Buying opportunities, for those looking for bargain deals, are still good and should extend well into 2010 and 2011. Housing starts according to the Commerce Dept. have come in lower than expected for 2009.
One would naturally think, as home builders attempt to reduce inventory, that home prices would stabilize. To a certain extent they have stabilized albeit temporary.
First time home buyers who have been sitting on fences, automobiles and motorbikes are now out in force trying to take advantage of the $8,000 tax credit set forth by the U.S. government. Ironically, the tax credit is due to expire on November 30'th. This small flood of home buyers has temporarily created a high demand in low to middle income housing which in turn has created more competition among investors seeking cheap deals on foreclosures and HUD homes.
Investing in fixed secured real estate notes can yield fruitful returns often higher than mutual funds while providing security of investment only found with bonds and CD's. Conservative investors looking for stable long-term investments such as bonds, CD's or money-markets currently only receive APR rates between 2% and 4%. The inflationary period looming due to government spending, budget deficits and money printing will continue to drive these investments into the ground. A high price to pay for security of investment.
What Is A Fixed Secured Note Backed By Real Estate?
A first position high yield collateralized note much like a lean held by a mortgage lender on a piece of real estate that can be called due if the terms of the agreement are not met between lender and borrower. In this case, the note holder (i.e. private lender) would simply take control of the real estate if the terms of the loan are not met. The borrower (i.e. real estate investor) will buy a piece of real estate with the money provided by the note holder. The two parties agree on a set of terms of the note. The property is purchased and the term starts. A fixed secured note can also provide investors such as retirees tax free income by using a self-directed IRA for the source of the note. For more information on self-directed IRA's visit: http://www.trustetc.com
Terms
The terms of a fixed secured note are generally 3 to 5 years, 6% to 10% APR interest only with monthly payments. There is typically a balloon payment of the original principle payed to the note holder at the end of the term just like a CD.
I came across this video which illustrates the cause of the banking crisis and stock market collapse. I found it very informative and easy to understand with excellent graphics and commentary. Video - Courtesy crisisofcredit.com
As an investor I hope I can always learn from my mistakes and help others. I hope together we can all grow stronger moving forward.
Have the planets lined up to create perfect timing for you to purchase that piece of property you always wanted? That is the million dollar question that has been asked repeatedly this past year. Part of that question can be answered with a resounding yes, if and lets specify "if" you do your research and make sure it is the right purchase in part based on current economic trends.
There are many properties on the market that some buyers feel like they can blind-fold themselves then throw a dart and land on the bulls-eye target of property. This is not a game of "Price Is Right" where you are a contestant and when it's your turn to spin the wheel you hope it lands on something good. There are no consolation prizes for picking the wrong property and making the wrong decisions relating to timing. With an economy that keeps tripping over its feet and can't seem to stand up straight just yet, one has to go further in making sound decisions when it comes to buying property because of the unpredictable state of economy right now.
At a time where it seems like the mass media wants to re-release "The Day the Earth Stood Still" as to how our future will be based on the economy, true investors and economists know what a difference a day can make and that the 5:00 O'clock news prime slots need to be filled with stories that hold the public in panic to keep their attention. The economy has been as reliable as the seasons that change. An economic downturn always recovers in time the same as spring comes every season. Seeds planted where there is nothing but soil will bring about strong healthy growing grass so when buying property you are planting a seed that you intend to nurture the best you can in anticipation of it growing in due time. We are always making use of the upward green arrows on financial graphs and charts so it's pretty safe to say you won't have to put away that green marker for very long as the red at some point starts to dry out.
All investors including ones new to the playground know that the "golden grail" to succeeding in the real estate business is location. Location is the alpha and the omega of the real estate world. The common mistake is many assume that high-end prime location property is the be-all to end-all but that is simply not the case. Although those locations are often sought after they are not always the most favorable for an investor. When evaluating a property, the investor needs factor in the property's cabability of producing a high return, regardless of the forecast prediction.
It seems like yesterday that Britney Spears was the hottest thing to hit the music scene & no one could have imagined that her stock a.k.a. her career could have dropped so quickly after riding so high and her oops so far has not been done again. The same falls true for property and the location you purchase it in as well as the potential of what you can do with it. An area can be highly desirable for five years running and just as you decide to zero in on it you notice it is like that slow leak in your tire that took a couple of weeks before it had you parked on the side of the road. It must be determined if the tire is just flat or totally shot as in what is the potential for a property in a location to rebound or will it remain in a lull for a long time to come.
It is very important to understand how critical location is in terms of how it can increase your ability to sell during what seems like an elevator that has a broken "up" button and keeps heading down floor after floor but you know eventually it is going to stop. The great news is that just like that battery that you assumed was dead but starts working like a charm after charging, the value of majority of locations will go up in time.
You don't want to end up like Evander Holyfield with the threat of losing his 54,000 square foot home expressing "I have money but I am not liquid" Whew, that is quite a statement because we know one of the bottom lines is liquidity so when you purchase that property please consider how soon you might see a return on investment, and what you can pull as profit if any when you decide to sell seeing as that your profits for a time will be held in equity. When your profits are tied up in equity, do your best to select property that can meet its forecast, produce ample returns, and provide easy liquidation, regardless of the market condition
The phrase "product research" strikes fear in the heart of real estate buyers and investors everywhere, especially ring with horror in boom times like now when we are in the thick of foreclosures.
The popular misconception of doing property research is that hours upon hours needed to be spent at the local recorder's office, sifting through countless pages of real estate documents, which do not have much entertainment value. However, despite the tedious affair of collecting this important information, it is of vital importance to do so, especially for determining Comparable Sales and the Lien & Loan History.
Investors who own properties that have appreciated significantly and investors who have written off a portion of an investment that has depreciated, both face a similar problem when considering making a sale: capital gains taxes. Those with properties that has increased in value may face large capital gains taxes on the property's increased value, and others will be faced with a depreciation recapture tax on the funds that were written off each year.
Both kinds of investors can benefit from a 1031 tax deferred exchange. Under section 1031 of the IRS tax code, investors can defer taxes on gains in business or investment properties by rolling gains over into another similar ("like kind") property.
The IRS created the tax-deferred exchange to encourage continuous investment. The folks in our government knew that imposing capital gain taxes when people sold an investment property would make people want to hold onto those properties. In addition to discouraging those people from selling, those capital gains taxes would make investors think twice before buying more property. With the 1031 exchange, the IRS encourages the continuation of real estate investments.
The real estate market and the mortgage industry has turned upside down as our economy is spiraling downward which we haven't seen seen in decades. In this depressed economy, some of our loans on our homes exceed the actual value on the market. The prices of residential real estate are so depressed, hitting an all time low since 1980 that some experts are forecasting that we are headed into a recession.
Just this last February, it was noted that the prices were dropping at such an alarming rate that the slump did not look as if it was easing up but instead gaining speed. The Standard & Poors/Case-Shiller housing index for prices using over 20 large cities in the U.S. dropped almost 13% in one month in comparison to last years figures. A good number of these 20 cities are stating that it is a decline they have not seen in over 30 years.
Developers are filing bankruptcy and homes have been left uncompleted and unoccupied and even those companies that were looked upon as the more established builders have stopped building or slowed down to a survival crawl.
All investors including ones new to the playground know that the "golden grail" to succeeding in the real estate business is location. Location is the alpha and the omega of the real estate world. The common mistake is many assume that high-end prime location property is the be-all to end-all but that is simply not the case. Although those locations are often sought after they are not always the most favorable for an investor. When evaluating a property, the investor needs factor in the property's cabability of producing a high return, regardless of the forecast prediction.
The popular misconception of doing property research is that hours upon hours needed to be spent at the local recorder's office, sifting through countless pages of real estate documents, which do not have much entertainment value. However, despite the tedious affair of collecting this important information, it is of vital importance to do so, especially for determining Comparable Sales and the Lien & Loan History. 
The IRS created the tax-deferred exchange to encourage continuous investment. The folks in our government knew that imposing capital gain taxes when people sold an investment property would make people want to hold onto those properties. In addition to discouraging those people from selling, those capital gains taxes would make investors think twice before buying more property. With the 1031 exchange, the IRS encourages the continuation of real estate investments.
Just this last February, it was noted that the prices were dropping at such an alarming rate that the slump did not look as if it was easing up but instead gaining speed. The Standard & Poors/Case-Shiller housing index for prices using over 20 large cities in the U.S. dropped almost 13% in one month in comparison to last years figures. A good number of these 20 cities are stating that it is a decline they have not seen in over 30 years.
