Market News & Commentary by Chris McLaughlin, January 12, 2009
http://www.shortsalesriches.com/welcome.html
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This is your year, right?? Let’s make it happen! Forget the headlines, forget all the negativity, and forget all the turmoil. More millionaires are created during times like these than any other time … so are you ready to make it happen? If so, be one of the 34 spots that we have left for our Tuesday night webinar entitled “Recession Proof Real Estate Investing: How to Buy Property with no out of pocket costs!”
The link is right here, so jump on this now:
https://www2.gotomeeting.com/register/655619177
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Citigroup and Morgan Stanley were in talks over the weekend about combining their brokerage division. The Associated Press reported that Morgan Stanley may pay up to $3 billion for a 51% stake in Smith Barney, and then Morgan Stanley would be given five years to buy the rest of the brokerage firm. This wouldn’t be the only change for brokerage firms lately, as Merrill Lynch sold to Bank of America amid all of the turmoil in the banking world.
In bailout news, the U.S. Senate may be voting this week to authorize the incoming Obama administration to tap the remaining $350 billion in TARP funds. But the outgoing President was a bit defensive about the criticism of his administration’s handling of the event, and said that wouldn’t be asking Congress for it unless Obama wanted him to do so. Bush noted: “I readily concede I chunked aside some of my free market principles when I was told by chief economic advisers that the situation we were facing could be worse than the Great Depression.”
And in welcome news to those Realtors and investors that are driving clients around looking for short sales and foreclosures, oil fell below $38 a barrel. The continued slide is due to weak earnings from corporate America as well as concerns about macroeconomic issues that will reduce demand for oil and gas.
Now on to real estate investor education …
Short Sale Real Estate Versus Municipal Bonds
Outside of federal bonds, municipal bonds have historically been considered one of the safest places to park your cash especially in preparation for retirement; but, are they really as safe as they appear? If 2008 didn’t convince you of the futility of holding paper instruments or glorified promissory notes rather than hard assets, then perhaps a cold-hard look at the number may.
Let’s examine muni bonds compared to real estate; how much cash flow can you realistically expect to generate from each? There was a time not all that long ago when financial advisors would pull out fancy charts showing how your retirement account would grow by 10 percent annually and viola’ …you would be wealthy and well established once retirement age arrived simply by contributing to your 401-K or setting aside a relatively modest fund each month.
Over the years those 10 percent returns were replaced with 8 percent returns on the charts but still a relatively robust expectation. As of 2008 the analysts and financial advisors are more likely to hide those charts or spend an extensive period of time talking about “historic norms” since the returns are elusive and principle loss is the name of the game for 2008 and beyond. The fact is, today the average muni investor is happy to squeeze out 3 percent returns from those “safe” bond portfolio’s or dividend accounts.
Think about it…at 3 percent you aren’t even keeping pace with the government estimated rate of inflation…and you can expect to be “locked in” to that rate for 5, 10 or even 20 – 40 years. With the current rate of economic stimulus being pumped into the economy, few experts believe the rate of inflation will remain at the current “low” of 5 percent.
Now let’s compare cash flow – after all, the numbers are what really matter. To generate $1,500 per month income from muni bonds at the current rate you would need to have invested $600,000; it’s worse for dividend paying stock since taxes would be required….plus, stocks are subject to dramatic increases and decreases putting your principle at risk should you be required to liquidate. On the other hand, short sale investors could easily generate $1,500 of income per month with as little as ONE paid in full piece of property used as a rental to generate retirement income. In fact, by investing the same $600,000 into short sale real estate rather than muni bonds or dividend paying stock a real estate investor could realistically expect triple, quadruple or even greater returns than those allotted by bonds.
The benefits don’t stop there! In addition to easily outperforming bonds, short sale real estate provides tremendous tax advantages over the life of the home and future price appreciation that keeps pace with inflation. As tangible assets, real estate can be used as collateral for other loans or expenses, increases net worth, generate monthly income in the form of rental real estate plus much more. Now as yourself, which makes more sense: $600,000 investment to generate $1,500 per month return or buying short sale real estate capable of producing multiples of that amount each and every month?
As tough economic times continue into 2009 and beyond, investors from all walks of life need to take steps to protect their own financial interests. Don’t leave your hard earned money in the hands of the same people that created this crisis; instead, crunch the numbers and find ways to grown your own income. One of the advantages of investing in short sale real estate is the ability to begin with next to nothing; you don’t need to have $600,000 sitting around in a bank account…in fact, millions of people have learned how to start small with just one or two homes and build a satisfying 2nd income, retirement account or long term portfolio in their spare time.
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See you at the top!
Chris McLaughlin
http://www.shortsalesriches.com/blog
P.S.: Don’t miss out on our upcoming webinar on Recession Proof investing this Tuesday at 9 PM ET! There’s only 34 spots left, so jump on this now:
https://www2.gotomeeting.com/register/655619177
P.P.S.: If you wanted to get in on the Seven Figure REO product, sorry we’re SOLD OUT! Congrats to the lucky folks who jumped on it when we told them to!
But there is a launch by our friend Mike Collins..get information on what he’s doing before that goes away too!
https://rehablist.infusionsoft.com/go/tvsmash/NJur1
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