08.14.08
Posted in Miscellaneous, Real Estate, Small Business at 4:54 pm by admin
“Susan, you just don’t know…there are no opportunities out here!”
I hear the cry of distress and frustration daily from my clients who believed they were making good investments only to find out that there were big pitfalls in those decisions. My answer to this cry is always the same – maybe you can’t see them now because you’re in distress, but there are always opportunities out there.
To see where I’m coming from you must understand my viewpoint on two economic ideas:
Capitalism assumes free enterprise and is an intangible ideal that when used appropriately can bring both amazing rewards and excruciating punishments. As an intangible, Capitalism is not the cause of human greed, dishonesty or any other flurry of human emotions that it has been blamed for. In this free market I have witnessed people making six figure incomes with pet day cares – not kennels or boarding, but daycare. I have witnessed people making and selling street art to raise just the amount of funds required to live in the beach neighborhood they enjoyed. I’ve watched clients become successful by rehabbing buildings and selling them, or by catering-cleaning-tutoring-gardening – you name it, because they were able to see an opportunity and cash in on it.
2nd disclosure – we live in a global economy, like it or not. But really what is not to like? Human beings have far more potential than they are led to believe sometimes. The opportunities we seek may be further than our initial outlooks take us, but they are out there – we just need to know how to spot them no matter where they are.
So, this article is not just my soapbox appeal for capitalism. No, I want to reassure you that there are still opportunities. That is the beauty of this system - where there is crisis, there are solutions. In every case, those making money and sustainable wealth are or were providing solutions.
Here is my for instance- after the dot.com bubble where many analysts warned us that many of these companies were being boosted by hype and not by financial fundamentals, resources for trading and research became more prevalent and less expensive. The dot.com heyday allowed the technical and internet entrepreneurs to get funded to start many innovative products and systems that have been improved upon today including automated scheduling services, web conferencing, web stores, etc.
I have another one, the fuel/energy crisis – many years ago when I was working on my MBA, my class was asked to do a paper marketing various hybrid technology cars. The caveat at the time was that any green marketing would be a sure killer to the campaign as people were generally put off by the green message. In our studies I found that not only did the technology exist for mass production of hybrids, but for hydrogen, fuel cell and electric cars as well as alternative fuel cars. They just were in such low demand that the cost became prohibitive and the nation’s infrastructure was unsuitable for the change. Then, in 2006, gas began to soar to unprecedented prices both here and abroad. Suddenly, green technology is incredibly popular. In time we will see things they have been testing for years coming to fruition because the demand and the money will be there to drive the solutions. It took the energy crisis to bring that to light.
So, as we look at the housing bust, and we labor under its tremendous burden brought about by bad decision making by both buyers and lenders, we have also garnered lessons that were a long time coming. Lending practices are being tightened and reviewed, people are making much more educated and advised decisions, and there have been a series of new industries and opportunities opening up as a result. The past is the past. I would like to use the past to look forward to the future. We need to look for our opportunities where they have always been born – in solving problems. The loan modification, short sale advisors are numerous now and those people are making money because they are resolving a problem. There are new ways of getting financed being created every day since the credit situation has tightened. REOs and Foreclosure realtors are up to their eyeballs in inventory.
But those are solutions that have already been created, I would like to spend the rest of this month talking about solutions that are budding ideas or under marketed ideals. Here’s one – Let’s see if anyone can spot an opportunity from this blog post on the Wallet Pop: Please read the article at www.walletpop.com/blog/2008/08/14/less-than-zero-lots-of-detroit-properties-worth-even-less-than/ I’d love to hear your comments, and give you some of my thoughts.
One final thought – I have always believed that a business whose model includes problem solving and win/win solutions has the greatest chance of not just survival, but success!
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08.11.08
Posted in Podcast at 4:13 pm by admin
Susan gives us some tips about how teenagers can build a strong credit report.
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07.27.08
Posted in Business Profiles, Podcast at 10:54 am by admin
Enjoy this interview with Levi Richard as he talks about his story of getting started in Real Estate investing and opportunities he’s found in Texas real estate.
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07.23.08
Posted in Real Estate at 9:47 am by admin
Savvy investors and business people know that there is always a play to be made in every circumstance. Even in the past few weeks when the DOW was experiencing huge drops, people were making money in the stock market. Same goes with business - for every crisis is an opportunity to create a solution and the people providing the solutions are raking in the big bucks. The same goes for real estate. With record foreclosures and defaults being so prevalent there are advantages for smart investors to take a hold of. Stay tuned next week for my podcast coming up. I interviewed a client- investor of mine who is doing well with his niche in real estate. He discusses how he does it and how he can help both tenants and investors.
In the meantime, I keep trying to put my finger on what went wrong for so many investors. Clearly many were overzealous in a crazy market. ANY bubble – whether it be a stock market, tech, real estate or commodity bubble, may spell instant profits, but always brings with it incredible hardship and grief after a time. Beware ANY guru who tells you anyone can succeed and become rich following their methods. Part of financial literacy is knowing YOUR situation, your risk tolerance, your upcoming goals and your current finances. There is no “one method fits all” program out there. While I would love everyone to invest in real estate still, I know there are so many ways of doing so that makes it possible for virtually any financially able person to participate in some meaningful fashion. But, as with any investment, these purchases require a plan and analysis. So this article is a basic blueprint to what you should be doing to find yourself a property suitable for purchasing.
1) THIS WILL ALWAYS BE MY FIRST STEP – IF YOU KNOW ME PERSONALLY THEN YOU HAVE PROBABLY HEARD THIS BEFORE - HAVE A PLAN!
A Plan does not have to be volumes long and involve complicated financial calculations. It should, however, be written and consist of AT LEAST the following information:
· What are my objectives – what do I want to do with this real estate? Flip, buy and hold, use as a cash flow to offset other negatives, practice trial for a particular method?
· How much disposable cash do I have available for this
· Based on my personal history, what kind of financing will I be needing for this project
· How does this project fit with the rest of my investments, what is its purpose?
· Exit strategy – All things going perfectly, when do I intend to exit this investment, or do I intend to exit at all?
· Plan B – In the instance that all things DO NOT go perfectly, how do I exit this project and at what point
2) Research – There are many honest and reputable business people out there. But you should never blindly take anyone’s advice without some background research. I don’t expect you to become an expert in every field but you should gain enough familiarity that you can at least judge whether you are on the right track in a project that makes you comfortable enough to start. Don’t let fear stop you from acting, but mitigate your fear with some very basic research so that you are making the best INFORMED decision you can. Here are just some of the areas you should research before signing on to a project:
· Location – What are similar properties listed for and selling for in the past six months
· Region – What is the outlook for the region your property is located in
· Weather – Will the region’s weather restrict your plan in any way, including the timetable for completion
· Rental Market – What is the rental market in the area like for your particular type of property
· Property Managers – Know at least three managers you can contact for assistance, get these contacts from unrelated sources
· Infrastructure – Know about any major universities, hospitals, research facilities, airports, etc in the area
· Demographics – Know who lives, buys, rents in the area including income range, education range, economic industry range, rent/own ratios
· How many units in your neighborhood are owner occupied as opposed to renter occupied – does this ratio fit your objective
3) Financing – There are many different options and creative methods to finance real estate projects out there. There is nothing wrong with creative financing when done responsibly. The problem the economy is facing is based on a lack of (or general disregard of) personal finances. With that being said, choose the financing that fits your plan. Remember that real estate is a large investment no matter your time horizon, to finance over and above your reasonable means will eventually catch up with you. Plan for vacancies, slow sales times, reserves for unexpected repairs and other unplanned expenses. Know, in advance, what your plan is if you lose your job, get sick or can’t work. Make sure you have in mind some kind of realistic exit strategy.
4) Build a Team of Professionals to Help You. Get a second and/or third opinion about rent ability, sale ability and financing. While this is part of your research step, be sure that even in closing the deal you have a realistic idea of what you are doing and who you can go to for additional information if the need arises. By getting competing advice, you will also be sizing up the credibility of the team you are putting together to help you get your project completed.
5) Read everything before signing. I’ll be honest, I never read through every single sheet of paper before signing loan docs. I don’t have that kind of time. But I’ve read and signed enough that I know what I’m looking for in general. You should have a day to review the documents before signing them. If you are closing by mail, be sure to tell the escrow company to set the closing date out a few days (give them a specific date) so that they have all the numbers correct on the Settlement Statement. If possible, have the paperwork reviewed by your attorney if you are not 100% comfortable with it. Review at a minimum:
· Final Closing Statement
· Deed
· Loan Terms
· Title Insurance
· Appraisal
· Any addendums, disclosures, riders
If it sounds too good to be true, it probably is – Beware the always optimistic guru/salesperson/representative. There are deals out there that ARE too good to be true, but in fact are true. But a credible salesperson will never guarantee you anything, will always answer your questions, and while they won’t give away their information, they will give you enough to look into and get comfortable with. If not, then it may not be a match and you should continue looking. There are literally thousands of deals out there to be had at any given time, don’t be rushed into making a poor decision just because someone tells you the deals are closing quickly.
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07.18.08
Posted in Miscellaneous at 7:45 pm by admin
As I talk to people, one of the problems I find is their financing/mortgaging decisions were not made with a basic understanding of the options. How do you know what kind of questions to ask if the basic terms of mortgages are never explained to you? With that in mind, I’d like to define a few of the mortgage terms out there that many times are tossed around with little understanding of what they really are. You’ll know better what questions to ask if you can understand some of the terms being volleyed at you.
Prime Loans – These loans are conforming loans that require good credit and good income and asset documentation. It comes with the the best interest rates available.
Alt-A Loans – These include the loans most self employed people use. They require better fico scores, but little to no documentation of income or assets.
Sub-Prime Loans – These loans do not meet either the credit worthiness nor income verification of the other two segments. Another attractive feature is that these type of loans allow borrowers access to mortgage funding with little to no down payment. These loans generally charge higher interest rates and are considered riskier for lenders . Only 5.1 percent of the mortgages in the country are sub-prime loans.
Conforming Loans – These are loans that meet the guidelines of Freddie Mac and Fannie Mae. They are generally under $417,000 in loan amount with documentation and credit scores.
Fannie Mae (FNMS) – Fannie Mae is the nickname for the Federal National Mortgage Association. It is a Government sponsored enterprise or GSE. Fannie Mae buys or guarantees conforming loans loans as a way of replenishing the money supply available for additional mortgage lending.
Freddie Mac (FHLMC) – Freddie Mac is the nickname for the Federal Home Loan Mortgage Company – it is also a GSE. It operates similarly to Fannie Mae setting its own guidelines and underwriting requirements.
Annual Percentage Rate (APR) – The total cost of credit to borrower. The APR takes into account the one time costs of lending.
These are just a few of the terms I find useful in reading the financial news. Please let me know if there are any others you’d like explained and I’ll do my best.
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07.15.08
Posted in Miscellaneous at 8:23 pm by admin
Indymac closed its doors Friday and reopened on Monday as Indymac Federal bank. What should we have learned from this incident that we can act upon right away?
The banking system is strong enough to cover its insured deposits - INSURED deposits. Indymac represented only .2% of insured deposits covered by the FDIC so at this point deposits are safe as long as you remained within the FDIC insured limits. Those limits are $100,000 of regular accounts and an additional $250,000 on retirement accounts (IRAs and SEPS, etc). If you are within these limits you will more than likely be just fine.
Unfortunately, up to 100 other banks are in similar positions to IndyMacs. Wisely this time, the government has decided not to name them right away to avoid the massive withdrawals spurred on by Senator Schumer’s letter last week stating that IndyMac was in trouble. Here is what you need to do:
1) If you bank with Indymac, be sure to get their word and advice on the status of your deposits. Be sure they are not aggregating the regular accounts with the retirement accounts. The insured limits again are $100,000 for regular accounts and an additional $250,000 for retirement accounts.
2) If you are banking anywhere else, take steps NOW to be sure your deposits remain within the insured limits. If they do not, please move the overage to another institution right away.
Keep your eye out for additional bank takeovers coming soon. Most banks (9500 depositary institutions in this country) are in good shape. The 100 questionable banks will unlikely bring down the system, but be sure to fall within their guidelines for protecting your funds.
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07.13.08
Posted in Miscellaneous at 3:37 pm by admin
A recent survey reported by the Mortgage Servicing News via NewsEdge indicated that a large percentage of Americans are Financially Illiterate. It was conducted by the Center for Economic and Entrepreneurial Literacy (CEEL), a project of the Employment Policies Institute.
The survey was conducted to spotlight the growing need for financial and credit education to assist Americans in their purchasing and financing decisions. The need is being driven by the “bubble” economies of the last fifty years in which financial decisions were made based on trend and wishful thinking and less on actual financial knowledge. Whether it is commodities, stocks, or real estate, the lack of good financial decision making is at the heart of many of today’s economic worries. Among the startling results are the following:
69% of those surveyed did not know you had to pay BOTH the interest on your entire balance plus late fees for late credit card payments.
97% could not identify the percentage of service fees paid on a $20 ATM withdrawal, and 90% didn’t really know how much the actual fee was, most thought it was lower than it is.
Almost 70% of those surveyed did not identify their FICO score as the most important factor in getting financing for your home.
Over 80% did not know you could use a portion of your ROTH IRA for your first home purchase, education expenses and retirement.
Operation Hope is a non-profit organization that is targeting the lacking economic education in our public schools. They highlight empowerment through financial literacy among the country’s youth via their Silver Rights Movement.
“Without question, education is the ultimate poverty eradication tool, for when you know better you tend to do better. But financial literacy is the means by which one moves from simply avoiding the poverty trap to embracing a true prosperity agenda; for themselves, their families and their communities.” John Hope Bryant, Founder and Chairman and CEO of Operation HOPE.
Financial Empowerment is at the heart of small business and entrepreneurship. Go to seminars, listen to podcasts, and talk with your accountant….empower yourself and your children to share in the vast wealth of this country through fearless ingenuity and financial knowledge. And then get involved in increasing financial literacy throughout our country by lending your time and resources to organizations like Operation Hope. The more educated the population, the stronger our economy becomes. As I’ve stated before, Small Business benefits when our children (and our adults) are educated. More ideas become reality, more individuals are uplifted from their dire situations in a more permanent way, and more demand for better goods and services drives more efficient private market solutions.
Please take some time to visit the Operation Hope webpage and see their work and their initiatives in action.
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07.08.08
Posted in Miscellaneous, Small Business at 9:08 pm by admin
The really interesting thing about difficult times is the way small business in the US innovates new solutions. For instance, in particularly difficult times of hard to get credit, peer-to-peer lending has begun to grow as a viable business solution. Previously I wrote about a company called Prosper.com that allowed individuals to bid down rates and allowed even some of the riskier borrowers to get a second chance while allowing individuals to make interest on their money at a rate they were comfortable with.
I also linked to a wonderful charitable organization called Kiva.org that funds small business loans (international microfinance) for entreprenuers in emerging and depressed countries. (You can view both of these sites by clicking on their link on either my Business Links blogroll, or their banner on my Important Links page). I have been very active in this charity, it embodies the best ideals of social finance and empowerment. Instead of giving a man a fish, you are helping to teach the man to fish. It is a very powerful concept to watch unfold into reality.
Today, I wanted to preview another viable option for small business financing called Zopa. Zopa is actually backed by a group of credit unions making it less risky than the Prosper.com model. While it will assess borrowers an interest rate based on your credit, your community of friends and family can help bid down that rate by investing as little as $500 into a Zopa CD. At the end of the term, your friends and family will have earned a competitive interest on their principal and will have not have risked a thing. The model is similar to Prosper and Kiva in that it allows people to help themselves and other people at the same time. It similarly does not use big banks so Zopa can keep costs down.
Social financing is not just for business either. People are using the service to finance their weddings, education, consolidate credit cards and pay for unexpected medical emergencies. The CD invested is guaranteed by the partner credit union issuing the CD and is federally insured up to $100,000 because it is issued through a credit union. When purchasing the CD you must choose one borrower that you would like to help. And borrowers must have decent credit (FICO of 640 I believe) to qualify. But Investors need only buy a minimum $500 CD to participate at the highest rates unlike the big banks who require $5000 to qualify for similar rates. Take a moment to look at the Zopa.com site if you need a boost, or if you have a few bucks you’d like to invest safely for a year and help someone else out at the same time!
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07.05.08
Posted in Small Business, Technology at 1:54 pm by admin
Multiple Streams of Income?
Who has the time or resources?
The average business owner puts 100% of their free time into planning for or working their business. There really isn’t a lot of time after their obligations to their business and their families to exploit alternative income streams. Not to mention, many business owners find themselves dependent on their hard work for their income stream. If they are unable or unwilling to work any longer, their income will be severly reduced or eliminated all together.
It is important for business owners to learn how to capitalize on each of their efforts in a variety of ways. For instance, I realized this past tax season that I was answering the same questions a multitude of times. I have turned to this blog as a method of addressing those questions that seem to affect a variety of clients. It has also become a forum for me to present options, tools, books, workshops, etc that will benefit a multitude of clients as well as their associates. Instead of a single hours consultation fee, I am now able to consult and educate a variety of clients at the same time. I reach more of my client base and am able to create an income from providing resources to assist them in their business endeavors. Additionally, I am freed up to consult with more clients on a variety of new issues.
Here’s another example….a client and friend of mine recently opened a networking group. She has been very diligent and proactive in promoting this business. Upon talking with her further she indicated that one of the tools she found that let her reach a larger audience in a small amount of time was an email marketing company called Constant Contact. This company not only email blasts her members, it provides her with attractive templates and reports for her email campaigns. It even provides a way to collect payment for services, attendance, etc by using Paypal or Credit Card buttons. This eliminates her need to email, analyze responses, and collect money and make deposits. The service also has newsletter templates, promotional templates and a variety of other event templates. I recently tried it out for my July workshop and will be using it for the August workshop to be announced in the next week or so.
Think about the possibilities…you can create an e-book or pdf pamphlet with advice on how to pursue a particular goal or solve a particular problem that you address over and over, or you can tape a seminar or workshop and sell a downloadable copy as an instructional tool, using Constant Contact to promote and collect for it. The possibilities are endless. Talk to your accountant about the possibilities of creating multiple streams of income and various tools that make it easier and cost effective to do. Or, alternatively, check back for my August workshop or email me at MoneyTalks@SusanJamesAndAssociates.com and I’ll put you on my mailing list so you’ll be notified when it comes up.
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06.30.08
Posted in Podcast at 8:00 am by admin
The Money Talks Cafe Podcast #2 is up and ready for download. We talk about blogging and podcasting to communicate with your clients and to attract new ones.
The Money Talks Cafe #2:
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