Is your cup half full or half empty

INVESTING PHILOSOPHIES

 

Is Your Cup Half Full Or Half Empty?

 

 

 

by Jack Miller

 

Is your cup half full or half empty?   Let's take a look at the empty half first?  We're far enough along in this recession to seriously examine where we are going and how prepared we are to reach our goals.  More to the point, are we certain that those optimistic goals we set a few years ago are still attainable?  We in the house business have historically relied upon the combination of easy credit, leverage, appreciation, income, market demand, and tax shelter to create wealth in the form of equity. Is this still valid? 

 

Many of these benefits are fading away today.  In many areas, in order to sustain the market demand, sellers are being forced to cut prices and rents; and each price cut comes directly out of the equity that was so carefully created.  Although new home buyers and owner occupants are being tempted with low interest rate loans, non-owner occupants are having a hard time finding the credit they need to continue to acquire homes either for resale or to hold as long term investments.  Government promises of bank and owner bailouts, difficulty in being able to evict non-paying tenants without lengthy legal proceedings, and the threat that the tax code is going be revised to make more of our income taxable are making it much more difficult to attain the profit margins we recently enjoyed. 

 

What about the full half?  In the short term, we are facing many challenges that must be overcome; but in the long term, the future holds even greater promise for those who continue to be active.  Statistics tell us that the average American family moves every seven years or so.  To do this they must sell their homes. Millions of new buyers will buy their homes at today's low prices.  In a few years there will be a cornucopia of opportunity for real estate and mortgage brokers, those who Option houses for sale, and those who take title subject to new low interest rate loans to hold houses for income and long term appreciation.

 

In the interim, a multi-billion dollar backlog of unsold homes in the hands of builders, lenders, HUD, and pre-foreclosed owners must be liquidated.  Instead of sitting on the sidelines waiting for prices to rise, those who buy and sell houses even at lower and lower prices can still make a lot of money. Although inventory turn over has slowed and profit margins reduced,  we are still able to turn over houses we have bought in about four months or so for enough profit to motivate us to continue to actively seek out houses to buy, and buyers to sell them to. 

 

Those who are in areas where there is less opportunity to buy houses should take a sharp look at the mobile home market; particularly mobile homes that are situated on individual platted lots.  Owners of owner occupied mobile homes have a hard time selling primarily because, as a general rule, brokers are focusing solely on stick-built houses.  Owners are reluctant to pay for expensive ads.  This leaves the field wide open for entrepreneurs who buy mobiles at discount, clean them up, and resell them into the market using 103% financing under the HUD Access program. 

 

To qualify for this, homes must have been manufactured after July 1976, only been moved once from the dealer to the lot, and be sited on approved foundations.  There's relatively little competition in this area, and with the numbers of new manufactured homes steadily shrinking, the market for used homes is strengthening.

 

Today the house business continues to generate income and profit for me. At today's prices, it can for you too, but only if you're willing to make a change. If you are among those who are discovering to your dismay that the security promised by your employer and your 401K plan have largely disappeared; or are seeing your employer's business failing; or are vulnerable to down-sizing in a corporate merger; it's time to plan your next step now while you have time.

 

I was forced out of my job into the house business by Nixon's recession. Within just a few years, by taking advantage of the real estate slump and taking title, subject to existing loans, with very little cash, I was able to retire on rents as a landlord.  Making your own career adjustment is what I want you to focus on in this seriesReprinted by Permission Visit  www.CashFlowDepot.com

or call (972) 496-4500.  Jack Miller passed away in October 2009. A few of us were fortunate to be able to attend some of his outstanding seminars and also to  get to know him as a wonderful person. Jack  spoke at MREIA meetings and was an international speaker and active investor, specializing in single family houses. He  wrote a monthly investment newsletter and conducted seminars on Exchanging, Management, Portfolio Strategies and Options.