TARP

Real Estate News & Commentary by Chris McLaughlin, February 5, 2009
http://www.shortsalesriches.com/welcome.html

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CNBC reported today that the White House plans to announce next week that it is moving away from having the government buy up trillions of troubled assets and putting them into a bad bank, rather it is more interested providing insurance and guarantees of the troubled assets in a “ring fence” concept.  The current plan will likely involve the remaining $350 billion of TARP money, and rumors of several trillion are now apparently not in the cards. 

In economic news today, the US Department of Labor reported that adjusted initial jobless claims for a 4 week period were 626,000, an increase of 35,000 over the prior week’s revised figure.   Most analysts had expected 585,000 new claims, so the 626,000 number surprise many.  The number of jobless claims is now at a 26-year high. Ouch.

Now, on to our real estate investing section…

Short Sales Excuses – and Why they are All Wrong

If you have been sitting on the side-lines thinking about investing in short sales but haven’t yet taken the plunge then chances are you have a few of the following short sales excuses to blame. Learn how to overcome the fear of failure and instead focus on the path to profit by informing yourself why all the facts you think you know are actually wrong.

Excuse #1. You need a lot of extra time and money to get started.

Fact: It sure doesn’t hurt but one of the great things about short sales investing is the ability to begin with very little out of pocket funds. Unlike starting your own business that requires immense up-front capital as well as most of your free time, short sales investing uses leverage and can be started in your spare time.

Excuse #2. You need years of experience.

Fact: No, you don’t need years of experience…you only need to tap into the know-how of someone else who has been there and done it with a track record of success. Hmmmm, now where can you find that if not right here at the shortsalesriches.com strategy?

Excuse  #3. You need to have a heart of stone to deal with foreclosures.

Fact: This has nothing to do with your level of empathy or not. Properly transacted, many homeowners benefit as much if not even more than the short sale investor; you are actually doing them a favor in many cases.

Excuse #4. It’s too late to begin investing in short sales.

Fact: There are still plenty of great homes to select from and in many areas, the inventory is still growing. Don’t assume the federal bail-out or other stop-gap solutions will work for everyone or even be desirable; many people will not qualify or simply want to walk away and start over. There are still plenty of great properties to be found for those who know where to look and how to make an offer.  Are you aware that there were over 1 million jobs lost in the last 2 months?  What will happen to all those homes?

Excuse #5. It’s still too early to begin investing in short sales.

Fact: Although there are still plenty of great homes at ultra-affordable prices with historically low interest rates, that situation could change at any time. Even if the price of homes continued to decline, any increase in interest rates or lending standards could negatively impact today’s favorable conditions. Buy while the buying is good to lock in favorable prices and rates.

See you at the top!

Chris McLaughlin

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

P.S.

This week’s webinar replay is right here…for the next 8 hours:

http://www.webinarwizards.com/custom/index.cfm?id=170879

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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Finally, a blog for Real Estate professionals
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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

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Why Bank of America Needed More TARP Money

Market News & Commentary by Chris McLaughlin, January 16, 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 23 spots that we have left for our Saturday webinar at 4 PM EST and 1 PM PST 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/783035902

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Even before taking the oath of office President elect Barack Obama got what he wanted for Congress.  The US Senate voted yesterday to release the second half of the $700 billion TARP fund, and the incoming Obama group has planned to allocate between $50 and $100 billion toward foreclosure prevention.  In a positive sign for Realtors and investors looking for buyers, the new President’s team has signaled that stimulating buyer demand for homes is a priority, possibly by reducing interest rates even further is part of such a strategy.  We’ll have to wait for more information to come.

Bank of America announced its worst financial performance in 17 years today – they lost $2.39 billion.  Ouch!  The bank also announced that it would take on another $20 billion in TARP money.  Why?  Two words: Merrill Lynch.  As  Bank of America readies itself to buy the brokerage firm, the bank is discovering that the “mark to market” write downs, an accounting rule that requires Bank of America to write down assets to their existing market price, not the price that they might be worth if you took the time to sell them.  How does this accounting rule affect banks? 

Let me give you an example.  Let’s say Merrill Lynch has a billion worth of mortgage backed securities.  Let’s also say that 25% of those are now in default, but 75% of them are paying just fine and are on time.  You would think that the valuation of the securities would be $750 million or less, right?  Well, given how mad investors are with the rating agencies they just don’t want them on their balance sheets.  Period.  So what would be considered $750 million worth of good loans are now worth $100 million at today’s market value.  No one wants them: they are toxic at any price!

Now let’s assume the Merrill Lynch has to recognize these assets on their financials.  What used to be a billion is now $100 million in the current market.  So even though the securities would be worth a lot more than $100 million if they were to go through an orderly process of selling off the assets, the bank is required to report it based on what it is worth now—in an illiquid market.

Now understand that we got these new “mark to market” rules after the Enron scandal, and they do have validity, because without them banks can essentially lie about what their assets are.  But in this instance, when extraordinary circumstances have created tremendous illiquidity, many banks are frankly being forced to unfairly write down assets that will be worth much more than their current liquid valuation. 

If the new Congress wants to save some taxpayer money, they should modify the mark to market accounting rules to have an outside appraisal identify what they assets are really worth versus forcing banks to mark down assets that are viewed as toxic. 

Now on to our real estate education section…

Unemployment Claims Crashing Websites – Create Your Own “Safety Net”

As pink slips pile up, jobless claims have become so prevalent they are literally crashing websites and phone systems as workers rush to file unemployment claims. New York, Ohio and North Carolina were forced to shut systems down completely due to heavy volume; considering the average unemployment wages are less than $400 per week or roughly $1,600 per month (or less), one might wonder if there is a better way to create your own safety net.

As it turns out…there is! Short sales offer investors of any background the ability to take their financial future into their own hands rather than stand in line waiting for the government to provide minimal income replacement. It doesn’t require a lot of money, time or extensive training to create your own safety net with an income stream as high or low as desired.

In less time than you might spend on “hold” when applying for a Michigan unemployment benefits (average hold time of four hours according to some clients), you could be well on your way to submitting an offer on your first short sale transaction worth thousands – or even tens of thousands. With a straight 12 months of job losses, 2008 is shaping up to be the worst on record in over 50 years. 

Learn how to create your own safety net with these short sale related resolutions for the new year:

1.      Do it daily. Each and every day do something toward growing your short sale empire. It doesn’t need to be a lot but you should get into the mindset of profit and success.

2.      Try something new. Once you master a formula that works (like the one provided by ShortSalesRiches) then continue to refine it and add to your portfolio of tools and resources.

3.      Expand. Begin small then build a base by incorporating new areas, different types of real estate or other potentially profitable relationships.

4.      Educate. Never stop learning. Find a mentor and learn from others as you go along. Share your knowledge with others along the way.

5.      Add a subscription. Find a source of reliable, pertinent and up-to-date information like that provided by the ShortSalesRiches.com/blog to keep a pulse on the trends.

6.      Query like crazy. Set a personal “outreach goal” for the next month to revitalize and jump-start this year’s success.

7.      Embrace the Internet. Learn how to use it then stick to it. If you don’t have the time to dedicate to doing it all yourself then hire someone to help. It’s an investment in success.

8.      Don’t be fearful. During tough economic times there is a tendency for people to run for cover and settle for less – often much less – rather than bet on their own skills and tenacity.

9.      Get organized. Stop procrastinating and take the time needed to put everything in its place, set up the tools you need and start using them.

10.  Be a bit of a brag! Yes, when you have a success it is important to pat yourself on the back…just be selective. While you are making thousands or tens of thousands of dollars on short sales, don’t expect your unemployed brother in law to be thrilled for you. Instead, teach him how to join you in creating a long term safety net and life you love.

See you at the top!

Chris McLaughlin

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

P.S.: Be one of the 23 spots that we have left for our Saturday webinar at 4 PM EST and 1 PM PST 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/783035902

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Market News & Commentary by Chris McLaughlin, January 15, 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 42 spots that we have left for our Saturday 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/783035902

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This shouldn’t be a surprise to anyone reading this real estate investing newsletter, but it is official: foreclosures jumped 81% in 2008 according to RealtyTrac.  The numbers are a little frightening when you consider the impact: one in every 54 homeowners received a foreclosure filing.  And over 2.3 million properties went into foreclosure last year.  “Clearly the foreclosure prevention programs implemented to date have not had any real success in slowing down this foreclosure tsunami,” stated James J. Saccacio, the CEO of RealtyTrac.

Shares of lending giant Bank of America were under pressure today, dropping over 16%, as the Bank readies itself to absorb Merrill Lynch & Co.’s losses.   The bank will receive an additional $10 billion on TARP funds, on top of the $15 billion it received in October, in order to provide adequate capital to absorb Merrill Lynch. 

And not all banks are losing money … at lease not JP Morgan Chase.  The bank, which purchased Washington Mutual last year, reported a profit of $702 million, which was down from $2.97 billion in the year ago period, or a 76% decline.  CEO Jamie Dimon said “If the economic environment deteriorates further, which is a distinct possibility, it is reasonable to expect additional negative impact on our market-related businesses, continued higher loan losses and increases to our credit reserves.”

Now on to real estate investing news…

News You Need to Know for 2009 – FHA Short Sales Easier than Ever!

As if increased minimum wage laws and ultra-low interest rates weren’t good enough, short sale investors will be downright delirious to learn about changes to FHA laws set to begin in 2009. On December 24^th, 2008 the Department of Housing and Urban Development (HUD) released “Mortgage Letter 2008-43”….despite the inconspicuous title, this is a powerful boon to every short sale investor in the nation.

For those of you who somehow managed not to be engrossed by this less than climatic title, here are the major changes coming soon to a FHA/HUD foreclosure near you!

1. Elimination of the clause calling for 63 percent or greater property appraisal versus debt. Now properties can appraise at any value and still be eligible for the program.
2. Increased Net. Instead of the former 82 percent net based upon appraisal value the new limits will be 88 percent if sold with 30 days, 86 percent if sold within 60 days and 84 percent thereafter.
3. Increased Closing Costs on Short Sales. Although not a lot – FHA will now allow up to 1 percent of closing costs rather than the former zero.
4. Increased Seller Incentives. Again, although not a lot this will at least allow sellers a reasonable down payment toward a rental home by putting up to $1,000 in their pocket at closing.
5. Increased Lien Allocations. Junior liens up to $2,500 are now allowed – just one more tool that helps sweeten the pot for short sale investors interested in pursuing FHA/HUD homes.
6. Removal of Repair Limitations. This is one change that could potentially add up to thousands depending upon the required maintenance on the home. This opens the doors to many homes that would otherwise be ignored due to excessive damage.
7. Exceptions to Non-Owner Occupant Requirements. This is on a case by case basis but opens to the door to rental properties formerly excluded from the program.

To learn more or read the release for yourself visit: http://www.brokencredit.com/wp-content/uploads/2008/12/fha-pre-foreclosure-short-sale-guidelines.pdf

New Year’s Resolutions for the Short Sales Investor

Admit it. Your New Year’s resolutions look a lot like last year’s list don’t they? If you are like most people then near the top of your list is “get in shape” followed by some type of ambiguous financial goals. The trouble with most New Year’s resolutions is they fail to energize, motivate – or even make sense. When was the last time you REALLY got excited about cutting back or doing without? Rather than emphasize the negative, it’s time to create a realistic list of positive goals designed to make a lasting difference in your life. Here are some more tips designed to transform wishful thinking into reality for the coming year.

1. Write it Down. Researchers have discovered the mere action of taking the time to write it down increases the odds of actually putting the plan to work.
2. Tell it to Others. Commit to the plan of action by making it known to others; whether in person, via telephone or simply as part of an online discussion. Let others know of your goals.
3. Be Specific. Get into the nitty-gritty details; duration, specific amounts, locations or other pertinent information should be spelled out in as much detail as possible.
4. Measure Continuously. Set a schedule to measure progress on a continuous – and frequent basis.
5. Work toward it Daily. Make it a regular part of your routine to do at least one item toward your goal on a daily basis throughout 2009.
6. Dare to Dream. Don’t discount your own dreams or ability to profit…it is what excites and motivates people to take action. While the rest of America is sitting on the side-lines while the greatest buying opportunity of a generation sits in front of them, those who dare to dream of a better life are capitalizing upon it.
7. Get a Mentor. It is important to banish negativity from your vocabulary and personal goals; while a healthy dose of constructive criticism is always warranted – that is quite different from negativity. Constructive criticism is born of information and experience while negativity stems from fear. Surround yourself with knowledgeable professionals who are successful in the short sales field rather than those to fearful to take action.
8. Educate Yourself. Information and education are key to growing in any field. In fact, common wisdom holds it takes a minimum of 1,000 hours to become fully informed about any given topic. To put this into perspective, 1,000 hours is the equivalent of 25 weeks of full-time work. Fortunately, you don’t need to start from scratch. Benefit from the wisdom of others that have gone before you and customize it to your own situation.
9. Invest in Success. Perhaps one of the biggest mistakes most real estate investors make is failure to invest in success. Whether it is your time, money or simply opportunity cost required to put short sales real estate to work – the fact is you must make up your mind to invest in your own success before anyone else will follow.

See you at the top!

Chris McLaughlin

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

P.S.: Be one of the 42 spots that we have left for our Saturday 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/783035902

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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 2^nd 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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