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.
Showing posts with label propertyvestors. Show all posts
Showing posts with label propertyvestors. Show all posts
Wednesday, June 10, 2009
Saturday, February 28, 2009
Shifting Tides
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.
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.
Thursday, January 1, 2004
Welcome to PropertyVestors
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
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