Interest rates

[GlobalWealth]

Here it comes...

 

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[Bounce]

Let me get this straight... The Fed is concerned that raising rates will cut off the economic recovery (I don't see a recovery anyway) and the politicians are going to raise taxes next year????

So, to do some math...

1) Higer taxes - check
2) Higher debt - check
3) Higher interest rates - check
4) Stagnating economy - check

Let's see, 1 + 2 + 3 + 4 = ?

 

[Bounce]

10.

Can someone tell me when this forum turned from productive discussion of wealth-building techniques to just complaining about all the things that are wrong with this country?

Sheesh...

Too bad you missed the point.

 

[andviv]

1) Higer taxes - check
2) Higher debt - check
3) Higher interest rates - check
4) Stagnating economy - check

Let's see, 1 + 2 + 3 + 4 = ?

OK, I want to play this game....

How do we profit from these 4 conditions?

1.
If higher taxes are expected then Real Estate will be taxed even more (property taxes, maybe less deductions, maybe more local taxes to the rent income). How to adapt to it?

2.
How to profit from higher debt? I assume you mean higher government debt, correct? If you mean consumer debt then maybe it is time to create a company of "credit repair services" and consumer debt advice. Charge people to help them work out their debt and negotiate the amount owed. I have thought about this in the past, but haven't pull the trigger on it.
How else could you profit from this?
Buying munis and other government debt does not sound reasonable then, does it?

3.
Higher interest rates: Get fixed loans today and then offer loans at short terms, making money in the spread (i.e. be the bank). How else could we profit from these conditions? Owner-financing of RE properties?

4.
Stagnating economy: I simply have no clue what to do in this case. Heck, I don't even really understand that word. It probably means "ketchup" in french.

10.
I assume this all leads to inflation at some point, and we have discussed this Ad Nauseum in other threads, so I will leave this one alone in this thread.

Ideas?

 

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[EastWind]

And what was your point? That political and economic factors are conspiring against those who are trying to achieve success in this country?

Yes, we know. We've had hundreds of posts on this forum over the past couple years that discuss the fact that the economy sucks, that interest rates are going to increase, that taxes may increase, blah, blah, blah...

Do you really consider any of that to be new information? If not, what is the purpose of reiterating it in every thread? You can reiterate those things as long as you'd like, but if you're not proposing solutions to the problems, then you're just complaining.

Perhaps my expectations for this forum are just too high...

relax before you burst a blood vessel. lol. i'm not into investing be it in stocks/funds/bonds, whatever. never have, because i have never had the money. however, these guys are ahead of us in terms of cash flow, and have money to invest. their approach is different than most of us, they are on a higher level. just like MJ, while me and you are trying to make a buck starting a business. they already got cash that they are trying to protect and grow. So their approach is understanding of macro economics, and how to exploit the movement in the market, value of currency. I know it affects me, but I don't care about inflation, stagflation, deflation, whatever. I'm broke. I need to make some money first. I don't see Bounce's post as complaining. If you had a million+ cash, you do be concerned and perhaps connect more to him. You ask that he suggest a solution, there is no solution that we he can suggest, we are at the mercy of the govt/law makers, so the only solution we can follow is a personal one to protect our asses. For them, figure out how to exploit the effects of the out of control printing press. For a nobody like me? figure out how to make some cash fast.

 

[MJ DeMarco]

Higher interest rates!??!?! Bring it on!! I want a pay raise!!! (I'm a lender, not a borrower!)

 

[GlobalWealth]

10.

Can someone tell me when this forum turned from productive discussion of wealth-building techniques to just complaining about all the things that are wrong with this country?

Sheesh...

Not sure if this was directed at me or not, but that is unimportant. I am not complaining. This was in the news this morning and interest rates have a huge impact on your wealth, whether you are a stock market investor, RE investor, web entrepreneur, or a male stripper.

It affects our future buying power. I only posted this as a news alert. We need to be aware of macro conditions, not for the sake of complaining, but for the sake of learning how to benefit.

I personally am a firm believer in 'turmoil creates opportunity'. I personally made more money in 2008-9 in any 2 year period of my life. And I hope we all learn to profit from these market inefficiencies.

I personally wish the govt would abandon fiat currency and abolish the fed, but until that point, I intend to profit from these inefficiencies. And interest rates is a huge part of that. If you are an RE investor, this can be great news as long as you take steps to benefit.

 

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[andviv]

so, back to important, fastlane-related topics...

HOW DO WE PROFIT FROM THIS?

 

[faq88]

Do like MJ said. YOu become a lender. Imagine if home loan rates went into the teens or twenties like they have in the past. If you had the cash to lend money at those percentages you would be rolling in the dough.

 

[RealOG]

What about aquiring low rate assumable debt? Like the kind you find on commercial RE? Or seller financing?

As interest rates increase, your lower rate note will become more valuable to the borrower and could be "sold" when you sell the property.

 

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[GlobalWealth]

What about aquiring low rate assumable debt? Like the kind you find on commercial RE? Or seller financing?

As interest rates increase, your lower rate note will become more valuable to the borrower and could be "sold" when you sell the property.

How do you suggest acquiring this debt? Buying it from cash poor hard money lenders? Any suggestions on finding this?

 

[Cat Man Du]

so, back to important, fastlane-related topics...

HOW DO WE PROFIT FROM THIS?

SEE new thread....on the above! :urock2:

 

[RealOG]

How do you suggest acquiring this debt? Buying it from cash poor hard money lenders? Any suggestions on finding this?

You arent actually buying debt, you are buying property with the debt attached. The actual debt is probably not worth a whole lot and will be worth less over time. That is why you want to be on the borrowing end.

You would have to commit to purchasing real estate or some other long term asset. Rates for loans are very low (if you can qualify) and so are property prices. Find a motivated seller with equity (where I buy, there are many) and have them finance the sale. If they feel you have the ability to perform or you can show a track record, it becomes easier.

Operate the buildings for cashflow (or just sit on them) on the short term, then sell them along with the assumable debt when A) the market recovers, or B) interest rates go up. All RE deals are about price and terms. If you can secure good terms, price goes up.

 

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[GlobalWealth]

You arent actually buying debt, you are buying property with the debt attached. The actual debt is probably not worth a whole lot and will be worth less over time. That is why you want to be on the borrowing end.

.

I misunderstand your statement then. I thought you were suggesting that you buy debt.

 

[EastWind]

Are you sure?

i'm sorry. that was a stupid assumption on my part. you probably do have a million dollars. and everyone that has millions don't think the same way. so, i'm not no where certain of my statement and shouldn't have made that.

 

[CommonCents]

I'd think there will be a growing demand for reverse mortgages. Not sure what you need to do to get in the biz or the metrics. More and more seniors will need to tap their home equity to supplement their retirement.

 

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[LesG]

Higher interest rates!??!?! Bring it on!! I want a pay raise!!! (I'm a lender, not a borrower!)

In general, I normally think the opposite of what was quoted above. Hmmm..

Borrower will have a big pay raise if they fix in those low 30 year fix rate mortgages.
Banks will be hurting big time on those same 30 year mortgages.
I say get those 30 year fix rate loans in break even to positive cashflowing properties.

I too am a lender, but my longest term is 1 year. I don't want to get trapped as a lender with low rates. Got to be flexible. 12% 7 points is my going rate.

 

[hakrjak]

10.

Can someone tell me when this forum turned from productive discussion of wealth-building techniques to just complaining about all the things that are wrong with this country?

Sheesh...

I think the point was that with all those factors in place that Bounce ref'd... We don't have to worry about interest rates going anywhere for awhile yet....

Cheers,

- Hakrjak

 

[MJ DeMarco]

Just to update this thread, the latest treasury auctions have had weak demand causing rates to rise ... rising rates foreshadows inflation, higher mortgage rates (based on the 10Y), and falling bond prices.

Bell begins to toll for bonds Outside the Box - MarketWatch

http://www.marketwatch.com/story/treasury-fall-after-payrolls-up-most-in-3-years-2010-04-02

 

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[Russ H]

In general, I normally think the opposite of what was quoted above. Hmmm..

Borrower will have a big pay raise if they fix in those low 30 year fix rate mortgages.
Banks will be hurting big time on those same 30 year mortgages.
I say get those 30 year fix rate loans in break even to positive cashflowing properties.

I too am a lender, but my longest term is 1 year. I don't want to get trapped as a lender with low rates. Got to be flexible. 12% 7 points is my going rate.

Les, I'm assuming your loans have the rates fixed, yes?

I believe MJ is talking about lending out money at rates tied to some index-- as inflation kicks in, the index rises, and his rates rise. So he gets a stronger return.

Yes?

-Russ H.

 

[Cat Man Du]

Les, I'm assuming your loans have the rates fixed, yes?

I believe MJ is talking about lending out money at rates tied to some index-- as inflation kicks in, the index rises, and his rates rise. So he gets a stronger return.

Yes?

-Russ H.

I believe that he's thinking of the buyers of OUR properties..... the higher rates will either reduce our BUYER population OR could eat into our profits!!! The economic picture is VERY important to us ( either way it goes ) because we have to look-down to the middle-class that are purchasers! :coffee:

 

[LesG]

Russ H,

Yes it is fixed at 12% but only for 1 year. I loan to advanced real estate investors that can handle the 12% and 7 points. At 12 and 7 I'm looking at 19% apr. Actually higher as most of my loans close in about 9 months. So my returns are north of 20%.

 

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[Russ H]

Les-

I understand. Your loaning at those rates is a perfect example of RK's "win-win" philosophy when he talks about buying RE--- that if you buy right (low), you have the ability to make more deals happen, b/c more money is available to you.

My only point was when MJ talks about "woo hoo-- interest rates are going up!" that he's speaking from the perspective of a lender who has loaned out money with an adjustable interest rate tied to key economic indexes-- so when inflation goes up, so does the index, so does the interest rate, and MJ makes more money from the money he loaned out.

If your loan terms are 1 year or less, I'm guessing you don't mess around w/adjustable rates-- you just give them a fixed rate (12%, at this time). Correct?

-Russ H.

 

[LesG]

yes fixed at 12%.

 

[Cat Man Du]

yes fixed at 12%.

That's why they call it......HARD MONEY, because you better know WHAT you're doing when borrowing under those terms! :smx19:

 

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[hakrjak]

Those terms are pretty industry standard for hard money right now. I was actually getting quoted 12.9% with 5 pts up front here recently.

Regarding ARMs -- most from a few years back are tied to LIBOR -- so it will be interesting to watch those rates and how they move vs treasuries IF we see a move higher...

Hakrjak

 

[hakrjak]

And LIBOR still looks very stable, by the way.... Check out the latest:

LIBOR | 1 Month Libor 3 Rate 6 Month Rates Bond Index Current One 90 day 30 Day

I just had an ARM adjust to Libor + 2.25% this month on the 1st, and couldn't be happier. It went down from 4.85% to 3.1%

Cheers,

- Hakrjak

 

[Cat Man Du]

And LIBOR still looks very stable, by the way.... Check out the latest:

LIBOR | 1 Month Libor 3 Rate 6 Month Rates Bond Index Current One 90 day 30 Day

I just had an ARM adjust to Libor + 2.25% this month on the 1st, and couldn't be happier. It went down from 4.85% to 3.1%

Cheers,

- Hakrjak

:smx9::great::smx9::great: How sweet it is!!!

 

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[hakrjak]

More news today that the Fed will be maintaining a low interest rate environment for some time to come....

Fed says "extended period" may last a long time - Yahoo! Finance=