When we have prosperity in the United States, usually as a result of extended periods during which interest rates are relatively low, it is possible for ANYONE to succeed.  Our markets are so vast, our citizens so effluent, our institutions so liberal, that practically every form of commercial activity has a theoretical and statistical chance to succeed.  The problem with that scenario is that good times cause millions of would-be entrepreneurs to enter the market place.  Success becomes a very competitive venture in which those with true ability are virtually indistinguishable from those without the skills and knowledge normally required as a prerequisite to prosperity.

In hard times, the reverse of the above holds true.  Slowing economic activity causes businesses to retrench.  The faint of heart drop out, others cut back on costs, materials, labor.  They slow down their payments to the banks.  They withdraw surplus funds to meet current expenses.  Bankers, seeing their reserves beginning to diminish, are faced with increasing loan demand from borrowers who foresee less and less certain profits with which to repay them.  Interest rates are increased to meet market demand for money.  Loan terms are stiffened to discount increasing risk.  Money becomes tighter and tighter.  THIS IS WHEN THE BEST OPPORTUNITIES HAPPEN!

          

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Continue reading “Why Private Financing Is Smarter Than Institutional Financing”

A lender's fantasy is to have thousands of borrowers, up to their ears in debt, who transfer a major portion of their earnings to him each month in the form of interest and charges. On the other hand, this scenario can be a borrower's worst nightmare. Indiscriminate use of credit has brought even the biggest real estate moguls low. Between them, Bill Zeckendorf, Donald Trump, and Bill Levitt lost $billions because of debt. Using credit can become a habit that's very hard to kick.

Lack of financial discipline is what creates "Money Junkies" who can't get through a month without a credit "fix". Here are 10 tips to help avoid becoming one:

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Everyone likes simplicity. Regularity. But, quite often, the more simple things are, the less lucrative. An example is simple interest. It's easy to figure, but compound interest is a lot more profitable to the lender.

Lenders would like every payment to come in on the last day of each month. They would like to be able to impose late payments for every payment not received when due. And they'd like to be able to foreclose, get the property back, and resell it without missing a payment. Unfortunately, the world doesn't work this way.

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One of the major disadvantages of transferring assets from tangible property to a future income stream in the form of a series of payments on a contract or Note is that, in the event of high inflation, you can't be certain of maintaining the purchasing power of the money you receive.

Conventional lenders got caught in this trap in the late 1970s and early 1980swhen high inflation rates rampaged across the financial landscape.

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When structuring a creative purchase or sale, the first task is to determine the needs of the buyer or seller, as the case may be. This is done by slow, patient inquiry that takes place only after the parties are comfortable with each other.Most people are motivated, directly or indirectly, by an emotional response to fear or greed; or a combination of these.

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What's the relevance of learning about creative financing today? Why should anybody take the time to learn how to buy and sell property without using cash or credit?

Admittedly, today when credit is still cheap and available, there may be little need for such knowledge, but tomorrow it will be too late.   Now is the time to learn everything you can about creative financing if you want to survive and thrive in the future.

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