May 2, 2010

Get rich quick schemes do not work everyone knows that. What does work is to look at long-term trends, and make good long-term investment decisions which will over time yield a good return on your investment.  Warren Buffet buys when prices are low and sells prices are high. It is a pretty simple concept.  Take housing for instance. The people who got burned most badly, were the late comers to the Buying Frenzy and had high hopes of cashing in. The early arrivals, were able to double or triple their money.  As prices steadily rose, it was predictable that the so-called bubble would burst.  But timing played an important role in determining who the winners and losers would be.

So let’s look at the market now.  Is there opportunity here?  ABSOLUTELY!   Housing has hit bottom. The record number of foreclosures has actually paved the way for people willing to make MODERATE gains over time.  The key word here people is MODERATE.   If you are looking for a double to triple pay out, you may be disappointed. However, even stocks won’t give you that.

So let’s look at what a modest investment could yield.  In My Market of St. Cloud Florida (Central Florida) the absorption rate is hovering around fifty percent.  That is indicative of a healthier market than we have seen in three years.  It means almost an equal number of homes are coming onto the market, as are going off the market. They are selling almost as quickly as new ones are coming on.  What is driving the market?  PRICE.

Prices have reset to 1992 levels in many cases. This creates affordable housing for just about everyone. A decent rate of return on investment would be 20-30% given the economy today. Show me an investment yielding greater than that?  The fact is that bonds, stocks and CD’s are paying way under that and will as long as home interest rates remain low. Most bankers i have spoken with locally agree that we will continue to see home mortgage interest stay int he range of 5-6%  throughout the rest of the year.

Money is still available. In fact Osceola County received a good portion of funds from the $8,000,000 which was allocated by the government to assist blighted communities. Those funds are still available for rehab, and low-income families in the form of down payment assistance. Correct me if I am wrong, but since when does free money not create a long line of takers?

There are rehab programs available as well. Wells Fargo for instance is offering a loan product the 203K rehab loan. Which funds repairs as part of the purchase. What may disqualify a home under FHA (say no appliances for example) would qualify under the 203K program.  Yet, many people are unaware this is an option.


The economy is going to shift and change.  Money devalues as inflation increases.  If you had the opportunity to buy a property today (which you do) for under $100,000 you should jump on it.  As inflation pressure the value of your money downward, that investment over time will appreciate and you will actually come out ahead as opposed to putting it into a savings account which is paying next to nothing in interest. 


Renting is an option for many people. However, there is no recovery on rent. Once you pay, it is gone.  It does not help your credit rating either.  The deductions you are entitled to as a homeowner have significant impact on how much you can recover in tax credits. Mortgage interest for example, property taxes, home owners insurance, all deductible. Today it is possible to home a home for less or equal what you are paying in rent. This was not true 3-4 years ago.   something to think about. Wouldn’t you rather be a landlord than have one?

Building wealth means taking a risk, Stepping outside of your comfort zone and doing a little research. It also means looking for opportunities and not buying into mainstream media. When things are down opportunity is up.


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March 25, 2010

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