Archive for Interest Rates

It’s a great time to buy

Aug 24 | by | In the news, Interest Rates, Mortgages, Real Estate
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I’m sure you’ve heard what’s going on with the market recently: mortgage interest rates are at a record low, the Dow Jones Industrial Average has dropped dramatically a couple of times recently and home prices keep going down. Sure, these are indicators that the economy’s having trouble finding its feet and that means tough times for many people, but let’s look at it another way.

Imagine your favorite secondhand store. Personally, I like hunting around secondhand stores every now and then because you can find some totally awesome stuff. Of course, the definition of awesome depends on who’s talking. One time, I found a great surplus US Navy peacoat and snatched it up. I get compliments on it all the time, which means I’m fairly certain I made a good find there.

11549 203395197595 505137595 3146157 3452542 n 294x300 Its a great time to buy

my clown pants, including awesome bowling shoes

Another example of a treasure I found at a secondhand store is a pair of pants referred to at my house as my “clown pants.” I found them for a whopping $5 and have given them a great home. To me, they’re a great statement of panache and I can totally make them work. To my wife, they’re an embarrassing eyesore and she threatens to send them back from whence they came when I’m not looking.

There are some things at the secondhand store that don’t stay there for long because they’re pretty much universally awesome. To bring this back to the earlier discussion, the market indicators mean that real estate is on sale, virtually sitting on the clearance shelf with a big sign on it that says “Huge discount!”

In a couple of very specific real estate markets, you can make your investment dollar go much farther than it would in other places and we’re helping our clients buy as much of this clearance sale real estate as we can find. There are currently two places where the conditions are just right for what we’re doing and those are Las Vegas, Nevada and Phoenix, Arizona. We’re not just scooping everything up; we’ve got very specific criteria for choosing what our members buy to make sure you’re getting a valuable piece of property. We want you to end up with the real estate equivalent of a baseball autographed by Joe DiMaggio that someone had hiding in a drawer and not the $5 clown pants, just because they were cheap.

The Five Profit Centers on the Strait Path

Jun 17 | by | Cash Flow, Discount Equity, Down Payment, Interest Rates, lease option
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MONEY%20TREE The Five Profit Centers on the Strait Path

The interesting thing about Strait Path real estate is that even though profitability is one of six factors considered for every deal, the Strait Path system is still far more profitable than other forms of investing. In other words, the Strait Path system is still the best even when profitability is an investor’s sole or primary focus.

This is because the system offers five profit centers, wher

eas others offer only one or two. The five profit centers include 1) discount equity, 2) cash flow, 3) down payment, 4) appreciation, and 5) tax benefits.

1. Discount Equity Discount equity is the difference between the market value and the purchase price of a home. Our finding system helps us secure properties with 15 percent equity or more. Depending upon the size of the home and its discount purchase price, you may make more on one purchase than you make all year in your current job. For example, if a home is worth $275,000 and you can purchase it at a 15 percent discount for $233,750, you’ll make $41,250 on the purchase alone.

2. Cash Flow Cash flow is the monthly amount you receive from your tenants less your monthly mortgage payment. In short, it’s the difference between your mortgage payment and what your tenant pays you each month.

$200/mo cash flow

3. Down Payment The technical term for this is “option consideration,” which is a fee paid by tenants to secure their opportunity to purchase the home within a specified period of time. This is nonrefundable, and we receive on average $5,000 down per house.

$5,000 down payment

4. Appreciation Appreciation is the rise in value of a property over time due to increased demand. What’s notable about Strait Path real estate is that we don’t rely on appreciation to turn a profit, though we do account for it when it occurs.

10% additional profit

5. Tax Benefits Tax law allows homeowners to deduct mortgage interest from their taxes. This is a huge advantage in Strait Path real estate, since the goal is to purchase as many homes as possible

With a fixer-upper, investors receive the first profit center and, if they’re lucky, the fourth. But they have no cash flow, they do not get a down payment, and capital gains taxes often wipe out any earnings. With rentals, investors enjoy tax benefits and sometimes benefit from property appreciation. They receive no down payment, however, and they’re lucky if they get a good deal up front and receive a positive cash flow. Once again, the Strait Path system offers investors all five income streams.

Taking advantage of the now

May 20 | by | Discount Equity, Interest Rates, lease option, Mortgages, Real Estate
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Here’s what’s happening in our market and why real estate makes sense.

An excerpt from Michael Masterson’s Journal:

Taking advantage of real estate prices that are as low as they’ve been in 20 or 30 years

It is impossible (and foolish) to try to predict the bottom (or top) of this (or any) market. But, by any measure, we have just gone through one of the biggest real estate recessions in the history of the United States.

In South Florida, for example, you can find properties for less than half of what they were selling for at the peak of the market. More important, you can buy these properties with 20% down and start enjoying positive cash flow from month one. (Four and five years ago, you couldn’t get positive cash flow out of rental units with 50% down.) So today’s prices make sense from a businessman’s perspective.

My real estate partner Peter and I have been buying homes in the $120,000 to $130,000 range (after closing costs and renovations). We are getting monthly rents of $1,300 to $1,600 on these. I am financing our deals at 4% (which is good for me). At that rate, we are making about 6% to 8% on our money, not counting appreciation.

My brother is buying up residential properties and apartment complexes in lively downtown areas, beach areas, and areas targeted for “stimulus money” renovation. He is buying at such deep cash flow prices that he is able to pay his investors (including me) minimum guaranteed yields of 7.5% plus equity participation. Because of this, he has raised a considerable amount of money in the last few months, and he is using the money to do some very impressive deals.

He just bought a 14-unit building across the street from the beach for $725,000! Think of that. Each beach-view, one-bedroom unit cost him only about $50,000 — and this apartment complex could be worth several million in the not-too-distant future. He also now controls three properties in the heart of a rapidly growing downtown, zoned commercial and residential. And even though they’re in a prime spot, he is generating yields of over 8%.

Whether with Peter, through my brother, or by myself, I will continue to invest in real estate so long as prices are low. If they go down further, I’ll buy more aggressively. I have no risk of losing money, because all the properties I’m investing in are making money on a monthly basis. Even if rents drop, I won’t be losing money. The 4% to 8% yield I’m enjoying will cover me even if rents go down another 25%, which is highly unlikely.

I get immediate income from these deals. Instead of getting 0% on my cash, I’m getting a minimum of 7.5% fully secured guaranteed yields by loaning it to my brother, and additional yield from the “after-debt” cash flow.

But the real opportunity is in the appreciation potential. As I said, I fully expect to make an extra $10 million in appreciation in the next five to 10 years as inflation pushes up real estate prices. I might make as much as $30 million, but I’m trying to be conservative.

There are some who say that real estate prices won’t inflate with the rest of the economy, but I think they will. Here’s why. Buildings are built with core commodities… lumber, copper, aluminum, concrete, steel. Labor is another big expense. You can’t have inflation without a rise in those costs.

Plus, as my brother points out, properties in many areas are selling for less than replacement value. In some cases, even if you got the land for free, you couldn’t build these homes for what you can buy them for today. That’s even after taking depreciation into account.

Last but not least, in many instances, it’s already far cheaper to buy than it is to rent. Eventually, this will turn the tide toward buying. It’s just a matter of time.

So that’s my first inflation-beating recommendation: Start buying undervalued, quality rental properties now. Don’t wait for the market to bottom. Just find properties that will give you a net cash flow of at least 4% to 9% after all expenses (including property taxes, maintenance, fees, etc.).

Utah Gallops Into Housing Boom

May 5 | by | Announcements, In the news, Interest Rates, Meet the team, Real Estate
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2002 10 01 Oct Reserve Bank contemplates housing bubble 540 Utah Gallops Into Housing Boom Talk about a national housing boom.

There’s even buzz from the Beehive State.

Better known for its share of the Rocky Mountains, vividly colored plateau and canyon vistas, salt flats, Mormons, a bright, multilingual workforce and the likes of outlaw Butch Cassidy (Circleville), Donny and Marie Osmond (Ogden), Roseanne Barr (Salt Lake City), James Woods (Vernal), and Loretta Young (Salt Lake City), Utah is swiftly coming into it’s own as a hot housing habitat.

“We have been through a weak cycle that has affected all areas of the State of Utah. However, this year looks very promising,” Mark Watterson, from Keller Williams in Midvale, UT reported to the Realty Times Market Conditions Report.

How hot is it?

The 45th State to join the Union, Utah now ranks 35th in home appreciation, moving up fast, 15 spots from its dead last position a year ago, according to the just released Office of Federal Housing Enterprise Oversight’s First Quarter 2005 Home Price Index.

The index says the selling price of Utah homes rose 6.3 percent from the first quarter of 2004 to the same period this year. That’s only about half the national rate of increase, at 12.5 percent, but some Utah markets are much, much hotter.

The Utah Association of Realtors own first quarter report revealed Salt Lake County, the state’s largest real estate market, clocked an 8.09 percent increase in the average sale price of single-family detached homes, put at $204,311 in the first quarter this year, up from $189,013 in the first quarter 2004. During the first quarter this year, nearly 3,500 homes (single-family detached and condos) sold in the Salt Lake County market. Condo prices rose only 5.98 percent.

In smaller markets, some of them resort areas, first quarter prices truly skyrocketed.

According to the association, after Salt Lake County, the next largest markets and their quarterly sales (all homes), along with average price increases, were:

* Utah County, 1,015 home sales, house prices up more than 19 percent, condo prices up 15 percent.

* Washington County, 724 home sales, house prices up more than 21 percent, condos up more than 15 percent.

* Weber County, 690 home sales, house and condo prices both up nearly 18 percent.

* Davis County, 686 home sales, house prices up nearly 10 percent, condo prices up by more than 14 percent.

* Resort town Park City yielded more condo sales (184) than single-family home sales (140) and clocked a 15.5 percent increase in average condo prices and 19.3 percent for houses.

“Some experts feel that Utah is unvalued by 25 percent. I feel a 10 percent growth rate is extremely likely,” said Watterson.

“With all the out-of-state investors looking into Utah, it can only improve our appreciation over current levels. This is an exciting time as we watch our most important investment become more valuable. This is a great time to be in the game and not on the side lines,” Watterson advised buyers and sellers who’ve been waiting to move in, up or out.

Utah’s more affordable housing market is enjoying some housing market spill over from it’s booming neighbors.

“Utah real estate values have appreciated more solidly in recent months, a trend expected to pick up speed in 2005 and 2006. The reasons include more impressive economic growth and the fact that Utah real estate is again ‘bargain priced’ versus its neighbors,” said area economist Jeff Thredgold.

On it’s western border, Nevada currently has the nation’s fastest appreciating home prices, which rose more than 31 percent in the last year. The nation’s most populous state, California, just west of Nevada, is No. 2 on the OFHEO’s Home Price Index list with home price appreciation higher than 25 percent. To the south, Arizona enjoyed a 19.43 percent home price appreciation during the first quarter and ranks No. 7 in the nation on the OFHEO Home Price Index list.

However, Thredgold says Utah is leaving in the dust its first recession in 50 years (from 2002 to 2003) and can hold its own economically. The state is a mecca of academic and higher education institutions that produce a well-educated workforce and its pro-business climate attracts existing and start-up businesses in the technology, pharmaceutical and biomedicine fields, among others.

The state’s net job creation is second in the nation only to Nevada during the last 12-month period and the jobs aren’t just lower-paying service jobs, but employment gains in manufacturing, finance, trade, transportation, utilities, professional and business services and construction, as well as the leisure and hospitality sectors.

Unemployment is down to 4.6 percent from the nearly 6 percent two years ago, Thredgold reported.

“Utah is the 5th fastest growing state and the real estate market is showing it,” Mayra Sanchez Johnson of Prostar Realty reported to Realty Times’ Market Conditions Report.

“Prices are steadily rising and a well-maintained home will sell in less than 30 days. New housing is booming and there are offerings from condos and townhouses to starter homes and luxury homes at very affordable prices,” she added.

Will 2014 be the Big Real Estate Turnaround?

Mar 9 | by | Interest Rates, Real Estate
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Where is our nation’s real estate market headed? What will happen to interest rates, the building market, and supply of homes? Learn why now is the best time to buy real estate and cash in on easy profits. Using REIC’s system leads to amazing profits in a typical market. Watch what happens however to all the portfolio owners that experience the next upswing in real estate. Build your portfolio now and 2014 could be the year you become worth a lot of money just for holding a portfolio.

Read more:

http://www.biggerpockets.com/renewsblog/2010/02/15/real-estate-economist-sees-opportunity-until-2014/

Becoming Profit-Conscious vs. Interest Rate-Conscious

Dec 2 | by | Interest Rates, Mortgages
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One issue we continually strive to overcome is the interest rate-conscious mentality when it comes to financing investment properties.

Here is one of our “secrets” that can help make you real estate rich: Higher interest rates can make you more money than lower rates.

This statement may seem shocking, so let’s look at several examples. As we look at these examples, understand that each of these principles is a critical ingredient in the secret formula for taking people with average credit and average income and leveraging more homes on their credit than any other lending institution could do.

Keep Your Eye on the Profits

Investors keep their eye on the profits. They focus on what they gain by buying a home, as opposed to a consumer, who focuses on the rates and what they lose in acquiring a home.

The Strait Path™ system will help you acquire many homes, but this cannot happen with the person whose only expectation is getting the best rates, because that reality does not exist for the investor who wants to maximize their portfolio.

Do not focus on the 8% interest rate as your loss, but rather the 65% profit as your gain. The impact on your profit margin between a really good and a really bad interest rate is less than a few percent.

Lesson: Keep your eye on the profits!

Each Home Makes you Wealthier

All banks are not the same, and you must pick banks in a manner that will ensure you can leverage as many homes on your credit (with your job situation) as possible, whether it is 3 homes or 25.

The profits from each home you buy increase your net worth by 6 figures. Accordingly, REIC goes to banks that often have steeper rates in order to leverage more homes on your credit.

You may have to exchange a 1.5% higher interest rate for an additional $150,000 profit. The issue is not over rates, but rather how many banks are willing to continue lending for your portfolio.

Lesson: Don’t go with the banks with the lowest rates, but rather the banks that will let you buy the most real estate.

Cracking the Banking Code

The banking industry is a complicated world that requires specific training and cutting-edge information and updates to stay abreast of all your banking options.

One of REIC’s secrets to rapidly acquiring so many homes is dealing with largely unknown facts of how the banking industry works.

Banks make a decision whether or not to accept your next purchase based on what mortgages are already on your credit, how quickly they were acquired, what banks they are with, how your file was submitted, and what you are doing with the properties, to just name a few criteria.

We have learned how to maximize your ability to acquire the most investments possible. Our formula for leveraging several homes on your credit requires us to use banks in specific combinations, so that each additional bank will follow and accept your next investment purchase.

As a result, we can buy twice as much real estate if we are not just focusing on the rates, but on which banks we can get to agree to give you your next loan.

This often means that REIC will choose a bank with a higher interest rate so that we can already be qualifying for your next homes.

Lesson: Paying higher interest rates to particular banks enables us to purchase twice the investment properties, as compared to what we could do if we just went to the banks with the lowest rates.

Selecting the Right Loan

You cannot just go and get any loan if you are looking at maximizing your portfolio.

For example, if your goal was to pay the home off over time, and you wanted a 30-year or a 15-year loan to do it, that strategy would cap out very soon. You would qualify for only a fraction of the loans than you could with Interest-Only loans and ARMs (Adjustable Rate Mortgage).

We educate our members on the loan process and make sure you are completely comfortable with the loans we suggest. These loans capitalize on the best cash flows and overall profits for your portfolio.

*Please note most loans closing right now are 30-year fixed because they currently offer the most advantages.

Lesson: Only certain loan programs will allow you to leverage yourself into your maximum financial potential.

What Are You Doing with Your Homes?

Another critical key to buying so many homes with the REIC system is what you are doing with your investment properties.

By using our proprietary Compassionate Financing™ system, you will collect between $300 and $600 more than you would by simply renting it out.

This corrects your DTI (debt-to-income ratio) and brings your personal finance ratios in line so that you continue qualifying for additional homes.

Lesson: A well-sold Compassionate Financing™ contract is the key to overcoming your financial ratio issues that typically cut your investing short.

Protect Your Future Portfolio

Weaving carefully through the banking industry requires a considerable amount of effort and strategy.

Doing a loan here or there throughout this process with another lending company, including any refinances of your own homes can quickly unravel your ability to buy as much real estate as possible.

Protect your portfolio by keeping your entire lending business to the professionals that have the foresight and the hindsight to see complicated lending issues from afar off.

Lesson: Solving and dodging these issues usually happens long before we are faced with a complication.

Summarizing your Profits

All of these factors ultimately add up to buying more real estate than you could with your old financial paradigm.

Consider, for example, the following scenarios comparing someone who is rate conscious to someone who uses our proprietary financing formula.

In Scenario A, our client may be able to buy 3 investment properties total, with the combined rates on all three properties of 23% (8% + 7% + 8% =23%), and a total profit after 5 years of $360,000 ($120,000 + $110,000 +$130,000), or 195% annualized return (65% + 60% + 70% = 195%).

This 195% annual ROI (Return on Investment) was created with a total interest rate cost of 23%.

In Scenario B, our same client is able to buy 6 investment properties total, with the combined rate of 52% (8.5% + 8.0% + 8.5% + 9% + 9.5% + 8.5% = 52%), and a total profit of $685,000 ($115,000 + 105,000 + 125,000 + 115,000 + 105,000 + 120,000), or a 355% annualized return (60% + 55% + 65% + 60% + 55% + 60% = 355%).

This 355% annual ROI was created with a total interest rate cost of 52%.

In Scenario A, the client may have received some competitive investor interest rates, but they led to an outcome of only being able to buy 3 investment homes.

In Scenario B we had higher rates, but we were able to create $685,000 of profits compared to $360,000.

Why Having More Homes is Better

Buying more homes is not just about creating more profits.

Some of you have goals that extend beyond an extra $500,000 in the next 5 years, and a 5-6 home portfolio. For you, the key to your success lies in creating a powerful portfolio that can attract future partners.

Obviously, 6 profoundly profitable homes will have more credibility for attracting partners than 3 homes. These partners have money and credit you will now use on all your future investment deals.

You can now participate in real estate with no money out of your pocket and no credit. This portfolio unlocks your ability to thus create unlimited returns and now have limitless financial potential.

Higher Rates = Greater Profits

The take-home lesson is that focusing on interest rates can distract you from the more important issues.

REIC’s experience has shown that time and time again, people make investment decisions based on rates when they should be focusing on the profits.

Overlook rates that are 1 or 2 points higher, if it means that you can qualify for even one more home.

This is the investor’s financial paradigm, and it will hopefully lead you to extra six-figure profits this year that you might not otherwise have realized.

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