Market Plunges, Fed Cuts Rates
I often contrast my program to the “safe” or “easy” returns I hear about in the stock market. I believe with just a few minutes of analysis, you will see that our program consistently outperforms the market, and basically all other investment opportunities. The key is that our properties require very little capital to start (consider our $0 down program) and within 60 - 90 days, all (or more than all) of our investor’s captial has been recaptured. Through cash out refinances, our program largely leverages the bank’s money, which is paid for by our tenants. With $0 of our own capital in a project, the return is infinite. Real estate can generate cash flow, cash out, tax benefits, and equity. Our program is designed to generate a variety of each of the aforementioned benefits. Here’s what the market has done since December 1999.
In December 1999 The Dow was 11,497 Today, January 2008 The Dow is 11,971
In December 1999 the S&P 500 was 1,469 Today, January 2008 the S&P 500 is 1,310
http://moneycentral.msn.com/investor/charts/chartdl.aspx?Symbol=%24indu&CP=0&PT=10
That’s basically a loss over, nearly 9 years. Accounting for inflation, both indices have provided a terrible return. You may have timed the market and gotten in and out at the right time, but it’s largely likely that you didn’t. Most investors can not time the market.
The median home price in January 1999 was $164,800 (Keep in mind my investors buy foreclosures, which average 30 - 50% under retail values)
The median home price in Nov 2007 is $239,100 (The homes my investors and I buy average $110,000 - Less than half the Chicago Metropolitan Average and again at 30 - 50% discounts to retail values)
http://www.census.gov/const/uspricemon.pdf
Over the same period, the median home price in our market is up 45%. The fact that we purchase homes at significant discounts, more than accounts for vacancies and maintenance. Our program is proven, consistent and provides safe returns. The only major drawback is the liquidity factor, which has a downside as well. It’s true stocks are more liquid than real estate. Liquidity may seem like a benefit, however it is this reason that stock “bubbles” burst, and real estate “bubbles” deflate. The liquid nature of the markets induce panic and sell off which runs rampant in today’s markets. The median home price may fluctuate, but there is no camparison to the volitility of the stock market. From the peak of 2007, the Dow is down nearly 2000 points (nearly 14%). Remember, real estate does require some effort and my program is not designed to be “Get Rich Quick”, but when I woke up today and watched the market, I was glad that I have 2 types of assets: Cash and Houses.