Win-Win-Win Post 182

Review the headlines

Top Five Stories You May Have Missed

Here are the five top Moneynews stories from the past week that you may have missed:

Kevin Freeman: Terrorists, Nations Plot Attack to Doom Dollar
Terrorist organizations and sovereign governments have attacked the U.S. financial system in the past and may do it again to destroy the U.S. dollar’s status as global reserve currency, says author Kevin Freeman . . . Click Here.

Trump: Soaring Gasoline Prices Will Cost Obama His Job
High gasoline prices will cost President Barack Obama his re-election, as voters won’t tolerate what they see as inaction to do anything to lower prices at the pump, says billionaire developer and real-estate mogul Donald Trump . . . Click Here.

Former Fed Official: U.S. Headed for a ‘Fiscal Cliff’ Next Year
Princeton economist and former Federal Reserve Vice Chairman Alan Blinder says the U.S. is cruising toward a 2013 “fiscal cliff.” He predicts the economy will be hit with a 3.6 percent decline in gross domestic demand “as tax cuts expire and spending falls” . . . Click Here.

Feldstein: Obama’s Tax Hikes to Spark New Recession
Martin Feldstein, former chief economic adviser to Ronald Reagan, says the most important cloud on the economic recovery horizon is the large tax increase that will occur next year unless legislation is passed to block it . . . Click Here.

Bernanke: Economy Lacks Strength to Sustain Gains
There is still not enough spending and investment to sustain the economic recovery, said Federal Reserve Chairman Ben Bernanke, and consumer demand remains weak relative to its level before the Great Recession . . . Click Here.

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

Coach Mitch’s REFLECTIONS™

 

Heed the headlines

They all call for continued soft economic times ahead. And for a truly hellish future, read Aftershock, whose authors make a good case that we face an extended deep depression in which real estate prices fall even further and stay down for 10 years. For those thinking that buying a personal residence or an investment property at regular prices is OK in this economic climate– think again. If the market continues to be soft, and you need to sell, how much of a loss can you afford to take in order to make a sale? Think about this carefully.

What if you HAD to sell?

A neighbor recently found a new position, after having been fired from his position of 12 years, and after looking for a job in his field for over 18 months. Sadly, however, he had to move 1000 miles away, to an unknown area, with a newborn, without friends or relatives nearby. But, he was lucky, he was able to sell his house and fairly quickly.

It helped that the neighborhood we live in is considered a prime location around Albany, NY. In good times homes in our neighborhood do not last long. However, he still had to accept $20000 less than he paid for the home. Our market has not retreated a lot in this downturn, about 10%-20%, depending on location. It’s a good thing that he made a killing when selling his previous home in Delaware upon accepting the promotion that required the move to Albany. At least he had the profit from his previous sale to give back on this sale, or at any rate, what monies were left after needing to use that profit to live because he didn’t have income for 18 months.

What if you buy now?

Let’s say that you get “a deal” and only pay 90% of FMV, Fair Market Value, are you safe from potential economic ravage? No.

A typical 4/3 home is often going for $250000 or more, but you paid only 90% or $225000. Other like houses are at $250000, but remember you need to sell and this is soft market. Realtor commissions are 6% or $15000. Fixup/cleanup can easily be $5000. No one pays full price these days (you didn’t) so you’re going to have reduce your asking price somewhat, say 5% or $12500. Adding it up, you will be lucky to only lose a net of $6250. It’s a good thing that, when buying, you paid somewhat less than the full amount because if you had paid regular price, as my neighbor did, then your loss would be $32500. That’s a real kick in the pants.

Don’t ever pay retail – think fire sale

These days, the most you should consider paying for housing is 50% of the Fair Market Value. You don’t have to have the dream house. Keep looking until you find a home that is satisfactory – but make sure it’s no more than 50% of FMV. The food in that wonderful kitchen won’t taste as good if you have to sell at a loss.

Don’t give in to your feelings

The biggest issue to overcome is that we are mostly emotional beings. Our emotions rule, often to our detriment. We make choices based on how we “feel” about something rather than how well that item fits our needs. We choose based on our wants, rather than our needs. It is a crucial difference, often costing us dearly.

Look for personal/financial difficulty

Others, who acquiesced to their feelings, paying retail, have no choices; they are required to take a loss if they wish to sell. You are smarter than that. Tax delinquents often have free and clear property. Yet, with the banking situation today, they cannot refinance, usually because of bad credit, buyers can’t qualify to purchase, and relatives don’t have money to lend to pay the taxes.

When you show an interest, they entertain your low-ball offer, because no one else is offering more. In fact, most of the time, people have stopped showing any interest at all. They may not be happy with your offer, but your responsibility is to your interests. They are resigned because they did not look after their interests properly. They convinced themselves that the market would go up, forever, and paid far too much, so that their whim could be satisfied.

Be patient

You are only going to purchase a personal residence a few times in your lifetime. I am convinced that you can have your cake and eat it as well. Plan well in advance so that time is not a factor. It won’t matter in a few years, if you looked for a few more months, but in the end you will have found that property at 50% of retail. Should something horrid happen to this economy, as is predicted by many, then at least you can absorb the financial hit better than your neighbor.

Win-Win-Win

You’ve heard the old joke, Q: “How fast do you have to run if a bear is chasing us?” A: “I just have to run faster than you.” From a Machiavellian perspective, you have to look out for yourself. So, be smart; find a property where the current tax delinquent owners were not smart. Help them out of their situation, and get a great deal at the same time. Then, change the property to your liking. For you it’s a win-win. You win when you purchase, and you have acquired with so much extra equity that you can win again by rehabbing and upgrading to what you want. Should the market continue to be soft or to tank all together, if needing to sell, you can lower your price because you paid so little when purchasing, another win. Win-Win-Win!

Isn’t it interesting, Coach Mitch’s Tax Delinquent Property “Ridiculously Simple System…”™ allows you to win even though all around you are losing.

Be wise,