When you consider the yields that conventional investors earned on their invested capital compared to those earned by single family house investors over the past 5 years, it’s no wonder that investment in single family homes has been so popular. Now that prices are softening, the prospect for making a fortune merely through equity appreciation without much work or know-how seems a much longer term proposition. As a result, a lot of the enthusiasm of newbies for single family houses is slip sliding away. Attendance at investment clubs is shrinking together with the numbers of eager investors willing to put up money for a share of quick turn profits. Now they want more collateral and higher yields on their investments.
Should You Be Buying, Or Selling, Houses Today?
With the stock market beginning to move up in value, and houses in some areas beginning to go down, investors who are serious about their financial futures can’t afford to rest on their laurels. They have to continue to seek investments that offer high enough yields at a commensurate risk to pay them back for the time and money spent. So in that spirit, let’s take a critical look at single family houses as an investment; given all the uncertainty about the market that rising energy, insurance, and interest costs create compared to other alternatives:
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When You Can’t Sell, Buy “right”!
In many places in America, the single family market is transitioning into the beginning phases of a buyers' market. This is a mixed bag of blessings. The good news is that there will be plenty of houses around from which to pick and choose bargains. The bad news is that there will be fewer buyers to sell to. Those with unsold inventory are going to be forced to either learn how to manage, or spend additional money hiring those who do. Rental cash flow will be less spectacular than appreciation has been. Buying solely for appreciation will be more risky. In this month's letter, we'll explore the ramifications to entrepreneurs of the changing market, and how they can deal with it profitably.
The Fundamentals Don’t Change . . .
Please forgive me for a little self-indulgence this month. Sometimes I ponder what brought me to this place and time in my financial life. It all started back in 1975 when one of my mentors, Warren Harding, devised a challenge for me. When, as a new Broker, I asked him what I should do to become as successful as he was, he gave me this prescription for success: (A) Complete a course of professional study that would lead to an advanced real estate brokerage designation as a Certified Commercial Investment Member. (B) Complete seminars dealing with practical and creative solutions to real estate problems using unconventional finance. (C) Acquire at least $1,000,000 in highly leveraged income property with fully amortizing loans to hold in my personal investment portfolio. (D) Own property in at least 10 States. And finally, write a real estate article and get it published in a nationally published magazine explaining a new real estate concept. I set out to do all these things and a new life unfolded for me.
The Time Is Ripe To Revisit Manufactured Housing . . .
Mobile homes are overlooked by all but a few people in the equity business because they don't perceive them as offering opportunity for profit. Now that the paradigm is evolving from high short-term profit opportunities to long term buy-hold gains, mobile homes offer yet another way to adapt to the changing market. I've been involved with mobile homes as long as I've been buying houses. For the past few years, the greater portion of my annual net income has come from them. This month, we'll review some of the ways that big profits can be made with individual new and used mobile home units, mobile home lots, and mobile home financing. You may be surprised at what you've been missing.
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How Do Entrepreneurs Get Started?
I was a salaried employee living off my wages for half of my adult life. Even though I'd tried my hand at several ventures during that period, I couldn't figure out how full-time entrepreneurs could take such risks to earn a living. I didn't have enough money to buy a franchise; and couldn't imagine being able to support a family without a wage-paying job. I confess I was afraid to take the chance to cut loose from my paycheck. Suddenly, with fifteen minutes warning, I got fired. I discovered that I had few career choices. At age 40, these boiled down to working for less pay, or becoming an entrepreneur. I took the plunge.
Are You A Money-junkey?
Personal debt in America continues to rise as consumers push off the day of reckoning through the use of multiple credit cards. For many, this debt is ultimately paid off by refinancing their personal residences. On the face of it, being able to pay off high-cost short term non-deductible debt with long-term deductible mortgage debt has some merit on its face, but it ignores the fact that borrowers eventually wind up owing thousands of dollars against their heavily mortgaged property. This can only be repaid by selling their home.
Is Your Safety Net Unravelling?
April 2006 With the spate of lay-offs and corporate bankruptcies over the past few years, Corporate America can no longer be relied upon to provide a secure job and comfortable retirement income. The government is waffling on Social Security and other entitlement programs; but it is making it increasingly easy for people to set money aside for the future. Roth IRAs are just one of the concessions the tax collectors are making so you'll have a secure future. Not only are retirement plans of all shapes and sizes being encouraged by current tax policy, so is health care.
Don’t Let The “fear Factor” Hold You Back
March 2006 In 2006, it's going to be a little harder for us to make money. Gasoline prices are going to continue to inch upward as China and India begin to consume more energy. The proposed new tax bill promises higher taxes on profits. The new Chairman of the Federal Reserve will probably continue to raise interest rates to ward off inflation threats. Housing is cooling off as the number of houses on the market is exploding. Speculators who bet on fast appreciation in the condo market are beginning to feel the pinch. If banks get stung badly on builder defaults, credit is going to be harder to get for entrepreneurs.
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How Prepared Are You For Personal Disaster?
February 2006 Recently, a subscriber had a surprise heart attack. It came without any warning. Fortunately, medical attention was close by and full recovery is expected, but it could have been financially debilitating. Whether killed or incapacitated by ill health, others will need to step in and take charge of business operations to keep income coming in. For a fortunate few, substitutes have been well trained, and business has gone on as usual. But, many times, when unprepared family members or friends try to fill the breach, the result is financial disaster and loss that far exceeds the costs of medical care. This becomes particularly acute when property is mortgaged. When loan payments come due, your lender isn't going to waive its income just because you are having personal health problems.
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