed to have net worth adequate so as investment in the project does not exceed ten percent of the investor's net worth.

Benefits of meeting these standards:

If you fit into this category you may be eligible for many investment opportunities that other investors are not allowed to participate in.
The key is that many higher risk, and thus higher reward, investments are only available to qualified “accredited investors.”
The main benefit to qualifying is that you gain access to investments, and greater returns, that “average” investors can not access.
Quite simply, it comes down to convenience and privacy for the investment managers. By marketing investments only to accredited investors, a fund or company can avoid many of the filing requirements to which most public companies are subjected.

Utilize Self-Directed IRA’s to Increase Profits with Private Lending

In the September issue of InvestingSherpa, we introduced Self-Directed IRA’s as one of the most powerful and under-utilized investment tools available today. Self-Directed IRA’s are gaining notoriety, and more and more people are using their IRA funds to invest in partnerships, franchises, mortgages and real estate. At the same time, the investment tool is not widely known or used; only 4% of all IRA’s are categorized as Self-Directed. A tremendous amount of wealth is held in retirement accounts, yet only 4% of these accounts allow the investor to direct the investments! The tools are available that allow you to take control of your investments and your savings for retirement. Diversification is key with any investment strategy, and this diversification does not mean just diversified stocks, but also diversified with real estate. It is time to take control of your investment strategies and your retirement. A Self-Directed retirement account will give you more control and more options with your money.

Federal Reserve Chairman Ben Bernanke attributes much of today’s housing slump to the recent rise in mortgage rates. Rising numbers of mortgage defaults and mounting foreclosures are key factors that have forced many lenders to increase their rates, cancel promised loans, and even go out of business. Many would-be home buyers have discovered that credit is increasingly hard to come by.

The housing slump is not bad news for all, however. A growing number of investors are taking advantage of the ailing lending market to expand their own investment portfolio through Private Lending. By providing cash leverage at better credit rates or through less-stringent loan qualification requirements, private individuals are filling the gap created by skittish mortgage companies.

Once the domain of the wealthy elite, Private Lending has been discovered by those with a moderate amount of funds in their IRAs and 401(k)s. Thanks to the Employee Retirement Income Security Act of 1974 (ERISA), retirement account holders can “self-direct” their funds into a wide variety of investments, including Private Lending. These self-directed accounts enable investors to diversify their portfolio into potentially more secure and lucrative areas outside the volatile stock market.

At PropertyVestors we have been seeing a tremendous increase in Private Lending. Our investors are finding self-directed retirement accounts a lucrative way to invest in safe opportunities while still obtaining double digit returns. With the flexibility self-directed retirement accounts provide, investors can take immediate advantage of market trends, such as the one we are currently experiencing.

Some private lenders work directly with borrowers, while others work through mortgage brokers or real estate companies eager to move properties. Many private lenders looking for investment opportunities check out websites like Prosper.com, an online community of lenders and borrowers that works similarly to eBay. Although Prosper is still in its infancy stage, PropertyVestors does have a group created to take advantage of this growing trend. Most of our Private Lending at this point is done through traditional promissory notes. In addition to funding a development in West Virginia, we are actively funding projects in Charlotte, NC and Richmond, VA with organizations that have a successful business model in place.

Despite current economic ills, Private Lending offers the promise of excellent investment returns today and the potential for even more profitable opportunities in the future.

Use Private Lending to Grow Your Net Wealth with Smart Strategies from PropertyVestors

PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, Private Lending options; moderate with preconstruction syndication; and aggressive with developer deals in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. Education is also provided on how to take advantage of 1031 exchanges. PropertyVestors’ real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a FREE Basic Member and receive our eBook: “Capitalizing on Real Estate in Today’s Economy” and the monthly newsletter “InvestingSherpa.” For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Housing Industry & Mortgage Woes - How Woeful?

2007-10-18T12:17:00.000-04:00

Housing Slump, Credit Crunch, Subprime Mess, Record Foreclosures, Housing Bust, Credit Crisis, Mortgage Bust. These are just a few of the headlines and references I have heard over the past month or two referring to the current events taking place in the housing and mortgage industries. A quick search on Google or YouTube turns up mass quantities of information from “experts” making predictions and claiming they have been right all along. Is all of the negative press true? How do we know who to listen to and what experts are correct? I would like to offer some perspective on what is taking place in the U.S. housing market and mortgage industry.

First, please keep in mind, drama sells. In the age of 24-hour news networks with hours of airtime to fill, and the internet that is designed to give everyone a voice, even if that voice is unfettered and unedited, reality can be skewed in favor of the most dramatic scenarios. This is not to downplay the current events, but in today’s news environment, we need to make sure we gain a full perspective before making judgments, and reserve some skepticism for what may be passed off as absolute truths.

The current events are big, but more importantly, they are extremely complicated. The changes taking place in the U.S. housing markets and mortgage industry have effects being felt throughout the entire U.S. economy and to some extent globally. Making absolute predictions is impossible. Factors change daily, if not hourly, and some effects are too indirect to fully understand immediately.

As investors, we need to get educated about the current events, figure out how they are going to impact investment environments, and find the investment niches that make the most sense. Changes in investment environments do not mean the end of investment opportunities; in fact, changes often mean the availability of even more lucrative opportunities.

How Did We Get Here?
This is a very complex subject, and it is difficult, if not impossible, to gain a full understanding from a brief article. The hope here is to get an overview of what is taking place, and gain as much perspective as possible so we can all continue to make educated investment decisions.

Real estate is a consumer product, and as a consumer product it is subject to the well known economic theory of supply and demand. As demand goes up, supply goes down and becomes more costly, and visa versa. For the past 5-10 years (or whatever mark you want to put on our most recent housing boom), the demand for real estate was very high, which drove prices, and as a result profits, very high as well. The high demand, and high potential for profits, drove large quantities of people into the real estate investing arena.

Home sales and rising prices have been at record highs. Some people gained wealth from primary residences or second homes (end users), and many people decided to try their luck as real estate investors. However, not all of these end users and/or investors were well qualified through experience, credit, or income to own the real estate they were purchasing.

This raises the obvious question, why would banks lend to less then qualified buyers? There is no clear and simple answer to this question, but in an attempt to simplify, markets and trends are difficult to predict, and lending institutions, like individual investors, want to gain as much as possible from lucrative trends. The rise in housing was a trend that was lucrative for a lot of people, but in the end, as markets adjust (as they always do), many investors also stand to lose, and lending institutions are no different.

Banks and lenders loosened their qualifications to allow for more subprime loans in an effort to make the most of the rise in housing prices, and to satisfy the demand from institutional investors (hedge funds, mortgage backed securities, bonds, etc. – i.e. Wall Street) that wanted to buy the mortgages that the lenders were writing. The last few years of the housing boom were spurred in large part by these subprime loans. (Subprime refers to mortgages granted to borrowers whose credit history is not sufficient to get a conventional loan at prime rates. Often these borrowers have impaired or even no credit history.) When qualifications were loosened, more home buyers were available to the market, which allowed for prices to continue to increase…i.e. more demand sends prices higher. The issue is that the U.S. economy is now feeling the effects of these less then qualified buyers.

Many factors play a role in the timing and methods in which markets, such as the U.S. housing market, adjust and change over time. One major factor to consider is the high price point of housing compared to the average income of buyers. As housing prices continued to rise year after year, a large gap began to form between the average income of U.S. citizens and the average price of housing. While prices increased and credit was easily accessible, end users and investors were not very concerned about this growing gap because funds, in the form of home loans, equity lines, or lines of credit, were easy to come by; not to mention the ease in which real estate could be bought and sold to create profits. However, as demand began to slow, and in turn rises in price began to slow, this gap became more evident and more of a concern.

As if creating a recipe for poor housing conditions, sprinkle in a few other factors, and a vicious circle is easily created. Housing prices rise and people show little concern about the fact that they may be spread a bit to thin from a financial perspective. Credit is easily accessible, so equity from these rising prices is readily available. As housing prices level off, and in some places decline, it becomes clear that the easily accessible profits from appreciation are also ending. Lending institutions become aware that housing is slowing and they too begin to adjust their practices to the changes in the market. The lenders adjust by tightening their qualifications to qualify for the lending they are offering, which in turn means less people can qualify for loans, i.e. less buyers on the market. Now we have a situation where demand is lowering and supply is rising, and the net effect is a leveling off, if not lowering, of pricing for the available supply of housing.

In addition to these changes to the housing market, another major ingredient needs to be added – Adjustable Rate Mortgages (ARM’s). ARM’s are mortgages that start with a low, “teaser,” interest rate, and adjust to a higher interest rate after a period of time, usually 3-5 years. Towards the end of the housing boom, when lenders were loosening their qualifications to bring more buyers to the market, ARM’s became a regularly used tool by lenders, especially to the subprime market. In retrospect this seems like a risky practice. Give individuals with less then stellar financial pasts loans that are complex, and appear financially manageable at first glance, but will adjust in the near future to much higher payments. During the boom many people tried to point these risks out, but money often speaks louder then words. The risks were considered and lenders chose to continue the practice; mainly because the demand for these types of loans was high from both buyers and Wall Street.

ARM’s that were created towards the end of the boom are now beginning to adjust from their “teaser” interest rates to much higher rates, in turn creating payments that owners can not, or are not willing, to pay. This in turn adds an increase in foreclosures to our poor housing recipe. As markets slow, demand lessens, prices flatten or decline so equity and appreciation are lost, available credit tightens, and then rates adjust up; some owners find themselves in very tight financial positions, and even upside-down on their real estate assets.

Recall the two types of buyers mentioned above, end users and investors. End users are more inclined to fight through difficult financial times with their homes because this is where they lay their head each night. However, many end users, despite their desire to fight, can not make ends meet; especially as rates and their monthly payments drastically increase. Investors on the other hand, are the first ones to turn away from their investments when times are tough. When the housing boom was at its height, real estate investing seemed easy, almost free money, and as a result the number of investors increased dramatically. When times became tight many of these investors lost their desire to work through the difficult times. As a result of end users being incapable of affording higher monthly payments and large numbers of investors losing their will to work through difficult times, foreclosures have increased at record amounts.

The vicious circle now grows as foreclosures are added to the recipe. Markets that are already experiencing slow sales, declining prices, lower demand from buyers, are now faced with even more inventory from foreclosures. Supply increases and demand decreases. In addition, lenders, and ultimately Wall Street, who buys mortgage backed securities, are now seeing large numbers of defaults on their mortgages, which immediately affect their bottom lines – their profits. A short time ago, they could not write enough loans, and their profits were growing at a record pace; now the number of loans they are writing is drying up and the mortgages they were depending on for profits are defaulting.

As Wall Street sees these changes, they too begin to adjust to the market conditions. Funding for subprime loans dries up almost entirely. The force that was helping to spur the boom is now slowed to a halt. Lenders begin to go out of business, and as the lending and investment landscape adjusts, the effects ripple through the U.S. economy and globally. Housing slows, appreciation and equity level off, if not decline, available credit tightens, foreclosures increase, lenders and Wall Street feel the effects, the subprime industry slows incredibly, demand slows and supply increases, corporate and institutional profits are impeded, people have less cash at their disposal and credit is more difficult and more expensive, so people spend less, global investors begin to look elsewhere to invest because the U.S. economy is not growing the way it has for the past few years. This is a very simplified explanation of an amazingly complicated and inter-related process, but the idea is clear – Every aspect of the U.S. economy, and ultimately the world economy, is connected in some way, and as a major economic force such as the housing industry undergoes changes, the effects will ripple through the economy.

The complexity makes economics a very difficult science/art to fully understand, and even more difficult to accurately predict or pin point. The positive aspect of the complexity is that nothing is as clear cut as it may seem from a simplified explanation. Conditions may have seemed ideal during the housing boom – the economy was doing well, and people were creating a lot of wealth through real estate; the reality is that it could not have been ideal because we are now dealing with the backlash of that boom. In the same way, the current housing/mortgage crunch may seem serious, and many would have you believe dire, but conditions are still working themselves out, and positive aspects can and will be found.

What is Really Going On?
Armed with a general understanding of the forces that are coming together to create the current events, let’s focus on some more specifics about these forces. Moody’s Economy.com (a leading independent provider of economic, financial, country, and industry research designed to meet the diverse planning and information needs of businesses, governments, and professional investors worldwide) predicts that 2.5 million first mortgages will default this year, and they expect the delinquencies to peak in the summer of 2008. This is a tremendous amount of defaults, and the peak is still months away. Does this merely reinforce all of the bad news? Not necessarily.

These statistics need to be broken down a bit further. First, the worst-hit loan category will be subprime adjustable-rate mortgages (ARM’s). Nationally, the core of the problem is subprime ARM’s that were originated in 2005 and 2006, when lending standards became very loose. This is clearly a problem, but the problem is contained; it is not throughout the entire mortgage industry.

In fact, the prime fixed-rate mortgage market has seen almost no detioration from defaults. In addition, while the origination of ARM’s has plummeted by almost 50% in the third-quarter of 2007 when compared to 2006, applications for fixed-rate loans have risen by 30% during the same period. The industry is in the process of self-regulating. These trends demonstrate that there is still ample confidence backing the lending industry, but this confidence is only available to support well-qualified loans. There is still plenty of investment capital in the industry, but this capital is being reserved for less risky investments…i.e. well-qualified applicants and fixed-rate loans. This stricter analysis of loans is reducing the availability for home purchases, refinances, and equity access, but this reduction in availability is focused mainly on the outer margins of creditworthiness, where lending has grown extensively the past few years.

In addition to the core of the problem being focused on subprime ARM’s, a large concentration of defaults is focused on a small amount of states. In early September, the Mortgage Bankers Association released its second-quarter report for the three months that ended June 30 and found that most of the loan delinquencies and foreclosures were happening in seven states: Michigan, Ohio, Indiana, California, Florida, Nevada, and Arizona.

The last four states (California, Florida, Nevada, and Arizona) have high rates of ARM’s. These four states are also seeing declining house prices which makes refinancing these ARM’s difficult. In addition, these four states have a disproportinately high share of investor loans, which are more likely to default if the investors see the value of their investments falling because of dropping home prices.

In the first three states (Michigan, Ohio, and Indiana), the high level of deliquency and foreclosure has to do with the underlying economy. For example, Michigan lost nearly 300,000 jobs between 2001 and April 2007. To add another ingredient to the vicious cycle of our housing conditions, local economies have a tremendous effect on the value of housing in that area. In a study done by the FDIC (An independent government agency created by Congress in 1933 to maintain stability and public confidence in the nation's banking system.) looking at housing booms and busts in U.S. cities, it can be shown that the main regional instances of U.S. home price busts since 1978 are connected to fairly acute, localized economic shocks that tend to affect major employers. As a result of this localized economic shock, the most detrimental factor in the bust cities is population outflow. Jobs are lost and people leave the area. Population outflows are extremely damaging to housing markets. The demand for homes is lowered and the number of houses on the market rises – demand down and supply up. The problems of these upper Midwest industrial states clearly follow this trend.

When statistics are further analyzed, it becomes evident that it may not be time for widespread panic. We need focused efforts in the areas where the problems are concentrated.

What Can Be Done to Remedy the Situation?
There are a number of solutions that can be implemented to help the immediate problems and to prevent this type of event from occurring in the future. First, the government recognizes the issues and is taking steps to remedy the problems, while at the same time trying not to over-step their bounds. Since these issues are still so new to the economy, the remedies are still in the process of being created and implemented.

One potential remedy is to allow bankruptcy courts to modify the terms of a homeowner’s mortgage loan. This is not a far stretch from current powers of the courts, which already have the power to modify payments on other secured debts, including mortgages on other properties. Responsible lenders who made loans on reasonable terms would not be effected, but predatory lenders would end up with loans they should have made in the first place.

A second governmental approach is to utilize the FHA (Fair Housing Administration) to help borrowers refinance and avoid foreclosure. The Bush administration is looking to the FHA to offer refinancing options to homeowners, including those who are not yet in default or foreclosure, but who are at risk of falling behind in their payments on mortgages that were structured to offer payments that were very low at first but then escalated. This gives the government the ability to assit those people caught in the subprime mess without advocating a financial bailout.

As recent as October 10th, the Bush administration put forth a new initiative they are billing the Hope Now partnership. The initiative is designed to coordinate the efforts of mortgage counselors, servicers, lenders, investors, and state and local government to reach out to as many homeowners as possible to prevent foreclosures. As of October 10th, eleven loan servicers that handle 60% of U.S. mortgages have agreed to participate in the initiative. It is expected that others will join, and have good reason to join, because minimizing foreclosures benefits lenders and investors as well as homeowners. Hope Now will conduct a national direct-mail compaign to reach at-risk borrowers, encouraging them to either call their lenders or a credit counselor to explore options to refinance or modify their existing loans.

In addition to immediate remedies, actions must be taken to prevent similar scenarios in the future. First, it must be reemphasized that not every borrower was deceived into accepting a hazardous or unsuitable loan. Many investors walked into these loans with full knowledge but chose to dismiss the risks. However, the main group that is being negatively affected by this backlash are the homeowners who chose to accept subprime ARM’s, and this group should be protected from these problems in the future. Mortgages are incredibly complex transactions and borrowers typically want a helping hand to guide them. This helping hand ususally comes from the mortgage lenders that are selling them the product. Furthermore, people who turn to the subprime market for money tend to be the least sophisticated consumers, and the most easily misled.

Here are four suggestions to assist this group:
1. No more “teaser” rates: Loans should not be made unless the lender has taken reasonable steps to ensure the borrower can repay based on the real rate. Lenders should also be required to factor in homeowners insurance premiums, property taxes, and any other debts the borrower may have.

2. Limit Stated Income Loans: These loans were originally designed for self-employed individuals, but mortgage brokers began to abuse them to help people into loans that could not be afforded in the long run. Without proof of self-employment, these loans should not be used.

3. End prepayment penalties for subprime loans: For people with bad credit, prepayment penalties are often used to lock them into a loan with poor rates and terms. Prepayment penalties should not be allowed under a certain credit score. If a borrower is above that credit line, it can be assumed that the borrower understands and can guage the risks of the loan.

4. Mandatory housing counseling for subprime borrowers: Purchasing a home is one of the largest investments anyone can make. It should not be taken lightly. It should be mandatory that vulnerable buyers must be educated about the mortgage process before making such large decisions.

Current Investing Climate
The majority of the U.S. housing markets are doing okay, if not well. The mortgage industry is not in complete disarray. Real estate investments are not dead in the water. With a full perspective of what is taking place, it can be seen that caution is needed, but full stagnation is not required. There are plenty of good investments to be made. The investment climate has changed. Investors can no longer go out and buy any house expecting giant profits, but this change is a good thing. Investors and investments are now becoming more realistic, and the competition for great investments is thinning out as uneducated investors leave the real estate arena all together. Niches need to be found, but the proper investments are out there.

Build an investment fortune with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with developer deals in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. Education is also provided on how to take advantage of 1031 exchanges. PropertyVestors’ real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: “Capitalizing on Real Estate in Today’s Economy.” For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (www.PropertyVestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Take Charge of Your Retirement Funds

2007-09-12T14:28:00.000-04:00

More and more people are using their IRA funds to invest in partnerships, franchises, mortgages and even real estate. You can do this by using what is called a Self-Directed IRA. Only 5% of all IRA are categorized as Self-Directed. What exactly does this mean? A Self-Directed IRA means that you have more control and more options with your money.
Welcome to the world of Self-Directed IRA's.

A Self-Directed IRA will Build Your Net Wealth:
If you have not heard the news already, get ready for some great advice about using your IRA money to make a fortune. This past month one of our Premier Members and entrepreneur, Stacy Miller, 47 of Charlottesville, VA decided to try something new to improve the returns of her retirement account. Rather than putting her IRA money into the latest hot stock or mutual fund that gave her single digit returns, Miller decided to set up a Self-Directed Traditional IRA that allowed her to utilize $100,000 to purchase a luxury high rise condo in a new real estate strategy called a, "Preconstruction Syndicate". After her own research, Miller used PropertyVestors.com to educate herself further on this unique strategy that helps build her net wealth and is projected to return a minimum return on investment of 40% within a two year timeframe.

Ordinarily a positive return on investment would result in a capital gains tax at the time earned. But because Stacy's property was held by her Self-Directed Traditional IRA, her tax will be deferred until she begins taking out distributions years from now. Now can you imagine owing no tax at all? It can happen when you utilize a Self-Directed Roth IRA. That is powerful investing!

Miller is a perfect example of an educated investor that is not only using savvy investing strategies", but is doing so by leveraging her Self-Directed Traditional IRA account. PropertyVestors assisted Miller in this transaction, and is seeing an influx of baby boomers taking advantage of their IRA money to building net wealth. "It is great to see an "Ah ha" moment when someone first learn that she can actually take control over her IRA and can use real estate to diversify investments and grow net wealth. It helps her to obtain financial goals faster than ever thought," say's Shawn Barry with PropertyVestors.

Surprised that the IRS allows this type of transaction? You are not alone. You probably already know that you can buy stock through an IRA at a brokerage firm. But many don't realize that it's perfectly within IRS rules - and actually has been since the code for IRAs was first written in 1974 - to buy real estate and private equities with Self-Directed IRA money. In fact, as long as you watch out for what the IRS calls "prohibited transactions," almost any type of investment is permitted, from a condo to a new business venture - with the exception of collectibles (such as artwork and jewelry), life insurance, and the stock of S-corporations.

So how many people are doing this? Growth in the self-directed IRA business is staggering, with a 30% growth rate last year alone. Why so popular? Investors want true diversification in their retirement account portfolio. "When you don't have confidence in the stock market, it is only natural to turn to real estate as a consistent option for growing net wealth; just keep up with the trends, invest in emerging markets and educate yourself on smart real estate strategies." Barry adds (see article: Is a Major Stock Market Correction Looming?).

After Miller's initial success, she has options to become even more ambitious with her Self Directed IRA by purchasing her first international investment in Tuscany, Italy which PropertyVestors plans to have available by next year. In the meantime, Miller can use her remaining account with PropertyVestors private lending strategy to invest in real estate projects such as foreclosures, rehabs and flip opportunities managed by real estate professionals within the PropertyVestors network. Miller enjoys being a passive real estate investor while earning double-digit returns with each real estate strategy available to her.

What advice do you have for those that want to move forward with a self-directed IRA? "Begin by educating yourself on established companies that will hold your Self-Directed IRA account and will offer the services that you need. I suggest researching Pensco Trust and Guidant Financial. Next create your "team." You need to have at least a tax professional and someone to help you find the investments you are looking to diversify in. PropertyVestors is helping more and more people everyday find the right real estate investment. Finally create a diversified real estate portfolio with strategies that protect you in any market condition" Barry suggests. "You'll be amazed at the real estate options that are available to maximize returns and minimize risk in today's economy. Miller is a great example of one of our members open to new strategies and powerful tools, and will profit greatly".

Build an IRA fortune with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEO's, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies that its real estate portfolio specialists discuss are conservative, private lending options; moderate with preconstruction syndication; and aggressive with direct preconstruction purchases in emerging markets, coastal regions and waterfront properties.
With PropertyVestors, you can take advantage of a new model and innovative residential real estate strategies. PropertyVestors’ real estate strategies can position you to take advantage of current market conditions. In addition, it can help you maximize your profits while minimizing your risks.

To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: “Capitalizing on Real Estate in Today’s Economy.” For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About the Author
Sarah Barry is the founder of PropertyVestors (http://www.propertyvestors.com/). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

Opportunities for Accredited Investors

2007-08-30T14:46:00.000-04:00

“Accredited Investor” or “Qualified Investor” is a term that is sometimes thrown around pretty loosely in investment circles. What exactly does it mean, and what are the benefits of qualifying as an accredited investor? I have been asked these questions on a number of occasions; so I feel this topic warrants a bit more explanation. Every investor can benefit from a better understanding of key investment terms, and some of you may even qualify as accredited investors and not be aware of it.

What is it?: Accredited investor is a term defined by various securities laws that delineates investors permitted to invest in certain types of higher risk investments (including real estate), limited partnerships, hedge funds and angel investor networks. The term generally includes wealthy individuals and organizations such as a corporation, endowment or retirement plans.

For our purposes, we will focus on individuals rather then organizations.In the United States, for an individual to be considered an accredited investor, he must have a net worth of at least one million US dollars or have made at least $200,000 each year for the last two years ($300,000 with his or her spouse if married) and have the expectation to make the same amount this year. This rule came into effect in 1933 by way of the Securities Act of 1933.

The exact definition comes from the federal securities laws, Rule 501 of Regulation D , and is as follows:

A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;

A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.

Why?: The SEC has established criteria for preventing people who perhaps need more investing experience from investing in unregistered securities and/or real estate opportunities that are less well known than stocks and bonds. The idea is that the SEC is trying to protect investors that lack the needed investing experience and/or disposable capital to get involved in higher risk investments. There are some assumptions that go along with being an accredited investor. An investor who meets the foregoing standards is considered an accredited investor, and should also meet at least one of the following criteria:

A) The accredited investor or his professional advisor can be reasonably assumed to have the capacity to protect his own interests in connection with the transaction by reason of his business experience or the business or financial experience of his advisor.
B) The accredited investor can reasonably be assumed to be capable of bearing the economic risk and can reasonably be assumed to not require immediate liquidity pursuant to his investment in the securities.
C) The accredited investor can reasonably be assumed to have net worth adequate so as investment in the securities does not exceed ten percent of the investor's net worth.

Benefits of meeting these standards?:

If you fit into this category you may be eligible for many investment opportunities such as hedge funds, commodity funds and special public funds that other investors are not allowed to participate in.
The key is that many higher risk, and thus higher reward, investments are only available to qualified “accredited investors.”
The main benefit to qualifying is that you gain access to investments, and greater returns, that “average” investors can not access.
Quite simply, it comes down to convenience and privacy for the investment managers. By marketing securities only to accredited investors, a fund or company can avoid many of the filing requirements to which most public companies are subjected.

Opportunities: Do you qualify as an accredited investor? Do you know someone that qualifies as an accredited investor? PropertyVestors, an investment group of CEOs, entrepreneurs and savvy real estate investors, currently has real estate investment opportunities open to accredited investors. If you or someone you know has interest in these great opportunities, please contact us as soon as possible. These types of opportunities do not last long! You can find us as http://www.propertyvestors.com/, or you can contact us directly at invest@propertyvestors.com or call 1-877-90-BUYER.About

The Author
Sarah Barry is the founder of PropertyVestors (http://www.propertyvestors.com/). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Real Estate Investing is Like Riding a Bike...

2007-08-27T15:09:00.000-04:00

What do walking, riding a bike, and investing in real estate have in common? All of them follow the general rule that doing something new for the first time can be quite challenging. Once you overcome those first time challenges with walking and riding a bike, your muscle memory takes over and you will not forget how to use your new skills. Unfortunately, the challenges with real estate can not be so easily memorized. Economics, market cycles, trends, just to name a few factors, all change on a continuous basis. This means that first time investors as well as seasoned investors have challenges that they must face. The good news is that challenges can be overcome, and once the challenges are managed, there is great reward for your efforts.

One of the first challenges that both new and experienced investors need to address is whether now is the right time to invest in real estate. The quick answer to this question is that it is always the right time to invest in real estate; it is just a matter of finding the right investment. However, this answer is a bit simplistic and in what the media hypes as a "softening" real estate market, some concrete information can go a long way to instilling confidence in your investment decisions. There are a lot of factors that go into making the decision to invest, but at the heart of any investment, there is a common goal…making a profit! If we all have a common goal of making a profit, or turning our money into larger sums of money, who's advice or trends should we take notice of? I suggest we take notice of the people that are making it happen, the wealthy.

A recent survey by Citi Smith Barney says that over half of millionaires and 40 percent of affluent investors, or approximately 25 percent of the U.S. population, believe that real estate is a good investment. And these people practice what they preach. Among the wealthy, nine out of ten own some sort of real estate investment accounting for one-third of their portfolio, and most (52 percent) report that despite a softening housing market, their real estate investments have increased over the last year.

Ownership of second homes is particularly common among millionaires (50 percent) compared with 20 percent among those in lower income brackets. Two-thirds of those who own a second home or vacation home report that the value of this investment has increased over the past year.

Although investors widely believe the housing market is an important part of the overall economy (41 percent very important, 54 percent somewhat important), and most made money from their real estate investments, eight out of ten feel the housing sector is weaker today than it was a year ago. Moreover, many expect the housing market to remain weak (28 percent) or become even weaker over the next 12 months (46 percent).

What does all of this mean? To me this information says that while the national real estate market as a whole can be characterized as "softening," according to wealthy investors there are still great investments out there to be found. The key of course is finding those investments, and having enough influence to negotiate terms that take advantage of the current real estate investment climate and trends.

Here are some suggestions that every investor should consider when diving into a real estate investment:

Resources. Profitable investments require capital to earn a respectable return. This may seem obvious, every investor needs to start with an honest assessment of how much money and time they are willing to commit to achieve their financial goals. Successful investors set aside specific sums, line-up financing in advance and plan to commit time as well as money to their investments. One of the first questions you should ask is how much money can I comfortably commit to an investment. The next consideration is what type of time and activity commitment to I want to make. There are varying levels of activity when it comes to investing. Do you want to be an active or a passive investor…do you want to actively "flip" a house and do all the work yourself, or do you want to passively work with a group that can take the burden of the hands-on work off your plate?

Research. Profitable investments do not happen by accident; rather, they result from careful research that compares, contrasts and considers various opportunities. In the context of real estate, research means investigating real estate markets and properties: Are prices rising or falling? Is the inventory of for-sale properties growing or shrinking? Are rents strengthening or weakening? Is the population getting larger or smaller? Is the job market healthy or ailing? What is the overall economic outlook for the area? Are you prepared to make all of these decsions on your own, or would it be wise to enlist some outside assistance?

Calculate. Instinct and intuition can be important aspects of investment decisions. But successful investors act purposefully on the basis of hard facts as well as experience, knowledge and soft feelings. Smart investors do not risk money on impulse; they pause to make projections, run the numbers and weigh the risks and rewards before they invest. Be prepared to crunch numbers and make a realistic analysis of every investment.

Rely. Trusted advisors also are crucial to profitable investments. Beginners, in particular, need to find and consult experts who can help them learn more about the benefits, opportunities and risks of real estate investments. A knowledgeable real estate advisor is invaluable to help you reach your investment goals, research markets, locate suitable properties, structure and management investments, and even build wealth over the long term.

Risk. Real estate investors need to accept that investment always entails risk to earn an attractive return and that property values do fluctuate over short and long cycles. One way to reduce risk is to invest with one or more partners, though risk-sharing among multiple people has its own risks of complications and strife. Either way, experienced investors know they need to take calculated chances. They do not sit on the sidelines, unless they have good rational reasons to stay put and be patient.

Results. Savvy investors make decisions to accomplish specific investment goals. While some properties might offer the potential of both income and capital appreciation, others make tradeoffs between those two objectives to maximize one or the other. And while some properties might be ideal for short-term fix-up and resale, others might be better suited for long-term hold in an investment portfolio. Novices need to know their own goals and tolerance for risk to make investments accordingly and with confidence.

Prosper with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory. Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate risk with preconstruction syndication; and aggressive with direct preconstruction purchases in emerging markets, coastal regions and waterfront properties. With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. You can be protected from a downturn market, whether it is a substantial correction or any other trouble that may be brewing on the economic horizon.

The fact of the matter is: The "general" U.S. real estate market is in the doldrums and you really need to do your homework to understand what strategies will protect your assets. PropertyVestors' real estate strategies can position you to take advantage of these and other market conditions. Not only that, it can help you maximize your profits while minimizing your risks.To learn more about these topics, visit www.PropertyVestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (http://www.propertyvestors.com/). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.
Labels: Baby Boomer, Investing, Investment, Money, Real Estate, Retirement, Strategy, Trends, Wealth

Profiting from Discounted Notes

2007-07-12T09:17:00.000-04:00

Profiting from Discounted Notes: Confidential Note buying Investment Opportunity

History/Overview
A note is a legal document that obligates a borrower to repay a loan at a specified interest rate during a specified period of time or on demand; sometimes also referred to as promissory notes or mortgages. Notes can be associated with just about anything that can be bought and sold – houses, mobile homes, land, cars, boats, condos, consumer electronics, rare books, coins, stamps, antiques, home improvements…the list is almost endless. For our purposes, we will focus on notes attached to real estate, generally referred to as mortgage notes.

A mortgage note is the promissory note associated with a mortgage loan; it is a written promise to repay a specified sum of money plus interest at a specified rate. While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and makes the borrower who signs the note personally responsible for repayment.For the most part, it is the mortgage note which determines the "type" of mortgage, and the varying types have an affect on the amount repaid and the timeline of the repayment.

Types of mortgages:

If the note has a fixed interest rate and payments, then the loan is a Fixed Rate Mortgage (FRM) loan
A fixed interest rate with adjusting payments is a Graduated Payment Mortgage (GPM)
A floating interest rate and payment amount indicates an Adjustable Rate Mortgage (ARM)
An amortization schedule longer than the maturity date indicates a balloon payment mortgage
When the payment schedule calls only for interest and no principal, thus leaving behind the full principal due at maturity, the loan is an interest only loan
A payment adjustment frequency less than the interest rate adjustment frequency implies a mortgage which allows for negative amortization

Notes are created by banks, and by individuals. Banks hold first and second mortgages (notes.) Over the last 30 years many sellers and businesses have taken back first and second mortgages on property they have sold.

Notes are sold for several reasons, including:

To raise cash -
For servicing – some individuals/companies create notes, but do not have servicing capabilities
To mitigate risk – some individuals/companies are only set up to service performing notes; when a note is non-performing, the note is sold to mitigate risk; there are specific companies specialized in servicing the non-performing notes, with the specific goal in curing them back to performing.

Such notes have a FACE VALUE (the unpaid principal), an INTEREST RATE at which the note is being paid and a TERM (the amount of time left before it is paid off). Buying, selling and trading notes has become big business, and many investors are creating great wealth with this strategy. Due to the "time value" of money which assumes a dollar today is worth more than a dollar at some future time, notes are sold at discounted rates- usually at 60-75 cents on the dollar! Like bonds, mortgage notes offer investors a stream of payments over a period of time. When notes are purchased at a discounted rate due to the time value of money, there is built in equity created immediately, and to improve upon this position even further, every month payments will be made to the owner of that note…creating a monthly cashflow, with no hands-on effort!

Investors – who invests in mortgage notes and how do they do it? Mortgage Note buyers are companies or investors with the capital to purchase a mortgage note. If someone is holding a private mortgage, these investors will give cash and take over receiving the monthly payments that were being paid to the previous owner. A Mortgage Note for these investors are home loans or mortgages that are secured by real estate. Mortgage notes could be anything from $10,000 to $1 million or even tens of millions of dollars. Anyone can be a mortgage note buyer, but there some hurdles to overcome.

Barriers to Entry
Notes are not cheap. They cost thousands, often tens of thousands, or even millions of dollars. Most note brokers, companies who sell notes, will only offer their notes in "bundles;" meaning that in order to have access to the discounts, you must purchase a large group of notes. Clearly this takes a great deal of capital. Mistakes can be very costly. The problems for a newcomer are obvious. Unless you have piles of cash, how do you start? How do you become experienced without making a mistake that could cost you dearly?

Two Pitfalls
There are two pitfalls waiting for the unwary. Some people rush out and buy paper without knowing what they are doing. They have just read a book, attended a seminar or heard a taped course, they get all excited and buy the first note they see. These people quickly get into trouble.

The other pitfall is the "paralysis of analysis." Some people read all the books, take all the seminars, study all the tape courses, but never buy any notes. All they are doing is spending money on an intellectual exercise. They are afraid to take any action.

Finding Notes
The first challenge you will face is how to find notes. Broadly speaking, there are two approaches to finding notes. One is to look for individual note holders. A second is to market your business.
Advertising
The first approach, locating individual note holders, is centered around advertising. Note buyers (I'll be using that as a generic term for both note investors and note brokers) use every kind of advertising method available to them, although every note buyer does not use every method, of course. Examples of advertising methods are: direct mail (including courthouse research), newspaper display and, more commonly, classifieds, Yellow Pages, flyers, brochures, "specialty" advertising (that's the term for things like t-shirts, pens, hats, paperweights, etc., etc. imprinted with your message), even billboards, radio and TV. No doubt you have seen the TV ad campaigns run by some of the large institutional investors aimed at people who own structured settlements, lottery winnings and mortgages. Judge Wapner was even a spokesman for one of them.

I am not a fan of advertising for note sellers, for the simple reason that it brings pitifully few responses and costs a lot of money. You are better off spending that time and money networking and creating your own notes.

Direct Mail
What about Direct Mail? I was told by someone who sells mailing lists of noteholders that note brokers often ask him if they can rent 100 or 500 names. That is a total waste of money. Even the very best direct mail campaigns to a list of this type rarely if ever receive more than a 5% return. And that's when the pros design the package. When it's designed by someone who doesn't know the arcane secrets of successful direct mail marketing -- and there are many -- the
return will fall to 2%, 1% or even less. Do the math: if you only end up buying 1 out of 20 notes you see (and that's a good average for a new note buyer), and you send 500 letters, and you hit pay-dirt and get a 2% response, how many notes will you buy?

Networking
Targeting individual note holders can work if you have the money and knowledge of advertising (or can afford to hire a pro) to pull it off. Most people don't come into the business with both of those assets, particularly the latter.

The second approach is to market your business, a.k.a. "networking." Instead of establishing a goal to target individuals who might be holding notes, the goal of networking is to target certain people whose clients and contacts are people who hold notes. In the words of Hank Harenberg, the hands-down expert in this technique as applied to the note business,

"The theory behind it (networking) is simple and powerful. We contact the businesses that have the clients that we want and convince them to help us contact those clients. Suppose you are a business with a thousand customers. If I make presentations to ten businesses like you, I've touched 10,000 people by calling on ten people."

Networking does not depend upon advertising. It involves a lot of personal contact: one-on-one meetings with people, making presentations to groups both small and large, writing articles for trade publications, attending and even speaking to trade conventions, etc.

Who are the types of people you should target in your networking? Well, who are the people who might know noteholders? When you think about it that way, the answers start flowing: Real estate agents. People in title companies. Lawyers (think real estate settlements, divorces, estates and tax planning). Accountants. Bank trust officers. Who else can you think of?
The principal advantages to networking are that it produces long-term results and it is far less costly than advertising. The major drawback is that it takes a long time to establish the relationships that keep the notes coming in.

PropertyVestors Approach
As you can see, finding discounted notes can be quite labor intensive. In many cases, it may be wise to be a part of a group that purchases these notes together. You then have access to the knowledge of the group, you can get larger discounts because the group can buy in bulk (buying power), your investment is spread across multiple notes (diversification), and you will have the assistance of the group to maintain and service the notes.

PropertyVestors is an international real estate investment group that offers a discounted notes program to it's Premier Members. After researching the various ways to approach note buying in order to address the needs of our Premier Members, PropertyVestors has established a partnership with a top performing note purchaser in order to minimize risk and maximize returns. We investigated only companies that had been purchasing notes for over 20 years had a servicing arm that has a strong track record.

Please keep in mind that the approach outlined below is for our Premier Members that are "accredited investors" only. Our current opportunity is outlined below.
1 – Non-performing mortgage notes are purchased in bulk by a banking "insider"
- 1st Position mortgage
- 80% of home value at time of purchase (the home may have appreciated substantially, depending on the age of the loan)
- Purchased at a discount
- The loans are "scrubbed" and check for legitimacy.
2 – A package or "pool" or notes is sold to private investors
- Pools are sold to private investors at between 50 & 60 cents on the dollar
- Prices run between $5 million and $1 billion or more in sales price
- The investment is secured by real estate valued at approximately 44% Loan to Value (80% 1st mortgage @ 55 cents on the dollar = 44%)
- The servicing company services the loan using non-adversarial tactics to get the occupant paying again.
3 - The loan is modified to make it easier for the occupant to resume payment
- The interest rate may be lowered
- Late fees or other charges may be forgiven
- ARM's can be changed to fixed rate, interest-only loans
- The occupant is taken through credit repair so they can refinance in 1-2 years
4 – The investor receives cashflow until the loan is refinanced.
- Cashflow from modified mortgage payments is remitted to investor through the servicing bank.
- Cashflow equals interest on FULL LOAN AMOUNT
- Once the borrower's credit is repaired, the loan is refinanced and the investor receives the entire loan balance
- In the case of individual loans that cannot be repaid, they are re-sold at a profit.
- The investor has the ability to request the following exits on any of their loans that don't perform:
o Deed in lieu of foreclosure
o Deed in lieu of foreclosure plus cash to get the occupant relocated
o Sell the note back into the market
- The investor will be able to log into a secure website and check their loan portfolio and check their loan portfolio to see which loans have been paid off

Process –

Visit http://www.propertvestors.com/ to research further on our investment group, get access to our free report "Capitalizing on Real Estate in Today's Economy", and join as a Premier Member to get access to profitable opportunities. The annual cost for membership is $245.25 annually.
Investor completes Proof of Funds document and has their funds verified by an independent bank.
The investment bank finds and "scrubs" an appropriate pool of notes.
Investor is notified of the next pool in their price range.
Investor opens escrow account. (No money is taken from escrow until settlement. If settlement does not occur, escrow is returned)
Investors receive pool information (mortgage notes, deeds, etc.) and conducts their own due diligence.
Contracts executed, settlement completed and funding occurs.
The servicing company services notes and sends checks to Investor.
Investor uses secure website to track status of notes.

Build a Discounted Note Fortune with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with developer deals in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. Education is also provided on how to take advantage of 1031 exchanges. PropertyVestors' real estate strategies and ongoing education can position you build your net wealth, while minimizing risk.

To learn more about these topics, visit www.PropertyVestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (http://www.propertyvestors.com/). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Two Mega Trends to be Aware of: And How you Can Profit from Them!

2007-06-19T09:11:00.000-04:00

I hate it when my dire forecasts come true. But my job is to call it like it is, and help you make sound investment decisions. So I keep my emotions out of the process, and focus on reality.

And when I look around me and see what's going on in the markets right now, I see two nasty scenarios coming to pass.

Today, I want to tell you why the worst is not yet over in housing, and why the dollar will continue to get crushed …

Mega-Trend #1: Housing's Elusive "Bottom" Keeps Getting Pushed Farther Out
Hardly a day goes by without some pundit somewhere calling a "bottom" in housing. Two-bit real estate agents … ivory-tower economists … starry-eyed portfolio managers … they can't seem to help themselves!

But as we have been saying throughout the year, our research tells me the worst is not behind us. Sales remain weak and inventories are extremely high. Prices simply have to fall further to right the ship. Nothing I've seen has changed my mind. If anything, things are getting worse, especially for the public home builders. Get a load of the latest news out of these guys …

March 27: Lennar, the largest homebuilder by sales, reported a stunning 73% plunge in quarterly profits. CEO Stuart Miller, who only a couple months earlier prompted a big rally in building stocks by releasing an optimistic earnings target, did a dramatic about-face. Not only did he say the company wouldn't meet his earlier forecast, he also said things were so poor and the outlook so cloudy that he couldn't even set a new goal!

April 4: Ryland Group said first-quarter sales dropped a sharp 26%. Meanwhile, the company announced a hefty $65 million charge because of slumping land and property values from one end of the country to the other.

April 10: D.R. Horton, the second-largest homebuilder, dropped a bomb of its own. The company said second-quarter orders plunged 37% … average prices dropped almost 6% … and that "the spring selling season has not gotten off to its usual strong start."

Result: These stocks continue to trade like death warmed over. And if the key spring season finishes as poorly as it began, these companies are in for even more pain.

Meanwhile, the mortgage problems that were supposedly "contained" are seeping into other areas. For example, I'm seeing major problems with companies that lend to the so-called Alt-A borrowers, people who fall between the subprime and prime categories:

Shares of a big Alt-A player, M&T Bank, just plunged the most since 1998. Reason: Bond investors soured on Alt-A loans, which drove down the value of the mortgages on M&T's books. Another company, American Home Mortgage Investment, saw its stock lose 15% in one day. It said demand for higher-risk mortgages had dried up, and that it would have to boost reserves to account for borrower defaults. And FirstAmerican LoanPerformance, a research firm, said the 60-day late payment rate on Alt-A mortgages has more than doubled to 2.6% in the last year. Thirty-day delinquency rates are even higher — around 5%.

As a result, lenders are cutting back on their riskier loan programs. That, in turn, is going to knock marginal home buyers out of the market and exacerbate the housing downturn.
And that's not the only trend I see right now …

Mega-Trend #2: Higher Foreign Interest Rates Are Driving Down the Dollar
Clearly, the U.S. housing outlook stinks. That's forcing the Federal Reserve Board to keep interest rates stable, despite clear and present inflation dangers.

Meanwhile, the economic outlook overseas is great. Countries like China, India, Japan, Brazil, Australia, and Canada are all outperforming the U.S. by virtually every measure. Because of that strong growth, foreign central bankers around the world are steadily hiking interest rates …

The Reserve Bank of Australia raised rates three times in 2006, with another hike in the weeks ahead.
The European Central Bank has increased rates to 3.75% over the past several months, and based on their comments this week, we are expecting another hike in June.
The Reserve Bank of India raised its key rate twice this year.
The People's Bank of China is boosting its benchmark interest rate.

Heck, everyone from Taiwan to Norway to Latvia is boosting rates.

What happens when foreign central banks get serious about fighting inflation while our Federal Reserve stalls? The dollar gets sent to the woodshed! The broad U.S. Dollar index is already down almost 4% from its January high. It's trading at its worst level against the euro since January 2005. It's getting trounced by the British pound, closing in on the two dollars-for-every-one-pound level for the first time since 1992. And it has plunged to a 17-year low against the Australian dollar!

None of This Makes Me Happy, But It Can Make You Money
The good news: You can still make lots of money in real estate if you are smart with your approach. If you are one of our international Premier Members at PropertyVestors, exchange rates for the real estate opportunities we provide you are looking better every day. If you are a Premier Member here in the U.S., the strategies we provide help minimize your risk in today's market while maximizing your return. And as dismal as the news may be, our Premier Members are still receiving double- to triple-digit returns.

Hopefully, you've been following our advice on how to make the most of these trends. For instance, I've devoted previous PropertyVestors columns to telling you how to diversify your IRA mutual funds into safer real estate investments.

How have those strategies worked out for you and your family?

Prosper with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate risk with preconstruction syndication; and aggressive with direct preconstruction purchases in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. You can be protected from a downturn market, whether it is a substantial correction or any other trouble that may be brewing on the economic horizon. The fact of the matter is: The "general" U.S. real estate market is in the doldrums and you really need to do your homework to understand what strategies will protect your assets. PropertyVestors' real estate strategies can position you to take advantage of these and other market conditions. Not only that, it can help you maximize your profits while minimizing your risks.
To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Live Rich, Retire Richer

2007-05-22T09:08:00.000-04:00

Live Rich, Retire Richer - It Just May be Possible to Have it All!

WE ALL KNOW THE DRILL: To make sure you have enough green for your golden years, you're suppose to max out your 401(k) contributions, invest in index funds and growth stocks, and not - repeat - not splurge on the top-of-the-line Ferrari. All sound advice. But where's the fun in that? And what about now, when you're actually, you know, living your life?

Well, we believe it's possible to both live the good life and turbocharge that retirement account. In the following sections, you'll find ideas for real estate investments that help you diversify your holdings and maximize your returns while minimizing your risk. You will not see many of these opportunities and strategies reported in the business section of your daily newspaper. Like purchasing luxury condos at a fixed discount direct from the developer and selling it for 40-60% gains without closing on the property. How about purchasing premium lots in the next hot community before the developer spends a single dollar in marketing informing the baby boomers or the average investor? And lastly, how about investing in real estate in places where supermodels lounge on the sand and beach houses can still be had for six figures or less? Want a preview? Aim Google Earth at Punta del Este, Uraguay.

Maybe you are interested in learning new ways to save tax dollars on every purchase you make by using a 1031 exchange, so you have more money to spend on your grandchildren and less money to Uncle Sam. Better yet, ever think about buying real estate with a self-directed IRA account and rolling your profits back into your IRA to make double- to triple-digit profits? Perhaps it's time to understand why banking institutions don't market the fact that there are self-directed IRA LLC's that allow you to have check writing capabilities directly from your IRA to purchase real estate. Perhaps it is because the banks don't make any money off of you if you take it out of mutual funds and stocks…..

Prosper with Smart Strategies from PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies include conservative, private lending options; moderate with preconstruction syndication; and aggressive with direct preconstruction purchases in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new investment model and innovative real estate strategies. You can be protected from a downturn market, whether it is a substantial correction or any other trouble that may be brewing on the economic horizon. The fact of the matter is: The U.S. real estate market is in the doldrums and you really need to do your homework to understand what strategies will protect your assets. PropertyVestors' real estate strategies can position you to take advantage of these and other market conditions. Not only that, it can help you maximize your profits while minimizing your risks.

Perhaps You Want to Look South…Way South.
Although there are many investments we are very confident about in the U.S., many of our members are interested in visiting and sometimes even retiring overseas. So if you're thinking about this yourself, why not head way South to Uruguay. Ura-where? The tiny South American nation is wedged between Brazil and Argentina, whose sputtering currencies have been attracting global-trotting bargain hunters in recent years. But, it's getting harder to find a real deal in those countries with all the competition from euroflush investors and increasingly prosperous locals. That makes largely overlooked, but delightfully cosmopolitan Uruguay the place to be. Known as the Switzerland of South America, Uruguay played host to the jet-setting crowd in the '60's. These days the likes of Ralph Lauren and Naomi Campbell hit the beaches of Punta del Este.

Where to Buy
Punta developers are cranking out luxury condos and oceanfront villas that range in price from less than $200,000 to as much as $5 million. You can still buy a four-bedroom house two blocks from the beach for $160,000. Go farther up the coast and you can snag 360 acres of ranch land – with lagoon - for $5.8 million. To be near the heart of Uruguay's culture and commerce, head to Montevideo. With its cafes, galleries and Old World opera house, the city offers a colonial charm without the high prices. The Ciudad Vieja neighborhood is considered the place with the greatest headroom for real estate appreciation in the coming years. Bargains abound: A three-bedroom house for less than $50,000 is not uncommon. That's the beauty of Uruguay: Get in for a song now and spend your winters in the sun – or cash out when it's time to retire.

Other Bargains
If Uruguay is not your cup of tea, there are plenty of other places ripe for real estate appreciation. Calabria, on the toe of Italy's boot, is where rock bottom prices meet the Mediterranean sun. A two-bedroom apartment on the ocean-side town of Scalea can be snapped up for $83,000. Additional opportunities are in being finalized including luxury condos in Tuscany, Italy. We are also researching many other areas including Malaysia, Croatia and Bulgaria. We do our best to meet the needs of our investment members, even if it does take us out of the U.S. I certainly don't mind!

To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author
Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors'

Project Opportunity in "City of the Future" Award Winner

2007-05-05T09:01:00.000-04:00

Learn more about award winning Chicago and earn high profits

Attention: Interested Investors. We're conducting a weekly conference call on Wednesdays at 9 PM EST. Our Investment Group has committed to purchasing $240 Million in a 5-star development in Chicago. Join our call to learn about our bulk purchasing and how we ensure pricing that is significantly below the first pre-construction price point. Preferential terms and conditions are negotiated with the developer which make the programs both highly rewarding and highly protected for the buyer-investor. Earn 40% returns and higher! And, while no investment is totally risk free, this one could not be closer!

Purchase your unit under the PropertyVestors umbrella and enjoy the benefits and ease of purchasing into this incredibly profitable property.

This opportunity is only available for those that register as Premier Members with proper documentation completed. The investment strategy and contract details are not available to the public, so proper non-disclosures are a must. To register as a member, please click here.
This is an excellent opportunity that PropertyVestors is proud to present. Read the recent press release about Chicago below.

Chicago Declared North American ''City of the Future'' for Its Economic, Business and Financial Strength

Monday April 23, 9:05 am
ETFinancial Times' fDi Magazine Awards Chicago the Top HonorCHICAGO--(BUSINESS WIRE)--Financial Times publication, fDi Magazine (Foreign Direct Investment), today announced that Chicago is North America's "City of the Future" for 2007/2008. The award distinguishes the city as having the best prospects for inward investment, economic development and business expansion in the NAFTA region (USA, Canada and Mexico).

Chicago was chosen based on more than 60 criteria including everything from cost effectiveness to human resources to infrastructure. An independent panel of experts looked at data submitted by each individual city, and Chicago ranks number one overall in its category of "major cities" (cities with populations greater than 2 million people) in the publication, which is distributed worldwide.

Scores were given to each city based on seven selection factors. Chicago was the only city (in any size range) to rank in the top five of all seven selection factors:

* # 1 - Best Economic Potential
* # 1 - Best Infrastructure
* # 1 - Best Development and Investment Promotion
* # 2 - Most Cost Effective
* # 3 - Best Human Resources
* # 3 - Best Quality of Life
* # 5 - Most Business Friendly

"Chicago has the most diversified economy in the country," said Mayor Richard M. Daley. "The combination of this and our tremendous talent pool, dynamic quality of life and unmatched infrastructure have made us a truly global competitor."

"No other city has dominated any of these benchmarking exercises anywhere around the globe in the way Chicago has in the Major city category," said David East, Publisher, fDi - Foreign Direct Investment.

fDi Magazine researches and awards the honor every other year. Chicago was also awarded "City of the Future" in 2005, when there were separate award categories for the USA, Canada and Mexico. This year, being grouped together, Chicago takes the honor for the whole region, making the title more competitive. Additionally, this year fDi Magazine reported twice the number of applicants as in 2005.

"We are striving to showcase Chicago's tremendous business, cultural and human capital resources to the world," said Paul O'Connor, executive director of World Business Chicago. "Winning this award consecutively proves that our strength as a global competitor is being recognized internationally."

The "City of the Future" feature is one of a global series of regional reports led by the fDi research staff. Unlike other frequent media rankings led by opinion polls, this competition reflects independent analysis of factual data. The selection process is similar to the way executives and site selection consultants weigh potential locations on many critical selection factors as they develop a list of preferences out of an extensive list of alternatives.

About World Business Chicago
World Business Chicago (WBC) is a not-for-profit economic development organization promoting metropolitan Chicago. WBC markets Chicago's competitive advantages, coordinates business retention and attraction efforts, and seeks to enhance Chicago's business-friendly environment. WBC's Board of C-level corporate executives is chaired by Chicago Mayor Richard M. Daley. For more information, visit www.worldbusinesschicago.com.

About fDi Magazine
Foreign Direct Investment (fDi) is a specialty magazine published by the Financial Times group for C-level executives and their professional advisors. It provides global market research and analysis for the executives who are responsible for the global business strategy and location selection decisions of their companies, such as where to establish, maintain, expand, or relocate operations as companies adapt to the changing conditions in their markets.

__________________Chicago for the 2016 Olympics

Invest in Chicago with PropertyVestors
PropertyVestors is an investment group of CEOs, entrepreneurs and savvy real estate investors that are taking active steps to maximize their profits, while minimizing their risk by creating a diversified real estate portfolio. Investors are able to easily apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies that its real estate portfolio specialists discuss are conservative, private lending options; moderate with preconstruction syndication; and aggressive with direct preconstruction purchases in emerging markets, coastal regions and waterfront properties.

With PropertyVestors, you can take advantage of a new model and innovative real estate strategies. PropertyVestors' real estate strategies can position you to take advantage of current market conditions. In addition, it can help you maximize your profits while minimizing your risks.

To learn more about these topics, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive our eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.
About The Author Sarah Barry is the founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double- to triple-digit returns on their real estate investments.

Is a Major Stock Market Correction Looming?

2007-05-02T08:57:00.001-04:00

Three Great Real Estate Strategies to Profit No Matter What Happens!

With the Dow Jones industrial average reaching new highs almost daily, the stock market is in a frenzy. We're watching "one of the crazier moments in modern financial history," said Bill Fleckenstein in MoneyCentral.com.

The crazy highs were recently dampened when stock prices fell nearly 9 percent overnight in China on February 27, driving a market meltdown with skittish U.S. investors. That day, the Dow Jones closed down 416.02 or 3.3 percent at 12,216.24—its lowest close since Dec.1. And the S&P and NASDAQ each plunged more than 3 percent. Fred Dickson, chief market strategist for D.A. Davidson—the largest full-scale investment company based in the Northwest–referred to the tumble as a "natural adjustment" to high increases to stock prices. The pull back in prices, he added, was not a signal of an impending bear market.

However, former U.S. Federal Reserve Chairman Alan Greenspan has warned that the American economy might ease into recession by end of this year. He feels there are signs the current economic cycle is coming to an end. "When you get this far away from a recession, invariably, forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said in a recent Associated Press article. "For example, in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle."

The million-dollar question is: Is the stock market destined for a major correction? Some financial experts think so. For example, David Wyss, an economist with Standard & Poor's, told CNNMoney.com that the market is overdue for a significant correction. We couldn't agree more! Do you think the Dow could ever drop past 10,000, past 9,000 or even 8,000?

Innovative Real Estate Strategies the Ideal Solution

So what are your options if you're weary of your investments in the stock market and believe that a correction will take place because of the housing bubble, the actions of baby boomers, political climate, repercussions of the war in Iraq and other factors? You can avoid a major correction altogether by investing in innovative strategies in real estate. These strategies don't include a lot of hands-on effort like flipping, attending auctions and certainly not being a landlord. Moreover, they enable you to diversify your real estate investments, just as you did with your stock portfolio.

Consider the following stock example: If you were to purchase Google stock today for almost $400 a share, what would happen if, in one month, it dropped down to $300 a share? You would lose $100 per share. What would happen if I told you that you could purchase Google stock at a 15-percent discount at $340 a share today (an instant gain of $60 a share), but if it went down to $300, I would let you purchase the share at a 15-percent, re-adjusted purchase price of $255 one month later without incurring loses from your original purchase? And no matter how steep the drop in market, you would always have a 15-percent equity in your purchase of Google stock—yet still reap the benefits of any appreciation?

Well, this strategy actually exists in real estate, and it's called a "preconstruction syndicate". It's what smart investors are doing, and it leverages what investment groups provide: buying power. A preconstruction syndicate is just one of three PropertyVestors strategies that you should consider in order to avoid a 1987-like correction to your stock assets.

Prosper with Smart Strategies from PropertyVestors

PropertyVestors is an investment group of CEO's, entrepreneurs and savvy real estate investors that are taking active steps to protect themselves against a market correction by creating a diversified real estate portfolio. Investors are able to apply diversity in real estate geographically and by asset class through its various investment strategies and types of inventory.

Furthermore, PropertyVestors enables investors to capitalize on different market conditions. The strategies that its real estate portfolio specialists discuss are low-risk, private lending options; moderate risk with preconstruction syndication; and high risk with direct preconstruction purchases in emerging markets such as the coastal regions and lakes on the Carolinas.

With PropertyVestors, you can take advantage of a new model and innovative real estate strategies. You can be protected from a downturn market, whether it is a substantial correction or any other trouble that may be brewing on the economic horizon. The fact of the matter is: Americans are in debt. They're living in houses bought with interest-only loans, adjustable-rate mortgages and other creative financing that can strangle them financially if rates increase (and they likely will). PropertyVestors' real estate strategies can position you to take advantage of these and other market conditions. Not only that, it can help you maximize your profits while minimizing your risks.

To learn more about this topic, visit www.propertyvestors.com, sign up with the investment group by becoming a Premier Member for $245.25 annually and receive the eBook: "Capitalizing on Real Estate in Today's Economy." For general information about PropertyVestors or its offerings, email invest@propertyvestors.com or call 1-877-90-BUYER.

About The Author..

Sarah Barry is the Founder of PropertyVestors (www.propertyvestors.com). PropertyVestors is a successful real estate investment group that creates above-market returns at below-market risk. Access to PropertyVestors' three smart real estate strategies enables investors to achieve double to triple digit returns on their real estate investments.

Welcome to PropertyVestors

2004-01-01T08:35:00.000-05:00

Welcome to PropertyVestors Blog. For those of you that do not know me, my name is Sarah Barry and I am the Founder of PropertyVestors.com.

PropertyVestors, is a successful real estate investment group that offers access to three smart real estate strategies. We help you achieve double- to triple-digit returns on your real estate investments.

We pride ourselves on education and buying power and our foundation is based on four important components including:

1. Network
2. Analysis and Information
3. Diversification
4. Ease of Engagement

You'll learn much more about these four components as we get to know one another better. Start off by signing up for our official newsletter, "InvestingSherpa" and receive our 25 page eBook, "Capitalizing on Real Estate in Today's Economy". Once you have an opportunity to read our eBook, register for a free webinar before making a decision of becoming a Premier Member to get the inside scoop on all that we do at PropertyVestors.

We work extremely hard identifying the best deals around the nation and are in the process of expanding internationally in countries such as Canada, Ireland, Germany, Holland, Norway, Denmark and now Australia. We are quite excited as you can imagine. So keep us in mind when you think of real estate investing, sign up for the free newsletter and see where it takes you. We do hope that if you become interested in making your first investment or your 100th, you'll think of us and become a Premier Member at http://www.PropertyVestors.com/.

In the meantime, I look forward to your feedback and hope you can grow our group.

To your success,

Sarah Barry
Founder, PropertyVestors
Smart Strategies for Real Estate Success
invest@propertyvestors.com
1-877-90 BUYER