general motors

Real Estate News & Commentary by Chris McLaughlin, March 30, 2009
http://www.shortsalesriches.com/welcome.html

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Brand New Investor Makes It Happen!  If you

missed the amazing testimonial from a newbie

real estate investor who made $51,000+ on her

first deal, go here now to watch this video:

 

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ET, 5:30 PM PST:

 

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Foreclosures spike again in February

 

It was starting to look like the problem was easing before January, when foreclosure starts declined to 69,000 in November from 77,000 in October and then dropped again to 56,000 in December.  But in January the number of started foreclosures jumped to 217,000, and now February’s numbers have leaped up again to 243,000.  87,000 homes were repossessed (foreclosures completed) by banks during February, a 28% jump from the 68,000 foreclosures completed in January.  Since the mortgage meltdown hit in July 2007, 1,395,044 homes have been lost.  In February, nearly 250,000 homeowners received either mortgage modifications or repayment plans from their lenders, according to Hope Now, the coalition of lenders, investors, and community advocacy groups put together by the Obama administration’s foreclosure prevention initiative. 

 

AIG back in the news

 

American International Group (AIG) has cut or delayed payments to some of its real-estate ventures, potentially leaving the developers and their bankers in the lurch.  AIG had previously been sued by Mitchell L Morgan Management Inc for missed and delayed payments, and the latest victim is Alabama shopping-center developer Alex Baker.  The action puts 15 banks at risk of exposure to soured loans.  AIG Global Real Estate, an arm of the insurance company, has interests totaling more than $23 billion across 53 million square feet of real estate.  The Federal Reserve is monitoring AIG’s spending closely after committing $180 billion in bailout funds, but whether that’s helping or harming is still anyone’s guess.

 

Detroit failed

 

The Obama administration gave General Motors and Chrysler LLC failing grades Monday for their turnaround efforts.  It promised a sweeping overhaul of the troubled companies, but also threatened a “structured bankruptcy.”  Prior to the announcement, CEO Rick Wagoner announced his resignation, saying it came at the request of the Obama administration.  GM will get 60 more days and Chrysler 30 more days in which to make a final push toward proving they can run viable businesses.  If Chrysler succeeds — probably by merging with Fiat — it will receive a $6 billion loan.  In GM’s case, the officials would not specify how much the carmaker might receive, but we can all guess it’ll be a lot. 

 

Stocks slide on banking troubles

 

Bad news from the auto sector was bad enough, but Treasury Secretary Tim Geithner’s announcement that more banks would need help caused stocks to tumble, with the Dow opening 202 points lower, the S&P 500 index lost 21 points,  and the Nasdaq composite lost 39 points.  As Art Hogan, chief market strategist at Jefferies & Co put it, “We were starting to see some light at the end of the tunnel, but it’s beginning to look oddly like a train.”  That pretty much captures investor sentiment this am.  Would it be an understatement to say the week isn’t off to a good start?  Especially if you own auto or banking stocks.

 

Now on to our real estate investing education section…

 

Understanding the Time Value of Money – Why Short Sales Still Make Sense

 

Deflation or Inflation? Chances are whichever side of the debate you happen to be standing on at the moment you are in good company. The government experts are readily printing money out of thin air…and actually admitted as much in recent weeks…while financial analysts, other governments around the globe and those with fixed incomes fear the rise of inflationary pressures. How could so many smart people have such a strong disagreement? It comes down to the time value of money. A topic of such importance it will have profound implications on the way you structure investments throughout your lifetime.

 

There are two primary methods used to determine the time value of money – Present Value and Future Value. Present value is what a dollar today is worth rather than the value compared to receiving it as some point in the future. For example, let’s assume you have an option to sell or hold a modest property purchased via short sale. To keep the calculations and comparisons simple, we will further assume the property is paid in full.  You are reasonable positive you could pocket $100,000 by selling the property outright but wanted to know if this was your best option.

 

Typically, future dollars are worth less than present dollars due to inflationary pressures. The entire purpose of the Federal Reserve is to assure a steady supply of funds including controlled inflation (defined in the 1-3 percent range). So for example, if the rate of inflation was rising at 3 percent annually the value of $100,000 would be only $74,400 in only ten years.  Wait 20 years and that same $100,000 is only valued at $55,000. Bump up the rate of inflation to 5 percent and $100,000 drops to only $61,000 in ten years and only $37,000 in 20…now you know why lottery ticket discount so much if you take the lump sum payment up front! Ditto for insurance companies.

 

Short sale investors should immediately realize money printing combined with the ability to use leverage in the form of loans can dramatically increase the ability to generate cash today – not ten or twenty years into the future. In fact, the more excess cash (above what is needed to pay your bills and service debts) you generate today, the better especially during times of inflation. If inflationary pressures hit the levels seen in the 70’s take a look at what happens …$100,000 turns into $42,000 within ten years and only$14,000 by year 20. What originally would pay for a modest home will eventually only be enough to buy a used car without taking steps to preserve your wealth.

 

Rarely, a reversal takes place where future dollars may become more valuable than current dollars as is sometimes seen during a deflationary cycle. That is what the government fears most since it would make it more costly to pay back all the loans and debt obligations – a cost so high it could jeopardize the foundation of the nation. However, the current deflationary concern is a temporary one at best. The Federal Reserve has repeatedly stated they expect the deflationary aspect of this current crisis to cool by the end of 2009 to 2010…listen carefully – unlike what many “think” they hear…the government and Fed Reserve is not claiming the pain will be over…only that the current deflationary spiral will come to an end. The lack of investment grade returns is unlikely to resume its former hay-day for quite some time while employment continues to lag. Both add up to very real pain as Americans are unable to make a profitable investment or keep pace with their standard of living from lagging wages.

 

Bottom Line: This is a once in a lifetime buying opportunity unlikely to last forever. Act before it is too late.

 

See you at the top!

 

 

 

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html  

 

P.S.

 

Don’t miss out webinar Tuesday at 8:30 PM ET, 5:30 PM PST:

 

https://www2.gotomeeting.com/register/745206430

 

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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Finally, a blog for Real Estate professionals
that want up-to-the-minute news, & how it impacts
us and our market…

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*************************************************

About the author:

 

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

 

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month

   * Long-time authority on real estate investing
      and rapid flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 agents, uniquely
     positioning him to help thousands of investors
     make money in the biggest market opportunity ever!

     * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

     * On twitter: http://twitter.com/mclaughlinchris
     * On facebook: http://www.facebook.com/addfriend.php?id=709199143

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Mid-Day Market News & Commentary by Chris McLaughlin, December 30, 2008
http://www.shortsalesriches.com/welcome.html

——
You really can make a huge six figure income … even a 7 figure income … with no money out of your pocket in the deepest recession our country has ever faced.  How?  Just register now for our fr’ee webinar unveiling the strategies to use in this economy…all tonight at 9 PM ET: 

https://www2.gotomeeting.com/register/638209573

——
This should come as no surprise to most of our readers: home prices posted an 18% drop for October of last year, the biggest drop ever since the Standard & Poors/Case-Shiller 20 city housing index was created.  The 10-city index fared a bit worse, dropping 19.1%.  And there areas really got wacked: Phoenix dropped 33%, Las Vegas slid 32%, and San Francisco declined 41%. 

The Conference Board announced that its Consumer Confidence Index dropped 38 in December from a revised 44.7 in November.  The low number surprised economists: a survey of 62 number crunches estimated that the reading would come in around 45.   

But in good news for consumers, General Motors announced that it would once again offer zero percent financing for the next several weeks.  This comes on the heels of the announcement that GMAC was approved as a bank, therefore eligible to tap into $5 billion of the $700 billion of TARP funds. 

 

Now, on to our real estate investing education section…

Discounting Hedonic Pricing Models

Short sale investors interested in obtaining the lowest possible price should learn to turn the tables on rapid rate increases by discounting hedonic pricing models to their benefit. Hedonic pricing essentially works like this; instead of calculating the increase in a price of a home as inflationary, the “upgrades” and other enhanced “quality” measures are calculated independent of the base price of the home. While this is a valid method of taking quality improvements into account especially during periods of economic growth, it does little to account for increased “liabilities” during periods of economic or financial contraction.

Let’s demonstrate by using a basic example; Buyer A and Buyer B both purchased 3 bedroom, 2 bath homes on 1/3 acre lots with city utilities. Each home is 1500 sq. feet living area and is 3 years of age. Home A is a “bare bones” affordable housing model with laminate counter-tops, inexpensive carpet and off the shelf fixtures throughout. Standard bathtub, windows, doors and other items were used. The cost of the home was $100 per square foot or roughly $150,000 plus the price of the lot. Buyer B also purchased a home of the same size but with granite countertops, imported Italian tile, upgraded windows and custom features throughout. Upgraded appliances, a large in-ground pool, whirlpool spa tubs and other upgrades resulted in a cost of $300 per square foot or a selling price of $450,000 plus the price of the lot.

So far so good. Unfortunately, as the economy begins to stagnate items originally deemed highly desirable quickly become undesirable as the cost of maintenance and repairs outpaces the ability of homeowners to sustain these items. This is where short sale investors are likely to reap major benefits. Deep discounts of common upgrades or former enhancements are possible by keeping these rules of thumb in mind:

1.     If it requires high maintenance it is a liability and should be deeply discounted. In-ground pools are a prime example. Not only do they increase electric bills when heating but cleaning supplies and maintenance contracts can easily cost $100-$250 per month. Items that require regular out of pocket costs should be deeply discounted as potential liabilities for a property. Aggressive pricing estimates would deduct the cost of repairs, maintenance and even potential removal of the item.

2.     If it requires minimal maintenance but adds no additional value it should be discounted by comparing a standard pricing model. For instance, those beautiful granite countertops don’t save money or increase functionality to the home therefore they are of no more “real” value when selling than laminate or less expensive alternatives. Make a point of going through the home and putting together a comprehensive replacement price list based upon standard “off the shelf” alternatives for all items that do not activity save money or represent major buying incentives in the new economy.

We had so many positive comments about our top 5 positive things about the market … so we’re going to post it again for you:

As 2008 draws to a close and short sale investors look to 2009 the question on everyone’s mind is whether or not the economy will continue its downward spiral or experience a recovery. Despite the considerable abundance of doom and gloom reporting in the media, there are a few bright spots that aren’t receiving the full attention deserved. Short sale investors searching for a silver lining in an otherwise cloudy economic environment would do well to focus on these current trends:

1. $40 per gallon oil and $1.65 per average gasoline. How low will it go and how long it will last is subject to debate but one thing is certain; those who rely upon gasoline and oil are experiencing a bit of much needed relief in the form of lower prices.

2. Low Mortgage Rates & Dropping LIBOR Rates. The cost of money is cheap – not just inexpensive but downright cheap. Make no mistake about it, real interest rates are the lowest in decades and make it less expensive than ever to borrow money to build a short sale empire. It is possible to buy more house for less money while simultaneously spending less on taxes and insurance. It’s a win-win-win situation for those with the courage to buy when others are selling.

3. Huge Fiscal Stimulus. Coming soon to a federal budget near you is a huge fiscal stimulus package destined to become one of the largest in history. Bridges, roads, hospitals, schools, utilities and other mega-projects are slated to spur the economic growth needed to jump-start the economy. Whether you believe the stimulus package will work or worsen the long term economy, one thing is certain; those workers will need affordable and convenient housing for long term projects. Short sale investors would do well to make a mental note of future road plans, schools and other large building projects in the target areas of interest. Whether you buy low and sell high or wait for the path of progress to reach you, it is a position of strength rather than weakness.

4. Long Term Lag-Times. The global decline in commodities and other tangible assets will eventually lead to long term shortages with tremendous upside profit potential for short sale investors. Remember, there is a lag time between the supply and demand which will result in high demand and low supply once the economy stabilizes. Everything from basic building materials to mineral rights, timber and even natural gas holdings will be impacted. Savvy short sale buyers would do well to realize the long term potential inherent in their holdings.

5. More Renters. Foreclosures aren’t over…in fact, due to legislative restrictions on the number of “bad loans” and tangible assets a bank may have on the books at any given point in time, the current bail-out simply provided the liquidity required for banks to prepare for the 2^nd stage of the growing mortgage meltdown. Most experts agree that what began as a sub-prime mess is expanding into ARM’s, low/no Doc loans and even prime mortgages in response to rising unemployment, falling stocks and bonds plus a plethora of other economic problems hit the average homeowner.

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See you at the top!

Chris McLaughlin
http://www.shortsalesriches.com/blog

P.S.:

Are you ready to get 2009 rolling?  Then it is time to come to our LIVE “Recession Proof Real Estate Investing” webinar tonight – at 9 PM ET:

https://www2.gotomeeting.com/register/638209573

P.S.S.:

Have you seen the hilarious “Short Sale Kid Gets a Holiday Haircut.”  Don’t miss this challenge issued by Nathan Jurewicz:
http://www.youtube.com/shortsalesriches

 

Where is the outrage?  My perspective …

Mid-Day Market News & Commentary by Chris McLaughlin, November 25, 2008
http://www.shortsalesriches.com/welcome.html

——
Sorry there was a glitch that brought our webinar down for a few hours … so we’re reposting it for today only:

http://www.shortsalesricheswebinar.com

Don’t miss it – everyone that has watched it says it is perhaps the most useful tool in understanding what’s going on in the real estate market, and how to make money in today’s environment!
—–

Where is the outrage?

The jets arrived in Washington.  Corporate jets, that is.  Usually cost about $20,000 per trip within the U.S.  And they had all the nice amenities.   Perhaps a sip of champagne while thinking of how many billions to ask Congress for?  Perhaps a bon bon here or there, to help cleanse the palate.

And when they touched down, they were met with gas guzzler SUVs to help bring their big wig corporate honchos to Capitol Hill.

Three CEOs from the 3 big US automakers prepared to tell Congress who they are cutting costs left and right … and they’d like $25 billion from the taxpayers.

Yeah, let’s spend $20,000 on a trip to Washington while asking for $10 – $12 billion.

Did you know that General Motors leased seven corporate jets before everyone starting crying foul?

They’re going to get out of a few leases now.

Where is the outrage?

Here on Main Street.  That’s where.  No one else seems to care.

The same place it has always been.  By the people that actually pay the taxes.  The folks that aren’t participating in the “bailout.”

Citigroup gets bailed out by the government, with Uncle Sam backing over $300 billion in loans and providing another cash infusion of $20+ billion … and what do we learn that Citigroup has done?

They freakin’ spent $400,000,000 for the naming rights for the New York Mets stadium.   That’s $400 million!  And what does the CFO Gary Crittendon say about the waste? “That was a decision made in a different time.”

Well, actually Gary, Citigroup’s financials were pathetic last year as well.  And I really doubt you’re going to see a $400 million influx of new business by naming a stadium after your company.   Can you imagine how many new online banking relationships you could have if you spent $400,000,000 in online advertising with google and other pay for performance mediums?  No, you clowns will go waste $400 million on a stadium.

Where is the outrage?

Here on Main Street.  That’s where.  No one else seems to care.

Here’s another idea on blowing money… Tiger Woods just lost his $7 million dollar endorsement deal with General Motors .   That actually brought Buick back from the dead, and made it cool again (if it ever was cool).  Citigroup should bail out on the dumb stadium idea, and then have Tiger Woods as their celebrity endorser. 

The only problem is that Woods has an image to protect.  He probably won’t want to get caught up in this bailout mess.   But hey, I think we all know he pays a lot in taxes, so if they wanted to blow some money on him I’d be OK with it.  Sure beats a stadium for the Mets.

And while we’re talking about idiotic ideas, let’s not forget about the clowns working at AIG.  These folks actually spent $100 million to sponsor Manchester United, the UK soccer team.   And when word got out about the $150 billion bailout from Uncle Sam, some folks wondered whether AIG would try to unwind out of the deal, perhaps sell its new found marketing concept to another company that’s not essentially broke?

Nope, and AIG spokesperson confirmed it was still business as usual.

Where is the outrage?

Here on Main Street.  That’s where.  No one else seems to care.

But I bet you do!

Now on to our real estate investor education section…

The Top Trends to Watch in 2009

As the Thanksgiving holiday approaches in the midst of one of the most volatile financial markets in decades, it might seem there is little for short sale investors to feel thankful about. As the old adage goes, there is a silver lining in every cloud and despite the downturn in the real estate market, it could turn out that investing in short sales is the best decision you ever made.  Not only does it diversify your earnings potential but if these top trends for 2009 hold true, it may turn out to be one of the few ways to hold your own during the next year.  I’m about to tell you some brutal facts…but keep your head about you when you read them—remember that if you know what you’re facing you’ll be able to figure out how to benefit from it!

1.     Lowered Retail Sales. During what is typically the most robust period of retail sales, stores are showing more than sluggish results; they are showing downright discouraging spending patterns as the seasonally adjusted retails sales experienced their largest decline ever for October 2008. Experts expect the trend to continue well into 2009 and only worsen after this holiday season.

2.     Reduced Motor Vehicle Sales. As the Big Three auto makers line up for their turn at federal funds just to make it to 2009 it should come as no surprise that motor vehicle sales have experienced their worst performance since WWII. Experts agree this is a long term trend for 2009 and perhaps beyond.

3.     Housing Starts = Housing Stops. The 2009 forecast for housing starts is so bad it actually resembles a stop instead. Not only is there a 1 to 2 year existing inventory for homes but housing starts for single family homes have recently posted a low of .54 in September 2008 with no end in sight.

4.     Negative New Home Sales. While existing home sales recently experienced a slight upturn, new home sales are still falling and expected to lag throughout 2009.

5.     Stagnating Treasury Yields.  The world is seeking safety over substance in any form they can obtain it so don’t expect Treasury bonds or securities to do more than the bare minimum throughout 2009. After adding taxes and the impact of inflation, actual yields are zero or actually negative…which still beats the stock market!

6.     Dropping Consumer Confidence. Rising unemployment, reduced access to credit and diluted retirement accounts have finally taken their toll on typically optimistic Americans; in fact, the perpetual optimism has given rise to abject fear as they scramble to reduce living expenses and cut back to the basics. Short sale owners holding affordable housing will find their properties in high demand in the coming year.

7.     Rising Unemployment. Outside of the government (not exactly known for its high paying illustrious positions), most industries are cutting back or planning to cut back during 2009. Expect to see more demand for homes located near convenient locations and short commute times combined with Escalating Consumer Debt. As the cost of food, insurance and other necessities merges with unemployment and other costs consumers are turning to credit cards and other debts to make up the difference. Meanwhile, banks are increasing lending standards and raising interest rates. The result is a toxic combination sure to take a toll during the next year.

Now hold on! I know you’re thinking, I’m tired of reading all this negative stuff!  Folks, the reason I’m telling you this is so that you’ll get excited about the opportunities that distressed properties will bring.  You need to know facts about what’s really going to happen.  There won’t be a “bailout” of everyone … so there is going to be plenty of opportunity for those in the know to make money!

See you at the top!

 

Chris McLaughlin

P.S.:

Sorry there was a glitch that brought our webinar down for a few hours … so we’re reposting it for today only:

http://www.shortsalesricheswebinar.com

Don’t miss it – everyone that has watched it says it is perhaps the most useful tool in understanding what’s going on in the real estate market, and how to make money in today’s environment!

Mid-Day Market News & Commentary by Chris McLaughlin, November 10, 2008
http://www.shortsalesriches.com/welcome.html

Don’t miss this webinar!  We’re holding another webinar on The Top 12 Strategies for Short Sales Riches this coming Tuesday at 9 PM EST, 6 PM PST.  This is something you just don’t want to miss!  Register today:
https://www2.gotomeeting.com/register/324799291

——
The market was higher in morning trading as investors cheered a $586 billion stimulus package from the government of China.  The China bailout is seen as assisting many of the multinational US companies such as Caterpillar or General Electric.   But the sheer size of the stimulus package gives many hope that the US government will also propose a stimulus package that will jump start consumer confidence as well as housing demand.

Meanwhile, the nearly trillion dollar bailout is getting spent faster than many folks can count.  The Federal Reserve and the Treasury Department announced another $40 billion will be committed to help bail out AIG, making the total bailout of the insurance giant around $150 billion.   The additional $40 billion comes out of the $700 billion recently approved by Congress.

In other bailout news, Fannie Mae announced that it is burning cash and might need some more government help.  The mortgage-finance giant reported a staggering $29 billion dollar loss in the quarter.  Ouch.

And shares of automaker General Motors (GM) slid to a 60 year low today after analysts forecast that the company may run out of cash in April 2009.  Analysts slashed their price targets for the company, with Barclays now targeting GM at $1 a share and Deutsche Bank taking its price target to $0.  Some stock commentators believe that there will be limited government intervention to possibly bailout the automakers. 

Circuit City filed for bankruptcy protection.  The nation’s electronics retailer will shed 700 jobs and will close approximately 20% of its stores.  

Yeah, it was a bunch of bad news today … but don’t let it get your down, just learn more about short sales and REO properties.   This is your time.  This is your moment.  Make it happen for you.

I just love this quote I found:

“God grant me the serenity to accept the people I cannot change, the courage to change the one I can, and the wisdom to know it’s me.”  - Unknown

So now that you know it’s you, and that this market is what you make of it, let’s talk about the seven mistakes most Realtors and investors make with short sale investing.

The mistakes in short sale investing might come as a surprise to many in the real estate industry; after all, the media is filled with news about escalating bankruptcies, banks dissolving overnight and loss of consumer confidence…obviously it’s a buyer’s market.  Unfortunately, availability doesn’t translate into information so the majority of would-be buyers simple don’t understand the who, what, how and why of short sales as evidenced by the seven biggest mistakes below:

1.     Thinking rather than doing. Short sale investors that think about buying but don’t actually ever get around to putting a plan into action are not buyers or investors – just dreamers. Stop procrastinating and take action.

2.     Failure to follow the rules. Each and every bank, buyer or broker has a process that must be followed. One of the advantages of dealing with Short Sales Riches is the ability to learn a proven system that gets results rather than having to start from scratch.

3.     Improperly presenting your case. Make no mistake about it; successful short sale negotiations require a solid presentation to the buyer and the bank. Fortunately for you, there isn’t any need to recreate the wheel – simply adopt what has been proven to work and begin building your own short sale profits.

4.     Failure to take risk. Playing it safe has a time and place but there are times in life when risk is rewarded; ask yourself, how have your stocks and bonds performed over the past few years? Is your job keeping pace with inflation? Can you afford to retire if the current financial trends continue? If you are like most Americans then it is time to take a chance on something different; something you are able to control, something everyone needs.

5.     Substituting Attitude for Accomplishment. With enough credit cards and lines of credit it’s easy enough for nearly anyone to “act” wealthy but when times get tough suddenly things fall apart. Successful and wealthy individuals may not always look rich but they have staying power and actual accomplishments to prove their net worth. Forget finding fame and fortune overnight – success is typically the product of planning, preparation and tireless pro-activity. 

6.     Last minute thinking. It never fails; a flood of offers at the final hour. Unfortunately, last minute thinking puts you into direct competition with all the other procrastinators and eliminates the opportunity to fix potential problems that may arise. Instead, jump in early before the sleepers wake up.

7.     Putting all your hopes into one property. This is particularly true of short-sale newbies; don’t fall in love with a property. Keep your options – and mind- open to different types of properties. Keep the real objectives in mind; profit potential.

More tomorrow…

See you at the top!

 

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

 

P.S.: You are going to be on our Webinar tomorrow night aren’t you?  As Jim Rohn said: “If someone is going down the wrong road, he doesn’t need motivation to speed him up.  He needs education to turn him around.”  Get that education now:

https://www2.gotomeeting.com/register/324799291