Hello My Trusted Readers,

To say the current market is unstable is a gross understatement. We are experiencing changes in the bond market on a daily basis that used to take months to occur. In fact, yesterday's weekend announcement by the Fed Chairman was the first such "weekend announcement" in over 30 years!

How does this affect you personally? It depends! If you're one of our many customers locked into a good solid 30 yr fixed loan program, then you probably aren't stressed at all. If you're in the process of purchasing a new home, refinancing your current home, or trying to pick up some investment properties, then you would probably like to stay a little more informed on what's going on in the marketplace. So let me a take a brief moment to bring you up-to-date and give you my overall assessment at this point.

The crisis we are going through right now is actually due to a lack of liquidity. The basic problem is there aren't enough lenders who want to loan money right now, and those that do are making it harder to qualify. If you think about it, it makes total sense. Remember when all of the hurricanes hit Florida a couple of years ago? Since the insurance companies had to pay a record amount in claims, they re-evaluated whether or not to continue to do business there. Some of the insurance companies pulled out of Florida all together, while the few who were left raised their rates significantly to cover their risk and losses.

Likewise, most lenders are doing the same risk analysis based on the incredible number of foreclosures they've experienced in the last year. Many of the banks have pulled totally out of higher risk categories like...Sub-prime loans, Jumbo loans, Interest Only loans, Stated or No-Doc loans, and ARM's. Others have significantly increased both the requirements to qualify for these loans, as well as the interest rates. So, even though the Fed has lowered the Fed Funds rate and the discount rate, the lenders have in some cases increased their rates to the consumer due to their losses.

As far as Countrywide and Bear Sterns going out of business is concerned (or getting bought out for $5.00 and $2.00 per share respectively), you will probably see more of that. While part of this is due to their previous business practices of taking on too many bad loans, the other part is due to margin calls. Many major banks have been writing loans since last August and holding onto them in hopes of making more money as the market turns. The problem is that the market has continued to get worse, so the banks have too much money tied up and they have been forced to sell some of their portfolio at a loss! This is what caused most of the fluctuations in the marketplace last week, and it will probably continue to affect the market for the interim.

The Bottom Line is this ...It's still an incredible time to buy a house or refi...........IF You Can Qualify!!! The only way to know is to give me a call and let us do a complete loan analysis. Unlike normal times where I can accurately predict what programs and prices you qualify for at the drop of a hat, it has become a very complex and time consuming process. I have several customers that are making great moves and taking advantage of the market right now, while others are waiting and trying to time it. Both strategies can be good based on your risk tolerance and knowledge of the market. Either way, we're confident that we are in a very strong position to give you the expert advice and service you'll need in this historical market. After all, we know customers like you prefer to get the Lowest Cost Strategy based on your long-term financial goals vs. getting baited into the wrong program by the promises of the lowest rate. Let's continue to work together not only with you, but your CPA, Financial Planner, and your Realtor to make sure that your house is not only a wonderful home, but a sound part of your overall financial portfolio.

As a side note, look for a whole new format for our newsletters and more consistent up dates starting in the next couple weeks!

Your Mortgage Advisor for Life,

Tom

Tom Larkin
Manager/Sr. Advisor


Stay ahead of the curve with relevant market information and education!

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Benchmark Mortgage
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At the current time, it's no secret the price of real estate has stopped increasing and has started to fall in most parts of the country. Though this may be bad news for people who were planning on their homes going up in price quickly, a dip in price is good news for those looking to invest in real estate.

In the coming years, many people will be making money because they bought into this real estate market downturn. Making a lot of money in real estate is of course, easier said than done, but it is certainly not unprecedented.

The first step on the road to riches is to gain the understanding of the tried-and-true theory of making money in real estate. The first step in gaining this knowledge is an understanding of the rule of 72.

The Rule of 72

The rule of 72 helps us understand the effects of compounding interest over longer periods of time. It states, compounding interest will double the price of a commodity in the number of years of 72 divided by the yearly interest rate. For instance, if you had $10,000 in the bank and it was earning six percent per year, you would divide 72 by 6 to find out how long it would take the $10,000 to double into $20,000.

The answer is, of course, 12. So, if you were to invest for a very long period of time, for instance, 36 years; your $10,000 investment would turn into $20,000 in 12 years, $40,000 in 24 years, and $80,000 in 36 years.

It is common for real estate to increase 6 percent in a year. In fact, this would be a relatively slow market. The price of realty doesn't always go up, but when there is a hot market, it is not uncommon to see real estate increase by 20 to 30 percent in one year.

Since the market is not always hot, it doesn't make sense to use the rule of 72 to calculate for enormous gains like 30 percent. Those types of gains are an aberration. However, since the '50s real estate has increased, in some areas, by an average of 8 percent. For simplicity reasons however, lets use the figure of 7.2 percent.

If a commodity increases by 7.2 percent per year, the rule of 72 tells us that its price will double every 10 years. 72 divided by 7.2 is 10. So, you can see that over the long haul it is smart to be invested in real estate all the time.

Leverage

Simply doubling your money every 10 years will not put you on the fast track to wealth. To get on the fast track to wealth, you must incorporate leverage. With leverage you control a large amount of worth, while only having invested a small amount of money.

Here's how leverage works in real estate. If you are able to put down 20 percent on a $200,000 property, you will have invested $40,000. If the price of that property doubles in the next 10 years, which the rule of 72 tells us it will at a yearly interest rate of 7.2 percent, the price of the property will be worth $400,000 after the 10 year period. If you had been able to rent out the property with your tenants making the monthly mortgage payments, as well as paying your taxes and insurance, you will have made $200,000 with your $40,000 investment.

This is leverage at work because the rule of 72 should have doubled your $40,000, but you actually made $200,000 because of the leverage your mortgage, combined with renting gave you.

If your mortgage happened to have been an interest only mortgage, the property would never be paid off, but your monthly payment would have been low enough to have your tenants paying the mortgage payments each month without you suffering a negative cash flow.

At this point, you could sell the property and receive $200,000 minus probably, $5,000 to $6,000 for expenses, at closing. Plus you will also get back your original $40,000 down payment. Of course, as a real estate investor, your next move would be to use your $235,000 to make down payments on other properties.

You can see how a person could use the rule of 72 and leverage over and over again to become very wealthy. This is not a far-fetched hypothesis. It is a proven theory that has worked countless times.

For many people, the trick is to find the original down payment he/she will need to get started. Aside from the rule of 72 and a thorough understanding of how leverage works, knowing how to get started with little or no money is the next biggest key to success in real estate investing.

However, it will be the topic for another discussion.
Keyword Articles: http://www.keywordarticles.org

Ed Lathrop is a successful Real Estate investor.

He has developed EzCalculator, a Mortgage Calculator that calculates anything to do with mortgages, shows you how to pay off credit card debt and now includes a free student loan calculator.

This Free Mortgage Calculator, is home to the famous "How to Make $100,000 on Your Mortgage" calculator. Come visit this free site at Mortgage Calculator!

MORTGAGE MELTDOWN
Interest rate 'freeze' - the real story is fraud

Bankers pay lip service to families while scurrying to avert suits, prison


Sean Olender
Sunday, December 9, 2007
New proposals to ease our great mortgage meltdown keep rolling in. First the Treasury Department urged the creation of a new fund that would buy risky mortgage bonds as a tactic to hide what those bonds were really worth. (Not much.) Then the idea was to use Fannie Mae and Freddie Mac to buy the risky loans, even if it was clear that U.S. taxpayers would eventually be stuck with the bill. But that plan went south after Fannie suffered a new accounting scandal, and Freddie's existing loan losses shot up more than expected.
Now, just unveiled Thursday, comes the "freeze," the brainchild of Treasury Secretary Henry Paulson. It sounds good: For five years, mortgage lenders will freeze interest rates on a limited number of "teaser" subprime loans. Other homeowners facing foreclosure will be offered assistance from the Federal Housing Administration.
But unfortunately, the "freeze" is just another fraud - and like the other bailout proposals, it has nothing to do with U.S. house prices, with "working families," keeping people in their homes or any of that nonsense.
The sole goal of the freeze is to prevent owners of mortgage-backed securities, many of them foreigners, from suing U.S. banks and forcing them to buy back worthless mortgage securities at face value - right now almost 10 times their market worth.
The ticking time bomb in the U.S. banking system is not resetting subprime mortgage rates. The real problem is the contractual ability of investors in mortgage bonds to require banks to buy back the loans at face value if there was fraud in the origination process.
And, to be sure, fraud is everywhere. It's in the loan application documents, and it's in the appraisals. There are e-mails and memos floating around showing that many people in banks, investment banks and appraisal companies - all the way up to senior management - knew about it.
I can hear the hum of shredders working overtime, and maybe that is the new "hot" industry to invest in. There are lots of people who would like to muzzle subpoena-happy New York Attorney General Andrew Cuomo to buy time and make this all go away. Cuomo is just inches from getting what he needs to start putting a lot of people in prison. I bet some people are trying right now to make him an offer "he can't refuse."
Despite Thursday's ballyhooed new deal with mortgage lenders, does anyone really think that it can ultimately stop fraud lawsuits by mortgage bond investors, many of them spread out across the globe?
The catastrophic consequences of bond investors forcing originators to buy back loans at face value are beyond the current media discussion. The loans at issue dwarf the capital available at the largest U.S. banks combined, and investor lawsuits would raise stunning liability sufficient to cause even the largest U.S. banks to fail, resulting in massive taxpayer-funded bailouts of Fannie and Freddie, and even FDIC.
The problem isn't just subprime loans. It is the entire mortgage market. As home prices fall, defaults will rise sharply - period. And so will the patience of mortgage bondholders. Different classes of mortgage bonds from various risk pools are owned by different central banks, funds, pensions and investors all over the world. Even your pension or 401(k) might have some of these bonds in it.
Perhaps some U.S. government department can make veiled threats to foreign countries to suggest they will suffer unpleasant consequences if their largest holders (central banks and investment funds) don't go along with the plan, but how could it be possible to strong-arm everyone?
What would be prudent and logical is for the banks that sold this toxic waste to buy it back and for a lot of people to go to prison. If they knew about the fraud, they should have to buy the bonds back. The time to look into this is before the shredders have worked their magic - not five years from now.
Those selling the "freeze" have suggested that mortgage-backed securities investors will benefit because they lose more with rising foreclosures. But with fast-depreciating collateral, the last thing investors in mortgage bonds ought to do is put off foreclosures. Rate freezes are at best a tool for delaying the inevitable foreclosures when even the most optimistic forecasters expect home prices to fall. In October, Goldman Sachs issued a report forecasting an incredible 35 to 40 percent drop in California home prices in the coming few years. To minimize losses, a mortgage bondholder would obviously be better off foreclosing on a home before prices plunge.
The goal of the freeze may be to delay bond investors from suing by putting off the big foreclosure wave for several years. But it may also be to stop bond investors from suing. If the investors agreed to loan modifications with the "real" wage and asset information from refinancing borrowers, mortgage originators and bundlers would have an excuse once the foreclosure occurred. They could say, "Fraud? What fraud?! You knew the borrower's real income and asset information later when he refinanced!"
The key is to refinance borrowers whose current loans involved fraud in the origination process. And I assure you it was a minority of borrowers whose loans didn't involve fraud.
The government is trying to accomplish wide-scale refinancing by tricking bond investors, or by tricking U.S. taxpayers. Guess who will foot the bill now that the FHA is entering the fray?
Ultimately, the people in these secret Paulson meetings were probably less worried about saving the mortgage market than with saving themselves. Some might be looking at prison time.
As chief of Goldman Sachs, Paulson was involved, to degrees as yet unrevealed, in the mortgage securitization process during the halcyon days of mortgage fraud from 2004 to 2006.
Paulson became the U.S. Treasury secretary on July 10, 2006, after the extent of the debacle was coming into focus for those in the know. Goldman Sachs achieved recent accolades in the markets for having bet heavily against the housing market, while Citigroup, Morgan Stanley, Bear Sterns, Merrill Lynch and others got hammered for failing to time the end of the credit bubble.
Goldman Sachs is the only major investment bank in the United States that has emerged as yet unscathed from this debacle. The success of its strategy must have resulted from fairly substantial bets against housing, mortgage banking and related industries, which also means that Goldman Sachs saw this coming at the same time they were bundling and selling these loans.
If a mortgage bond investor sues Goldman Sachs to force the institution to buy back loans, could Paulson be forced to testify as to whether Goldman Sachs knew or had reason to know about fraud in the origination process of the loans it was bundling?
It is truly amazing that right now everyone in the country is deferring to Paulson and the heads of Countrywide, JPMorgan, Bank of America and others as the best group to work out a solution to this problem. No one is talking about the fact that these people created the problem and profited to the tune of hundreds of billions of dollars from it.
I suspect that such a group first sat down and tried to figure out how to protect their financial interests and avoid criminal liability. And then when they agreed on the plan, they decided to sell it as "helping working families stay in their homes." That's why these meetings were secret, and reporters and the public weren't invited.
The next time that Paulson is before the Senate Finance Committee, instead of asking, "How much money do you think we should give your banking buddies?" I'd like to see New York Sen. Chuck Schumer ask him what he knew about this staggering fraud at the time he was chief of Goldman Sachs.
The Goldman report in October suggests that rampant investor demand is to blame for origination fraud - even though these investors were misled by high credit ratings from bond rating agencies being paid billions by the U.S. investment banks, like Goldman, that were selling the bundled mortgages.
This logic is like saying shoppers seeking bargain-priced soup encourage the grocery store owner to steal it. I mean, we're talking about criminal fraud here. We are on the cusp of a mammoth financial crisis, and the Federal Reserve and the U.S. Treasury are trying to limit the liability of their banking friends under the guise of trying to help borrowers. At stake is nothing short of the continued existence of the U.S. banking system.
Sean Olender is a San Mateo attorney.

Understand Real Estate Cycles and Growth (Advanced) Real Estate Strategy

Courtesy of Signil Wealth

The 4-Phase Process

Strategically investing in real estate consists of a taking advantage of demand, selecting the appropriate property platform setting up an applicable exit strategy and doing this all in the right order in order to minimize your invested capital, reduce your exposure to risk and achieve the maximum equity build-up and cash flow-Maximum Benefit.

Rather than chasing cash flow one house at a time, implement a strategic plan to accomplish your wealth building and cash flow needs.

The phases of real estate portfolio planning are presented below:

Phase I, Create A Real Estate Plan. This phase of your investment real estate portfolio planning process is considered an active step. It is the point at which you determine your roadmap and plot your course from A to Z.

Phase II, Grow Equity. The second phase of the investment real estate portfolio planning process is considered a passive phase where your real estate purchases are timed in capture market demand as demand is outpacing supply and your portfolio is passively working for you.

Phase III, Compound Growth. Phase III of the investment real estate portfolio planning process is based on actively re-leveraging your growing equity into additional growth markets by selling in one city, using a 1031 tax deferred exchange and reinvesting in additional cities by timing the real estate cycle.

Phase IV, Convert Equity to Cash Flow. The final phase of completing your investment real estate portfolio is to convert your equity to cash flow. By building equity first and then converting to cash flow, the true potential to achieve income replacing cash flow is enhanced. The conversion of equity to cash flow is accomplished through the sale of residential real estate holdings (equity building real estate) using a 1031 tax deferred exchange and the acquisition of commercial real estate holdings (income producing real estate) with higher net operating income.
As you move through the four phases of real estate portfolio planning, it is important to remember that this is not a single four step process. Most investors will cycle through Phase I through Phase III several times in order to build equity before converting to cash flow. Once equity is converted to cash flow, the process may simply be started again with Phase I.

Market Cycle Phases

Real estate markets, cities large and small are subject to the simple economics of supply and demand and each and every city goes through a natural supply and demand cycle. Historically, the real estate cycle is approximately seven (7) years long from start to finish. As a result of national and global influences, recent cycle trends have been slightly longer.

EARLY GROWTH PHASE

SUPPLY TREND - DOWN
DEMAND TREND - UP

Early Growth phase is the catapult into the next market cycle. In-migration and job growth begin to accelerate rising demand. Construction actively remains generally low as supply is over-run by demand very rapidly. Rents begin to rise and vacancy approaches its low point of the entire cycle. Real estate values begin a steady hedge upward. At this point in the cycle, the local area through local media coverage begins to hear tremors of possible growth, but, growth is not yet the topic of general conversation.

MIDDLE GROWTH PHASE

SUPPLY TREND - DOWN
DEMAND TREND - UP

The longest segment of the Growth phase, the middle Growth phase is the peak for the momentum of the upward cycle. The recent in-migration of people and the generally late start to new construction places a significant strain of the availability of supply causing prices to rise rapidly. New development, construction and annexation permits reach their peak to accommodate this demand. The low of rental vacancy balances slightly as new construction supply becomes available for purchase by the incoming workforce. Coverage by the local media trends toward the boom time that will never end. The recent, swift and generally large population increase begins to place significant strains on local infrastructure and government.

LATE GROWTH PHASE

SUPPLY TREND - DOWN
DEMAND TREND - UP

Nearing the top of the market cycle, the late Growth phase is the steady calm before the next economic imbalance. Real estate values continue to rise steadily and the in-migration of people remains steady. Due to higher real estate values resulting in fewer qualified buyers, rents begin to rise once again. Alternative, lower cost housing such as condominium and town home properties becomes attractive and in greater demand resulting in the number of multi-unit and conversion permits increasing significantly. The strains on local infrastructure and government continue many times being addressed through an increase in real estate taxes creating a further unbalance, in conjunction with higher real estate values, the affordability and cost of living indices.

EARLY SATURATION PHASE

SUPPLY TREND - UP
DEMAND TREND - FLAT

Entering the Saturation zone of the Growth phase, indications of slowing economic drivers begin to surface. Construction activity remains high but results in slightly longer days on market, a slowing pace of appreciation and, for the first time is several years, enough supply to meet the requirements of demand. These indicators are subtle; they are not large jumps in an analytical trend line but rather slight deviations from recent results that go relatively un-noticed by the local area. A refinance boom is common.

LATE SATURATION PHASE

SUPPLY TREND - UP
DEMAND TREND - DOWN

The late Saturation zone is the first time the impact of changing economics begins to be felt. Real estate values begin to flatten; marketing times increase sharply and rents level. The availability of new construction supply becomes abundant and builder / developer incentives surface for the first time in years as a means to maintain cost controls. Extremely strong recent appreciation figures coupled with new and marketable investor packages lure unwary buyers that may lack an understanding of the recent, current and upcoming market cycle impact.

EARLY DECLINE PHASE

SUPPLY TREND - UP
DEMAND TREND - DOWN

During early Decline phase, the supply of available owner and non-owner occupied properties begins to rise. New demand and in-migration has dramatically decreased resulting in flat real estate values, rents generally remain flat, but vacancy figures begin to trend upward resulting in the first direct impact of the impending rising cost of ownership. High real estate taxes further affect owner occupants and investor cash flow setting the stage for the first wave of foreclosure exodus from the marketplace.

MIDDLE DECLINE PHASE

SUPPLY TREND - UP
DEMAND TREND - DOWN

The middle Decline phase is headlong into the down cycle. Supply is high and rising, demand is low and falling and out migration of people and jobs is apparent. Rental incentives, discounts and negotiation are common place. A significant rise in the cost of ownership can be expected as no economic catalyst is positioning the market for entry into the next transition phase. Job loss is causing foreclosures to increase steadily causing lender non-performing asset ratios to spike. Construction activity is extremely low if not virtually non-existent.

LATE DECLINE PHASE

SUPPLY TREND - UP
DEMAND TREND - DOWN

Late Decline phase is the bottom of the cycle. Real estate values have flattened and may have lost value, vacancy is at its peak and rents are low. The available supply is high and demand remains low while job loss and foreclosures have peaked. Extended marketing times are normal for owner and non-owner occupied property in both the rental and sale categories. Due to its affordability, an increase in apartment living becomes noticeable. There are no economic indicators leading toward a market catalyst, yet, political discussions turn toward corporate attraction, job growth and economic recovery.

EARLY ABSORPTION PHASE

SUPPLY TREND - FLAT
DEMAND TREND - UP

The focus on a political economic recovery begins to breed results. After having been through a recent Decline phase, local real estate values once again become comparatively affordable within the nation. Political incentives become a standard means of attracting job growth and the results of infrastructure improvements during the last Growth phase all offer an edge to the local community in its efforts to attract business. These catalyst efforts are generally behind the scenes, occasionally mentioned in media coverage and predominantly politically driven. The focus is in the creation of new jobs in order to catapult the next wave of in-migration.

LATE ABSORPTION PHASE

SUPPLY TREND - DOWN
DEMAND TREND - UP

The efforts to attract an economic migration begin to work. At this point in the cycle, the local population (excluding commercial real estate professionals and political participants) is generally unaware of the impending growth. Supply begins a slow trend downward, then flat, and then downward once again as indications of rising demand begin to blip on the radar screen. Construction activity remains low. Marketing times slowly begin to shorten and rental incentives begin to disappear. Real estate values and rents remain flat as vacancy slowly drops. This all happens very slowly and without great exposure in the public eye.


As demand increases and supply is constrained, real estate values rise. The point in time that this occurs, i.e. prices begin to consistently rise, is known as the entry into the Growth Phase of a real estate cycle. The Growth phase of the cycle generally last, depending on the market classification, between one (1) and three (3) years.

After a period of rising values, a natural balance between supply and demand is restored and the pace of appreciation slows as a city enters the other major phase of the real estate cycle, this is known as the Decline Phase. The entrance to the Decline phase of the cycle is the point at which real estate values flatten and the cost of ownership begins to consistently rise as vacancy increases and rents fall.

Between the two phases of the real estate cycle are two Transitional Zones. First, the Absorption zone of the market cycle is the bridge from Decline (flat values, higher vacancy and low rents) to Growth (rising values, lower vacancy and higher rents). Through the Absorption zone, economic conditions are changing and setting up a positive imbalance with higher demand and short supply. Second, the Saturation zone is the bridge from Growth to Decline. Through the Saturation zone, local construction activity generally remains high. While this period of time closely resembles the Growth phase, a closer look begins to expose less demand, longer exposure times on market and an increasing supply.

Many times this increasing supply during the Saturation zone is a result of the new builder home inventory generated and still available from the recent Growth phase. Because demand is now slowing and new construction supply is rising, builders often begin offering incentives and opening the sale of their inventory to investors. The question must be asked: Is the Saturation zone of the cycle where an investor really wants to buy investment real estate? Before you answer, remember, the Decline phase (flat values, higher vacancy and low rents) comes shortly after the entrance into the Saturation zone!

Strategically investing in multiple markets and timing your acquisitions during the transitional Absorption zone and early Growth phase, you can diversify your portfolio while potentially maximizing the return on your invested dollar, building equity quicker and, following the 4-Phase process, increase your residual real estate cash flow.

Real Estate Demand

Nationally, the demand for residential and commercial real estate is increasing and is projected to continue to outpace supply. The astute investor explores this fact and identifies that for over 200 years, real estate has appreciated at approximately 6% nationally. Regionally and locally, during this 200 year period, certain cities have appreciated at a much greater rate because of the economics of Supply and Demand. In order to participate in these growth markets, most investors rely on 'getting lucky' and hope to live in the right place at the right time.

Demand can be observed and by tracking the economic conditions of over 12,000 cities nationwide, Signil identifies opportunities nationwide so that you can participate in expanding real estate cities rather that waiting and hoping.

Here are the facts that are driving national demand: (1) overall population growth, (2) an increasing number of households, (3) shortage of supply, (4) largest segment of the population at their peak earning years (5) the second largest segment of the population leaving the nest and entering the renter and first time home buying age.

First, according to research done by the Brookings Institution and from data obtained in the 2000 Census the population in the United States is expected to increase by nearly 33 percent by the year 2030. That's approximately 94 million more people than were counted in the 2000 Census.

Second, because of the changing social influences in America, and with fewer people getting married or at least marrying later in life and the influence of increasing minority homebuyers, the expected demand on housing will continue to rise. Remember, rising demand results in rising prices.

Third, it is estimated over half of the homes, office building, stores and factories needed in the next 25 years do not exist today. With urban and suburban limitations on the availability of land, the supply of water driving regional growth and government initiated slow or no growth initiatives, the fight for this required real estate space will be an ongoing battle and will force growth to happen in very strategically located areas of the country.

Fourth, the Baby Boomer generation, people born between 1946 and 1964, have reached their peak earning age, incomes the highest ever and more discretionary money exists than in any other generation. Those born in 1946 are 59 years old today and those born in 1964 are only 41 years old in 2005. This population, the largest generation at approximately 78 million people continues to increase demand for second homes in cities offering affordability, health care, good transportation systems, mild climate and cultural activities and vacation homes in resort market areas.

And fifth, the Echo Boomer population, approximately 76 million people between the toddler and college ages are leaving the nest and will be out on their own, in their own homes and with their own jobs over the next 20 years. This real estate demand is captured by monitoring job growth, wage scales and affordability values and rents in cities across the country.

Market Types

In order to track approximately 12,000 cities across the country, Signil separates real estate markets into three very simple categories: Rental Markets, Retail Markets and Resort Markets. By categorizing market types, we are able to analyze demand, determine which phase of the real estate cycle a city is in and help identify appropriate investment property platforms to achieve Maximum Benefit.

Each market (or city) type is defined below:

Rental Market - Is a city with an abundance of long term rentals with low enough home prices that rents cover debt service and all expenses. Investing in a rental market is based on economic demand derived from local economic conditions suggesting rapid increases in value.

Retail Market - Is a city where home prices have risen so that rents no longer cover debt service and all expenses. Investing in a retail market is based on economic demand derived from local economic conditions suggesting sustainable growth.

Resort Market - Is a city with an abundance of short term rentals, well anchored as a vacation destination. Investing in a resort market is based on economic demand derived from national and occasionally international influences.

For more information on finding the "sweet spot" in the next "hot spot" contact clint@erealestate.com .

Short Sales Opportunity The following article by D.C. Fowler is packed with great information on how to negotiate a successful short sale. With foreclosure numbers increasing due to the adjustable rate mortgages that were financed in the peak real estate boom, the present market presents good opportunities to take advantage of during the correction phase.

Anyone who has ever profited from a short sale has also without a doubt had one or two rejected at some point. Guess What? It is just the nature of the beast…As with most things; you're playing a numbers game.

There are very few investors who truly know how to successfully negotiate a Short Sale. We find that most investors have the perception that all that is necessary is to submit an offer and wait for the bank to give you an answer. If all goes well the offer will be accepted but in many cases it's not that simple.

That's why a strategic plan is necessary. "What do you mean?" You ask. A strategic plan means making the deal go your way by persuading the lender to agree with your offer.

There are several steps that will ensure your success when negotiating with lenders.

First of all, you must be able to determine if you indeed have a short sale opportunity on your hands. Many investors are under the misconception that every homeowner facing foreclosure is a good short sale candidate. This could not be any further from the truth. One of the most common mistakes made by investors is attempting to fit a round peg into a square hole. Not all deals are good short sale opportunities. You must know the difference between a good and a bad deal. Period! You'll have to analyze the deal and develop an excellent plan of attack if you want to truly master the art of the Short Sale.

Second, you must not take no for an answer. No can never be the final chapter to your negotiation. If the lender says no you must ask yourself why. There must be a reason. Why did they say no? Is there anyone else I can speak with? Was my offer to low? How does the lender determine their bottom dollar? What else can I do? What was the BPO amount? These are just a few of the questions that need to be addressed each time you are met with some resistance from the lender.

We'd like to share an awesome deal that one of our students closed recently. His name is Thomas Stockman.

Thomas got a call off of one of his signs from a gentleman that had two properties in foreclosure. The two properties were on the same street and were bought as rental homes within the last year. Consequently, they were also financed by the same mortgage company. One property had a mortgage balance of approximately $150,000 and was in need of several thousand dollars of repairs. The other had a mortgage balance of $156,000 and was currently being rented for $1,100 per month. Both properties had little equity but the neighborhood had been very active over the last 9 months. After qualifying the two potential deals he decided to attempt short sales.

He contacted the bank and began the process. His offer on the first house was $89,900 and $95,800 on the second house. The bank rejected both and asked for higher offers. After several conversations and some additional documentation to justify his offer, Thomas was able to get each property at $60,000 below market value. Thomas rehabbed the first property for $3,500 and has it on the market for sale. Since the second property was already occupied by a tenant he kept it. His mortgage is roughly $400 per month (interest only loan/taxes paid at year end) he makes $700 in monthly positive cash flow. Not bad for a beginner (wink).

This would have never happened if Thomas accepted NO from the bank. If he would have not known what pressure points to touch and how to counter without increasing the offer amount, and we would not be talking about these deals.

This type of outcome is customary when you are equipped with the necessary tools and know how to turn a "No" into a "Yes" just by slightly adjusting your approach. Thomas got two great properties with lots of equity and a constant cash flow, the homeowner avoided TWO foreclosures, and the bank was satisfied.

Remember, the next time you are putting together a short sale offer, be prepared and take control of the deal. Never take NO for an answer. Be proactive not reactive. Don't just submit offers without having a game plan. Do yourself a favor and take advantage of the opportunity to make lots of money in an industry where great deals are hard to come by. We hope that you have learned something and are on your way to much success.