Podcast Archives - Jay Garvens

I was blessed to spend Thanksgiving this year in New Mexico with my wife’s side of the family. Growing up in Wisconsin, my Thanksgivings were always fairly routine: turkey, cranberry sauce shaped like a can, potatoes, etc. This year, however, our Thanksgiving was infused with traditional New Mexican flavors like green chilies and tomatillos. It was different, to be sure, but the most striking difference at the table was less the ethnic divide as the generational divide between the three generations gathered there. Culturally, my parents and my wife’s parents could not be more different. But in terms of worldview and temperament, I noticed a lot of similarities.

In the United States there are, at present, five distinct generations living, from Generation Z, the youngest, to the Greatest Generation. Because of this, it’s easy to compare the characters of each generation. As I saw over Thanksgiving, members of a generation are defined more by the historical events unique to their times than by their own ethnic or religious backgrounds. Although my wife’s parents are Southwestern Hispanics and my parents are Midwestern Germans, they are all of the same generation, which is evident in their lifestyles and spending habits. They believe all debt is bad and made all purchases, from groceries to houses, in cash. The believed savings was its own reward, which is why my father died with millions in the bank.

The following generation—the Baby Boomers—could not have been more different. They have historically had net-negative savings, have been spending wildly for almost forty years, and carry incredible levels of debt from high-balance credit cards to mortgages. The positive effect of this has been the extraordinary expansion the US economy has experienced since the 1980s; the negative effect is that household finances are fragile and cannot easily recover from shocks like the Great Recession.

My generation, Generation X, has been more fiscally prudent than the Boomers, with higher levels of savings and less debt, but we are not as strict with our finances as our parents’ generation. We carry mortgages, often carry balances on our credit cards, and most have student loan debt. And although we’re relatively productive, our numbers were not large enough to make up for the loss in economic activity once the Boomers started retiring. We are, in fact, the first generation that was actually smaller than its predecessor.

I am a firm believer that the Millennials will make up for the lost economic activity as they begin to come of age around 2020. Numerically they are the largest generation in American history and one of the best educated (at least on paper). They are more savvy with using technology to save and invest, so although their purchases of homes and cars tend to be less extravagant as Gen Xers and Boomers, the average US household should be on much firmer footing then we have seen in decades.

The next time your extended family gathers together, take notice of the generational similarities between the different sides of your family. It is astounding how people from different parts of the country—or even different countries altogether!—and different ethnic backgrounds can be so similar. The same broad influences that have affected specific generations in the past will continue to do so, and we’ll eventually see the effects of this on our economy, which can’t happen soon enough!

11-29-2014 Family Reunion

We cover a lot of diverse topics on The Jay Garvens Show, from mortgages and real estate to finance and global markets, but every once in a while it’s crucial to focus on a smaller and more immediate topic: ourselves. As individuals we seldom make headlines and therefore think our actions don’t matter; we’re more interested in the grand scale and scope of global markets, and so we put ourselves on the back burner. And so, for this week’s show, I pivoted away from our usual focus on markets and finance toward more personal issues.

But, before we pivot, I should offer a brief snapshot of our local real estate market as outlined on the show by Bill McAfee of Empire Title. The local real estate market is still healthy, if not red-hot as we saw in 2013. Listings are below the ten-year running average at 3,500 active listings, and there is a pronounced shortage of listings in the sub-$250,000 range. Overall, the local market is up 4% versus last year in terms of median home prices, but homes under $250,000 have appreciated even faster. This suggests a healthy local market that will continue to see consistent gains without any major surprises.

The consistency of the market, coupled with a pronounced drop in rates, allowed many people who had started seeking change in their lives to fully realize it. Through my radio show and mortgage company, I met dozens of individuals that became first-time homeowners, and I was fortunate to learn each of their stories—specifically, when they decided to pursue homeownership and what they changed in themselves and their lifestyles to make it happen. Through our periodic first-time homeownership and investment property classes, I got to meet dozens more who were just starting to implement personal change in their lives and who will probably realize their dream of homeownership next year.

I was also given a poignant illustration of all the forms that personal change can take when one of our clients had to cancel his loan application days before closing. I suspected something was slightly off when I first met him, and it turned out he was struggling with drug dependency and his family finally staged an intervention to get him into rehab. As excited as I was that this man was pursuing his dream of homeownership, I was humbled to learn of his personal struggles and thankful that he had a family in his life to intervene. It was a reminder that we sometimes have to take a step back to move forward—and I hope, eventually, he’ll use this step back to get a running start on his future.

Most people’s experience with change won’t be as drastic as this, and we should reflect on stories like this to understand that most of us are already starting from relatively good positions in life. Most of us aren’t struggling with dependency issues, and the worst we have to deal with is breaking bad habits and adopting better ones—for example, being more disciplined with our money and budgets, and using our leisure time to read rather than watch TV.

Earlier this year, I spent several shows discussing New Years resolutions, developing good personal habits, and so on. I figured I should get an early start for next year to let people go through the binge-spending and binge-eating holidays while keeping in mind the dedication and willpower than will be required to affect real and lasting change in 2015. I met dozens of individuals this year who completely transformed their lives, and I look forward to meeting dozens of the same next year, too.

11-22-2014 Let’s All Reach For Change

There’s an old quote, variously ascribed (though Google suggests it’s by Will Rogers), that goes: The surest way to double your money is to fold it in half and put it in your pocket. Rogers also said people spend too much money they don’t have, buying things they don’t need, to impress people they don’t like. Whether you lose money on a bad investment or waste money on a silly purchase, the effect is the same: you have lost money with little to show for it. It’s as though you never earned the money to begin with. We have discussed the various ways of earning money on past shows. On this week’s show, we discussed how to keep it.

At least since the original consumer credit boom of the 1920s, our culture has used debt to create the illusion of prosperity. Throughout the 20th Century, Americans on average had an extremely low, if not outright negative, savings rate. New appliances, automobiles, and large houses have been staples of the American household for nearly a century. This impulse has, fortunately, weakened since the Great Recession; Americans are now saving and paying off debt at historic rates, and are keeping things like large appliances and automobiles for longer than ever. People are being more financially prudent and conservative than they’ve been in decades.

This trend is not isolated to older generations, either. The after-effects of the Great Recession, which are still being felt today, plus massive levels of student debt have nudged Millennials toward more basic, less flashy lifestyles. They prefer smaller, more practical cars and homes. Most prefer renting to owning, and many live at home with their parents well into their 20s, if not 30s. The younger generations, even more than the older Gen Xers and Baby Boomers, show tendencies toward frugality and thrift.

We can see this financial conservatism translate to political conservatism, as evidenced by the most recent mid-term elections. Regardless of personal politics, everyone should consider the demographic, gender, and racial makeup of the new wave of Republican politicians, which saw a substantial number of young people, women, and minorities elected as Senators and Representatives. This may portend a growing trend of traditionally liberal spenders, such as African-Americans and women, adopting a more conservative approach to spending. Whatever the political consequences of the last election, it’s likely the cultural consequences will be immediate and lasting.

The outcome of the most recent election is only the latest evidence that American culture is shifting toward fiscal prudence. This doesn’t seem to be translating to social conservatism per se, but the last decade has seen American consumption and spending habits trend toward more discipline and less reckless splurging. This will ultimately cause people to feel more secure about their budgets; as they waste less money to poor investments and useless purchases, they’ll realize their earnings power has always been stronger than it’s felt.

 

11-15-2014 Spend Less Earn More

You’ve no doubt noticed a gradual increase in the number of radio and TV commercials directed at senior citizens. In between the advertisements for adult diapers and golf-oriented retirement communities in Florida, you may have heard advertisements for reverse mortgages. Although these are relatively rare mortgage products today, they are becoming more popular as more and more Americans reach their senior years; eventually, a reverse mortgage may be the right financial product to suit your, or a close family member’s, life circumstance. This is why it’s imperative to understand what a reverse mortgage is, who they’re for, and what risks may be involved.

First things first: What is a reverse mortgage? Well, it’s exactly what it sounds like. Instead of money going from your pocket into a house to pay off a mortgage and create equity, a reverse mortgage depletes the home’s equity to pull money from the home and put it in your pocket. The lender places a lien on the property that becomes due once the home is sold or the last surviving spouse passes away.

I heard a few gasps at that last sentence. “A lien?!” you say. “Isn’t it dangerous to have a lien against the property? Won’t that put possession of my home at risk?” No! There are several myths and misgivings about reverse mortgages that demand clarification. Among them:

 

* Whether the owner loses ownership/title. As with a traditional mortgage, the owner maintains ownership and title, while the lender merely places a lien on the property.

* Whether an owner can be forced out of their home. The laws governing FHA-backed reverse mortgages prohibit a homeowner from being evicted from their home by the lender. A homeowner cannot out-live a reverse mortgage. The owner must still pay property taxes and homeowners insurance, though.

* Whether the income from a reverse mortgage affects current benefits like Social Security or military retirement. No! The income from a reverse mortgage does not affect eligibility or entitlement amounts for government benefits. Similarly, the income from a reverse mortgage is not taxable.

* Whether your current property is eligible for a reverse mortgage. As long as you occupy the property as your primary residence, it should be eligible for a reverse mortgage. This includes duplexes, townhomes, and even mobile homes. Investment properties, however, can not be used for a reverse mortgage.

 

There are a lot of benefits to a reverse mortgage, but as a complicated product there are other factors to consider. The original purpose of the reverse mortgage was to provide low-income senior citizens with reliable income while keeping them in their home; it was not meant to provide free money for vacations. Reverse mortgages should not be used for frivolous purposes; as the largest asset most people will have, a home’s equity should not be treated lightly.

We have only scratched the surface of reverse mortgages so far. This is why I’ll be hosting a special educational class specifically on reverse mortgages on Tuesday, November 18th, 2014, with one of my loan offers who has years of experience originating reverse mortgage. This is a free class with an open Q&A session, and anyone interested in learning more about reverse mortgages should RSVP immediately to reverse their seat.

11-8-2014 Reverse Responsibly

When the market goes up, everyone cheers; when the market goes down, everyone panics. This year alone saw the stock market reach record highs and the bond market reach near-record lows—several times! People react to every sign and omen, even when those signs and omens tell them contradictory things. They obsess over each detail so incessantly that they miss the broader trends. That is, they can’t see the forest through the trees.

One recent example of this phenomenon occurred on October 15th, 2014. In a blink-and-you-miss-it moment, US Treasuries dipped below 2% for the first time in almost 18 months. This, of course, translated into lower interest rates on mortgages, and almost instantly the phones at Garvens Mortgage Group were slammed with clients wanting to refinance. Many legitimately benefited from refinancing, but some were so anxious to trim an eight of a point off their interest rate that they didn’t stop to consider the consequences of a refinance—such as whether the savings on the interest rate would cover the closing costs of the loan by the time they sold that home. They saw the opportunity of instant savings but didn’t consider the upfront cost, or whether it would make sense over the medium- and long-term.

Rates are still substantially lower than they were over the spring and summer, even though they’re rebounded from the psychologically exciting 2% barrier. And, really, anyone who can legitimately benefit from a rate-and-term refinance has already done so by now. Most of these people saw the forest—that is, an extended period of depressed interest rates—and took the time to consider all aspects of a refinance before deciding to apply for one. They didn’t obsess over the day-to-day market fluctuations.

(Actually, one did obsess over the day-to-day details: He saw a small dip in rates and decided against locking his rate in case rates dipped even further. Instead, they skyrocketed and he missed his chance to save money entirely.)

Another example of seeing the forest through the trees was the clients—and there were a few of them—who did refinance and decided against refinancing into a 30-year mortgage which, as you know, I consider a government-sponsored scam. In any case, these borrowers didn’t want to reset their mortgages to 30 years after paying down 5 to 10 years already, so instead elected to refinance into 15- and 20-year mortgage products. In most cases, this resulted in higher monthly payments, but over the life of the loan they will have saved tens of thousands of dollars in interest.

In the age of Twitter, 24-hour news, and instant communication, we’re all inundated with data and details every hour of every day. With all this information, it’s difficult to distinguish between the fleeting and the permanent—to know what’s just noise in the data and what’s actually a trend. It takes effort to ignore the insignificant minutiae and focus on the forest, but learning to do so will offer extraordinary benefits.

11-1-2014 Can’t See the Forest Through the Trees

I’m not sure if you noticed, but it’s election season. And while the title of this week’s show is “Term Limits,” it fortunately has nothing to do with politics. Rather, it’s a continuation of various themes we have discussed on prior shows—namely, how to use your knowledge of coming economic trends to structure your finances and how to use smarter mortgage products to come out ahead once those trends subside.

I have said repeatedly (but not too forcefully, since I have to make a living!) that the 30-year mortgage is the biggest government-sponsored scam around. Even loans financed with today’s historically low rates will, once amortized over 30 years, cost double the principal amount because of interest. As an exercise, look up a mortgage calculator online (most banks and lenders have one on their site) and compare the same principal amount at 4.5% amortized over 15 and then 30 years. Then consider that 4.5% rate you’re will probably increase over the next couple years. The difference in interest will shock most people.

This is, in essence, what I meant by ‘term limits.’ The terms of different mortgage products will have different limits. It’s crucial to familiarize yourself with those limits and decide which best suits your financial needs. While most will agree that a 30-year mortgage is easier to carry—that’s why they exist—they should ultimately understand that a 15-year mortgage is, in fact, better.

To understand why, recall what I have said on past shows about the anticipated trajectory of the US economy over the next several years. Those of us who subscribe to a demographics-based view of economics believe we are in for another six years of poor economic performance before things start accelerating in the year 2020, when Millennials begin reaching their peak productive years. This leaves six years of spinning our wheels and probably another five or six years before the economy really takes off.

Where will you be in 10 to 15 years, and where will your friends and neighbors be? If you have a 15 year mortgage and they have a 30-year mortgage, here’s where you’ll be: 15 years ahead of your neighbor. You’ll own an asset outright while they’re still paying on theirs. You’ll have more resources to invest and save. You’ll also be tens of thousands, if not hundreds of thousands, of dollars ahead because of the money you saved on interest.

Now, where will you be over the next 10 to 15 years? If you opt for a 15-year mortgage, you’ll have a few hundred dollars less to spend each month. Your house will probably be slightly smaller than you could have afforded with a 30-year mortgage. There are costs—sometimes painful costs—associated with more prudent loan options, but ultimately you will be far better off than if you’d chosen the alternative.

If you’re more concerned with instant gratification than long-term planning, then by all means choose the easier program. But if a few extra hundred dollars a month is worth the tens of thousands saved over the life of the loan, you should absolutely choose the shorter term. You’ll not only be far better off in the future, but you’ll likely make a smarter home purchase. Spending less makes you more conscious of value, and rather than buying whatever you want, you’ll be forced to buy what you need. That is one limit of a 15 year term, but sometimes limits coax us into doing what we should have done anyway.

10-25-2014 Term Limits

 It’s commonly said (erroneously, it turns out) that the Chinese use the same word for both ‘crisis’ and ‘opportunity.’ That may not be true in fact, but I agree with the sentiment behind it: moments of crisis present opportunities for those patience and prescient enough to wait out the storm. On this week’s show, I applied this idea to our current economic situation and showed how individuals who take a little initiative now will be steps ahead of their peers when the economy ultimately recovers.

During times of crisis or uncertainty, our natural impulse is to hunker down and wait out the storm. When things look bleak, it is of course unwise to pursue bold and risky ventures. Too often, however, this prudence quickly becomes idleness, and people will have wasted an entire downturn being unproductive. It’s commonly said that you should make hay while the sun is shining; the corollary is that you should sell your hay and plan your next sowing when it isn’t. You may not see instant returns for your efforts, but you will see returns when the economy recovers. But if you remain idle, you will someday regret not having invested your time and effort when conditions were conducive for disciplined planning.

Opportunities are all around if you know where to look. As business shut down and liquidated, they unloaded vast amounts of capital and productive equipment that can now be re-purchased at great discounts. Commercial real estate is still depressed. Rents are cheap. Residential properties offer great investment opportunities. The sad fact is that most of the economy is still reeling from the recession.

The Fed’s QE policies have only worked to inflate asset classes like stocks, leaving the rest of the economy tremendously depressed. These other, depressed assets are where the best investment opportunities can be found. Often, the best opportunities aren’t so much in what they are as in what they can replace. For example, your dream job—whether at a different firm or at a firm you start yourself. Economic downturns are perfect times to assess your employment situation and make drastic—though prudent!—changes.

When times are good, people will stay with a job they hate because it pays well. But when employers have universally cut hours, postponed raises, and reduced perks and incentives, you’ll find other more ideal jobs are competitive with your current wages. It becomes less of a financial sacrifice to pursue a new job or career when the economy is depressed. And with so many Americans unemployed or under-employed, better prospects are available to those with the initiative and foresight to look for jobs now rather than waiting for the economy to recover.

As regular listeners know, I predict another six years of poor economic performance. Many people will spend this time being idle, never considering the abundance of opportunities out there. Paradoxically, the absence of opportunities creates its own opportunities. For example, because of low interest rates, a 15 year mortgage today costs the same each month as a 30 year mortgage did in 2006. Imagine that: Someone getting a 15 year mortgage today will be no worse off than their friends who got a 30 year mortgage in 2006, but will be 15 years and a tens of thousands of dollars ahead by the time they pay off their mortgage!

Examples like this abound if you know where to look. If you spent the last six years being idle, now is the time to start engaging with the opportunities out there and planning for life once the economy recovers. Those who take initiative now will be immeasurably better off than those who don’t.

10-18-2014 Gaining Strength from Weakness: Quantitative Easing (QE)

  If you presently have a mortgage, your mailbox has no doubt been inundated with fliers from mortgage lenders advertising extremely low rates. And it’s true: the days of the 3% mortgage are back. But less than a month ago, most experts were predicting a steady increase in rates. What happened? How did we get back to the 3% mortgage, and how long can we expect to stay here? The answer lies with the Federal Reserve, their quantitative easing program, and the projected performance of the US economy.

As a brief refresher, the Federal Reserve began its policy of Quantitative Easing (QE) in the immediate aftermath of the 2008 housing collapse and subsequent recession. Because interest rates had been effectively zero since 2006, the Fed had limited options to stimulate the economy. Typically, the Fed reacts counter-cyclically to extremes in the economy: they will raise the interest rate to cool an overheated economy or lower the interest rate to stimulate a dragging economy. Since the prime interest rate determines how expensive it is to borrow money, cheap money will provoke increased economic activity and vice versa.

QE is a method of artificially lowering the cost of credit by purchasing longer-maturing debt, like Treasuries, and thereby keeping rates low while simultaneously expanding the monetary base. The Fed is in the middle of its third round of QE. It had pledged to purchase a set amount of mortgage-backed securities each month until the US economy reached certain inflationary and employment goals. Throughout 2014, the Fed signaled that they would begin ‘tapering’ their bond purchases on account of the unemployment rate dropping and inflation remaining well below target.

However, recent economic news has not been encouraging. Wages and average hours worked have remained stagnant; the number of jobs being created is sub-par considering we’re 6 years out from the recession; oil prices are dropping; retail figures are week; and Europe is once again making headlines for the fiscal catastrophes set to erupt in Greece, Ireland, and Spain.

Responding to this news, the Fed has been less forceful with its insistence that it will begin tapering. Some experts are even speculating that they will be forced to institute a fourth round of QE—although that seems unlikely. They’re far more likely to avoid shocking the economy with a sudden taper in asset purchases. This is what investors are expecting and is why Treasuries recently dropped 20 basis points overnight. Speculation that the Fed will continue buying mortgage-backed securities coupled with capital flows from under-performing economies like Japan and Germany are depressing bond yields and will continue to do so until the picture improves.

As Yogi Berra said: “Predictions are hard—especially about the future.” Nobody knows what the future will bring. Just a month ago, everyone was certain that we were on the brink of a great recovery. Now everyone has retreated to a state of pessimism. Domestically and internationally, events are unfolding that demand appropriate reactions from the Fed. Everything seemed to have been contained until earlier this week; suddenly, we are getting bad news from all corners. Nobody knows how long the present bout of bad news and low rates will last, but I do know one thing: it won’t last forever. If you missed out on the historically lows rates of 2012 and 2013, now is your chance to take advantage them.

 

10-11-2014 Infinity and Beyond

You’ve no doubt heard the expression, “make hay while the sun is shining.” When conditions are favorable for productive endeavors, you should use that opportunity to get things done! Well the sun has been shining for several years. It may not feel like it, but the economic malaise of the last few years has provided an opportune time to be productive. With few negative shocks but also few high-return opportunities, our current economy is a perfect environment to structure your finances and prepare for times when the sun isn’t shining—or, hopefully, when it’s shining extra bright.

            If you subscribe to a demographic approach to economic modeling (as I do), you should be prepared for six more years of economic malaise. Simply put: Boomers have been leaving the labor market and tightening their spending habits in large numbers since 2006, and it won’t be until the Millennials enter their high-productivity years in 2020 before the Boomers’ lost economic activity is recovered and, eventually, surpassed. The false-starts and meager economic growth of the last six years seem likely to continue for another six.

What, then, should you be doing over the next six years? On the show, we discussed twelve action- and thought-items (that is, things you should either be doing or be thinking about) that are perfect for such lean years as we’ve been living in. They are:

 

1)    Know your goals and choices – You should decide now what your personal and financial goals for the future will be. When the economy is booming, a multitude of opportunities can present themselves and distract you from settling on disciplined goals.

2)    Remember history repeats itself – There is nothing new under the sun. Economies ebb and flow, and you should anticipate that the economy will recover—and, eventually, contract again. You should prepare for the next recovery and, also, the next contraction.

3)    Debt is the grim reaper – Since there are few high-return investments around, your best bet is to eliminate debt and save on the interest. If your debt isn’t being productive, get rid of it!

4)    Build your cashflow – There are many high-value properties for sale. Use the recovering-but-still-depressed real estate market to add investment properties to your portfolio and build your cashflow.

5)    Follow the fixed income play – Capital gains may prove lucrative, but they’re highly volatile. The fixed income model of consistent income, such as through rental properties, is more stable, secure, and is easier to plan around.

6)    Time yourself in and out of stock market – The market is cyclical, and often it isn’t too difficult to spot upswings and downswings from a mile away. It’s crucial to use advisors and your own intuition to time yourself in and out of the market.

7)    Play Monopoly with your home – Use your properties to generate income. Rental income is far more valuable than appreciation.

8)    Buy stuff cheap – As Warren Buffet says, “buy low and sell high.” Often this is easier said than done, but having cash reserves makes it easier to buy cheap assets when their value is deflated.

9)    Commercial real estate will be last sector to recover – Commercial real estate lags the residential market considerably. We won’t see a rebound in the commercial sector until the residential sector is in full swing.

10)  Avoid government and rising taxes – Structure your income to avoid the uncertainty of government action and future taxes. Different savings programs, such as IRAs or Roth IRAs, allow different approaches to avoiding the taxman as much as possible (but not completely).

11) Work for and with professionals – Your employer and business network should be populated with professionals. People who devote full-time attention to their careers are more reliable,

“Fortune favors the bold!” “Nothing ventured, nothing gained.” Really, there is no shortage of aphorisms and clichés meant to convey this simple truth: If you want to succeed, you must take risks. You must get into the arena and play. We live in a very fortunate moment in which credit is cheap, opportunities abound, and yet few people are intrepid enough to seek those opportunities out. This week’s show explained why you need to get into the arena, and how even a little risk goes a very long way.

There’s an old proverb (probably Chinese) that says: “The best time to plant a tree was 20 years ago. The second best time is now.” I think this is wise investing advice. An early start is always preferable, but those who have delayed their investing shouldn’t be discouraged from starting. Now is the second best time to get started, and in another twenty years you might be kicking yourself for not starting sooner.

I started investing in real estate in the early 2000’s, just after leaving the military. I saw the trajectory that house prices were on and knew early investments would see remarkable returns. I also saw the writing on the wall in 2007 and immediately started liquidating my real estate holdings. When you’ve seen and studied various bubbles—from oil to tech stocks to real estate—you get better at identifying ‘irrational exuberance’ and risky investments. I knew what was coming and managed to avoid the worst outcomes of the housing collapse. Many, however, are still shell-shocked from the real estate bubble bursting and believe it will happen again. In reality, the real estate bubble was just the latest in a never-ending series of manias and crashes. Real estate today is nowhere near bubble-levels, and with new restrictions on mortgage lending it’s unlikely we’ll experience another real estate bubble in our lifetimes.

Real estate is on a slow and steady growth trajectory. Last year, we witnessed double-digit gains because the price floor had been so low; real estate had a lot of ground to make up just to get back to the historic mean. Op-eds and talking heads lamenting a new ‘real estate bubble’ were speaking prematurely. We still live in a value-oriented real estate market, where real estate is generally commanding less-than-typical prices but is steadily appreciating. Naturally, the best deals have been claimed—most distressed and bank-owned properties have been purchased, flipped, and sold—but many great deals are still out there.

The professional flippers and real estate investors have slowed their purchases since they’re no longer able to realize 20-40% returns on their investments. But for beginning investors, it’s still possible to buy a distressed property, improve it, see an immediate 10-20% appreciation from repairs, 4-6% annual appreciation as the market improves, and net cash-flow from renting the property out. Those with a little foresight, initiative, and pluck are well positioned to take advantage of the great deals out there. And with programs like the FHA 203K, they can start investing with relatively little start-up capital.

It’s common to hear stories in person or on TV about investors who saw an opportunity, seized it, and are better off for it today. The best investors seem to have uncanny instincts for such opportunities. But it’s often less about knowing where to invest as actually getting up and doing it. Real estate has been a safe and attractive option for almost six years. It will remain an attractive option for decades. As of today, you cannot claim ignorance as an excuse for not pursuing the opportunities out there. You know what’s out there. Now you just have to get out there and act on your knowledge.

9-27-2014 Get Into The Arena