Top Ten Reasons You Should Attend Our Upcoming Seminar

10. You’ve had problems with an appraisal

9. Lenders are tightening up on you

8. You want to learn about some new markets that we are attacking

7. The market is down 40% and your 401K got killed

6. You need more write-off

5. You can make money by referring your friends - $500 Per

4. Obama is now in office and you’re scared

3. WHOLESALING - I’ll be teaching how to make quick cash with no long term liability

2. You have questions but haven’t bought your first home

1. You’re going to buy again anyway, the $2,999 is credited to next transaction and thus the seminar is FREE!

I’m going to be explaining the wholesaling process this one time only. You don’t want to miss it.  Join us at the "No BS" real estate seminar.

I’m sure you are panicked at this point. The banks are barely lending.  The Market has crashed and the media is talking global depression. The Dow is at 8,134 as I type this.  So what am I doing?  I am bidding on 20 homes.  Mass Hysteria has provided and incredibly opportunity for Mass Consumption of undervalued assets. Nobody can predict how far the market will fall or when the falling will ease.  Many people have lost 1/3 to 1/2 of your savings. Don’t jump off any buildings yet.  You can recover.  Recover by buying REAL assets that are undervalued and creating cash flow now.  My average home lately provides $30,000 in equity, $20,000 in cash and $150/mo. in cash flow.  What are you waiting for?  The illiquid nature of real estate is GOOD.  It keeps prices from falling off the planet.  In addition, these homes have tangible and real value.  Consider the replacement costs or the income approach to valuation when you buy an asset.  Many of you may not know this, but I have been licensed with a 6 and 63 in my previous life as a banker.  I could sell insurance, and mutual funds.  I quickly got out of that line of work for one simple reasons.  You can not sell what you don’t believe in.  I was not successful with these licenses as my heart was not in it.  Real estate is in my blood.  It’s my calling.  It is my passion.  While others often go to a job for a paycheck, I eat, sleep and breathe this business.  I live it.  You may struggle through a project or have a horrible transaction (we all have), but if you stay the course and build a portfolio, you will likely create an incredible amount of wealth. You can not rent stock. In panic sell offs, the little guy gets crushed.  Many of you may have gotten crushed, fret not, because there is opportunity everywhere. We have locked up 15 projects in the last week. We can not possibly send out every home we get. We do our best, however many hungry investors gobble these homes up before we can even send them out.  Contact my office if you’re ready to take advantage of this market, rather than let it take advantage of you.

The difference between my office and all other companies is simple, and here is the proof.  (Literally, the Proof of Funds). It’s now $1.6M.

Buy Low, Sell High.  This is the low my friends. In time of crisis I leave you with this poem:

IF

If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream-and not make dreams your master;
If you can think-and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two imposters just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on!"

If you can talk with crowds and keep your virtue,
Or walk with Kings-nor lose the common touch,
If neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And-which is more-you’ll be a Man, my son!
-Rudyard Kipling

The Truth About Bailouts:

As a staunch supporter of free markets, the thought of a bailout makes me nervous. Many smart people made smart bets and didn’t over leverage themselves. So why should we be liable for others, who went nuts and borrowed themselves into the ground. This, of course, is a tragedy for some and an incredible opportunity for others. While your retail purchases, perhaps your primary residence, may have taken a 10 – 15% dip in value, chances are your foreclosure purchases are still excellent sources of wealth, with ample equity. Those of us who purchased homes 50 – 70 cents on the dollar are still in a great position. The flooded rental market has likely also helped you with better quality and higher paying tenants. In short, most savvy investors are still in great shape. So what will the bailout do for (to) us?

In the short term, a bailout represents more liquidity for financial markets. For those of you who’ve recently been told that you no longer qualify for credit, this is a direct reflection of tightening credit markets. Banks are being extremely cautious. They are increasing their debt service coverage ratios, they are increasing their vacancy factors in their analysis of you, all the while, they are lowering LTV’s. All this leads to less available credit for investors, which is a mess and it does affect our business. It affects my investors and it’s obviously not optimal for any real estate finance. In the face of this, I have requested and received an increase in my line of credit of $600,000, which now totals $1.6M. This will allow me to fund additional deals for investors who may qualify for end financing, however without a lease in place, they fall short of a commercial approval. This comes at a personal cost to me and my business, but was a necessary move. In addition, the new Fannie/Freddie guidelines have limited investors to 4 properties from 10. This is a huge decrease. Those of you who have 4 homes or more, will no longer be cashing out in the secondary market. I fall into this category as well. With close scrutiny of the markets and constant communication with banks, we foresaw this. We were able to increase my line of credit and move to an 80% "as completed" commercial loan product in order to limit the need for cash out refinances. This product is UNLIMITED in terms of the number of projects you can buy, as long as you qualify based on credit, cash flow and income.

Both of these solutions became available with incredible timing. You may be thinking that I love this bailout, as it will likely loosen the purse strings with the banks and credit will be more readily available. In one sense I do, as my investors will get reasonable credit again. There is however a down side to this. The $700 Billion comes from us, the taxpayer. While I’m for (and in need of) increased liquidity, I’m fundamentally and incredibly opposed to taxation. Taxation can cripple the economy further and bring us from a limp to a crawl. We need tax relief, not increased taxation. A tax on large corporations will undoubtedly hit you, me and everyone else in the country. There is no tax that does not take money out of private hands and into the government. Government can call it what they want but taxing anyone, even the oil companies, will hurt us. The thought that these companies take the hit without passing it on to us is sophomoric. In addition, the terms of the bailout are vague, to say the least. We need much more control over what these funds are used for and how they are used.

Newt Gingrich was on Fox and basically trashed the structure of the bailout. I tend to agree with what Newt says, as he’s both pragmatic and bright. Neal Covuto was on the same program and mentioned 2 times where bailouts have been profitable for tax payers in previous crisis situations. I see where this could be a long term win for the taxpayer if the government were to structure and manage this bailout properly. There, my friends, is the problem. Ever been to the DMV? How about the post office? Government couldn’t successfully work a toaster, let alone a $700 Billion dollar bailout. Let’s face it, this is a tough one.

Do we let the economy fall apart, or do we quickly solve the crisis with a huge bailout? I believe that the laissez faire approach is the best, however we live in a big government world, so chances are, libertarian ideals are never going to come to fruition, although I respect and agree with their passion for a free market. Something is needed for sure. I could argue that bad businesses deserve to die (ala the George W. national address), but if their death starts to carry over into your world, you may be torn as I am. I am not thrilled with the concept of a bailout, but I need it for some of my clients. The sad thing however, is that when government is in charge you can be sure that there will be a down side. The free market approach, in this situation, could ultimately lead to a bank run and mass panic. There’s just something that stinks about the urgency of this bill and how they plan to solve this in a weekend. The element that stinks to me is that the Fed (owner, printer and controller of the money supply) will have increased power over us. That’s just plain scary, especially if you believe the Fed was a huge contributing factor in this by jacking up rates 16 sessions in a row. Can you say overkill?

Right now, I am buying homes that provide tremendous equity and cash flow. Most investors can still get money and they are doing the same, however the denials are stacking up and the bank’s credit criteria is not getting looser. The problem in my opinion, is that the pendulum has swung and it’s swung too far. This is not the immediate fault of the banks. Remember the FDIC insurance tag that you see at your banks? This insurance comes at a cost. The banks are being scrutinized by regulators. Regulators come in and review the loans of the banks. They review concentrations, appraisals, valuations, insurance and many more components. In order to insure your deposits, these banks need make sure the loans that are on the books are not “risky”. "Risky" loans can lead to default, which leads to less "insurability" of your money. Bad loans, can lead to liquidity issues for banks and ultimately insolvency. Banks become insolvent and your money is gone. These bank runs from the depression era were attributing causes to the formation of the Federal Reserve Bank. The catch of course, is that the Federal Reserve Bank has quite a large amount of control, yet it is not quite a governmental institution. The Fed lends money to the banks, government and ultimately us. Every dollar you have is a borrowed dollar. This is a core reason that I am vigilant with leveraging “appreciating” assets. Remember, houses don’t go up in value, dollars go down. Accumulating cash will not solve your problem, however assets that tend to keep up with inflation (houses) can curb the ever deflating dollar and create the stabilization of your financial wealth. If you have stock, you’re down big. If you have cash, you’re down big. If you have homes, you may be down from retail values, but if you buy foreclosures, you’re likely still up big. Your cash flow is likely up big too.

Last weekend I was with some investors who were discussing what amount of cash would allow you to live in this world without actually working. I’m not saying here that you’re yachting or at the country club, but you’re comfortable and eating. Your number can vary quite a bit, but the number I hear often is $3M.

$3,000,000 @ 3.5% in a bank is $105,000. No worries right? Remember, you’re only insured to $100,000.

$3,000,000 @ 5% in bonds is $150,000. Very limited worries right? What about market swings and corporate insolvency? Mortgage back securities were triple a rated, now the only buyer is the government (us).

Invest $3,000,000 in small single family homes, priced at $80,000 each, that rent for $1,200/mo. This would allow you to purchase 37.5 homes. Assume you pay $300/mo in real estate tax and insurance. This will yield you $405,000. Insurance Companies will insure $3M in real estate.

My point was, if you have half a brain and just a little drive, you can create the same returns with half the money. I’ll take bricks & mortar over cash, bonds, crooked ceo’s or the government anytime. I’m not exactly a conspiracy theorist, but it seems odd that the Fed is garnering even more power, with a swift move, in a time of crisis. If the Fed was created to control the money supply, curb inflation and stop crisis, then why are we, in 2008, faced with a such a national and global crisis? It could be that the Fed is overrated. It could be that the Fed overshot by raising rates 16 times in a row. Nobody was more outspoken about rates being artificially high than I was, I had quite a bit of my portfolio floating with Prime. Remember the inverted yield curve? How we got here is important, the liquidity is needed, and we must ensure that politicians are taken to task. I keep hearing that this bailout will cost $7,000 per taxpayer. In the same broadcast, I hear someone else say that it’s possible that the government and taxpayers make money on this deal. After all, 92% of people are current on their mortgage, so why are these mortgage backed securities worthless? The answer, is that something is worth what you can get for it. This reminds me of my dad telling me that the Becket stating my Ryne Sandberg rookie card was worth $49 may not mean I can actually get that price. I was devastated! I bought the card for $7 at a flea market, and to a 9 year old kid, I was loaded and impressed with myself. Baseball cards, homes and mortgage backed securities are all the same, you get what someone is willing to pay. Timing the purchase and sale is often more important than how or even what you buy. The intrinsic value of these securities is supposedly much higher than we’re paying, which I like. I’ve heard several of my friends who are investment bankers say that someone is going to make a lot of money out of this mess. I agree. It’s time to BUY. Ever heard of buy low, sell high? This is what they are talking about. The fact that the government is managing the process, well that’s a gamble.

You may be shocked that my typical comments on the stock market have come a day late. Yesterday’s stock market fiasco was the worst in nearly 7 years…and you thought real estate was bad.  The point, I try so hard to make with investors is that real estate is often more “secure” than your standard 401K and IRA options.  This is counterintuitive to what you may believe and is certainly counterintuitive to what you hear from the media.  When I discussed with my dad early on in my real estate career, my vision was simply to do something I loved, while being profitable.  My original visions of becoming a custom home builder never happened, largely because my dad convinced me that the low end was far safer, which I now believe to be true.  I could never leave the comfort and safety of low end real estate.  If you can’t sell your $1M spec home, chances are you’re stuck.  As a builder, you need to constantly acquire new land and build new homes to make money, while being an investor, you can buy 1 project and make money for a lifetime.  I wanted to create enough wealth to retire extremely young and enjoy life during the process.  While being licensed to sell insurance and mutual funds, I never felt that I could sell the product because I didn’t believe in it.  I did not see anyone getting rich, or even getting a decent return except for the asset managers.  On the contrary, I see many of my real estate investors doing very well.  See, the particulars of our success are extremely fundamental.  Everyone needs a place to sleep.  Does everyone need stock? No.  You can’t rent your stock out and you’ll have a hell of  time using a bank’s money to buy stock, so the beauty of leverage is out for the most part.

The most idealistic investors focus on the flip, but their eye is not on the ball.  My program has been rooted in the HOLD since I started.  If you want to make a quick buck, flipping is a neat concept.  I’ve flipped before, many of you have as well.  That is a great little injection of capital from time to time, however if you’re like me, you’re likely trying to replace your income with rents.  That’s right, the good old fashion landlord routine.  And yes, it involves a little risk and a little work, however the rewards can be incredible.  If you’ve met me before, you’ve probably heard me say that Donald Trump is not a flipper.  He’s an investor.  While I’m not a huge fan of Donny’s, the point helps new investors realize that the old fashioned hold is not all that bad after all.  True investors hold and recapitalize at the right times.  Selling in a down market is nuts, especially when you consider that rents are through the roof and rates remain relatively low.   The market is dictating hold, so I hold. 

The most important component that differentiates real estate from traditional investment strategies that are so ingrained in our psyche, is the fact that there is a plan B.  What started out as my plan B, holding, has now become  my A game.  There is an inverse relationship between values and rents.  Chances are that you’ve owned homes in hot markets and cold markets.  This year is a “cold” market with regard to value, however my rent roll has never been stronger.  Nearly every home I have rents extremely quickly and at peak rents.  The 2005 hype is gone.  Flippers quit, yet investors are buying with both hands.  I’m not overly concerned with a 10% decrease in values.  First of all, I (and my investors) have likely purchase the home for 50 - 70 cents on the dollar, so a 10% hit in value still allows us to have incredible equity positions. It’s important to mention here that my cash flow has exploded.  My rents are 10 - 25% higher in this market than they were in past “good real estate” years.  

The best way I can explain the root safety in my program is with a teeter totter example.  When prices go up, we create equity and have the ability to sell at profits.  When prices fall due to increased rates or credit tightening, our rents go up as demand increases for affordable houseing.  This, of course, allows us to have the opportunity to cash flow.  Provided you stay in the first time home buyer market and stick to the basic fundamentals, you likely won’t get too hurt. In fact, you’re likely to do extremely well by sticking to the basics.  My fundamental teeter totter approach is basic, but it works time and time again. If there were a better way to create this much wealth with this limited effort, I would find it, sell it or invest in it.  I stick with low end real estate for one simple reason, it works.  It works in good economic times and in bad.  It is not an accident that I have (and likely always will) stuck with “first time home buyer” homes. It is an extremely well thought out plan that has proven itself in good and bad markets.

I tell people that question the risk element of real estate, if you’re risky, keep buying stock. The last 10 year has been a good indicator that the risk associated with the stock market is extreme in comparison to real estate.  All the while I’ve been buying little pieces of the American Dream and chipping away at retirement.  It’s closer than you think.  There are no doubt more responsibilities associated with real estate.  Just this last year, I have had a home burn down, and another get hit by a truck.  Both equity positions were lost.  This was a stressful and painful experience, however by staying with my strategy of accumulation (or mass consumption), I have made up the loss in just 1 or 2 new purchases.  Where many folks go wrong, is they stop accumulating. There are times to re capitalize your portfolio.  Sell some (not now) and buy some new projects.  When talking to my very first investor the other day, he mentioned that he had been stagnant for some time and that it was time to get back in.  I expressed how incredible the opportunities are now.  Don’t hesitate.  Managing 10 properties is not much different than 3.  At 20+ you’ll need assistants, management or some sort of help, but I had a full time job and 15 homes at one point.  It’s doable, and I see no viable alternative with this type of return.

I’ve thrown in a clip of a home of mine that burned down.  I lost the equity position which was tens of thousands of dollars.  I wanted to clarify that my tag line of “Expect Maintenance, Expect Issues…” was derived from my own difficulties.  In the same year as this fire, I had a home that was destroyed by a truck that smashed into it.  It’s never fun to lose equity, but the truth is that my insurance kept me from losing everything.  There is no insurance for your mutual funds.  This business has a fair amount of hurdles, but it’s been an incredible wealth builder for me and it can be for you as well, if you’re willing to work at it.  Enjoy!

Recent Fed Rate Cuts are music to my ears.  In my estimation, the Fed increased rates far too swiftly and far too high over the last couple of years.  Today’s rate cuts bring us back to the lowest level they’ve been since December 2004.  Recent talk of recession and mounting foreclosures have induced the Fed to cut rates at a rapid pace.  Whether you’re a homeowner with a home equity line of credit, or a commercial borrower who floats with a Prime based product, you will save interest costs as a result of these recent rate cuts.  Investing in this market has become incredibly exciting.  I have purchased several homes lately as the perfect storm of Falling Rates, Falling Prices and Increasing Rents has forced my hand.  If you’re not buying now, you’re almost certainly missing out.  The “bottom” is difficult to gage, but I have to imagine that my experiences are an indication that the bottom is here, near or passed us.  A recent up tick in the amount of competition for these units has signaled to me that investors are nearly forced to take advantage of these incredible opportunities.  Many investors who were unilaterally focused on buy/sell or “flipping” crashed and burned.   For those of us who realize that successful real estate investors own (and hold) real estate, this has been an incredible opportunity.  If you consider the following, you will see why I have always done extremely well with real estate in both “good” and “bad” markets.

“Bad Real Estate Markets” are largely caused by Interest Rates Increasing = Prices go down, Rents go up
“Good Real Estate Markets” are largely caused by Interest Rates Decreasing = Prices go up, Rents go down

In good markets, I can sell projects that I’ve purchased previously and generate profits.  In bad markets, rents typically increase in collaboration with interest rates dropping, which results in better cash flow.  Either way, as an investor, money can be made in either “good” or “bad” markets.

There are some qualifiers that allow this process to work for me, and should help guide anyone buying investment real estate.

1. I buy low end real estate - I have 2 nice homes…both are for personal use.  I have 18 other homes ( I have had as many as 31 at one time) that are all valued under $250,000, most of which were purchased around $100,000.  These homes are generally in Aurora, Elgin, Joliet and Dekalb.

2. I rent the properties out - With rentals I’m able to cash out (refinance all of my invested capital, often creating even more capital  at my disposal) and cash flow, which allows me to utilize the banks money rather than my own.  Another key to my success is that I take advantage of the taxation surrounding long term capital gains.  Much of my income comes from the sale of homes I have purchased previously.  This income is taxed at 15% rather than my ordinary income tax bracket.

3. I don’t get emotionally attached to homes - When I want to sell a home, I simply price it right and sell it.  I don’t argue with the market.  I don’t demand a price.  I simply take what I can get.  With that being said, I also don’t “need” to sell anything.  If I “need” capital, I often borrow from my portfolio rather than selling my portfolio.

4. I have multiple income streams - Many folks wonder why I broker these homes, rather then buying them myself.  I broker 100 - 200 homes per year.  There is no bank around that will lend me $10M - $20M.  They will however lend me several million.  When I reach their lending limits or comfort level I focus on brokerage.   My brokerage business is a lot like many of my investor’s full time jobs.  Real Estate is likely a 2nd or 3rd profit center for most investors.  For me I need both Brokerage (Income for the Banks) and my projects.  My typical project yields me 5 to 10 times what brokering a project yields me, so it is advantageous for me to actually own the project rather than brokering it, however there are limitations to my purchasing power.  This is one of the principles that has kept me successful.  I never stopped “working” simply to invest.   A key here however, is that I’ve also never stopped investing either.

5.  I have stayed with what works - In 2005 many of my peers started building homes and focusing on high end real estate.  I’ve never built a home, although originally I wanted to become a custom home builder.  I did not however do this because the risk was not justified.  I could buy a lot for $175K next store to my home, general the project, build the home for roughly  $100 - $125/sq. ft.   4500 sq. ft. later I’d owe $625,000 - $740,000 on a home that is not rentable.  That same $625,000 could be used to buy 6 or 7 rentals, that would almost certainly yield $7,000/mo. in rental income.  This safety net of rental income provides me incredible security.  At the high end of the spectrum, you are limited to selling the home.  Having a plan B is priceless.

Prices are down, Rents are up, Rates are low.  This is the perfect storm for investors.  Now is the time to buy.  We have a small window of availability to really capitalize.  Coupled with our creative programs, you can really make hay while the sun shines.  Rates are going to drop 50 to 100 basis points (1/2% to 1%) today.  This translates into great cash flow potential for investors.

If you are interested in participating in a Joint Venture, Mass Consumption, LLC can partner with you.  You can use our line of credit to fund projects that we send out.  There are a wide variety of structures available.  Utilizing this partnership can be a tremendous opportunity.  You may be able to purchase real estate with very little cash out of pocket.

Our typical structure works as follows, on a case by case basis:

Procurring Partner (Mass Consumption LLC) provides funding for the project.

Managing Partner (Investor) will ultimately refinance the project and take advantage of the benefits of owning real estate.  Appreciation, Cash Flow, Cash Out and Tax Benefits.

• 90% of the Purchas Price will be funded by First Choice Bank, utilizing our Line of Credit.

• A Procurring Partner (Mass Consumption LLC for example) will provide you with funds for down payments (and in certain circumstances, rehab funds).

• As a Managing Partner, it will be your responsibility to manage the project and refinance the home in your own name (or legal entity) within 90 days.

• As a Managing Partner, you will have full ownership rights of the property upon refinance of the orginal partnership.

• Initial costs are limited to the Series LLC (typically $5,900 - $8,900).  You can put the Series LLC costs on a credit card if you’d like.

• Your 10% down payment will be provided for you at close.

• You can either put the rehab costs on a credit card or pay cash (in special circumstances the Procurring Partner will fund the rehab).

• Partnerships are limited to our projects.

• You will need a good credit score (680+) and solid income to qualify.  You will need to be approved with one of our lenders to refinance.

• If you have not refinanced the project within 90 days, you will make 1 interest payment and be allowed another 90 days.

• If you have not refinanced the project within 180 days, your interest in the property will be disolved.

The purpose of these Joint Ventures is to allow investors to buy real estate with as little cash out of pocket as possible.  The costs for this venture vary by project, but typically range from $5,000 - $10,000.

Investors are always struggling with finding banks who understand foreclosure investing.  My investors tend to have great success with Banks who understand my process.  The reason?  I spend countless hours meeting with banks and appraisers to explain our program.  After nearly 8 years in the business our track record speaks volumes.  At this point, we have banks competing for our business.  Currently we have several banks that will provide my investors a 90% home equity loan on investment property.  This program is VERY competitive in a VERY conservative market.  It’s important to understand our process and experience when working with banks and appraisers.  No matter how much success we display, appraisers tend to be conservative in order to protect themselves.  My front end research regarding comparables should more than justify our numbers.  In any market, good or bad, we do our homework on the front end to justify our values.  Every house we send out, will come with comparables homes that have sold recently.  Many appraisers will need to see these comps and consider them when preparing their appraisal.  Many appraisers will mistakenly provide comparables that were also sold in foreclosure.  This is an extremely common and a grossly inaccurate practice.  Appraisers need to consider the rehab that was done to the property.  They also MUST look at recent, sold comparables.  When these 2 things are considered, our process is very accurately displayed through the appraisal.  If you ever have an issue with an appraisal, call us!  We will fight on your behalf to defend our accurate values and assist you with the explanation of our values to the appraiser.  We can also refer you to appraisers who have experience with foreclosures.  If a retail (often conservative and inexperienced wtih foreclosure) appraiser is involved, the appraisal will inevitably be inaccurate.  I highly recommend using an appraiser with foreclosure experience.  Call us for the name and number anytime you are working to cash out refinance a property or obtain a home equity line.

I was contacted by Caroline Kim in response to the media frenzy surrounding foreclosures.  Check out the article here.

The article was great, but there are some miscommunications…I do not fault Carolin one bit however, as I do speak pretty fast and the interview must seem like a million numbers being thrown around.  I have not personally totalled 150 foreclosures, I sold 150 foreclosures in 2007.  I personally have owned up to 31 homes at once, which is quite a lot to manage.  Currently I own 15 homes, 5 of which are under contract for sale.  The final comment is perfectly accurate however…I don’t have a single stock, just cash and houses! 

Here is a great clip of Robert Kiyosaki (Authur of Rich Dad, Poor Dad) and Doug Crowe (founder of a successful real estate education and training program Springboard) discussing the value of holding real estate.  This is one of our basic principles and seems to be a common theme among successful real estate moguls.  I have been preaching the value of holding real estate since I started in 2000.  This is a great clip, enjoy.

What does another rate cut mean to investors? It means that the Fed is making a serious attempt to curb the struggling real estate market.  By lowering the fed funds target rate to 3.0%, the Fed has established a sincere effort to remedy their overzealous increases of the recent years.  The theory behind raising rates 17 consecutive times, was to hedge against inflation.  Inflation is extremely difficult to gage, and in all honesty, I have a hard time depending on the government to accurately gage inflation. In my opinion energy costs and gasoline are the major source of inflation in the country.  As we continue to see interest rates cut, this will ultimately help the US economy and will ease some of the “inflation” that the average Joe feels. 

I studied economics at the University of Illinois.  The theory or idea that increasing interest rates curbs inflation may be valid, but I have another perspective.  As rates go up, as they did from 2005 to 2006, this hurts the average American’s pocket book.  Think about it.  Credit card payments go up, home equity loan payments go up, and ultimately this cannibalizes the paychecks and pocket books of the American people.  I understand the theory, I really do. My argument here is that we (and the Federal Reserve Bank) need to examine rates and inflation in a different way. Inflation is defined as the increase in the price of some set of goods and services in a given economy over a period of time. It is measured as the percentage rate of change of a price index.[1] 

In my opinion, the price of milk, cars, food, etc. has not increased or “inflated” beyond a reasonable scope. The price of money however was “inflated” drastically from 2005 - 2006 and was kept artificially high in 2007.  By the 7th time rates were increased, I felt as though the Governmet/Fed was egregiously overreacting.  I predicted that this was a foolish move that would ultimately hurt the US economy.  Many made the same prediction.  Many people, as I do, feel that the Fed typically overreacts.  It’s just my opinion, but the fed funds rate cuts to 1%(post 9-11) was aggressive. With all the uncertainty post 9-11, I did feel that it was deemed as necessary and prudent. The increases in fed funds rate (and ultimately the prime rate) from 2005 - 2006 was excessive, to say the least. Economic growth has slowed, the “R” word is everywhere..and here we are cutting rates again.

So what does all of this mean to us as investors. This means that the softening economy has forced the Fed to lower rates, which will cost the average Joe and the average investor less to own their home.  Rates go down, prices tend to go up.  We’ll see if this happens.  It’s my opinion that 2008 will be a year full of incredible deals and incredible cash flow opportunities.  I’d suggest fixing your rates with Prime for the remainder of the year, for short term real estate transactions.  For your homes and your long term holds, I’d recommend locking in longer term products.  I have a 30 yr. interest only loan on my home.  Great product! The majority of my investment real estate is fixed at 7% until early 2009.  If you are investing in our program today, First Choice Bank, will fund your purchases at 90% with a prime (Currently 6%) floating product.

I have said this over and over again, “NOW IS THE TIME TO BUY”. Our average foreclosures is priced at $100,000. At 6% interest only, your payment will be $500/mo.  Add in your RE taxes and Insurance, and you’ll likely be around $750/mo.  Our average rents are $1,100.

With just 10 purchases, you could be cash flowing $3,500/mo.  This will likely take care of your personal mortgage and maybe even your car payments.   But Josh, What if Prime jumps back up?  Well that’s a great question.  We don’t know when rates will go up, but if you were to fix rates now you may pay a slight premium.  That being said, your cash flow situation will likely remain tremendous, as the mortgage crunch has forced first time home buyers to remain renters.  Take advantage now, the opportunities are abundant.